KIMCO’S Q4 EARNINGS: ENDING 2015 ON A STRONG NOTE, AND A VISION FOR THE FUTURE
Over the past year, Kimco dramatically transformed its portfolio, focusing on its assets in the U.S., which we believe to be the market with the highest growth potential. We also presented our 2020 Vision, a five-year roadmap that lays the foundation for an even stronger, world-class portfolio.
Before we get into the 2020 Vision, let’s look at some key performance figures in Kimco’s Q4 results.
- Our full year headline funds from operation (FFO) was $1.56 per diluted share, which hit the upper end of our guidance range we laid out in early 2015. That result is $0.11 higher than the 2014 amount, which was $1.44 per diluted share, and represented a 7.6 percent increase.
- Overall occupancy rates ended quite strongly, clocking in at 95.8 percent, which is up 20 basis points from last quarter and 10 basis points from fourth quarter 2014. Small shop occupancy helped drive that surge, and that segment’s occupancy is now 88.7 percent, a 70 basis point improvement over the prior year figure.
- The average base rent marched on, as well, with a 5.2 percent gain from the prior year.
- U.S. gross transaction volume exceeded $2.8 billion in 2015, with the acquisition of 59 high-quality, core market properties totaling $2.1 billion and the sale of 95 properties for $762.9 million.
- 2015 also saw the completion of Kimco’s exit from Latin America, and the commencement of its exit from Canada.
- Kimco declared a quarterly cash dividend of $0.255 per share.
Q4’s strong performance metrics
As we mentioned, occupancy rates and rents are trending in the right direction. In addition, U.S. leasing spreads are displaying a mark-to-market opportunity at Kimco, with a 31 percent increase on new leases and a combined spread of 13.1 percent in Q4.
We experienced same-site net operating income (NOI) growth of 2.8 percent this quarter, which was driven by minimum rent increases and positive basis point improvements from redevelopment. U.S. same-property NOI growth increased 3.1 percent in 2015.
Redevelopment remains a key component of our long-term growth strategy. Because of cost savings, we came in $5 million under our redevelopment budget of $189 million and above budget on NOI, improving the incremental return to 11.3 percent in 2015. Kimco believes the open-air retail landscape is healthy, and we continue to monitor new development and redevelopment opportunities.
Lastly, we’ve reaffirmed our guidance for 2016, which was provided at our Investor Day in December; our FFO as adjusted or recurring FFO per diluted share range is $1.48 to $1.52, and our headline FFO per diluted share range is $1.54 to $1.62.
Charting a path forward
These metrics offer a glimpse of why optimism is high at Kimco. Now, let’s look at our plan for the next few years. As we shared in greater detail in December of 2015, we unveiled our 2020 Vision. This five-year plan charts our growth and portfolio transformation, with the goals of increasing our NOI from our top properties, and generating strong growth in our NAV and earnings, while further reducing our targeted leverage levels. For additional insight, you can access Part I and Part II of the Investor Day presentation on our website or watch this year’s presentation in full.
As Milton Cooper said on our earnings call, we’ve gone back to the basics. We’ve streamlined the portfolio to capitalize on the advantages of the U.S. market, and we’ll move forward with developing and redeveloping shopping centers in many regional markets. Kimco’s executive team believes new opportunities still exist that will unlock more value from our portfolio, and our 2020 Vision will help us achieve that goal.
You can listen to the earnings webcast or read the transcript for more detail on Kimco’s Q4 earnings. Return to the blog in spring for our Q1 analysis.