This annual report on Form 10-K (“Form 10-K”), together with other statements and information publicly disseminated by Kimco Realty Corporation (the “Company”) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with the safe harbor provisions.  Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and could materially affect actual results, performances or achievements.  Factors which may cause actual results to differ materially from current expectations include, but are not limited to (i) general adverse economic and local real estate conditions, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business, (iii) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on terms favorable terms,to the Company, (iv) the Company’s ability to raise capital by selling its assets, (v) changes in governmental laws and regulations, (vi) the level and volatility of interest rates and foreign currency exchange rates, (vii) risks related to our international operations, (viii) the availability of suitable acquisition and disposition opportunities, (viii)(ix) valuation ofand risks related to our joint venture and preferred equity investments, (ix)(x) valuation of marketable securities and other investments, (x)(xi) increases in operating costs, (xi)(xii) changes in the dividend policy for the Company’s common stock, (xii)(xiii) the reduction in the Company’s income in the event of multiple lease terminations by tenants or a failure by multiple tenants to occupy their premises in a shopping center, (xiii)(xiv) impairment charges and (xiv)(xv) unanticipated changes in the Company’s intention or ability to prepay certain debt prior to maturity and/or hold certain securities until maturity and the risks and uncertainties identified under Item 1A, “Risk Factors” and elsewhere in this Form 10-K.10-K and in the Company’s other filings with the SEC.  Accordingly, there is no assurance that the Company’s expectations will be realized.

Kimco Realty Corporation, a Maryland corporation, is one of the nation's largest owners and operators of neighborhood and community shopping centers.  The terms "Kimco," the "Company," "we," "our" and "us" each refer to Kimco Realty Corporation and our subsidiaries, unless the context indicates otherwise.  The Company is a self-administered real estate investment trust ("REIT") and has owned and operated neighborhood and community shopping centers for more than 50 years.  The Company has not engaged, nor does it expect to retain, any REIT advisors in connection with the operation of its properties. As of December 31, 2011,2012, the Company had interests in 946896 shopping center properties (the “Combined Shopping Center Portfolio”), aggregating 138.1131.3 million square feet of gross leasable area (“GLA”), and 845829 other property interests, primarily through the Company’s preferred equity investments, other real estate investments and non-retail properties, totaling  approximately 34.126.6 million square feet of GLA, for a grand total of 1,7911,725 properties aggregating 172.2157.9 million square feet of GLA, located in 44 states, Puerto Rico, Canada, Mexico, Chile, Brazil and Peru. The Company’s ownership interests in real estate consist of its consolidated portfolio and portfolios where the Company owns an economic interest, such as properties in the Company’s investment real estate management programs, where the Company partners with institutional investors and also retains management.  The Company believes its portfolio of neighborhood and community shopping center properties is the largest (measured by GLA) currently held by any publicly traded REIT.

The Company's executive offices are located at 3333 New Hyde Park Road, New Hyde Park, New York 11042-0020 and its telephone number is (516) 869-9000.  Nearly all operating functions, including leasing, legal, construction, data processing, maintenance, finance and accounting are administered by the Company from its executive offices in New Hyde Park, New York and supported by the Company’s regional offices.  As of December 31, 2011,2012, a total of 685635 persons are employed by the Company.

The Company began operations through its predecessor, The Kimco Corporation, which was organized in 1966 upon the contribution of several shopping center properties owned by its principal stockholders.  In 1973, these principals formed the Company as a Delaware corporation, and, in 1985, the operations of The Kimco Corporation were merged into the Company. The Company completed its initial public stock offering (the "IPO") in November 1991, and, commencing with its taxable year which began January

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1, 1992, elected to qualify as a REIT in accordance with Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code").  If, as the Company believes, it is organized and operates in such a manner so as to qualify and remain qualified as a REIT under the Code, the Company generally will not be subject to federal income tax, provided that distributions to its stockholders equal at least the amount of its REIT taxable income, as defined under the Code.  In 1994, the Company reorganized as a Maryland corporation.  In March 2006, the Company was added to the S & P 500 Index, an index containing the stock of 500 Large Cap companies, most of which are U.S. corporations.  The Company's common stock, Class FH Depositary Shares, Class GI Depositary Shares, Class J Depositary Shares and Class HK Depositary Shares are traded on the New York Stock Exchange (“NYSE”) under the trading symbols “KIM”, “KIMprF”, “KIMprG” and “KIMprH”, “KIMprI”, “KIMprJ” and “KIMprK”, respectively.

The Company’s initial growth resulted primarily from ground-up development and the construction of shopping centers.  Subsequently, the Company revised its growth strategy to focus on the acquisition of existing shopping centers and continued its expansion across the nation.  The Company implemented its investment real estate management format through the establishment of various institutional joint venture programs, in which the Company has noncontrolling interests.  The Company earns management fees, acquisition fees, disposition fees and promoted interests based on value creation.  The Company continued its geographic expansion with investments in Canada, Mexico, Chile, Brazil and Peru.  The Company’s revenues and equity in income from its foreign investments in U.S. dollar equivalents and their respective local currencies are as follows (in millions):

The Company, through its taxable REIT subsidiaries (“TRS”), as permitted by the Tax Relief Extension Act of 1999, has been engaged in various retail real estate related opportunities, including (i) ground-up development of neighborhood and community shopping centers and the subsequent sale thereof upon completion, (ii) retail real estate management and disposition services, which primarily focused on leasing and disposition strategies for real estate property interests of both healthy and distressed retailers and (iii) acting as an agent or principal in connection with tax-deferred exchange transactions.  The Company may consider other investments through taxable REIT subsidiariesits TRS should suitable opportunities arise.

In addition, the Company has capitalized on its established expertise in retail real estate by establishing other ventures in which the Company owns a smaller equity interest and provides management, leasing and operational support for those properties. The Company has also provided preferred equity capital in the past to real estate entrepreneurs and, from time to time, provides real estate capital and management services to both healthy and distressed retailers.  The Company has also made selective investments in secondary market opportunities where a security or other investment is, in management’s judgment, priced below the value of the underlying assets, however these investments are subject to volatility within the equity and debt markets.

The Company's investment objective is to increase cash flow, current income and, consequently, the value of its existing portfolio of properties and to seek continued growth through (i) the retail re-tenanting, renovation and expansion of its existing centers and (ii) the selective acquisition of established income-producing real estate properties and properties requiring significant re-tenanting and redevelopment, primarily in neighborhood and community shopping centers in geographic regions in which the Company presently operates.  The Company may consider investments in other real estate sectors and in geographic markets where it does not presently operate should suitable opportunities arise.

The Company's neighborhood and community shopping center properties are designed to attract local area customers and are typically are anchored by a discount department store, a supermarket or a drugstore tenant offering day-to-day necessities rather than high-priced luxury items.  The Company may either purchase or lease income-producing properties in the future and may also participate with other entities in property ownership through partnerships, joint ventures or similar types of co-ownership.  Equity

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investments may be subject to existing mortgage financing and/or other indebtedness.  Financing or other indebtedness may be incurred simultaneously or subsequently in connection with such investments.  Any such financing or indebtedness would have priority over the Company’s equity interest in such property. The Company may make loans to joint ventures in which it may or may not participate.

The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties and a large tenant base.  As of December 31, 2011,2012, no single neighborhood and community shopping center accounted for more than 1.6%1.7% of the Company's annualized base rental revenues, including the proportionate share of base rental revenues from properties in which the Company has less than a 100% economic interest, or more than 1.2% of the Company’s total shopping center GLA.  At December 31, 2011,2012, the Company’s five largest tenants were The Home Depot, TJX Companies, Wal-Mart, Sears Holdings and Kohl’s,Bed Bath & Beyond, which represented approximately  3.0%, 2.9%, 2.5%2.6%, 2.1%2.0% and 1.7%, respectively, of the Company’s annualized base rental revenues, including the proportionate share of base rental revenues from properties in which the Company has less than a 100% economic interest.

We have elected to be taxed as a REIT for federal income tax purposes under the Code.  We believe that we have operated so as to qualify as a REIT under the Code and that our current organization and method of operation comply with the rules and regulations promulgated under the Code to enable us to continue to qualify as a REIT.  However, there can be no assurance that we have qualified or will continue to qualify as a REIT for federal income tax purposes.

Qualification as a REIT involves the application of highly technical and complex Code provisions, for which there are only limited judicial and administrative interpretations.  The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT.  New legislation, regulations, administrative interpretations or court decisions could significantly change the tax laws with respect to qualification as a REIT, the federal income tax consequences of such qualification or the desirability of an investment in a REIT relative to other investments.

In order to qualify as a REIT, we must satisfy a number of requirements, including requirements regarding the composition of our assets and a requirement that at least 95% of our gross income in any year be derived from qualifying sources, such as “rents from real property.” Also, we must make distributions to stockholders aggregating annually at least 90% of our REIT taxable income, excluding net capital gains.  Furthermore, we own a direct or indirect interest in certain subsidiary REITs which elected to be taxed as REITs for federal income tax purposes under the Code. Provided that each subsidiary REIT qualifies as a REIT, our interest in such subsidiary REIT will be treated as a qualifying real estate asset for purposes of the REIT asset tests. To qualify as a REIT, the subsidiary REIT must independently satisfy all of the REIT qualification requirements. The failure of a subsidiary REIT to qualify as a REIT could have an adverse effect on our ability to comply with the REIT income and asset tests, and thus our ability to qualify as a REIT.

As a result of all these factors, our failure to qualify as a REIT could also impair our ability to expand our business or raise capital and materially adversely affect the value of our securities.

To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our REIT taxable income each year, excluding capital gains, and we will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our net taxable income each year. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. While we have historically satisfied these distribution requirements by making cash distributions to our stockholders, a REIT is permitted to satisfy these requirements by making distributions of cash or other property, including, in limited circumstances, its own stock. Assuming we continue to satisfy these distributions requirements with cash, we may need to borrow funds to meet the REIT distribution requirements even if the then prevailing market conditions are not favorable for these borrowings. These borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments.

The economic performance and value of our properties is subject to all of the risks associated with owning and operating real estate, including:

Our properties consist primarily of community and neighborhood shopping centers and other retail properties. Our performance therefore, is generally linked to economic conditions in the market for retail space.  In the future, the market for retail space could be adversely affected by:

In addition, numerous commercial developers and real estate companies compete with us in seeking tenants for our existing properties and properties for acquisition. New regional malls, open-air lifestyle centers, or other retail shopping centers with more convenient locations or better rents may attract tenants or cause them to seek more favorable lease terms at or prior to renewal. Retailers at our properties may face increasing competition from other retailers, e-commerce, outlet malls, discount shopping clubs, catalog companies, direct mail, telemarketing or home shopping networks, all of which could (i) reduce rents payable to us; (ii) reduce our ability to attract and retain tenants at our properties; or (iii) lead to increased vacancy rates at our properties. We may fail to anticipate the effects of changes in consumer buying practices, particularly of growing online sales and the resulting retailing practices and space needs of our tenants or a general downturn in our tenants’ businesses, which may cause tenants to close stores or default in payment of rent.

At any time our tenants’,tenants, particularly small local stores, may experience a downturn in their business that may significantly weaken their financial condition. As a result, our tenants may delay a number of lease commencements, decline to extend or renew leases upon expiration, fail to make rental payments when due, close stores or declare bankruptcy. Any of these actions could result in the termination of the tenants’ leases and the loss of rental income attributable to these tenants’ leases.  In the event of a default by a tenant, we may experience delays and costs in enforcing our rights as landlord under the terms of ourthe leases.

In addition, multiple lease terminations by tenants or a failure by multiple tenants to occupy their premises in a shopping center could result in lease terminations or significant reductions in rent by other tenants in the same shopping centers under the terms of some leases. In that event, we may be unable to re-lease the vacated space at attractive rents or at all, and our rental payments from our continuing tenants could significantly decrease.  The occurrence of any of the situations described above, particularly if it involves a substantial tenant with leases in multiple locations, could have a material adverse effect on our performance.

financial condition, results of operations and cash flows.

A tenant that files for bankruptcy protection may not continue to pay us rent. A bankruptcy filing by, or relating to, one of our tenants or a lease guarantor would bar all efforts by us to collect pre-bankruptcy debts from the tenant or the lease guarantor, or their property, unless the bankruptcy court permits us to do so.  A tenant or lease guarantor bankruptcy could delay our efforts to collect past due balances under the relevant leases and could ultimately preclude collection of these sums. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages.  As a result, it is likely that we would recover substantially less than the full value of any unsecured claims we hold, if at all.

Real estate property investments are illiquid and generally cannot be disposed of quickly. In addition, the federal tax code restricts a REIT’s ability to dispose of properties that are not applicable to other types of real estate companies. Therefore, we may not be able to vary our portfolio in response to economic or other conditions promptly or on terms favorable terms.

to us within a time frame that we would need.

We may acquire or develop properties or acquire other real estate related companies when we believe that an acquisition or development is consistent with our business strategies. We may not succeed in consummating desired acquisitions or in completing developments on time or within budget. When we do pursue a project or acquisition, we may not succeed in leasing newly developed or acquired properties at rents sufficient to cover the costs of acquisition or development and operations. Difficulties in integrating acquisitions may prove costly or time-consuming and could divert management’s attention.attention from other activities. Acquisitions or developments in new markets or industries where we do not have the same level of market knowledge may result in poorer than anticipated performance. We may also abandon acquisition or development opportunities that management has begun pursuing and consequently fail to recover expenses already incurred and will have devoted management’s time to a matter not consummated. Furthermore, our acquisitions of new properties or companies will expose us to the liabilities of those properties or companies, some of which we may not be aware of at the time of the acquisition.  In addition, development of our existing properties presents similar risks.

Newly acquired or re-developed properties may have characteristics or deficiencies currently unknown to us that affect their value or revenue potential.  It is also possible that the operating performance of these properties may decline under our management.  As we acquire additional properties, we will be subject to risks associated with managing new properties, including lease-up and tenant retention.  In addition, our ability to manage our growth effectively will require us to successfully integrate our new acquisitions into our existing management structure.  We may not succeed with this integration or effectively manage additional properties.properties, particularly in secondary markets.  Also, newly acquired properties may not perform as expected.

We face competition in the acquisition, development, operation and sale of real property from others engaged in real estate investment that could increase our costs associated with purchasing and maintaining assets.  Some of these competitors may have greater financial resources than we do.  This could result in competition for the acquisition of properties for tenants who lease or consider leasing space in our existing and subsequently acquired properties and for other real estate investment opportunities.

We have invested in some properties as a co-venturer or partner, instead of owning directly.  In these investments, we do not have exclusive control over the development, financing, leasing, management and other aspects of these investments. As a result, the co-venturer or partner might have interests or goals that are inconsistent with ours, take action contrary to our interests or otherwise impede our objectives. These investments involve risks and uncertainties. The co-venturer or partner may fail to provide capital or fulfill its obligations, which may result in certain liabilities to us for guarantees and other commitments, conflicts arising between us and our partners and the difficulty of managing and resolving such conflicts, and the difficulty of managing or otherwise monitoring such business arrangements.  The co-venturer or partner also might become insolvent or bankrupt, which may result in significant losses to us.

Although our joint venture arrangements may allow us to share risks with our joint-venture partners, these arrangements may also decrease our ability to manage risk.  Joint ventures implicate additional risks, such as:

Our joint venture and preferred equity investments generally own real estate properties for which the economic performance and value is subject to all the risks associated with owning and operating real estate as described above.

There can be no assurance that we will be able to recover the current carrying amount of all of our non-retail and/or non-strategic properties and investments and those of our unconsolidated joint ventures in the future. Our failure to do so would require us to recognize impairment charges for the period in which we reached that conclusion, which could materially and adversely affect us.  

our business, financial condition, operating results and cash flows.

The risks we face in international business operations include, but are not limited to:

Each of these risks might impact our cash flow or impair our ability to borrow funds, which ultimately could adversely affect our business, financial condition, operating results and cash flows.

In order to fully develop our international operations, we must overcome cultural and language barriers and assimilate different business practices. In addition, we are required to create compensation programs, employment policies and other administrative programs that comply with laws of multiple countries. We also must communicate and monitor standards and directives in our international locations. Our failure to successfully manage our geographically diverse operations could impair our ability to react quickly to changing business and market conditions and to enforce compliance with standards and procedures. Since a meaningful portion of our revenues are generated internationally, we must devote substantial resources to managing our international operations.

Our future success will be influenced by our ability to anticipate and effectively manage these and other risks associated with our international operations. Any of these factors could, however, materially adversely affect our international operations and, consequently, our financial condition, results of operations and cash flows.

Our international operations include properties in Canada, Mexico, Chile, Brazil and Peru and are subject to a variety of United States and foreign laws and regulations, including the United States Foreign Corrupt Practices Act (“FCPA”). We have policies and procedures designed to promote compliance with the FCPA and other anti-corruption laws, but we cannot assure you that we will continue to be found to be operating in compliance with, or be able to detect violations of, any such laws or regulations. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject, the manner in which existing laws might be administered or interpreted, or the potential that we may face regulatory sanctions.

We cannot assure you that our employees will adhere to our Code of Conduct or any other of our policies, applicable anti-corruption laws, including the FCPA, or other legal requirements. Failure to comply with theseor violations of any applicable policies, anti-corruption laws, or other legal requirements may subject us to legal, regulatory or other sanctions, including criminal and civil penalties and other remedial measures. We have received a subpoena from the Enforcement Division of the SEC in connection with the SEC’s investigation, In the Matter of Wal-Mart Stores, Inc. (FW-3678), that the SEC Staff is currently conducting with respect to possible violations of the FCPA. See “Item 3. Legal Proceedings,” below. The U.S. Department of Justice and the SEC have a broad range of civil and criminal sanctions under the FCPA and other laws and regulations, which they may seek to impose against corporations and individuals in appropriate circumstances including, but not limited to, injunctive relief, disgorgement, fines, penalties and modifications to business practices and compliance programs. Any of these remedial measures, if applicable to us, could adversely affecthave a material adverse impact on our financial condition,business, results of operations, financial condition and cash flows.

liquidity.

We cannot assure you that we will be able to access the capital and credit markets to obtain additional debt or equity financing or that we will be able to obtain financing on terms favorable terms.to us.  The inability to obtain financing on a timely basis could have negative effects on our business, such as:

Adverse changes in our credit ratings could impair our ability to obtain additional debt and equity financing on terms favorable terms,to us, if at all, and could significantly reduce the market price of our publicly traded securities.

Our revolving credit facility and the indentures under which our senior unsecured debt is issued contain certain financial and operating covenants, including, among other things, certain coverage ratios and limitations on our ability to incur debt, make dividend payments, sell all or substantially all of our assets and engage in mergers and consolidations and certain acquisitions.  These covenants may restrict our ability to pursue certain business initiatives or certain acquisition transactions that might otherwise be advantageous. In addition, failure to meet any of the financial covenants could cause an event of default under our revolving credit facility and the indentures and/or accelerate some or all of our indebtedness, which would have a material adverse effect on us.

As with other publicly traded securities, the market price of our publicly traded securities depends on various market conditions, which may change from time-to-time.  Among the market conditions that may affect the market price of our publicly traded securities are the following:

The decision to declare and pay dividends on our common stock in the future, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our Board of Directors and will depend on our earnings, operating cash flows, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our indebtedness including preferred stock, the annual distribution requirements under the REIT provisions of the Code, state law and such other factors as our Board of Directors deems relevant.relevant or are requirements under the Code or state or federal laws. Any change in our dividend policy could have a material adverse effect on the market price of our common stock.

Our investments in marketable securities are subject to specific risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer, which may result in significant losses to us.  Marketable securities are generally unsecured and may also be subordinated to other obligations of the issuer. As a result, investments in marketable securities are subject to risks of:

These risks may adversely affect the value of outstanding marketable securities and the ability of the issuers to make distribution payments.

In the event of a default by a borrower, it may be necessary for us to foreclose our mortgage or engage in costly negotiations.  Delays in liquidating defaulted mortgage loans and repossessing and selling the underlying properties could reduce our investment returns.  Furthermore, in the event of default, the actual value of the property securing the mortgage may decrease. A decline in real estate values will adversely affect the value of our loans and the value of the mortgages securing our loans.

Our mortgage receivables may be or become subordinated to mechanics' or materialmen's liens or property tax liens. In these instances we may need to protect a particular investment by making payments to maintain the current status of a prior lien or discharge it entirely.  In these cases, the total amount we recover may be less than our total investment, resulting in a loss. In the event of a major loan default or several loan defaults resulting in losses, our investments in mortgage receivables would be materially and adversely affected.

Under various federal, state, and local laws, ordinances and regulations, we may be considered an owner or operator of real property and may be responsible for paying for the disposal or treatment of hazardous or toxic substances released on or in our property, as well as certain other potential costs relating to hazardous or toxic substances (including governmental fines and injuries to persons and property).  This liability may be imposed whether or not we knew about, or were responsible for, the presence of hazardous or toxic substances.

None

The Company's neighborhood and community shopping center properties, which are generally owned and operated through subsidiaries or joint ventures, had an average size of approximately 138,000138,518 square feet as of December 31, 2011.2012.  The Company generally retains its shopping centers for long-term investment and consequently pursues a program of regular physical maintenance together with major renovations and refurbishing to preserve and increase the value of its properties. This includes renovating existing facades, installing uniform signage, resurfacing parking lots and enhancing parking lot lighting.  During 2011,2012, the Company capitalized approximately $11.4$7.8 million in connection with these property improvements and expensed to operations approximately $25.8$25.4 million.

The Company's management believes its experience in the real estate industry and its relationships with numerous national and regional tenants gives it an advantage in an industry where ownership is fragmented among a large number of property owners.  The Company's neighborhood and community shopping centers are usually "anchored" by a national or regional discount department store, supermarket or drugstore.  As one of the original participants in the growth of the shopping center industry and one of the nation's largest owners and operators of shopping centers, the Company has established close relationships with a large number of major national and regional retailers.  Some of the major national and regional companies that are tenants in the Company's shopping center properties include The Home Depot, TJX Companies, Wal-Mart, Sears Holdings, Bed Bath & Beyond, Royal Ahold, Kohl’s, Best Buy, Royal Ahold, CostcoPetsmart and Bed Bath & Beyond.

Costco.

A substantial portion of the Company's income consists of rent received under long-term leases.  Most of the leases provide for the payment of fixed-base rentals monthly in advance and for the payment by tenants of an allocable share of the real estate taxes, insurance, utilities and common area maintenance expenses incurred in operating the shopping centers.  Although many of the leases require the Company to make roof and structural repairs as needed, a number of tenant leases place that responsibility on the tenant, and the Company's standard small store lease provides for roof repairs to be reimbursed by the tenant as part of common area maintenance.  The Company's management places a strong emphasis on sound construction and safety at its properties.

Minimum base rental revenues and operating expense reimbursements accounted for approximately 97% and other revenues, including percentage rents, accounted for approximately 3% of the Company's total revenues from rental property for the year ended December 31, 2011.2012.  The Company's management believes that the base rent per leased square foot for many of the Company's existing leases is generally lower than the prevailing market-rate base rents in the geographic regions where the Company operates, reflecting the potential for future growth.

Approximately 16.3%15.4% of the Company's leases of consolidated properties also contain provisions requiring the payment of additional rent calculated as a percentage of tenants’ gross sales above predetermined thresholds.  Percentage rents accounted for less than 1% of the Company's revenues from rental property for the year ended December 31, 2011.2012.  Additionally, a majority of the Company’s leases have provisions requiring contractual rent increases. The Company’s leases may also include escalation clauses, which provide for increases based upon changes in the consumer price index or similar inflation indices.

As of December 31, 2011,2012, the Company’s consolidated operating portfolio was approximately 92.5%93.4% leased and was comprised of approximately 61.558.9 million square feet of GLA, of which approximately 58.655.1 million related to properties held in the U.S. and 2.73.8 million related to properties located in Mexico.Latin America.  For the period January 1, 20112012 to December 31, 2011,2012, the Company increased the average base rent per leased square foot, which includes the impact of tenant concessions, in its U.S. consolidated portfolio of neighborhood and community shopping centers from $11.20$11.48 to $11.48,$12.18, an increase of $0.28.$0.70.  This increase primarily consists of (i) a $0.09$0.16 increase relating to acquisitions, as well as development properties placed into service, (ii) a $0.12$0.24 increase relating to new leases signed net of leases vacated and rent step-ups within the portfolio and (iii) a $0.07$0.30 increase relating to dispositions or the transfer of properties to various joint venture entities. For the period January 1, 20112012 to December 31, 2011,2012, the Company’s average base rent per leased square foot in its Mexican consolidated portfolio of neighborhood and community shopping centers decreased from $12.03$9.66 to $9.66,$9.22, a decrease of $2.37.$0.44. This decrease is primarily due to a weaker Mexican Peso during the period (average exchange rate Mexican Pesos to U.S. dollar was 13.62higher vacancy levels at December 31, 2011 versus 12.40 at January 1, 2011), the placement ofcertain development sites placed into service, which were included in occupancy in 2011,2012, and new leases signed net of leases vacated and renewals within the portfolio.

The Company's management believes its experienceCompany has a total of 5,027 leases in the real estate industryU.S. consolidated operating portfolio, of which 682 leases, comprising 3.7 million square feet of GLA, are scheduled to expire within the next 12 months, assuming available extension options are not exercised.  These expiring leases have an average base rent per square foot of $13.99.  The average rent per square foot on new U.S. leases signed during 2012 was $16.41.  The Company will seek to obtain rents that are higher than these expiring leases, however, there are many variables and its relationships with numerous national and regional tenants gives it an advantage in an industry where ownership is fragmented among a large number of property owners.

uncertainties which can significantly affect the leasing market at any time; as such, the Company cannot guarantee that future leases will continue to be signed for rents that are equal to or higher than current amounts.

More specific information with respect to each of the Company's property interests is set forth in Exhibit 99.1, which is incorporated herein by reference.

The Company is not presently involved in any litigation nor, to its knowledge, is any litigation threatened against the Company or its subsidiaries that, in management's opinion, would result in any material adverse effect on the Company's ownership, management or operation of its properties taken as a whole, or which is not covered by the Company's liability insurance.

The table below sets forth, for the quarterly periods indicated, the high and low sales prices per share reported on the NYSE Composite Tape and declared dividends per share for the Company’s common stock.  The Company’s common stock is traded on the NYSE under the trading symbol "KIM".

The Company has determined that the $0.76 dividend per common share paid during 2012 represented 72% ordinary income, a 23% return of capital and 5% capital gain to its stockholders.  The $0.72 dividend per common share paid during 2011 represented 71% ordinary income and a 29% return of capital to its stockholders.  The $0.64 dividend per common share paid during 2010 represented 70% ordinary income and a 30% return of capital to its stockholders.

In addition to its common stock offerings, the Company has capitalized the growth in its business through the issuance of unsecured fixed and floating-rate medium-term notes, underwritten bonds, mortgage debt and construction loans, convertible preferred stock and perpetual preferred stock.  Borrowings under the Company's revolving credit facility have also been an interim source of funds to both finance the purchase of properties and other investments and meet any short-term working capital requirements.  The various instruments governing the Company's issuance of its unsecured public debt, bank debt, mortgage debt and preferred stock impose certain restrictions on the Company with regard to dividends, voting, liquidation and other preferential rights available to the holders of such instruments.  See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Footnotes 13, 14 15 and 1917 of the Notes to Consolidated Financial Statements included in this Form 10-K.

The Company does not believe that the preferential rights available to the holders of its Class FH Preferred Stock, Class GI Preferred Stock, Class J Preferred Stock and Class HK Preferred Stock, the financial covenants contained in its public bond indentures, as amended, or its revolving credit agreements will have an adverse impact on the Company's ability to pay dividends in the normal course to its common stockholders or to distribute amounts necessary to maintain its qualification as a REIT.

The Company maintains a dividend reinvestment and direct stock purchase plan (the "Plan") pursuant to which common and preferred stockholders and other interested investors may elect to automatically reinvest their dividends to purchase shares of the Company’s common stock or, through optional cash payments, purchase shares of the Company’s common stock.  The Company may, from time-to-time, either (i) purchase shares of its common stock in the open market or (ii) issue new shares of its common stock for the purpose of fulfilling its obligations under the Plan.

The following table sets forth selected, historical, consolidated financial data for the Company and should be read in conjunction with the Consolidated Financial Statements of the Company and Notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-K.

The Company believes that the book value of its real estate assets, which reflects the historical costs of such real estate assets less accumulated depreciation, is not indicative of the current market value of its properties.  Historical operating results are not necessarily indicative of future operating performance.

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this Form 10-K.  Historical results and percentage relationships set forth in the Consolidated Statements of OperationsIncome contained in the Consolidated Financial Statements, including trends which might appear, should not be taken as indicative of future operations.

Kimco Realty Corporation is one of the nation’s largest publicly-traded owners and operators of neighborhood and community shopping centers. As of December 31, 2011,2012, the Company had interests in 946896 shopping center properties (the “Combined Shopping Center Portfolio”), aggregating 138.1131.3 million square feet of gross leasable area (“GLA”) and 845829 other property interests, primarily through the Company’s preferred equity investments, other real estate investments and non-retail properties, totaling  approximately 34.126.6 million square feet of GLA, for a grand total of 1,7911,725 properties aggregating 172.2157.9 million square feet of GLA, located in 44 states, Puerto Rico, Canada, Mexico, Chile, Brazil and Peru.

The executive officers are engaged in the day-to-day management and operation of real estate exclusively with the Company, with nearly all operating functions, including leasing, asset management, maintenance, construction, legal, finance and accounting, administered by the Company.

The following highlights the Company’s significant transactions, events and results that occurred during the year ended December 31, 2011:

2012:

The Consolidated Financial Statements of the Company include the accounts of the Company, its wholly-owned subsidiaries and all entities in which the Company has a controlling interest, including where the Company has been determined to be a primary beneficiary of a variable interest entity in accordance with the consolidation guidance of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).  The Company applies these provisions to each of its joint venture investments to determine whether the cost, equity or consolidation method of accounting is appropriate.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Consolidated Financial Statements and related notes.  In preparing these financial statements, management has made its best estimates and assumptions that affect the reported amounts of assets and liabilities.  These estimates are based on, but not limited to, historical results, industry standards and current economic conditions, giving due consideration to materiality. The most significant assumptions and estimates relate to revenue recognition and the recoverability of trade accounts receivable, depreciable lives, valuation of real estate and intangible assets and liabilities, valuation of joint venture investments marketable securities and other investments, realizability of deferred tax assets and uncertain tax positions.  Application of these assumptions requires the exercise of judgment as to future uncertainties, and, as a result, actual results could materially differ from these estimates.

The Company is required to make subjective assessments as to whether there are impairments in the value of its real estate properties, investments in joint ventures, marketable securities and other investments.  The Company’s reported net earnings are directly affected by management’s estimate of impairments and/or valuation allowances.

Base rental revenues from rental property are recognized on a straight-line basis over the terms of the related leases.  Certain of these leases also provide for percentage rents based upon the level of sales achieved by the lessee.  These percentage rents are recorded once the required sales level is achieved.  Operating expense reimbursements are recognized as earned.  Rental income may also include payments received in connection with lease termination agreements.  In addition, leases typically provide for reimbursement to the Company of common area maintenance, real estate taxes and other operating expenses.

The Company makes estimates of the uncollectability of its accounts receivable related to base rents, straight-line rent, expense reimbursements and other revenues.  The Company analyzes accounts receivable and historical bad debt levels, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts.  In addition, tenants in bankruptcy are analyzed and estimates are made in connection with the expected recovery of pre-petition and post-petition claims.  The Company’s reported net earnings are directly affected by management’s estimate of the collectability of accounts receivable.

The Company’s investments in real estate properties are stated at cost, less accumulated depreciation and amortization.  Expenditures for maintenance and repairs are charged to operations as incurred.  Significant renovations and replacements, which improve and extend the life of the asset, are capitalized.

Upon acquisition of real estate operating properties, the Company estimates the fair value of acquired tangible assets (consisting of land, building, building improvements and tenant improvements) and identified intangible assets and liabilities (consisting of above and below-market leases, in-place leases and tenant relationships), assumed debt and redeemable units issued at the date of acquisition, based on evaluation of information and estimates available at that date. Based on these estimates, the Company allocates the estimated fair value to the applicable assets and liabilities. Fair value is determined based on an exit price approach, which contemplates the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  If, up to one year from the acquisition date, information regarding fair value of the assets acquired and liabilities assumed is received and estimates are refined, appropriate adjustments are made to the purchase price allocation on a retrospective basis.  The Company expenses transaction costs associated with business combinations in the period incurred.

Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets, as follows:

The Company is required to make subjective assessments as to the useful lives of its properties for purposes of determining the amount of depreciation to reflect on an annual basis with respect to those properties.  These assessments have a direct impact on the Company’s net earnings.

On a continuous basis, management assesses whether there are any indicators, including property operating performance and general market conditions, that the value of the real estate properties (including any related amortizable intangible assets or liabilities) may be impaired.  A property value is considered impaired only if management’s estimate of current and projected operating cash flows (undiscounted and unleveraged) of the property over its remaining useful life is less than the net carrying value of the property.  Such cash flow projections consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors.  To the extent impairment has occurred, the carrying value of the property would be adjusted to reflect the estimated fair value of the property.

When a real estate asset is identified by management as held-for-sale, the Company ceases depreciation of the asset and estimates the sales price of such asset net of selling costs.  If, in management’s opinion, the net sales price of the asset is less than the net book value of such asset, an adjustment to the carrying value would be recorded to reflect the estimated fair value of the property.

The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting as the Company exercises significant influence, but does not control, these entities.  These investments are recorded initially at cost and are subsequently adjusted for cash contributions and distributions.  Earnings for each investment are recognized in accordance with each respective investment agreement and, where applicable, are based upon an allocation of the investment’s net assets at book value as if the investment was hypothetically liquidated at the end of each reporting period.

The Company’s joint ventures and other real estate investments primarily consist of co-investments with institutional and other joint venture partners in neighborhood and community shopping center properties, consistent with its core business.  These joint ventures typically obtain non-recourse third-party financing on their property investments, thus contractually limiting the Company’s exposure to losses to the amount of its equity investment, and, due to the lender’s exposure to losses, a lender typically will require a minimum level of equity in order to mitigate its risk.  The Company’s exposure to losses associated with its unconsolidated joint ventures is primarily limited to its carrying value in these investments.  The Company, on a limited selective basis, obtained unsecured financing for certain joint ventures.  These unsecured financings are guaranteed by the Company with guarantees from the joint venture partners for their proportionate amounts of any guaranty payment the Company is obligated to make.

On a continuous basis, management assesses whether there are any indicators, including property operating performance and general market conditions, that the value of the Company’s investments in unconsolidated joint ventures may be impaired. An investment’s value is impaired only if management’s estimate of the fair value of the investment is less than the carrying value of the investment and such difference is deemed to be other-than-temporary.  To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the estimated fair value of the investment.

The Company’s estimated fair values are based upon a discounted cash flow model for each specific property that includes all estimated cash inflows and outflows over a specified holding period and, where applicable, any estimated debt premiums. Capitalization rates, discount rates and credit spreads utilized in these models are based upon rates that the Company believes to be within a reasonable range of current market rates for each respective property.

The Company is subject to federal, state and local income taxes on the income from its activities relating to its TRS activities and subject to local taxes on certain non-U.S. investments. The Company accounts for income taxes using the asset and liability method, which requires that deferred tax assets and liabilities be recognized based on future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required, if based on the evidence available, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized.  The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized.

The Company considers all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed.  Information about an enterprise's current financial position and its results of operations for the current and preceding years is supplemented by all currently available information about future years.  

The Company must use judgment in considering the relative impact of negative and positive evidence.  The weight given to the potential effect of negative and positive evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists (a) the more positive evidence is necessary and (b) the more difficult it is to support a conclusion that a valuation allowance is not needed for some portion or all of the deferred tax asset.

The Company believes, when evaluating deferred tax assets within its taxable REIT subsidiaries, special consideration should be given to the unique relationship between the Company as a REIT and its taxable REIT subsidiaries.  This relationship exists primarily to protect the REIT’s qualification under the Code by permitting, within certain limits, the REIT to engage in certain business activities in which the REIT cannot directly participate.  As such, the REIT controls which and when investments are held in, or distributed or sold from, its taxable REIT subsidiaries.  This relationship distinguishes a REIT and taxable REIT subsidiary from an enterprise that operates as a single, consolidated corporate taxpayer.

The Company primarily utilizes a twenty year projection of pre-tax book income and taxable income as positive evidence to overcome its significantany negative evidence of a three-year cumulative pretax book loss.evidence. Although items of income and expense utilized in the projection are objectively verifiable there is also significant judgment used in determining the duration and timing of events that would impact the projection. Based upon the Company’s analysis of negative and positive evidence the Company will make a determination of the need for a valuation allowance against its deferred tax assets.  If future income projections do not occur as forecasted, the Company will reevaluate the need for a valuation allowance.  In addition, the Company can employ additional strategies to realize its deferred tax assets, including transferring a greater portion of its property management business to the TRS, sale of certain built-in gain assets, and further reducing intercompany debt.

The Company recognizes and measures benefits for uncertain tax positions, which requires significant judgment from management.  Although the Company believes it has adequately reserved for any uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different.  The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate.  Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in the Company’s income tax expense in the period in which a change is made, which could have a material impact on operating results (see Footnote 2422 of the Notes to Consolidated Financial Statements included in this Form 10-K).

Management and other fee income increased $2.2 million to $37.5 million for the year ended December 31, 2012, as compared to $35.3 million for the corresponding period in 2011. This increase is due to an increase in property management fees of $0.8 million, primarily due to the acquisitions of properties within the Company’s joint venture portfolio during 2012 and 2011, and an increase in transaction related fees of $35.7$1.4 million recognized during 2012, as compared to 2011.

General and administrative costs include employee-related expenses (salaries, bonuses, equity awards, benefits, severance costs and payroll taxes), professional fees, office rent, travel expense, and other company-specific expenses. General and administrative expenses increased $5.6 million to $124.5 million for the year ended December 31, 2012, as compared to $118.9 million for the corresponding period in 2011.  This increase is primarily a result of (i) an increase of $2.6 million in severance costs related to the departure of an executive officer in January 2012, (ii)  an increase in professional and consulting fees of $2.1 million, primarily due to increased transactional activity, and (iii) an increase in other personnel related costs during 2012, as compared to the corresponding period in 20102011.

During year ended December 31, 2012, the Company recognized impairment charges of $59.6 million ($22.5 million of which is included in discontinued operations) before income tax benefit and (ii)noncontrolling interest.  During the completionyear ended December 31, 2011, the Company recognized impairment charges of $32.8 million ($19.7 million of which is included in discontinued operations) before income tax benefit and noncontrolling interest.  These impairments were primarily calculated based on the usage of estimated sales prices and comparable sales information as inputs. The Company determined that its valuation in these assets was classified within Level 3 of the FASB’s fair value hierarchy. These impairment charges resulted from the Company’s efforts to market certain developmentassets and redevelopment projects, tenant buyoutsmanagement’s assessment as to the likelihood and overall growth in the current portfolio, providing incremental revenuestiming of approximately $7.9such potential transactions.

Interest, dividends and other investment income decreased $14.4 million to $2.2 million for the year ended December 31, 2012, as compared to $16.6 million for the corresponding period in 2011. This decrease is primarily due to (i) the Company’s sale of its investment in Valad notes during 2011, resulting in a decrease in interest income of $6.2 million, (ii) a decrease in other investment income of $6.4 million relating to the receipt of cash distributions during 2011 in excess of the Company’s carrying value of a cost method investment, (iii) a reduction in interest income of $0.5 million due to repayments of notes in 2012 and 2011 and (iv) a decrease in gains on sales of securities of $0.5 million.

Other expense, net increased $3.3 million to $8.0 million for the year ended December 31, 2012, as compared to $4.7 million for the corresponding period in 2011.  This change is primarily due to (i) an increase in acquisition related costs of $3.1 million relating to an increase in transactional activity, (ii) a decrease in gains on foreign currency of $2.4 million relating to changes in foreign currency exchange rates, partially offset by (iii) an increase of $2.5 million in gains on land sales during 2012, as compared to the corresponding period in 2010, which was partially offset by (iii) a decrease in revenues of approximately $1.12011.

Interest expense increased $4.1 million to $227.6 million for the year ended December 31, 2011,2012, as compared to $223.5 million for the corresponding period in 2011.  This increase is primarily related to a decrease in capitalization of interest due to the placement of certain development and redevelopment properties into service during 2012, as compared to the corresponding period in 2010, primarily2011.

During 2011, the Company sold a merchant building property to an unconsolidated joint venture in which the Company has a noncontrolling interest for a sales price of  $37.6 million resulting from the partial salein a pretax gain of  certain properties during 2011 and 2010.

(2)

Rental property expenses increased primarily$12.1 million after a deferral of  $2.1 million due to (i) operating property acquisitions during 2011 and 2010, and (ii) the placement of certain development properties into service, which resultedCompany’s continued involvement in lower capitalization of carry costs.

(3)

Depreciation and amortization increased primarily due to (i) operating property acquisitions during 2011 and 2010, (ii) the placement of certain development properties into service and (iii) tenant vacancies.

property.

Provision for income taxes, net decreased $2.1by  $17.4 million to $7.3$3.9 million for the year ended December 31, 2011,2012, as compared to $9.4$21.3 million for the corresponding period in 2010.2011. This decrease is primarily due to (i) an increase in income tax benefit of  $10.2 million related to impairments taken during the year ended December 31, 2012, as compared to the corresponding period in 2011, (ii) a decrease in the income tax provision expense of  $5.7 million in connection with a gain on sale of a development property during 2011, (iii) a decrease in tax provision of $2.8 million resulting from the receipt of a cash distribution during 2011 in excess of the Company’s carrying value of a cost method investment and (iv) a decrease in tax provision of $2.7 million resulting from a decrease in equity in income recognized in connection with the Albertson’s investment during 2012, as compared to 2011, partially offset by (v) an increase in foreign withholding taxes of  $5.4 million primarily resulting from an unrealized foreign exchange gains recognized for Mexican tax purposes on U.S. denominated mortgage debt within the Company’s Latin American property portfolio.

Net income attributable to the Company increased $97.0 million to $266.1 million for the year ended December 31, 2012, as compared to $169.1 million for the corresponding period in 2011.  On a diluted per share basis, net income attributable to the Company was $0.42 for 2012, as compared to net income of $0.27 for 2011.  These increases are primarily attributable to (i) additional incremental earnings due to increased profitability from the Company’s operating properties and the acquisition of operating properties during 2012 and 2011, (ii) an increase in gains on disposition of operating properties and change in control of interests, (iii) an increase in equity in income of joint ventures, net primarily due to gains on sales of operating properties sold within various joint venture portfolios during 2012 and (iv) a decrease in provision for income taxes, partially offset by (v) an increase in impairment charges recognized during the year ended December 31, 2012, as compared to the corresponding period in 2011, (vi) a decrease in interest, dividends and other investment income resulting primarily from the sale of certain marketable securities during 2011 and (vii) a decrease in gain on sale of development properties recognized during 2012, as compared to 2011.  The 2012 diluted per share results were decreased by a reduction in net income available to common shareholders of $21.7 million resulting from the repaymentdeduction of certain mortgage receivables duringoriginal issuance costs associated with the redemption of the Company’s 6.65% Class F Cumulative Redeemable Preferred Stock and 7.75% Class G Cumulative Redeemable Preferred Stock.

Management and other fee income decreased approximately $4.6 million to $35.3 million for the year ended December 31, 2011, as compared to $39.9 million for the corresponding period in 2010. This decrease is primarily due to a decrease in property management fees of approximately $2.4 million recognized during 2011, as compared to 2010, primarily due to the disposition of properties during 2011 and 2010 and a decrease in transaction related fees of approximately $2.2 million recognized during 2011, as compared to 2010.

General and administrative costs include employee-related expenses (salaries, bonuses, equity awards, benefits, severance costs and payroll taxes), professional fees, office rent, travel expense, and other company-specific expenses.  General and administrative expenses increased approximately $9.7$9.9 million to $118.9 million for the year ended December 31, 2011, as compared to $109.2$109.0 million for the corresponding period in 2010.  This change is primarily a result of an increase in equity awards expense related to grants issued during 2011 and 2010 and an increase in other personnel related costs during 2011, as compared to the corresponding periods in 2010.

During 2011, the Company recognized aggregate impairment charges of approximately $15.3$32.2 million (not including approximately $16.9($19.7 million of which is included in discontinued operations), before income taxes and noncontrolling interest, relating to adjustments to property carrying values, investments in other real estate investments, investment in real estate joint ventures and other investments.  The Company’s estimated fair values relating to these impairment assessments were based upon their respective estimated sales prices.  Based on these inputs, the Company determined that its valuation in these investments was classified within Level 3 of the FASB fair value hierarchy. 

These impairment charges resulted from the Company’s efforts to market certain assets and management’s assessment as to the likelihood and timing of such potential transactions.  Additionally, during 2011, the Company recorded impairment charges of approximately $0.6 million due to the decline in value of certain marketable securities that were deemed to be other-than-temporary.

During 2010, the Company recognized impairment charges of  approximately $28.0$34.5 million (not including approximately $6.5($6.5 million of which is included in discontinued operations), before income taxes and noncontrolling interest, relating to adjustments to property carrying values, real estate under development, investments in other real estate investments and other investments.  The Company’s estimated fair values relating to these impairment assessments were based upon estimated sales prices and discounted cash flow models that included all estimated cash inflows and outflows over a specified holding period.  These cash flows are comprised of unobservable inputs which include contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models were based upon observable rates that the Company believes to be within a reasonable range of current market rates for the respective properties.  Based on these inputs, the Company determined that its valuation in these investments was classified within Level 3 of the FASB fair value hierarchy.   

Additionally, during 2010, the Company recorded impairment charges of approximately $4.6 million due to the decline in value of certain marketable securities that were deemed to be other-than-temporary.

Mortgage financing income taxes changed by approximately $16.3decreased $2.1 million to a provision of approximately $19.5$7.3 million for the year ended December 31, 2011, as compared to $9.4 million for the corresponding period in 2010. This decrease is primarily due to a provisiondecrease in interest income resulting from the repayment of approximatelycertain mortgage receivables during 2011 and 2010.

Equity in income from other real estate investments, net decreased approximately $9.0 million to $51.8 million for the year ended December 31, 2011, as compared to $60.8 million for the corresponding period in 2010.  This decrease is primarily due to a decrease of approximately  $7.2 million in equity in income from the Albertson’s joint venture resulting from lower cash distributions received in excess of the Company’s investment during 2011, as compared to the corresponding period during 2010 and a decrease of  approximately $2.7 million in equity in earnings including profit participation earned from the Company’s Preferred Equity Program during 2011, as compared to the corresponding period in 2010.

During 2011, the Company disposed of 27 operating properties, one development property and one outparcel, in separate transactions, for an aggregate sales price of  approximately $124.9 million. These transactions, which are included in Discontinued Operations, resulted in an aggregate gain of approximately $17.3 million and aggregate impairment charges of approximately $16.9 million, before income taxes.

Additionally, during 2011, a consolidated joint venture in which the Company had a preferred equity investment disposed of a property for a sales price of approximately $6.1 million.  As a result of this capital transaction, the Company received approximately $1.4 million of profit participation, before noncontrolling interest of approximately  $0.1 million.  This profit participation has been recorded as Income from other real estate investments and is reflected in Income from discontinued operating properties in the Company’s Consolidated Statements of Operations.

Income.

During 2010, the Company (i) sold seven operating properties, which were previously consolidated, to two new joint ventures in which the Company holds noncontrolling equity interests for an aggregate sales price of approximately  $438.1 million including the assignment of $159.9 million of non-recourse mortgage debt encumbering three of the properties and (ii) disposed of, in separate transactions, seven operating properties for an aggregate sales price of approximately $100.5 million including the assignment of $81.0 million of non-recourse mortgage debt encumbering one of the properties.  These transactions resulted in aggregate gains of  approximately $4.4 million and aggregate losses/impairments of  approximately $5.0 million.

Additionally, during 2010, the Company disposed of (i) three properties, in separate transactions, for an aggregate sales price of approximately  $23.8 million and (ii) five properties from a consolidated joint venture in which the Company had a preferred equity investment for a sales price of  approximately $40.8 million.  These transactions resulted in an aggregate profit participation of  approximately $20.8 million, before income tax of  approximately $1.0 million and noncontrolling interest of approximately  $4.9 million.  This profit participation has been recorded as Income from other real estate investments and is reflected in Income from discontinued operating properties, net of tax in the Company’s Consolidated Statements of Operations.

Income.

Net income attributable to the Company increased approximately  $26.2 million to $169.1 million for the year ended December 31, 2011, as compared to $142.9 million for the corresponding period in 2010.  On a diluted per share basis, net income attributable to the Company was $0.27 for 2011, as compared to net income of $0.22 for 2010.  These increases are primarily attributable to (i) additional incremental earnings due to increased profitability from the Company’s operating properties and the acquisition of operating properties during 2011 and 2010, (ii) an increase in gain on sale of development properties recognized during 2011, as compared to 2010, (iii) increased equity in income of joint ventures, net primarily due to incremental earnings from increased profitability within the joint venture portfolios and fewer impairment charges recognized against certain joint venture properties during the year ended December 31, 2011, as compared to the corresponding period in 2010 and (iv) early extinguishment of debt charges recognized during 2010, aggregating  approximately $10.8 million, partially offset by (v) an increase in provision for income taxes.

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Comparison 2010 to 2009

		2010		2009		Increase		% change
		(all amounts in millions)
Revenues from rental property (1)	$	831.2	$	755.4	$	75.8		10.0%
Rental property expenses: (2)
Rent	$	13.8	$	13.6	$	0.2		1.5%
Real estate taxes		113.7		108.4		5.3		4.9%
Operating and maintenance		118.6		105.3		13.3		12.6%
	$	246.1	$	227.3	$	18.8		8.3%
Depreciation and amortization (3)	$	232.8	$	221.8	$	11.0		5.0%

(1)

Revenues from rental property increased primarily from the combined effect of (i) the acquisition of operating properties during 2010 and 2009, providing incremental revenues for the year ended December 31, 2010 of $70.6 million, as compared to the corresponding period in 2009 and (ii) the completion of certain development and redevelopment projects, tenant buyouts and overall growth in the current portfolio, providing incremental revenues of approximately $9.5 million, for the year ended December 31, 2010, as compared to the corresponding period in 2009, which was partially offset by (iii) a decrease in revenues of approximately $4.3 million for the year ended December 31, 2010, as compared to the corresponding period in 2009, primarily resulting from the sale of certain properties during 2010 and 2009.

(2)

Rental property expenses increased primarily due to (i) operating property acquisitions during 2010 and 2009 and (ii) the placement of certain development properties into service, which resulted in lower capitalization of carry costs, partially offset by (iii) certain operating property dispositions during 2010 and 2009.

(3)

Depreciation and amortization increased primarily due to (i) operating property acquisitions during 2010 and 2009, (ii) the placement of certain development properties into service and (iii) tenant vacancies, partially offset by (iv) certain operating property dispositions during 2010 and 2009.

Mortgage and other financing income decreased $5.6 million to $9.4 million for the year ended December 31, 2010, as compared to $15.0 million for the corresponding period in 2009. This decrease is primarily due to a decrease in interest income as a result of pay-downs and dispositions of mortgage receivables during 2010 and 2009.

Management and other fee income decreased approximately $2.6 million to $39.9 million for the year ended December 31, 2010, as compared to $42.5 million for the corresponding period in 2009. This decrease is primarily due to a decrease in property management fees of approximately $2.6 million from PL Retail, due to the Company’s acquisition of the remaining 85% ownership interest resulting in the Company’s consolidation of PL Retail in 2009, partially offset by an increase in other transaction related fees of approximately $0.1 million recognized during 2010.   

Interest, dividends and other investment income decreased approximately $11.9 million to $21.2 million for the year ended December 31, 2010, as compared to $33.1 million for the corresponding period in 2009. This decrease is primarily due to (i) a decrease in realized gains of approximately $5.2 million during 2010 resulting from the sale of certain marketable securities during the corresponding period in 2009 as compared to 2010, (ii) a reduction in interest income of approximately $3.8 million due to repayments of notes in 2010 and 2009and (iii) a decrease in interest and dividend income of approximately $1.9 million during 2010, as compared to the corresponding period in 2009, primarily resulting from the sale of investments in marketable securities during 2010 and 2009.   

Other (expense)/income, net changed approximately $10.1 million to an expense of approximately $4.6 million for the year ended December 31, 2010, as compared to income of approximately $5.5 million for the corresponding period in 2009. This change is primarily due to (i) a decrease in the fair value of an embedded derivative instrument of approximately $2.0 million relating to the convertible option of the Company’s investment in Valad notes, (ii) decreased gains from land sales of approximately $3.5 million, (iii) an increase in a legal settlement accrual of approximately $2.0 million relating to a previously sold ground-up development project and (iv) an increase in acquisition related costs of approximately $0.5 million.

Interest expense increased approximately $18.3 million to $226.1 million for the year ended December 31, 2010, as compared to $207.8 million for the corresponding period in 2009.  This increase is due to higher average outstanding levels of debt during the year ended December 31, 2010, as compared to 2009.

During the year ended December 31, 2010, the Company incurred early extinguishment of debt charges aggregating approximately $10.8 million in connection with the optional make-whole provisions of notes that were repaid prior to maturity and prepayment penalties on five mortgages that the Company paid prior to their maturity.

During 2010, the Company disposed of a land parcel for a sales price of approximately $0.8 million resulting in a gain of approximately $0.4 million.  Additionally, the Company recognized approximately $1.7 million in income on previously sold development properties during the year ended December 31, 2010.  

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During 2009, the Company sold, in separate transactions, five out-parcels, four land parcels and three ground leases for aggregate proceeds of approximately $19.4 million.  These transactions resulted in gains on sale of development properties of approximately $5.8 million, before income taxes of $2.3 million.

During 2010, the Company recognized impairment charges of approximately $28.0 million (not including approximately $6.5 million which is included in discontinued operations), before income taxes and noncontrolling interest, relating to adjustments to property carrying values, real estate under development, investments in other real estate investments and other investments.  The Company’s estimated fair values relating to these impairment assessments were based upon estimated sales prices and discounted cash flow models that included all estimated cash inflows and outflows over a specified holding period.  These cash flows are comprised of unobservable inputs which include contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models were based upon observable rates that the Company believes to be within a reasonable range of current market rates for the respective properties.  Based on these inputs, the Company determined that its valuation in these investments was classified within Level 3 of the FASB fair value hierarchy. 

Additionally, during 2010, the Company recorded impairment charges of approximately $4.6 million due to the decline in value of certain marketable securities that were deemed to be other-than-temporary.

During 2009, the Company recognized impairment charges of approximately $119.0 million (not including approximately $26.0 million of which is included in discontinued operations), before income taxes and noncontrolling interest, relating to adjustments to property carrying values, investments in real estate joint ventures, real estate under development and other real estate investments.  The Company’s estimated fair values relating to these impairment assessments were based upon discounted cash flow models that included all estimated cash inflows and outflows over a specified holding period and where applicable, any estimated debt premiums. These cash flows are comprised of unobservable inputs which include contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models were based upon observable rates that the Company believes to be within a reasonable range of current market rates for the respective properties.  Based on these inputs the Company determined that its valuation in these investments was classified within Level 3 of the fair value hierarchy. 

Additionally, during 2009, the Company recorded impairment charges of approximately $30.1 million due to the decline in value of certain marketable equity securities and other investments that were deemed to be other-than-temporary.

(Provision)/benefit for income taxes changed by approximately $23.3 million to a provision of approximately $3.2 million for the year ended December 31, 2010, as compared to a benefit of approximately $20.1 million for the corresponding period in 2009. This change is primarily due to (i) a decrease in income tax benefit of approximately $12.4 million related to impairments taken during the year ended December 31, 2010 as compared to the corresponding period in 2009, (ii) an increase in foreign taxes of approximately $6.8 million primarily resulting from an overall increase in income from foreign investments and (iii) an increase in the tax provision expense of approximately $6.8 million relating to an increase in equity income recognized in connection with the Albertson’s investment during the year ended December 31, 2010, as compared to the corresponding period in 2009, partially offset by (iv) a decrease in the income tax provision expense of approximately $1.4 million in connection with gains on sale of development properties during 2010, as compared to 2009.  

Equity in income of real estate joint ventures, net increased approximately $31.2 million to $34.6 million for the year ended December 31, 2010, as compared to $3.4 million for the corresponding period in 2009. This increase is primarily the result of a (i) an increase in equity in income of approximately $5.9 million from the Company’s joint venture investments in Canada primarily resulting from the amendment and restructuring of two retail property preferred equity investments into two pari passu joint venture investments during 2010, (ii) the recognition of approximately $8.0 million in income resulting from cash distributions received in excess of the Company’s carrying value of its investment in an unconsolidated limited liability partnership for the year ended December 31, 2010 and (iii) decrease in impairment charges of approximately $15.0 million resulting from fewer impairment charges recognized against certain joint venture properties during 2010, as compared to the corresponding period in 2009.

Equity in income of other real estate investments, net increased approximately $26.4 million to $60.8 million for the year ended December 31, 2010, as compared to $34.4 million for the corresponding period in 2009.  This increase is primarily due to the recognition of approximately $21.2 million of equity in income from the Albertson’s joint venture during 2010, as compared to $3.0 million of equity in income recognized during 2009, primarily resulting from the sale of properties in the joint venture and an increase of approximately $7.2 million in profit participation earned from capital transactions within the Company’s Preferred Equity Program during 2010 as compared to the corresponding period in 2009.

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During 2010, the Company (i) sold seven operating properties, which were previously consolidated, to two new joint ventures in which the Company holds noncontrolling equity interests for an aggregate sales price of approximately $438.1 million including the assignment of $159.9 million of non-recourse mortgage debt encumbering three of the properties and (ii) disposed of, in separate transactions, seven operating properties for an aggregate sales price of approximately $100.5 million including the assignment of $81.0 million of non-recourse mortgage debt encumbering one of the properties.  These transactions resulted in aggregate gains of approximately $4.4 million and aggregate losses/impairments of approximately $5.0 million.

Additionally, during 2010, the Company disposed of (i) three properties, in separate transactions, for an aggregate sales price of approximately $23.8 million and (ii) five properties from a consolidated joint venture in which the Company had a preferred equity investment for a sales price of approximately $40.8 million.  These transactions resulted in an aggregate profit participation of approximately $20.8 million, before income tax of approximately $1.0 million and noncontrolling interest of approximately $4.9 million.  This profit participation has been recorded as Income from other real estate investments and is reflected in Income from discontinued operating properties, net of tax in the Company’s Consolidated Statements of Operations.

During 2009, the Company disposed of, in separate transactions, portions of six operating properties and one land parcel for an aggregate sales price of approximately $28.9 million.  These transactions resulted in the Company’s recognition of an aggregate net gain of approximately $4.1 million, net of income tax of $0.2 million.

Net income attributable to the Company for 2010 was $142.9 million.  Net loss attributable to the Company for 2009 was $3.9 million.  On a diluted per share basis, net income attributable to the Company was $0.22 for 2010, as compared to net loss of $0.15 for 2009.  These changes are primarily attributable to (i) a decrease in impairment charges of approximately $112.1 million, net of income taxes and noncontrolling interests, (ii) an overall net increase in Equity in income of joint ventures primarily due to a decrease in impairment charges of approximately $15.0 million during 2010, as compared to 2009 and an increase in equity in income from the Albertson’s joint venture, (iii) an increase in Income from other real estate investments primarily due to an increase of approximately $7.2 million from the Company’s Preferred Equity program, (iv) additional incremental earnings due to the acquisitions of operating properties during 2010 and 2009, partially offset by (v) the recognition of approximately $10.8 million in early extinguishment of debt charges.

The Company’s capital resources include accessing the public debt and equity capital markets, mortgage and construction loan financing and immediate access to an unsecured revolving credit facility with bank commitments of $1.75 billion.

The Company’s cash flow activities are summarized as follows (in millions):