Kimco Realty Announces Second Quarter 2014 Operating Results; Solid Portfolio Fundamentals and Increase in Same-Property NOI Growth Continue Positive Momentum

Kimco Realty Corp. (NYSE:KIM) today reported results for the second quarter ended June 30, 2014.

Financial Results

Net income available to common shareholders for the second quarter of 2014 was $74.9 million, or $0.18 per diluted share, compared to $36.6 million, or $0.09 per diluted share, for the second quarter of 2013. For the six months ended June 30, 2014, net income available to common shareholders was $147.4 million, or $0.36 per diluted share, compared to $89.8 million, or $0.22 per diluted share, through June 30, 2013.

FFO, a widely accepted supplemental measure of REIT performance, was $141.2 million, or $0.34 per diluted share, for the second quarter of 2014 compared to $141.6 million, or $0.35 per diluted share, for the second quarter of 2013. For the six months ended June 30, 2014, FFO was $279.6 million, or $0.68 per diluted share compared to $276.5 million, or $0.68 per diluted share, for the same period last year.

FFO as adjusted, which excludes the effects of non-operating impairments as well as transactional income and expenses, was $143.2 million, or $0.35 per diluted share, for the second quarter of 2014 compared to $142.1 million, or $0.35 per diluted share, for the second quarter of 2013. FFO as adjusted for the six months ended June 30, 2014 was $284.0 million, or $0.69 per diluted share, compared to $274.3 million, or $0.67 per diluted share, for the same period in 2013.

A reconciliation of net income to FFO and FFO as adjusted is provided in the tables accompanying this press release.

Operating Results

Second quarter 2014 shopping center portfolio operating results:

• Pro-rata occupancy in both the U.S. and combined (including Canada and Latin America) portfolios increased 110 basis points over the second quarter of 2013 to 95.0% and 94.8%, respectively.
• U.S. shopping center portfolio pro-rata occupancy for anchor space (10,000 square feet and greater) was 97.8%, an 80 basis-point increase from the second quarter of 2013. The pro-rata occupancy for small shop space increased 200 basis points to 86.3% during this same period.
• U.S. portfolio pro-rata rental-rate leasing spreads increased 9.7% with rental rates for new leases up 13.3% and renewals/options increasing 8.2%. Pro-rata rental-rate leasing spreads in Canada and Latin America increased 10.4% and 12.3%, respectively.
• U.S. same-property net operating income (NOI) increased 2.5%, including a 40 basis point increase from the inclusion of redevelopments, compared to the second quarter of 2013.
• Combined same-property NOI, excluding the impact of foreign currency, increased 2.8% over the second quarter of 2013 with positive same-property NOI in Canada (+3.6%) and Latin America (+11.1%). Combined same-property NOI, including the impact of foreign currency, increased 2.0% over the same period in 2013.
• Total leases executed in the combined portfolio: 541 new leases, renewals and options totaling 2.1 million square feet.

Investment Activity

Acquisitions:

• As previously announced, Kimco completed the acquisition of a 24-property retail portfolio located predominately in the Boston metropolitan market, comprising 1.4 million square feet, for a total purchase price of $270.0 million, including $120.5 million of mortgage debt.
• The company purchased the remaining 60.9% interest in the 12-property Kimco Income Fund I portfolio (KIF I) from its joint venture partners for a gross price of $408.0 million, including $38.2 million of mortgage debt. Kimco earned a cash promote of approximately $18.8 million, which was used to reduce the company’s overall cash payment to $251.4 million.
• Subsequent to the second quarter, the company acquired a portfolio of 10 predominantly grocery-anchored shopping centers from its joint venture with SEB Asset Management for a gross price of $275.8 million. Kimco paid approximately $69.8 million for its partner’s 85% equity interest which was subject to $193.6 million of mortgage debt.

Dispositions:

United States

• During the second quarter, Kimco sold ownership interests in 15 U.S. properties (including eight properties held in joint ventures) totaling 1.7 million square feet for a gross sales price of $185.6 million, including $23.3 million of mortgage debt. The company’s share of the proceeds from these sales was $121.5 million.
• Subsequent to the second quarter, Kimco sold 11 properties totaling 704,000 square feet for a gross sales price of $103.9 million. The company’s share of the proceeds from these sales was $90.8 million.
• Kimco currently has 44 properties for sale that are under contract, including several portfolios, totaling approximately $325.8 million, of which the company’s share is approximately $260.4 million.

Mexico and South America (Latin America)

• As previously announced during the second quarter, Kimco completed the sale of four retail properties in Mexico for a gross sales price of 1.1 billion Mexican pesos ($82.1 million). The company’s pro-rata share of the proceeds was approximately 688.1 million pesos ($53.3 million).
• Kimco executed a contract of sale for three shopping centers in Mexico for a gross sales price of 1.5 billion pesos ($112.3 million) that is expected to close in the third quarter of 2014. The company’s pro-rata share of the sales price is approximately 1.3 billion pesos ($100.5 million). These transactions represent another step toward Kimco’s commitment to exit Latin America with the company successfully monetizing approximately 70% of its original investment in Mexico since 2013.

Capital Structure

During the second quarter, the company issued $500 million of seven-year senior unsecured notes due in May 2021 with a coupon rate of 3.20%. The net proceeds were used to (i) partially reduce borrowings under the company’s unsecured revolving credit facility, (ii) repay $294.6 million of senior unsecured notes that matured in June 2014 with a weighted average interest rate of 5.20%, and (iii) pre-fund $97.6 million of mortgage debt having a blended interest rate of 6.14% during the remainder of 2014.

Dividend Declarations

Kimco’s board of directors declared a quarterly cash dividend of $0.225 per common share, payable on October 15, 2014, to shareholders of record on October 3, 2014, with an ex-dividend date of October 1, 2014. This dividend represents a 7.1% increase over the previous dividend paid for the comparable period in 2013.

The board of directors also declared quarterly dividends with respect to the company’s various series of cumulative redeemable preferred shares (Class H, Class I, Class J and Class K). All dividends on the preferred shares will be paid on October 15, 2014, to shareholders of record on October 2, 2014, with an ex-dividend date of September 30, 2014.

2014 Guidance

The company affirms its 2014 full-year guidance range for FFO as adjusted, which does not include any estimate for transactional activities or non-operating impairments, of $1.36 - $1.40 per diluted share.

Estimated 2014 shopping center operating metrics for the combined portfolio remain as follows:

• Combined portfolio occupancy: +50 to +75 basis points
• Combined same-property NOI: +2.5% to +3.5%

Conference Call and Supplemental Materials

Kimco will hold its quarterly conference call on Wednesday, July 30, 2014, at 10:00 a.m. EDT. The call will include a review of the company’s second quarter 2014 results as well as a discussion of the company’s strategy and expectations for the future. To participate, dial 1-888-317-6003 (Passcode: 0905306).

A replay will be available through 9:00 a.m. EDT on September 1, 2014 by dialing 1-877-344-7529 (Passcode: 10047822). Access to the live call and replay will be available on the company's website at investors.kimcorealty.com.

About Kimco

Kimco Realty Corp. (NYSE: KIM) is a real estate investment trust (REIT) headquartered in New Hyde Park, New York, that owns and operates North America’s largest portfolio of neighborhood and community shopping centers. As of June 30, 2014, the company owned interests in 840 shopping centers comprising 121 million square feet of leasable space across 41 states, Puerto Rico, Canada, Mexico and South America. Publicly traded on the NYSE since 1991, and included in the S&P 500 Index, the company has specialized in shopping center acquisitions, development and management for more than 50 years. For further information, please visit www.kimcorealty.com, the company’s blog at blog.kimcorealty.com, or follow Kimco on Twitter at www.twitter.com/kimcorealty.

Safe Harbor Statement

The statements in this news release state the company's and management's intentions, beliefs, expectations or projections of the future and are forward-looking statements. It is important to note that the company's actual results could differ materially from those projected in such forward-looking statements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to (i) general adverse economic and local real estate conditions, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business, (iii) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms to the company, (iv) the company’s ability to raise capital by selling its assets, (v) changes in governmental laws and regulations, (vi) the level and volatility of interest rates and foreign currency exchange rates, (vii) risks related to our international operations, (viii) the availability of suitable acquisition, disposition and redevelopment opportunities, (ix) valuation and risks related to our joint venture and preferred equity investments, (x) valuation of marketable securities and other investments, (xi) increases in operating costs, (xii) changes in the dividend policy for the company’s common stock, (xiii) the reduction in the company’s income in the event of multiple lease terminations by tenants or a failure by multiple tenants to occupy their premises in a shopping center, (xiv) impairment charges and (xv) unanticipated changes in the company’s intention or ability to prepay certain debt prior to maturity and/or hold certain securities until maturity. Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the company's Securities and Exchange Commission (SEC) filings, including but not limited to the company's Annual Report on Form 10-K for the year ended December 31, 2013. Copies of each filing may be obtained from the company or the SEC.

The company refers you to the documents filed by the company from time to time with the SEC, specifically the section titled "Risk Factors" in the company's Annual Report on Form 10-K for the year ended December 31, 2013, as may be updated or supplemented in the company’s Quarterly Reports on Form 10-Q and the company’s other filings with the SEC, which discuss these and other factors that could adversely affect the company's results.

(1) Reflects the potential impact if certain units were converted to common stock at the beginning of the period. Funds from operations would be increased by $721 and $625 for the three months ended June 30, 2014 and 2013, and $1,441 and $1,249 for the six months ended June 30, 2014 and 2013, respectively.

FFO is a widely accepted supplemental measure of REIT performance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). Given the company’s business as a real estate owner and operator, Kimco believes that FFO and FFO as adjusted is helpful to investors as a measure of its operating performance. NAREIT defines FFO as net income/(loss) attributable to common shareholders computed in accordance with generally accepted accounting principles, excluding (i) gains or losses from sales of operating real estate assets and (ii) extraordinary items, plus (iii) depreciation and amortization of operating properties and (iv) impairment of depreciable real estate and in substance real estate equity investments. Included in these items are also the company’s share of unconsolidated real estate joint ventures and partnerships. FFO as adjusted excludes the effects of non-operating impairments, transactional income and expenses.

Same Property Net Operating Income is a supplemental non-GAAP financial measure of real estate companies’ operating performance. Same Property NOI is considered by management to be an important performance measure of Kimco's operations and management believes that it is helpful to investors as a measure of Kimco's operating performance because it includes only the net operating income of properties that have been owned for the entire current and prior year reporting periods and excludes properties under development and pending stabilization. As such, Same Property NOI assists in eliminating disparities in net income due to the development, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent performance measure for the comparison of Kimco's properties.

Same Property NOI is calculated using revenues from rental properties (excluding straight-line rents, lease termination fees and above/below market rents) less operating and maintenance expense, real estate taxes and rent expense, plus Kimco's proportionate share of Same Property NOI from unconsolidated real estate joint ventures, calculated on the same basis. Same Property NOI includes all properties that are owned for the entire current and prior year reporting periods and excludes properties under development and properties pending stabilization. Properties are deemed stabilized at the earlier of (i) reaching 90% leased or (ii) one year following a projects inclusion in operating real estate (two years for Latin American properties).

Projections involve numerous assumptions such as rental income (including assumptions on percentage rent), interest rates, tenant defaults, occupancy rates, foreign currency exchange rates (such as the US-Canadian rate), selling prices of properties held for disposition, expenses (including salaries and employee costs), insurance costs and numerous other factors. Not all of these factors are determinable at this time and actual results may vary from the projected results, and may be above or below the range indicated. The above range represents management’s estimate of results based upon these assumptions as of the date of this press release. Under U.S. GAAP, the company is required to release cumulative translation adjustment (“CTA”) balances into earnings when the company has substantially liquidated its investment in a foreign entity. CTAs result from currency fluctuations between local currency and the U.S. dollar during the period in which the company held its investment and are recorded as a component of Accumulated other comprehensive income (“AOCI”) on the company’s Condensed Consolidated Balance Sheets. During 2013, the company began selling properties within its Latin American portfolio and the company may, in the near term, substantially liquidate all of its investments in this portfolio which will require the then unrealized loss on foreign currency translation to be recognized as a charge against earnings. The final impact of currency will apply to the respective gains and losses on the sale of these operating properties and will not have an impact on FFO or FFO as adjusted. At June 30, 2014, the aggregate CTA net loss balance relating to the company’s Latin American portfolio was $117.0 million.