Solid Results for America's Largest Shopping Center Landlord

Tickers in this article: COST HD KIM TGT TJX
NEW YORK ( TheStreet) -- As a leading landlord of shopping centers in the U.S., Kimco Realty (KIM) has emerged from the Great Recession with an enviable tenant list featuring many higher quality and better credit tenants. The company's monstrous portfolio of 896 properties across 44 states, Puerto Rico, Canada, Mexico, and South America, has recovered a significant amount of lost occupancy, especially in the big- and mid-box categories.

Accordingly, Kimco has replaced many of their troubled tenants with higher-quality retailers. This diverse portfolio includes many brand names and the highly diversified platform remains the largest landlord of Costco (COST) , Home Depot (HD) , TJX (TJX) , Target (TGT) , Ross Stores (ROST) , Walgreen (WAG) and Bed Bath & Beyond (BBBY) , all strong investment grade companies. These tenants have enabled Kimco to draw more shoppers to the properties, improve leasing demand, and position the assets to better withstand another downturn.

Last week, Kimco reported its fourth quarter and year-end 2012 results and the improved performance is indicative of the higher quality income fundamentals. As David Henry, CEO of Kimco, explains:

"Overall, the shopping center industry in our portfolio in particular continues to demonstrate steady and sustained improvement across the board, benefiting from population growth and very little new development. Effective rents and occupancy rates are increasing at an accelerating rate. Our key metrics or vital signs, as we like to say, are very strong with 11 straight quarters of positive same-store NOI growth and an occupancy rate just under 94%, representing our highest level since the start of the recession and very high leasing spreads."

Kimco reported Funds from Operations (as adjusted) at 33 cents per share, up 10% from 30 cents per share last year. The full year 2012 Funds from Operations (as adjusted) came to $1.26 per share, reaching the top end of the guidance range. Kimco's occupancy climbed to 94% (on a gross basis) up 30 basis points sequentially. Kimco, with assets of around $9.74 billion has excellent liquidity of around $1.4 billion.


Kimco affirmed its 2013 FFO guidance range of $1.28 to $1.33 adjusted per share with a midpoint of $1.31. At the midpoint range, the Funds from Operations per share growth is a solid 4%.

A Focus on a Circle of Competence

Kimco has continued to accelerate its shopping center recycling program and the $8.8 billion (market cap) REIT is in the final stage of monetizing its non-retail assets. The largest non-core asset, InTown Suites, is under contract and Kimco expects to monetize "over $200 million during 2013."

As explained by Kimco's CEO, Dave Henry, on the latest earnings call: "Our sales contract with Starwood Capital on the InTown portfolio is now firm with no due diligence contingencies, and the sale is expected to close in the second quarter when the complicated loan assumption process is completed."