UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission file number 1-10899
Kimco Realty Corporation
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(Exact name of registrant as specified in its charter)
Maryland 13-2744380
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)
3333 New Hyde Park Road, New Hyde Park, NY 11042
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(Address of principal executive offices - Zip Code)
(516) 869-9000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X
Yes _____ No ______
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
40,393,389 shares outstanding as of
October 31, 1997.
1 of 12
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Financial Statements -
Condensed Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996.
Condensed Consolidated Statements of Income for the Three Months
and Nine Months Ended September 30, 1997 and 1996.
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and 1996.
Notes to Condensed Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the accompanying
Condensed Consolidated Financial Statements and Notes thereto. These unaudited
financial statements include all adjustments which are, in the opinion of
management, necessary to reflect a fair statement of the results for the interim
periods presented, and all such adjustments are of a normal recurring nature.
Results of Operations
Revenues from rental property increased $10.0 million or 24.4% to $50.8 million
for the three months ended September 30, 1997, as compared with $40.8 million
for the corresponding quarter ended September 30, 1996. Similarly, revenues from
rental property increased $16.4 million or 13.1% to $141.3 million for the nine
months ended September 30, 1997, as compared with $124.9 million for the
corresponding nine month period ended September 30, 1996. These net increases
are primarily attributable to (i) property acquisitions during the nine month
period ended September 30, 1997 (56 property interests) and throughout calendar
year 1996 (39 property interests), (ii) the completion of certain property
redevelopment projects and (iii) new leasing and re-tenanting within the
portfolio at improved rental rates.
Rental property expenses, including depreciation and amortization, increased
$7.6 million or 32.7% to $30.6 million for the three months ended September 30,
1997, as compared with $23.0 million for the corresponding quarter ended
September 30, 1996. Similarly, rental property expenses increased $7.6 million
or 10.4% to $80.7 million for the nine months ended September 30, 1997, as
compared with $73.1 million for the nine-month period ended September 30, 1996.
Rent, real estate taxes and depreciation and amortization charges contributed
significantly to this net increase in rental property expenses (increasing $4.0
million and $5.9 million, or 33.8% and 16.6%, respectively, for the three and
nine month periods ended September 30, 1997, as compared with the corresponding
three and nine month periods in the preceding year) primarily due to the 1997
property acquisitions and the property acquisitions throughout calendar year
1996. Interest expense increased $2.4 million and $1.9 million, or 36.2% and
9.5%, respectively, for
the three and nine month periods ended September 30, 1997, as compared with the
corresponding three and nine month periods in the preceding year, reflecting
higher outstanding borrowings during 1997 (resulting from the issuance of an
aggregate $100 million unsecured medium-term notes during May and July 1997 and
the assumption of approximately $59.5 million of mortgage debt during August
1997) as compared to the corresponding periods in 1996.
General and administrative expenses increased approximately $.4 million and $1.0
million, to $3.0 million and $8.5 million, respectively, for the three and nine
month periods ended September 30, 1997, as compared to $2.6 million and $7.5
million for the corresponding periods in the preceding year. This increase is
primarily attributable to increased senior management and staff levels during
1997.
During June 1997, the Company disposed of a property in Troy, OH. Cash proceeds
from the disposition totaling $1.6 million, together with an additional $8.3
million cash investment, were used to acquire an exchange shopping center
property located in Ocala, FL.
During September 1996, the Company disposed of a property in Watertown, NY. Cash
proceeds from the disposition, totaling approximately $1.8 million, together
with an additional $2.2 million cash investment, were used to acquire an
exchange shopping center property located in Lafayette, IN during January 1997.
Net income for the three and nine month periods ended September 30, 1997 was
$20.6 million and $62.3 million, respectively. Net income for the three and nine
month periods ended September 30, 1996 was $19.8 million and $54.2 million,
respectively. This represents an increase in net income of $.04 and $.15 per
common share for the three and nine month periods ended September 30, 1997,
respectively, after adjusting for the gains on sales of shopping center
properties in the respective periods. These increases reflect the effects of
property acquisitions, the completion of certain property redevelopment projects
and increased leasing activity which strengthened operating profitability.
Liquidity and Capital Resources
Since the Company's initial public stock offering in November 1991, the Company
has completed additional offerings of its public unsecured debt and equity
raising in the aggregate $1.2 billion for the purposes of acquiring interests in
neighborhood and community shopping center properties, repaying indebtedness and
for expanding and improving properties in the portfolio. Management believes the
public debt and equity markets will continue to be the Company's principal
source of capital for the future. A $100 million, unsecured revolving credit
facility established in June 1994, which is
scheduled to expire in June 2000, has made available funds to both finance
property acquisitions and meet any short-term working capital requirements. The
Company has also implemented a $150 million medium-term notes program pursuant
to which it may from time to time offer for sale its senior unsecured debt for
any general corporate purposes, including (i) funding specific liquidity
requirements in its business, including property acquisitions and redevelopment
costs and (ii) better managing the Company's debt maturities.
In connection with its intention to continue to qualify as a REIT for Federal
income tax purposes, the Company expects to continue paying regular dividends to
its stockholders. These dividends will be paid from operating cash flows which
are expected to increase due to property acquisitions and growth in rental
revenues in the existing portfolio and from other sources. Since cash used to
pay dividends reduces amounts available for capital investment, the Company
generally intends to maintain a conservative dividend payout ratio, reserving
such amounts as it considers necessary for the expansion and renovation of
shopping centers in its portfolio, debt reduction, the acquisition of interests
in new properties as suitable opportunities arise, and such other factors as the
Board of Directors considers appropriate.
It is management's intention that the Company continually has access to the
capital resources necessary to expand and develop its business. Accordingly, the
Company may seek to obtain funds through additional equity offerings or debt
financing in a manner consistent with its intention to operate with a
conservative debt capitalization policy.
The Company anticipates that adequate cash will be available from operations to
fund its operating and administrative expenses, regular debt service obligations
and the payment of dividends in accordance with REIT requirements in both the
short-term and long-term.
Effects of Inflation
Substantially all of the Company's leases contain provisions designed to
mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive payment of additional rent calculated as a
percentage of tenants' gross sales above pre-determined thresholds, which
generally increase as prices rise, and/or escalation clauses, which generally
increase rental rates during the terms of the leases. Such escalation clauses
are often related to increases in the consumer price index or similar inflation
indices. In addition, many of the Company's leases are for terms of less than 10
years, which permits the Company to seek to increase rents to market rates upon
renewal. Most of the Company's leases require the tenant to pay an allocable
share of operating expenses, including common area maintenance, real estate
taxes and insurance, thereby reducing the Company's exposure to increases in
costs and operating expenses resulting from inflation. The Company periodically
evaluates its exposure to short-term interest rates and will, from time to time,
enter into interest rate protection agreements which mitigate, but do not
eliminate, the effect of changes in interest rates on its floating-rate loans.
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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September 30, December 31,
1997 1996
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Assets:
Real estate, net of accumulated depreciation
of $199,156,875 and $180,552,647 $1,103,340,060 $ 891,503,339
Investment in retail store leases 16,408,989 18,994,321
Cash and cash equivalents 122,645,949 37,425,206
Accounts and notes receivable 16,090,574 13,986,138
Other assets 76,027,470 61,123,557
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$1,334,513,042 $1,023,032,561
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Liabilities:
Notes payable $ 410,250,000 $ 310,250,000
Mortgages payable 108,129,377 54,404,939
Other liabilities, including minority
interests in partnerships 72,450,843 52,606,653
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590,830,220 417,261,592
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Stockholders' Equity:
Preferred stock, $1.00 par value, authorized
5,000,000 and 930,000 shares, respectively
Class A Preferred Stock, $1.00 par value,
authorized 345,000 shares Issued and
outstanding 300,000 shares 300,000 300,000
Aggregate liquidation preference $75,000,000
Class B Preferred Stock, $1.00 par value,
authorized 230,000 shares Issued and outstanding
200,000 shares 200,000 200,000
Aggregate liquidation preference $50,000,000
Class C Preferred Stock, $1.00 par value,
authorized 460,000 shares Issued and outstanding
400,000 shares 400,000 400,000
Aggregate liquidation preference $100,000,000
Common stock, $.01 par value, authorized
100,000,000 and 50,000,000 shares, respectively
Issued and outstanding 40,390,889 and
36,215,055 shares, respectively 403,909 362,151
Paid-in capital 857,568,979 719,601,956
Cumulative distributions in excess of
net income (115,190,066) (115,093,138)
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743,682,822 605,770,969
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$1,334,513,042 $1,023,032,561
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months ended September 30, 1997 and 1996
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Three Months Ended September 30, Nine Months Ended September 30,
1997 1996 1997 1996
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Revenues from rental property $ 50,822,619 $ 40,837,356 $ 141,294,177 $ 124,943,673
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Rental property expenses:
Rent 1,644,698 336,489 2,499,182 1,018,286
Real estate taxes 6,573,729 4,697,077 17,479,097 14,524,830
Interest 9,181,521 6,742,537 22,252,562 20,320,905
Operating and maintenance 5,397,149 4,337,982 16,687,602 16,973,053
Depreciation and amortization 7,776,881 6,919,811 21,737,600 20,233,607
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30,573,978 23,033,896 80,656,043 73,070,681
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Income from rental property 20,248,641 17,803,460 60,638,134 51,872,992
Income from investment in retail store leases 895,107 904,371 2,704,761 2,723,735
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21,143,748 18,707,831 63,342,895 54,596,727
Management fee income 891,031 946,427 2,754,842 2,693,763
General and administrative expenses (2,991,139) (2,572,785) (8,526,158) (7,514,268)
Other income, net 1,597,444 1,949,764 4,474,666 3,621,433
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Income before gain on sale of shopping center
property 20,641,084 19,031,237 62,046,245 53,397,655
Gain on sale of shopping center property -- 801,955 243,995 801,955
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Net Income $ 20,641,084 $ 19,833,192 $ 62,290,240 $ 54,199,610
============= ============= ============= =============
Net income applicable to common shares $ 16,031,659 $ 15,223,767 $ 48,461,965 $ 42,674,560
============= ============= ============= =============
Net income per common share $ 0.44 $ 0.42 $ 1.33 $ 1.19
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months ended September 30, 1997 and 1996
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1997 1996
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Cash flow provided by operations $ 100,186,622 $ 78,658,029
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Cash flow from investing activities:
Acquisition of and improvements to real estate (173,518,344) (126,261,585)
Investment in marketable securities (1,968,889) (4,935,008)
Acquisition of real estate through joint
venture investment (907,068) -
Advances to affiliated companies (12,036,000) -
Proceeds from disposition of shopping
center property 1,550,000 1,825,000
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Net cash flow used for investing activities (186,880,301) (129,371,593)
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Cash flow from financing activities:
Principal payments on debt, excluding
normal amortization of rental
property debt (4,650,000) (649,153)
Principal payments on rental property
debt, net (860,754) (1,055,942)
Change in notes payable 100,000,000 (15,000,000)
Dividends paid (60,583,605) (51,037,393)
Proceeds from issuance of stock 138,008,781 156,789,824
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Net cash flow provided by financing activities 171,914,422 89,047,336
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Change in cash and cash equivalents 85,220,743 38,333,772
Cash and cash equivalents, beginning of period 37,425,206 16,164,666
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Cash and cash equivalents, end of period $ 122,645,949 $ 54,498,438
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Interest paid during the period $ 17,050,469 $ 17,556,631
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Supplemental financing activity:
Acquisition of real estate interests by
assumption of debt $ 59,235,192 $ -
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Declaration of dividends paid in
succeeding period $ 20,524,382 $ 17,261,237
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
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1. Interim Financial Statements
The accompanying Condensed Consolidated Financial Statements include the
accounts of Kimco Realty Corporation (the "Company"), its subsidiaries, all of
which are wholly-owned, and all majority-owned partnerships. The information
furnished is unaudited and reflects all adjustments which are, in the opinion of
management, necessary to reflect a fair statement of the results for the interim
periods presented, and all such adjustments are of a normal recurring nature.
These Condensed Consolidated Financial Statements should be read in conjunction
with the financial statements included in the Company's Annual Report on Form
10-K.
Certain account balances in the accompanying Condensed Consolidated
Balance Sheet as of December 31, 1996 have been reclassified so as to conform
with the current year presentation.
2. Public Stock Offering
On September 30, 1997, the Company completed a primary public stock
offering of 4,000,000 shares of common stock at $35.50 per share. The net
proceeds from this sale of common stock, totaling approximately $134.5 million
(after related transaction costs of approximately $7.5 million),will be used for
general corporate purposes, including the acquisition of interests in
neighborhood and community shopping centers as suitable opportunities arise and
the expansion and improvement of properties in the Company's portfolio.
3. Retail Properties Acquisition
During August 1997, certain subsidiaries of the Company acquired
interests in 49 fee and leasehold properties from a retailer, comprising
approximately 5.9 million square feet of leasable area located in Illinois,
Missouri, Texas, Oklahoma, Kansas, Indiana and Iowa. The aggregate price was
approximately $130 million, consisting of $70.5 million in cash and the
assumption of approximately $59.5 million of existing mortgage debt on certain
of these properties. The mortgage debt bears interest at 10.54% per annum and
cannot be repaid, without penalty, until its maturity July 1, 2000. The Company
was also granted (i) an option to acquire 11 other properties in this
transaction should certain conditions be satisfied, (ii) an option to acquire
two other properties for
$4.5 million, and (iii) rights of first refusal to acquire 31 additional
properties containing 4.2 million square feet of leasable area for a period of 5
years. The transaction also includes approximately 573,000 square feet of retail
space substantially occupied by other retailers and approximately 165,000 square
feet of available retail space.
Simultaneously with this transaction, the Company entered into a single
long-term unitary lease covering all premises occupied by this retailer pursuant
to which this seller/tenant may remain in occupancy and continue to conduct
business in these premises.
4. Property Acquisitions
During the nine months ended September 30, 1997, the Company and
its affiliates acquired interests in 6 shopping center properties located in
Indiana, Florida, South Carolina, Texas and Louisiana and a health care facility
located in Pennsylvania through separate transactions for an aggregate purchase
price of approximately $64.5 million.
5. Investment in Retail Store Leases
Income from the investment in retail store leases for the nine months
ended September 30, 1997 and 1996 represents sublease revenues of approximately
$15.8 million and $15.9 million, respectively, less related expenses of $11.5
million for each respective period, and amounts, which in management's
estimation, reasonably provide for the recovery of the investment over a period
representing the expected remaining term of the retail store leases.
6. Property Dispositions
During June 1997, the Company disposed of a shopping center property in
Troy, OH. Cash proceeds from the disposition totaling $1.6 million, together
with an additional $8.3 million cash investment, were used to acquire an
exchange shopping center property located in Ocala, FL.
During September 1996, the Company disposed of a property in Watertown,
NY. Cash proceeds from the disposition, totaling approximately $1.8 million
together with an additional $2.2 million cash investment, were used to acquire
an exchange shopping center located in Lafayette, IN.
7. Net Income Per Common Share
Net income per common share is based upon weighted average numbers of
common shares outstanding of 36,633,269 and 36,375,024 for the three and nine
month periods ended September 30, 1997, respectively, and 36,148,885 and
35,815,472 for the three and nine month periods ended September 30, 1996,
respectively.
8. Pro Forma Financial Information
As discussed in Notes 4 and 6, the Company and certain of its subsidiaries
acquired and disposed of interests in certain shopping center properties during
the nine months ended September 30, 1997. The pro forma financial information
set forth below is based upon the Company's historical, Condensed Consolidated
Statement of Income for the nine months ended September 30, 1996, and the
Condensed Consolidated Statement of Income for the nine months ended September
30, 1997, adjusted to give effect to these transactions as of January 1, 1996.
The pro forma financial information is presented for informational purposes only
and may not be indicative of what actual results of operations would have been
had the transactions occurred as of January 1, 1996, nor does it purport to
represent the results of future operations. (Amounts presented in millions,
except per share figures.)
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
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Revenues from rental property $ 144.8 $ 131.4
Net income $ 62.8 $ 55.2
Net income per common share $ 1.35 $ 1.22
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
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, or
which is not covered by the Company's liability insurance.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibits -
4.1 Agreement to File Instruments
Kimco Realty Corporation (the "Registrant") hereby agrees to file with
the Securities and Exchange Commission, upon request of the Commission,
all instruments defining the rights of holders of long-term debt of the
Registrant and its consolidated subsidiaries, and for any of its
unconsolidated subsidiaries for which financial statements are require
to be filed, and for which the total amount of securities authorized
thereunder does not exceed 10 percent of the total assets of the
Registrant and its subsidiaries on a consolidated basis.
Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KIMCO REALTY CORPORATION
08/12/97 /s/ Milton Cooper
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(Date) Milton Cooper
Chairman of the Board
08/12/97 /s/ Michael V. Pappagallo
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(Date) Michael V. Pappagallo
Chief Financial Officer