KIM

Business Context and Reporting Period

Company: Kimco Realty Corporation (Kimco)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2009
Business Overview: Kimco is a major owner and operator of neighborhood and community shopping centers. As of June 30, 2009, the portfolio included 1,941 properties totaling approximately 180.0 million square feet of gross leasable area (GLA) across 45 states and international locations. The Company is shifting strategy away from non-retail assets to focus on core retail operations.

Key Financial Metrics

Material Changes vs. Prior Period

• Significant Impairment Charges: The Company recognized approximately $176.5 million in non-cash impairment charges during the six months ended June 30, 2009, compared to $3.8 million in the prior year. This includes $50.0 million for property carrying values, $40.6 million for preferred equity investments, and $29.6 million for marketable securities.
• Net Income to Net Loss: The Company reported a net loss of $96.2 million for the six months ended June 30, 2009, a reversal from net income of $192.8 million in the same period in 2008. This was primarily driven by impairments and reduced income from joint ventures and preferred equity programs.
• Revenue Growth: Rental revenues increased 3.1% year-over-year, driven by 2008 acquisitions and development completions, partially offset by a decline in occupancy from 95.4% to 91.4%.
• Capital Markets Activity: In April 2009, the Company completed a primary public stock offering of 105.2 million shares, raising net proceeds of approximately $717.3 million. It also secured a $220.0 million unsecured term loan.
• Debt Reduction: Total liabilities decreased by approximately $518.6 million, largely due to the repayment of $165.8 million in unsecured senior notes and significant paydowns on revolving credit facilities.

Guidance, Outlook, and Risks

• Market Conditions: Management notes that the retail shopping sector has been negatively affected by the economic recession, leading to tenant bankruptcies and store closings. Real estate transactional activity is expected to remain low throughout 2009, curtailing near-term growth.
• Liquidity and Financing: Despite constrained credit markets, the Company maintains approximately $1.7 billion in available unsecured revolving credit facilities. Management believes it has viable refinancing alternatives for 2009 debt maturities.
• Dividend Policy: The Company paid $0.88 per share in dividends during the first six months of 2009. A quarterly dividend of $0.06 per share was declared in July 2009. The Board expects to return to a ratable quarterly dividend in January 2010, though future dividends remain at the Board's discretion based on earnings and liquidity.
• Risks: Key risks include the inability of tenants to meet lease obligations, continued declines in real estate values requiring further impairments, and the potential inability to access capital markets on favorable terms.

Investor Verification Checklist

• Impairment Sustainability: Verify if the $176.5 million in impairment charges represents a one-time adjustment or if further write-downs are likely given the ongoing economic downturn.
• Occupancy Trends: Monitor the occupancy rate decline from 95.4% to 91.4% and assess the impact of tenant bankruptcies on future rental revenue.
• Debt Maturities: Review the schedule of debt maturities, specifically the $130.7 million in consolidated debt due in the remainder of 2009, and the Company's ability to refinance in a tight credit market.
• Capital Allocation: Assess the utilization of the $717.3 million raised from the stock offering and the $220 million term loan, specifically regarding debt paydown versus new investments.
• Dividend Coverage: Evaluate the Company's ability to maintain dividend payments given the shift from net income to net loss and reduced cash flow from operating activities.