Acquisitions Boost Kimco's Q2 Numbers

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NEW HYDE PARK, NY-With Kimco Realty Corp.’s plans to acquire San Diego-based Pan Pacific Retail Properties Inc. for $2.9 billion in cash and stock, or about $70 per share, still the buzz, its second-quarter conference call was all about acquisitions.

Pan Pacific owns a portfolio of 138 retail properties totaling approximately 22.6 million square feet. Kimco will assume Pan Pacific’s outstanding debt of $1.1 billion for a total transaction value of $4 billion.

Kimco released that net income for the second quarter ended June 30 was $108.7 million compared to $83.8 million a year earlier, an increase of 29.7%. On a per share basis, net income increased 22.9% to $0.43 from $0.35 reported in the second quarter of 2005. All prior period per share have been adjusted for the company’s 2-for-1 stock split that was effective Aug. 23, 2005.

Kimco’s second quarter funds from operations (FFO) rose 18.6% to $133.3 million from $112.4 million for the same period last year. On a per share basis, second quarter FFO increased 12.5% to $0.54 from $0.48 a year ago. Quarterly FFO excludes gains on dispositions and transfers of operating properties net of minority interests and gains on dispositions of joint venture properties, totaling approximately $24.8 million, or $0.10 per share, in 2006 and approximately $8.4 million, or $0.04 per share, in 2005.

Kimco’s board of directors has increased the quarterly dividend 9.1% to $0.36 per share from $0.33 per share. This dividend increase represents the 15th consecutive annual increase in Kimco’s dividend, which has grown at a compound annual rate of 9.3% since the company’s initial public offering in 1991. In addition, the board declared the fourth quarter common stock dividend at the increased rate of $0.36 per share payable on Oct. 16, 2006 to shareholders of record on Oct. 4, 2006.

“My concern is that the consumer is stretched pretty far,” said CEO Milton Cooper during the company’s second quarter conference call. But along with that, he added that there is retailer demand for space in the company’s shopping centers, which are anchored by supermarkets. “Retail demand is vibrant.”

Emerging retail markets discussed during the call ranged from high-end domestic urban markets as well as a heavy play in Mexico. During the quarter, Kimco invested approximately $35.4 million in preferred equity transactions that consisted of 13 properties. One area of concentration that will continue will be south of the border. Mexico Investments is $5.7 million ground up development project in Puerto Vallarta. The 83,000-sf development is expected to be completed in the first quarter of 2007 and will be anchored by a 72,000-sf Soriana grocery store. Soriana, with 202 stores throughout Mexico, is one of the country’s largest grocery store chains.

Also acquired was a 20-acre site in Guadalajara for the ground up development of a 767,400-sf shopping center. The property is located in a highly sought after in-fill location in Mexico’s second largest city where there is strong demand from anchor tenants. Kimco has initially invested $31.6 million and the total project cost is expected to be approximately $83 million upon completion.

The company also recently completed a $5.2 million development project, Plaza Magno Deco, a 39,000-sf shopping center located in Mexico City.

“Coastal markets continue to be strong,” said Jeff Olson, president of East and West Coast supermarkets. “Right now we have a waiting list; there is no downtick in demand.” He also added that retailers are “being more patient with their prototypes so they can be more creative.”

The execs also said that the vast majority of the Alberston’s stores it acquired “will remain in supermarkets,” and those stores are in the company’s “long-term plans.”