KIMCO'S FOURTH QUARTER AND FULL-YEAR 2011 EARNINGS RECAP
Hopefully you've read over Kimco's fourth quarter and full-year 2011 earnings press release. Overall, our results were solid and showed improvement in several crucial areas, including FFO (Funds from Operations), operating metrics, and occupancy levels.
But if you haven't had a chance to read our press release yet and are looking for some of the highlights, we thought we'd recap our financial results and core business operations for the quarter and year on our blog. We plan to share these earnings recaps on our blog every quarter.
FFO and recurring FFO
FFO is a measure of cash flow which adds back depreciation and operating impairments, but excludes gains on sales of operating properties. It is a key metric of profitability for REITs.
Kimco's FFO for the fourth quarter of 2011 was $135.4 million or $0.33 per diluted share. That's up from $125.3 million or $0.31 per diluted share in 2010, representing 6.5 percent increase per diluted share. For the year, Kimco had FFO of $517.2 million or $1.27 per diluted share, both increases of 5 percent compared to 2010 FFO of $493.2 million or $1.21 per diluted share.
Kimco reported recurring FFO of $123.5 million or $0.30 per diluted share for the fourth quarter 2011, up from $119.7 million or $0.29 per diluted share in the fourth quarter of 2010. On an annual basis, Kimco's recurring FFO was $489.8 million or $1.20 per diluted share in 2011. That's up from $465.4 million or $1.14 per diluted share in 2010, representing 5 percent increase per diluted share.
Shopping center portfolio
Kimco's operating metrics also continued to improve in 2011. We ended the fourth quarter with gross occupancy in our combined shopping center portfolio (U.S., Canada, and Latin America) of 93.3 percent, an increase of 30 basis points both sequentially and over the fourth quarter of 2010.
This increase was mainly due to growth in our U.S. portfolio. Gross occupancy in our U.S. portfolio was 93.2 percent in the fourth quarter of 2011, up 30 basis points sequentially and 50 basis points over the fourth quarter of 2010.
Our pro-rata occupancy in our U.S. portfolio was also up. This was 93.1 percent for the last quarter, an increase of 30 basis points sequentially and 70 basis points over the fourth quarter of 2010. We were able to improve our occupancy through (1) positive net absorption (new leases' square footage was greater than vacated square footage), (2) acquiring more highly occupied shopping centers while divesting those with sub-par occupancy levels, and (3) improving on small shop leasing.
Kimco generated a positive U.S. cash-basis leasing spread of 4.9 percent on signing 282 same space leases, renewals, and options totaling 1.3 million square feet for the quarter. (Leasing spread is the difference between the rent a new tenant pays for a given space and the rent the previous tenant paid for the same space.)
We were also able to increase our combined same-property net operating income (NOI) by 1.6 percent over the fourth quarter 2010. For our U.S. portfolio, our increase in same-property NOI was 1.1 percent.
In 2011, Kimco acquired interests in 21 new retail properties, 17 of which are wholly-owned and four of which are joint ventures. That totals 3.6 million new square feet of space for $494 million.
Non-strategic U.S. shopping center portfolio
Disposing of and monetizing Kimco's non-retail assets has been a strategic focus for our company over the past few years. One of our major goals is to continue to return to our neighborhood shopping center roots. To that end, Kimco sold 31 non-strategic U.S. shopping centers for $158 million in 2011.
We also shed $286 million in non-retail investments in 2011. At the end of 2010, we held $799 million in non-retail investments, which represented 7 percent of our gross assets. Kimco ended 2011 with $513 million in non-retail investments, comprising 4.5 percent of the company's gross assets. That's a decrease of 36 percent over the year.
Dividend and capital structure
Kimco's board of directors declared a quarterly cash dividend of $0.19 per common share, payable on April 16, 2012, to shareholders of record on April 4, 2012. At year-end, Kimco continued to maintain investment-grade credit ratings. S&P and Fitch each rated the company BBB+, and Moody's gave us a BAA1 rating.
Kimco maintained its 2012 recurring FFO guidance range of $1.22 to $1.26 per diluted share. We also provided guidance on our combined portfolio occupancy, which we believe is going to increase somewhere in the range of 50 to 100 basis points in 2012. In addition, we believe our combined same-property NOI will increase by 1.5 percent to 3.5 percent by year-end.
Moving forward into 2012, Kimco's goals are centered around continuing to:
- Recycle assets, selling non-retail and non-strategic retail assets
- Selective acquisitions focused in targeted markets
- Lease up the company's Latin America portfolio
- Strengthen the company's balance sheet by continuing to reduce leverage levels and employ a conservative mix of capital
To achieve these goals, Kimco will be continuing to focus on small and mom-and-pop retailers, leasing small retail space to creditworthy tenants. This includes building our new FastTrack Franchise program, which we created to streamline the franchisor/franchisee process in our shopping centers.
Also helping move us toward our goals will be our active redevelopment program, which lets us keep properties on their growth trajectory and increases cash flow, NOI, and property value. We are also committed to our sustainability program, where we identify and pursue initiatives that are good for the environment and also good for the company.
We believe 2012 will be a strong year for Kimco as we remain focused on our balance sheet and seek ways to continue building value for our shareholders. For a deeper look at Kimco's quarterly earnings results, see our fourth quarter and year-end 2011 earnings release and our conference call transcript.