Kimco Realty Corp. 10-Q Summary: Period Ended June 30, 1999
Business Context and Reporting Period
This is a quarterly report (Form 10-Q) for Kimco Realty Corporation, a real estate investment trust (REIT) focused on neighborhood and community shopping centers. The reporting period covers the three and six months ended June 30, 1999. As of July 30, 1999, the company had 60,713,691 shares of common stock outstanding.
Key Financial Metrics
| Metric | Six Months Ended June 30, 1999 | Six Months Ended June 30, 1998 |
|---|---|---|
| Revenues from Rental Property | $218.9 million | $132.5 million |
| Net Income | $81.9 million | $53.0 million |
| Net Income Applicable to Common Shares | $68.7 million | $43.4 million |
| Cash Flow from Operations | $114.8 million | $70.3 million |
| Total Debt (Notes & Mortgages Payable) | $1.11 billion | $1.29 billion (Dec 31, 1998) |
| Cash and Cash Equivalents | $32.3 million | $43.9 million (Dec 31, 1998) |
| Basic EPS | $1.14 | $1.03 |
Material Changes vs. Prior Period
- Revenue Growth: Rental revenues increased 65.3% year-over-year for the six-month period. This growth was driven by the acquisition of 11 shopping centers in 1999, 65 properties acquired in 1998, and the full-year impact of the Price REIT Acquisition (completed June 1998).
- Expense Increases: Rental property expenses rose 68.8% to $135.2 million, and interest expense increased 85.2% to $43.4 million, reflecting higher debt levels associated with acquisitions and the Price REIT deal.
- Profitability: Net income increased 54.5% to $81.9 million. Adjusted for a gain on sale in the prior year, basic EPS improved by $0.13.
- Debt Structure: The company issued $130 million in fixed-rate Senior Notes in February 1999 to repay maturing floating-rate debt. Total debt decreased slightly from year-end 1998 due to principal payments and refinancing activities.
Outlook, Risks, and Management Commentary
- Capital Strategy: Management intends to maintain a conservative dividend payout ratio to fund expansion, renovations, and debt repayment. The company utilizes public debt and equity markets as primary capital sources.
- Liquidity: The company has a $215 million unsecured revolving credit facility (with $15 million outstanding as of June 30, 1999) and a $200 million Medium-Term Note (MTN) program. Approximately $493.2 million remains available under a shelf registration statement.
- Joint Venture Activity: The company formed Kimco Income REIT (KIR) in 1998. In April 1999, an institutional investor purchased a significant interest in KIR for approximately $70 million. Kimco now accounts for its investment in KIR using the equity method.
- Risks: Key risks include general economic conditions, financing availability, interest rate volatility, and the "Year 2000" issue. Management states Year 2000 compliance costs have been immaterial and systems are substantially compliant, though third-party vendor compliance cannot be guaranteed.
- Subsequent Event: Effective July 1, 1999, the company exercised an option to acquire 13 properties from KC Holdings for approximately $39.8 million.
Investor Verification Checklist
- Verify the sustainability of the 65% revenue growth rate given the heavy reliance on acquisitions in 1998 and 1999.
- Review the terms of the $130 million Senior Notes issued in February 1999 and the remaining floating-rate debt exposure ($33.8 million).
- Confirm the occupancy rates and rental rate improvements in the newly acquired portfolio versus the existing portfolio.
- Assess the impact of the KIR joint venture structure on future earnings recognition and liquidity.
- Monitor the execution of the July 1999 acquisition of 13 properties from KC Holdings and its integration into the portfolio.