Retail real estate investment trust (REIT), Kimco Realty Corporation’s (KIM) fourth-quarter 2014 funds from operations (“FFO”) per share, as adjusted, came in at 35 cents, in line with the Zacks Consensus Estimate and 2 cents above the prior-year quarter figure. Results benefited from growth in U.S. same-property net operating income (“NOI”).
Total revenue increased 16.6% year over year to $264.5 million, surpassing the Zacks Consensus Estimate of $253 million.
For full year 2014, Kimco reported FFO, as adjusted, of $1.40 per share, up from $1.33 reported a year ago. Full-year revenues came in at $993.9 million, up 15.4% year over year.
Quarter in Details
At the quarter-end, pro-rata occupancy in the U.S. and combined portfolios (including Canada and Latin America) stood at 95.7% and 95.8%, respectively, denoting year-over-year increases of 80 basis points (bps) and 130 bps. The fourth-quarter 2014 occupancy levels marked the highest since the first quarter of 2008.
In the U.S. shopping center portfolio, pro-rata occupancy for anchor space (10,000 square feet and greater) was 98.3%, reflecting an uptick of 40 bps year over year; while pro-rata occupancy for small shop space rose 280 bps to 88% over the same time frame.
Same-property net operating income in the U.S. portfolio climbed 4.3% from the year-ago period, representing the nineteenth consecutive positive quarterly increase. This included a 1.4% uptick on inclusion of redevelopments. Moreover, combined same-property NOI, excluding the impact of foreign currency, grew 4% from the comparable prior-year period.
Further, in the U.S. portfolio, pro-rata rental-rate leasing spreads moved north 9.4%, with rental rates for new leases rising 11.9% and renewals/options advancing 8.6%.
Kimco exited 2014 with around $187.3 million of cash and cash equivalents, up from $148.8 million at prior-year end.
Portfolio Activity
During 2014, Kimco’s U.S. transaction volume (pro-rata) exceeded $1.8 billion. The company acquired interests in 60 properties aggregating $1.1 billion and sold 91 properties for $717.1 million. Moreover, during the fourth quarter, the company’s strategic exit from Latin America was significantly accomplished with the sale of 25 assets for $205.2 million. (Read more: Kimco Closes $1B Deals in Q4, Majorly Exits Latin America)
Outlook
For full year 2015, Kimco has guided adjusted FFO per share in the range of $1.40–$1.44. The Zacks Consensus Estimate of $1.40 per share also lies within this range.
The company’s outlook is based on expectations of U.S. portfolio occupancy growth of 25–50 bps and same-property NOI increase in the range of 3.0–3.5%.
Dividend Update
Kimco’s board of directors announced a quarterly cash dividend of 24 cents per share on its common stock. The dividend will be paid on Apr 15, 2015 to shareholders of record on Apr 6.
Our Viewpoint
Going forward, solid demand for Kimco’s properties, its portfolio-transformation initiatives, along with an easy access to capital, promise considerable upside potential for the company. However, near-term earnings dilution, arising from high disposition activity, remains a concern for this Zacks Rank #3 (Hold) stock.
Investors interested in retail REITs may consider stocks like Agree Realty Corp. (ADC), The Macerich Company (MAC) and Regency Centers Corporation (REG). All these stocks hold a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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