KIM

Kimco Realty Corp. 10-Q Summary: Period Ended June 30, 1998

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, 1998. The filing includes unaudited condensed consolidated financial statements and management's discussion and analysis.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Rental revenues increased 46.4% year-over-year for the six-month period. This growth was driven by 15 new shopping center acquisitions, 3 retail property acquisitions, and the acquisition of The Price REIT, Inc. (completed June 19, 1998).
• Expense Increases: Rental property expenses rose 60.0% to $80.1 million, primarily due to higher rent, real estate taxes, and depreciation associated with new acquisitions. Interest expense increased 79.1% to $23.4 million due to higher outstanding borrowings and debt assumed in the Price REIT merger.
• Balance Sheet Expansion: Total assets more than doubled from $1.34 billion to $2.53 billion, largely due to the Price REIT merger and significant property acquisitions. Total liabilities increased from $600.6 million to $1.04 billion.
• Capital Structure: The company issued $100 million in medium-term notes and raised approximately $106 million through common stock offerings in the first half of 1998. The Price REIT merger involved the issuance of 11.9 million common shares and new preferred stock classes.

Outlook, Risks, and Management Commentary

• Capital Strategy: Management intends to maintain a conservative dividend payout ratio to reserve capital for expansion, debt repayment, and property renovations. The company expects to continue qualifying as a REIT and paying regular dividends from operating cash flows.
• Liquidity: The company has access to a $100 million revolving credit facility (expiring June 2000) and a $150 million interim facility (expiring August 1998). As of June 30, 1998, there were no borrowings under these facilities.
• Subsequent Events: Following the reporting period, the company acquired a portfolio of 30 properties from Metropolitan Life Insurance Company for approximately $167.5 million and acquired leasehold positions at 88 locations for a minimum of $95 million.
• Risks: Forward-looking statements are subject to risks including general economic conditions, local real estate market fluctuations, interest rate increases, and operating cost increases. The company is also addressing Year 2000 compliance issues, though management does not expect material adverse effects.
• Accounting Changes: The company noted the issuance of FAS 133 regarding derivative instruments, but anticipates no material effect due to limited use of derivatives.

Investor Verification Checklist

• Verify the integration and performance of the newly acquired Price REIT portfolio (43 properties) post-merger.
• Monitor the company's ability to refinance or extend the $150 million interim credit facility expiring in August 1998.
• Assess the impact of the significant increase in interest expense ($10.3 million increase for the six-month period) on future net income margins.
• Review the details of the subsequent $167.5 million Met Life acquisition and the $95 million Venture leasehold purchase to understand future capital deployment.
• Confirm the occupancy rates and rental rate improvements in the 15 shopping centers and 3 retail properties acquired during the first half of 1998.