SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 5, 1998 (January 23, 1998) Kimco Realty Corporation (Exact name of registrant as specified in its charter) Maryland 1-10899 13-2744380 - ------------------------------- ------------------------ ------------------- (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.) 3333 New Hyde Park Road New Hyde Park, New York 11042-0020 - ------------------------------------- ------------------- (Address of principal executive (zip code) offices) 516/869-9000 ----------------------------------- Registrant's telelphone, including area code Not Applicable - -------------------------------------------------------------------------------- (former name or former address, if changed since last report.) Page 1 of 22 KIMCO REALTY CORPORATION AND SUBSIDIARIES CURRENT REPORT ON FORM 8-K Item 2. Acquisition or Disposition of Assets As previously reported on Current Report on Form 8-K dated June 24, 1998, on June 19, 1998, Kimco Realty Corporation (the "Company") and The Price REIT, Inc. ("Price REIT") consummated a merger (the "Merger") whereby the Company acquired control of Price REIT pursuant to an Agreement and Plan of Merger, dated as of January 13, 1998, as amended as of March 5, 1998 and May 14, 1998 (the "Merger Agreement"), among the Company, REIT Sub, Inc., a wholly owned subsidiary of the Company ("Merger Sub"), and Price REIT. Pursuant to the Merger, Price REIT was merged with and into Merger Sub, whereupon the separate existence of Price REIT ceased. Item 5. Other Events Shopping Center Acquisitions - As previously reported on Current Report on Form 8-K dated May 22, 1998, during May 1998, certain subsidiaries of the Company acquired, in separate transactions, Lafayette Marketplace in Lafayette, Indiana and Bayshore Gardens Shopping Center in Bradenton, Florida for an aggregate purchase price of $33.3 million, which included the issuance of partnership units valued at approximately $5.0 million in connection with the Bayshore Gardens acquisition (the "May 1998 Shopping Center Acquisitions"). During July 1998, the Company acquired 3 neighborhood and community shopping center properties comprising approximately 384,000 square feet of gross leasable area ("GLA") in 3 states (the "July 1998 Acquisitions" and collectively, with the May 1998 Shopping Center Acquisitions, "the Certain Acquired Properties"). The July 1998 Acquisitions, acquired in separate transactions, for an aggregate purchase price of approximately $35.3 million, include: (i) Shoppes at Rivergate in Goodlettsville, Tennessee, (ii) Center of the Hills in Austin, Texas and (iii) Juan Tabo Plaza in Albuquerque, New Mexico. More specific information with respect to each of the Certain Acquired Properties is as follows: Lafayette Marketplace, located on State Road 38 in Lafayette, Indiana, is anchored by Michaels and contains approximately 214,000 square feet of GLA. Bayshore Gardens Shopping Center, located on Flamingo Boulevard in Bradenton, Florida, is anchored by Publix and TJ Maxx, and contains approximately 163,000 square feet of GLA. 2 Shoppes at Rivergate, located on Gallatin Park in Goodlettsville, Tennessee, is anchored by Uptons Department Store and Stein Mart and contains approximately 171,000 square feet of GLA. Center of the Hills, located on Route 71 West in Austin, Texas, is anchored by H.E.B. Grocery and Future Firm and contains approximately 153,000 square feet of GLA. Juan Tabo Plaza, located on Montgomery Boulevard in Albuquerque, New Mexico, is anchored by Walgreens and Page One Cellular and contains approximately 60,000 square feet of GLA. Management believes that the current annualized net cash flow generated by the July 1998 Acquisitions provides a weighted average annualized yield of approximately 10.1% on the Company's investment in such properties. Although none of the above Certain Acquired Properties individually represent a "significant acquisition" pursuant to the rules governing the reporting of transactions under this Current Report on Form 8-K, this report has been filed for the purpose of providing certain historical financial information for the Certain Acquired Properties and pro forma financial information for (i) the July 1998 Acquisitions, (ii) all previously reported 1998 acquisitions, which include the purchase of 15 shopping centers acquired during 1998 which were previously reported on Current Report on Form 8-K dated May 22, 1998 and the purchase of 30 fee and leasehold positions acquired by the Company from the Metropolitan Life Insurance Company ("the "Met Life Acquisition") on July 1, 1998 as previously reported on Current Report on Form 8-K dated July 9, 1998, (collectively, the "1998 Previously Reported Acquisitions") and (iii) the effects of the Merger. 3 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) (b) Financial Statements and Pro Forma Financial Information The financial statements and pro forma financial information filed herewith is as follows: Page Report of Independent Accountants..................................................6 Combined Historical Summary of Revenues and Certain Operating Expenses of Certain Acquired Properties for the Year Ended December 31, 1997 and the Three Months Ended March 31, 1998..............................................7 Notes to Combined Historical Summary of Revenues and Certain Operating Expenses of Certain Acquired Properties..................................8 Estimates of Net Income and Funds from Operations of Certain Acquired Properties................................................................9 Notes to Estimates of Net Income and Funds from Operations of Certain Acquired Properties....................................................... 10 Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1998...............13 Pro Forma Condensed Consolidated Statements of Income for the Year Ended December 31, 1997 and the Three Months Ended March 31, 1998.................14 Notes to Pro Forma Condensed Consolidated Financial Statements....................16 (c) Exhibits: * 23.1 Consent of PricewaterhouseCoopers LLP ---------------- *Filed herewith. 4 KIMCO REALTY CORPORATION AND SUBSIDIARIES CERTAIN ACQUIRED PROPERTIES COMBINED HISTORICAL SUMMARY OF REVENUES AND CERTAIN OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1997 5 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Kimco Realty Corporation: In our opinion, the accompanying Combined Historical Summary of Revenues and Certain Operating Expenses of Certain Acquired Properties, as defined in the accompanying Note 1, presents fairly in all material respects, the revenues and certain operating expenses of certain acquired properties for the year ended December 31, 1997 in accordance with generally accepted accounting principles. This combined historical summary is the responsibility of the management of Kimco Realty Corporation; our responsibility is to express an opinion on the historical summary based on our audit. We conducted our audit in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the combined historical summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the historical summary, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the combined historical summary. We believe that our audit provides a reasonable basis for our opinion. The accompanying Combined Historical Summary of Revenues and Certain Operating Expenses of Certain Acquired Properties has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 2, and is not intended to be a complete representation of the revenues and expenses of the Certain Acquired Properties. PricewaterhouseCoopers LLP New York, New York July 24, 1998 6 KIMCO REALTY CORPORATION AND SUBSIDIARIES CERTAIN ACQUIRED PROPERTIES COMBINED HISTORICAL SUMMARY OF REVENUES AND CERTAIN OPERATING EXPENSES Three Months Year Ended Ended March 31, December 31, 1998 1997 (Unaudited) ------------ --------------- Revenues: Base rentals $7,295,886 $1,798,178 Operating reimbursements and other income 1,118,339 331,684 ---------- ---------- 8,414,225 2,129,862 ---------- ---------- Certain operating expenses: Real estate taxes 837,169 209,292 Repairs and maintenance 477,675 129,806 Other operating expenses 283,769 59,560 ---------- ---------- 1,598,613 398,658 ---------- ---------- Excess of revenues over certain operating expenses $6,815,612 $1,731,204 ========== ========== 7 KIMCO REALTY CORPORATION AND SUBSIDIARIES CERTAIN ACQUIRED PROPERTIES NOTES TO COMBINED HISTORICAL SUMMARY OF REVENUES AND CERTAIN OPERATING EXPENSES 1. Certain Acquired Properties The Combined Historical Summary of Revenues and Certain Operating Expenses for the year ended December 31, 1997 relates to the operations of the following certain acquired properties (the "Certain Acquired Properties"), while under ownership previous to Kimco Realty Corporation and Subsidiaries. Property Name Location - ------------- -------- Lafayette Marketplace Lafayette, Indiana Bayshore Gardens Shopping Center Bradenton, Florida Shoppes at Rivergate Goodlettsville, Tennessee Center of the Hills Austin, Texas Juan Tabo Plaza Albuquerque, New Mexico 2. Basis of Presentation The Combined Historical Summary has been prepared on the accrual method of accounting. Certain operating expenses of the Certain Acquired Properties include operating and maintenance costs, real estate taxes, and insurance expense. In accordance with the regulations of the Securities and Exchange Commission, mortgage interest, depreciation and general and administrative expenses have been excluded as such costs are dependent upon a particular owner, purchase price or other financial arrangements. 3. Revenue Recognition Minimum revenues from rental property are recognized on a straight-line basis over the terms of the related leases. The future minimum revenues from rental property under the terms of all noncancellable tenant leases are approximately as follows: 1998 $7,053,000 1999 $6,823,000 2000 $6,455,000 2001 $5,903,000 2002 $5,394,000 Thereafter $23,143,000 8 KIMCO REALTY CORPORATION AND SUBSIDIARIES ESTIMATES OF NET INCOME AND FUNDS FROM OPERATIONS OF CERTAIN ACQUIRED PROPERTIES (Unaudited) The following represents an estimate of the net income and funds from operations expected to be generated from the operation of the Certain Acquired Properties based upon the Combined Historical Summary of Revenues and Certain Operating Expenses of Certain Acquired Properties for the year ended December 31, 1997. These estimated results do not purport to represent results of operations for these properties in the future and were prepared on the basis described in the accompanying notes which should be read in conjunction herewith. Estimated Net Income Excess of revenues over certain operating expenses $ 6,815,612 Less: Estimated depreciation (Note 1) (1,408,615) ============= Estimated net income $ 5,406,997 ============= Estimated Funds from Operations Estimated net income $ 5,406,997 Add: Estimated depreciation (Note 1) 1,408,615 ------------- Estimated funds from operations $ 6,815,612 ============= 9 KIMCO REALTY COPRORATION AND SUBSIDIARIES NOTES TO ESTIMATES OF NET INCOME AND FUNDS FROM OPERATIONS OF CERTAIN ACQUIRED PROPERTIES 1. Basis of Presentation Depreciation has been estimated based upon an allocation of the purchase prices of the Certain Acquired Properties to land (20%) and building (80%) and assuming a 39 year useful life applied on a straight-line method. No income taxes have been provided because the Company is organized and operates in such a manner so as to qualify as a Real Estate Investment Trust ("REIT") under the provisions of the Internal Revenue Code (the "Code"). Accordingly, the Company generally will not pay Federal income taxes provided that distributions to its stockholders equal at least the amount of its REIT taxable income as defined under the Code. 2. Acquisition Considerations In assessing the properties acquired, the Company's management considered the existing tenancies, which are the primary revenue source, the occupancy rates, which averaged 96.5% on the dates of acquisition, the competitive nature of the markets and comparative rental rates. Furthermore, current and anticipated maintenance and repair costs, real estate taxes and capital improvement requirements were evaluated. Management is not aware of any material factors that would cause the reported financial information in the accompanying Combined Historical Summary of Revenues and Certain Operating Expenses and Estimates of Net Income and Funds from Operations of Certain Acquired Properties to be misleading. 10 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENTS OF INCOME The accompanying Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1998 gives effect to (i) the purchase of four shopping center properties acquired by the Company during April and May 1998 which were previously reported on Form 8-K dated May 22, 1998 (the "Second Quarter 1998 Acquisitions") and the Met Life Acquisition on July 1, 1998 which was previously reported on Form 8-K dated July 9, 1998 (collectively, the "Second Quarter 1998 and Met Life Acquisitions"), (ii) the purchase of three shopping centers acquired by the Company in July 1998 (the "July 1998 Acquisitions"), (iii) the issuance of partnership units valued at approximately $5.0 million in connection with one of the Second Quarter 1998 Acquisitions, (iv) the borrowing of $67.5 million under the Company's unsecured revolving credit facility, and (v) the issuance of an aggregate $100.0 million and $30.0 million of unsecured medium-term notes bearing interest at 6.73% and 6.93%, respectively, as if these properties had been acquired, the partnership units and medium-term notes issued and the borrowings completed as of March 31, 1998. Additionally, the accompanying Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1998 gives effect to the Merger with Price REIT as if the Merger had occurred on March 31, 1998 and had been accounted for under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. The Company, in four transactions during April 1998, issued an aggregate 2,259,020 shares of the Company's common stock for net proceeds of approximately $77.6 million. These transactions have also been reflected in the Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1998. The accompanying Pro Forma Condensed Consolidated Statements of Income for the year ended December 31, 1997 and the three months ended March 31, 1998 reflect the historical results of the Company adjusted to give effect to (i) the 1998 Previously Reported Acquisitions and (ii) the July 1998 Acquisitions as if these transactions had been completed as of January 1, 1997 and (iii) the Merger as if it had occured as of January 1, 1997 and accounted for under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. 11 The Pro Forma Condensed Consolidated Balance Sheet and Statements of Income have been prepared by the management of the Company. These pro forma statements may not be indicative of the results that would have actually occurred if the 1998 Previously Reported Acquisitions, the July 1998 Acquisitions and the Merger had been in effect on the dates indicated. Also, they may not be indicative of the results that may be achieved in the future. The Pro Forma Condensed Consolidated Balance Sheet and Statements of Income should be read in conjunction with Kimco Realty Corporation's and Price REIT's audited financial statements as of December 31, 1997 and for the year then ended (which are included in each of the Companys' Annual Report on Form 10-K for the year ended December 31, 1997), and the unaudited condensed consolidated financial statements as of March 31, 1998 and for the three months then ended (which are included in each of the Companys' Quarterly Report on Form 10-Q for the period ended March 31, 1998) and the accompanying notes thereto. 12 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 1998 --------------- (Unaudited) Pro Forma Adjustments ------------------------------------- Second Quarter 1998 and Met Life Kimco Acquisitions July 1998 Historical (previously reported) Acquisitions -------------------- --------------------- --------------- Assets: Real estate, net of accumulated depreciation $ 1,311,322,749 $ 215,485,000 $ 35,325,000 Investment in retail store leases 15,539,477 - - Cash and cash equivalents 34,377,395 34,551,891 (5,325,000) Accounts and notes receivable 18,304,186 - - Other assets 91,573,797 - - -------------------- ------------------ ----------------- $ 1,471,117,604 $ 250,036,891 $ 30,000,000 ==================== ================== ================= Liabilities: Notes payable $ 510,250,000 167,500,000 $ 30,000,000 Mortgages payable 141,192,853 - - Other liabilities, including minority interests in partnerships 74,341,707 4,973,196 - -------------------- ------------------ ----------------- 725,784,560 172,473,196 30,000,000 Stockholders' Equity: Preferred stock, $1.00 par value, authorized 5,000,000 shares and 3,470,000 shares on a proforma basis Class A Preferred Stock, $1.00 par value, authorized 345,000 shares Issued and outstanding 300,000 shares 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 - - 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 - - Aggregate liquidation preference $100,000,000 Class D Convertible Preferred Stock, $1.00 par value, authorized 700,000 shares Issued and outstanding 429,159 shares - - - Aggregate liquidation preference $107,289,750 Class E Floating Rate Cumulative Preferred Stock, $1.00 par value, Authorized, issued and outstanding 65,000 shares - - - Aggregate liquidation preference $65,000,000 Common stock, $.01 par value, authorized 100,000,000 shares Issued and outstanding 40,419,440 and 54,600,452 shares on a pro forma basis, respectively 404,194 22,590 - Paid-in capital 858,197,672 77,541,105 - Cumulative distributions in excess of net income (114,168,822) - - -------------------- ------------------ ----------------- 745,333,044 77,563,695 - -------------------- ------------------ ----------------- $ 1,471,117,604 $ 250,036,891 $ 30,000,000 ==================== ================== ================= Pro Forma Adjustments -------------------------------------- Second Quarter Price REIT Price REIT Merger Historical Acquisitions Adjustments ------------------ ------------------ ------------------ Assets: Real estate, net of accumulated depreciation $ 617,657,000 $ 42,605,000 $ 263,690,422 Investment in retail store leases - - - Cash and cash equivalents 4,112,000 (4,000,000) (15,800,000) Accounts and notes receivable 16,397,000 - - Other assets 33,156,000 - (1,653,701) ------------------ ------------------ ------------------ $ 671,322,000 $ 38,605,000 $ 246,236,721 ================== ================== ================== Liabilities: Notes payable $ 293,000,000 $ (48,073,000) $ - Mortgages payable 37,381,000 22,978,000 - Other liabilities, including minority interests in partnerships 15,772,000 - 2,746,299 ------------------ ------------------ ------------------ 346,153,000 (25,095,000) 2,746,299 ------------------ ------------------ ------------------ Stockholders' Equity: Preferred stock, $1.00 par value, authorized 5,000,000 shares Class A Preferred Stock, $1.00 par value, authorized 345,000 shares Issued and outstanding 300,000 shares - - - Aggregate liquidation preference $75,000,000 Class B Preferred Stock, $1.00 par value, authorized 230,000 shares Issued and outstanding 200,000 shares - - - Aggregate liquidation preference $50,000,000 Class C Preferred Stock, $1.00 par value, authorized 460,000 shares Issued and outstanding 400,000 shares - - - Aggregate liquidation preference $100,000,000 Class D Convertible Preferred Stock, $1.00 par value, authorized 700,000 shares Issued and outstanding 429,159 shares - - 429,159 Aggregate liquidation preference $107,289,750 Class E Floating Rate Cumulative Preferred Stock, $1.00 par value, Authorized, issued and outstanding 65,000 shares - 65,000 - Aggregate liquidation preference $65,000,000 Common stock, $.01 par value, authorized 100,000,000 shares Issued and outstanding 40,419,440 and 54,600,452 shares on a pro forma basis, respectively 117,000 - 2,220 Paid-in capital 356,026,000 63,635,000 212,085,043 Cumulative distributions in excess of net income (30,974,000) - 30,974,000 ------------------ ------------------ ------------------ 325,169,000 63,700,000 243,490,422 ------------------ ------------------ ------------------ $ 671,322,000 $ 38,605,000 $ 246,236,721 ================== ================== ================== Pro Forma ------------------- Assets: Real estate, net of accumulated depreciation $ 2,486,085,171 Investment in retail store leases 15,539,477 Cash and cash equivalents 47,916,286 Accounts and notes receivable 34,701,186 Other assets 123,076,096 ------------------- $ 2,707,318,216 =================== Liabilities: Notes payable $ 952,677,000 Mortgages payable 201,551,853 Other liabilities, including minority interests in partnerships 97,833,202 ------------------- 1,252,062,055 Stockholders' Equity: Preferred stock, $1.00 par value, authorized 5,000,000 shares Class A Preferred Stock, $1.00 par value, authorized 345,000 shares Issued and outstanding 300,000 shares 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 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 Aggregate liquidation preference $100,000,000 Class D Convertible Preferred Stock, $1.00 par value, authorized 700,000 shares Issued and outstanding 429,159 shares 429,159 Aggregate liquidation preference $107,289,750 Class E Floating Rate Cumulative Preferred Stock, $1.00 par value, Authorized, issued and outstanding 65,000 shares 65,000 Aggregate liquidation preference $65,000,000 Common stock, $.01 par value, authorized 100,000,000 shares Issued and outstanding 40,419,440 and 54,600,452 shares on a pro forma basis, respectively 546,004 Paid-in capital 1,567,484,820 Cumulative distributions in excess of net income (114,168,822) ------------------- 1,455,256,161 ------------------- $ 2,707,318,216 =================== The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. 13 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 ------------------------------- (Unaudited) Pro Forma Adjustments ------------------------------------ 1998 Previously Kimco Reported July 1998 Price REIT Historical Acquisitions Acquisitions Historical ------------------ --------------- ------------------ ---------------- Revenues from rental property $ 198,929,403 $ 36,235,732 $ 4,592,794 $ 69,335,000 ------------------ --------------- ------------------ ---------------- Rental property expenses: Rent 4,873,200 - - - Real estate taxes 26,345,685 2,069,241 431,726 7,671,000 Interest 31,744,762 14,086,408 2,079,000 15,667,000 Operating and maintenance 22,194,628 2,163,488 390,120 5,890,000 Depreciation and amortization 30,052,714 6,379,239 724,615 15,752,000 ------------------ --------------- ------------------ ---------------- 115,210,989 24,698,376 3,625,461 44,980,000 ------------------ --------------- ------------------ ---------------- Income from rental property 83,718,414 11,537,356 967,333 24,355,000 Income from investment in retail store leases 3,571,946 - - - ------------------ --------------- ------------------ ---------------- 87,290,360 11,537,356 967,333 24,355,000 Management fee income 3,276,152 - - 299,000 General and administrative expenses (11,651,341) - - (4,191,000) Other income (expenses), net 6,677,279 (777,856) (265,000) 3,004,000 ------------------ --------------- ------------------ ---------------- Income before gain on sale of shopping center 85,592,450 10,759,500 702,333 23,467,000 Gain on sale of shopping center property 243,995 - - 2,787,000 ------------------ --------------- ------------------ ---------------- Net income $85,836,445 $10,759,500 $702,333 $26,254,000 ================== =============== ================== ================ Net income applicable to common shares $67,398,745 $10,759,500 $702,333 $26,254,000 =================== =============== ================== ================ Net income per common share Basic $1.80 ====== Diluted $1.78 ====== Pro Forma Adjustments ------------------------------------------------------- 1998 Price REIT Merger Acquisitions Adjustments Pro Forma ----------------- ---------------- ---------------- Revenues from rental property $ 8,452,000 $ - $ 317,544,929 ----------------- ---------------- ---------------- Rental property expenses: Rent - - 4,873,200 Real estate taxes 812,000 - 37,329,652 Interest 90,000 - 63,667,170 Operating and maintenance 778,000 - 31,416,236 Depreciation and amortization 1,522,154 1,475,000 55,905,722 ----------------- ---------------- ---------------- 3,202,154 1,475,000 193,191,980 ----------------- ---------------- ---------------- Income from rental property 5,249,846 (1,475,000) 124,352,949 Income from investment in retail store leases - - 3,571,946 ----------------- ---------------- ---------------- 5,249,846 (1,475,000) 127,924,895 Management fee income - - 3,575,152 General and administrative expenses - 1,500,000 (14,342,341) Other income (expenses), net (381,000) 8,257,423 ----------------- ---------------- ---------------- Income before gain on sale of shopping center 4,868,846 25,000 125,415,129 Gain on sale of shopping center property - - 3,030,995 ----------------- ---------------- ---------------- Net income $4,868,846 $25,000 $128,446,124 ================= ================ ================ Net income applicable to common shares $4,868,846 ($13,013,731) $96,969,693 ================= ================ ================ Net income per common share Basic $1.97 ===== Diluted $1.95 ===== The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. 14 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 ------------------------------- (Unaudited) Pro Forma Adjustments ---------------------------------------------------------------------------- 1998 Previously Kimco Reported July 1998 Price REIT Historical Acquisitions Acquisitions Historical ------------------ --------------- ------------------ ---------------- Revenues from rental property $ 63,111,632 $ 7,947,839 $ 1,174,504 $ 23,237,000 ------------------ --------------- ------------------ ---------------- Rental property expenses: Rent 2,752,135 - - - Real estate taxes 8,876,999 265,551 107,932 2,355,000 Interest 11,039,207 3,083,816 519,750 5,646,000 Operating and maintenance 6,936,109 529,202 96,535 2,400,000 Depreciation and amortization 8,899,764 1,409,994 181,154 4,961,000 ------------------ --------------- ------------------ ---------------- 38,504,214 5,288,563 905,371 15,362,000 ------------------ --------------- ------------------ ---------------- Income from rental property 24,607,418 2,659,276 269,133 7,875,000 Income from investment in retail store leases 916,171 - - - ------------------ --------------- ------------------ ---------------- 25,523,589 2,659,276 269,133 7,875,000 Management fee income 801,708 - - 68,000 General and administrative expenses (3,180,653) - - (1,314,000) Other income (expenses), net 1,437,863 (228,464) (66,250) - ------------------ --------------- ------------------ ---------------- Income before gain on sale of shopping center 24,582,507 2,430,812 202,883 6,629,000 Gain on sale of shopping center property 901,249 - - - ------------------ --------------- ------------------ ---------------- Net income $25,483,756 $ 2,430,812 $202,883 $6,629,000 ================== =============== ================== ================ Net income applicable to common shares $20,874,331 $ 2,430,812 $202,883 $ 6,629,000 ================== =============== ================== ================ Net income per common share Basic $0.52 ====== Diluted $0.51 ====== Pro Forma Adjustments ------------------------------------------------------- 1998 Price REIT Merger Acquisitions Adjustments Pro Forma ----------------- ---------------- ----------------- Revenues from rental property 2,038,000 $ - $ 97,508,975 ------------------ ---------------- ----------------- Rental property expenses: Rent - - 2,752,135 Real estate taxes 216,998 - 11,822,480 Interest (477,551) - 19,811,222 Operating and maintenance 142,002 - 10,103,848 Depreciation and amortization 380,538 (655,000) 15,177,450 ----------------- ---------------- ----------------- 261,987 (655,000) 59,667,135 ----------------- ---------------- ----------------- Income from rental property 1,776,013 655,000 37,841,840 Income from investment in retail store leases - - 916,171 ----------------- ---------------- ----------------- 1,776,013 655,000 38,758,011 Management fee income - - 869,708 General and administrative expenses - 375,000 (4,119,653) Other income (expenses), net (60,000) - 1,083,149 ----------------- ---------------- ----------------- Income before gain on sale of shopping center 1,716,013 1,030,000 36,591,215 Gain on sale of shopping center property - - 901,249 ----------------- ---------------- ----------------- Net income $1,716,013 $1,030,000 $37,492,464 ================= ================ ================= Net income applicable to common shares $ 1,716,013 $ (2,229,683) $29,623,356 ================= ================ ================= Net income per common share Basic $0.57 ===== Diluted $0.56 ===== The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. 15 KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1998 gives effect to (i) the purchase of four shopping center properties acquired by the Company during April and May 1998 which were previously reported on Form 8-K dated May 22, 1998 (the "Second Quarter 1998 Acquisitions") and the Met Life Acquisition on July 1, 1998 which was previously reported on Form 8-K dated July 9, 1998 (collectively, the "Second Quarter 1998 and Met Life Acquisitions"), (ii) the purchase of three shopping centers acquired by the Company in July 1998 (the "July 1998 Acquisitions"), (iii) the issuance of partnership units valued at approximately $5.0 million in connection with one of the Second Quarter 1998 Acquisitions, (iv) the borrowing of $67.5 million under the Company's unsecured revolving credit facility, and (v) the issuance of an aggregate $100.0 million and $30.0 million of unsecured medium-term notes bearing interest at 6.73% and 6.93%, respectively, as if these properties had been acquired, the partnership units and medium-term notes issued and the borrowings completed as of March 31, 1998. Additionally, the accompanying Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1998 gives effect to the Merger with Price REIT as if the Merger had occurred on March 31, 1998 and had been accounted for under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. The Company, in four transactions during April 1998, issued an aggregate 2,259,020 shares of the Company's common stock for net proceeds of approximately $77.6 million. These transactions have also been reflected in the Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1998. The accompanying Pro Forma Condensed Consolidated Statements of Income for the year ended December 31, 1997 and the three months ended March 31, 1998 reflect the historical results of the Company adjusted to give effect to (i) the 1998 Previously Reported Acquisitions and (ii) the July 1998 Acquisitions as if these transactions had been completed as of January 1, 1997 and (iii) the Merger as if it had occured as of January 1, 1997 and accounted for under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. 16 2. Pro Forma Adjustments (i) With respect to the 1998 Previously Reported Acquisitions: A. The adjustment to interest expense relates to (i) the assumption of mortgage debt encumbering four of the properties acquired (ii) the issuance of the $100.0 million medium-term notes and the additional borrowings under the Company's unsecured revolving credit facility. B. The adjustments to other income (expenses), net relates to (i) the elimination of interest earned on funds assumed to have been expended as of January 1, 1997 and (ii) the preferred return applicable to the partnership unitholders in connection with one of the acquisitions. C. The adjustment for depreciation was based upon an estimated useful life of 39 years using the straight-line method and purchase price allocations to land and building of 20% and 80%, respectively for the fee simple properties and to building (100%) for the properties subject to ground leases. (ii) With respect to the July 1998 Acquisitions: A. The adjustment to cash relates to proceeds from the issuance of $30.0 million medium-term notes offset by the cash used to acquire these properties. B. The adjustment to interest expense relates to the issuance of the medium-term notes. C. The adjustments to other income (expenses), net relate to the elimination of interest earned on funds assumed to have been expended as of January 1, 1997. D. The adjustment for depreciation was based upon an estimated useful life of 39 years using the straight-line method and purchase price allocations to land and building of 20% and 80%, respectively. (iii) With respect to the 1998 Second Quarter Price REIT Acquisitions (as presented on the Pro Forma Condensed Consolidated Balance Sheet) and the 1998 Price REIT Acquisitions (as presented on the Pro Forma Condensed Consolidated Statements of Income for the year ended December 31, 1997 and the three months ended March 31, 1998): The adjustments represent the acquisition by Price REIT of 3 shopping centers with respect to the 1998 Second Quarter Price REIT Acquisitions and 6 shopping centers with respect to the 1998 Price REIT Acquisitions which were acquired during 1998 prior to the Merger, on a pro forma basis as though the acquisitions has occurred at March 31, 1998 with respect to the 1998 Second Quarter Price REIT Acquisitions and as of January 1, 1997 with respect to the 1998 Price REIT Acquisitions. 17 (iv) With respect to the Price REIT Merger: A. The adjustment to Real estate, net of accumulated depreciation, reflects the increase in book value of Price REIT's real estate assets based upon (i) an exchange ratio of one share of Price REIT common stock for one share of Kimco Common Stock (assumed value of $38.59 per share of Kimco Common Stock) and 0.36 Kimco Class D Depositary shares ("Kimco Class D Depositary Shares") (assumed value of $25.00 per depositary share), each representing a one-tenth fractional interest in a new issue of Kimco 7.5% Class D Cumulative Convertible Preferred Stock ("Kimco Class D Preferred Stock") and (ii) an exchange ratio of one share of Price REIT Class A Floating Rate Cumulative Preferred Stock for one share of Kimco Class E Floating Rate Cumulative Preferred Stock (assumed value $1,000 per share) as follows: Issuance of: 000's -------- i. 11,921,992 shares of Kimco Common Stock (assumed value of $38.59 per share) based on an exchange ratio of one for one, $460,069 ii. 429,159 shares of Kimco Class D Preferred Stock (represented by 4,291,590 Kimco Class D Depositary Shares) based on an exchange ratio of 0.036 shares of Kimco Class D Preferred Stock (represented by .36 Kimco Class D depositary Shares) for one share of Price Reit common stock in exchange for 11,921,992 shares of Price REIT common stock and 107,290 iii. 65,000 shares of Kimco Class E Floating Rate Cumulative Preferred Stock (represented by 650,000 Kimco Class E Depositary Shares) based on an exchange ratio of one for one for 65,000 shares of Price REIT Class A Floating Rate Cumulative Preferred Stock 65,000 iv. Assumption of Price REIT liabilities 4,400 v. Merger costs 15,800 -------- Total purchase price to be allocated 652,559 Less: book basis of Price REIT's net assets acquired (after Second Quarter Price REIT Acquisitions pro forma adjustments) 388,869 -------- Pro Forma adjustment to real estate $263,690 -------- -------- B. The adjustment to cash and cash equivalents reflects the estimated fees and other expenses relating to the Merger, including, but not limited to, investment banking fees, legal and accounting fees, printing, filing and other related costs. C. During April 1996, the Company and Price REIT formed a partnership to purchase a property in Phoenix, AZ. The Company has consolidated this partnership for financial reporting purposes and Price REIT has recorded their interest using the equity method. The adjustments to Investments and advances in real estate joint ventures and Minority interests in partnerships, included in Other assets and Other liabilities, respectively, reflect the elimination of the partnership accounting for this partnership as a result of the Merger. 18 D. The adjustments to stockholders' equity reflect the issuance of (i) 11,921,992 shares of Kimco Common Stock, par value $.01 per share (ii) 429,159 shares of Kimco Class D Preferred Stock (represented by 4,291,590 Kimco Class D Depositary Shares) based on the exchange ratio of one share of Price REIT Common Stock for one share of Kimco Common Stock and 0.036 shares of Kimco Class D Preferred Stock (represented by 0.36 Kimco Class D Depositary Shares), and (iii) an exchange of 65,000 shares of Price REIT Class A Floating Rate Cumulative Preferred Stock for 65,000 shares of a new issue of Kimco Class E Floating Rate Cumulative Preferred Stock, par value $1.00 (represented by 650,000 Class E Depositary Shares) as follows: Cumulative Distributions Common Preferred Paid in in Excess of Stock Stock Capital Net Income (000's) (000's) (000's) (000's) -------------------------------------------------- Issuance of Kimco Common Stock $ 119 $ - $ 459,950 $ - Issuance of Kimco Class D Preferred Stock 429 106,861 Issuance of Kimco Class E Floating Rate Cumulative Preferred Stock 65 64,935 Price REIT's historical Stockholders' equity (117) (65) (419,661) 30,974 ------------------------------------------------ Stockholders' equity Pro Forma adjustments $ 2 $ 429 $ 212,085 $ 30,974 ================================================ E. The adjustment to depreciation and amortization results from the net increase in real estate owned as a result of recording Price REIT's real estate assets at fair value versus historical cost. Depreciation is computed on the straight-line method based upon an estimated useful life of 39 years and an allocation of the stepped-up basis to land and building of 20% and 80%, respectively. Pro forma adjustments to depreciation of real estate for the year ended December 31, 1997 and the three months ended March 31, 1998 are as follows: Year Ended Three Months Ended December 31, 1997 March 31, 1998 (000's) (000's) -------------------------------------- Depreciation expense based upon an estimated useful life of 39 years $ 18,337 $ 4,584 Less: Price REIT depreciation of real estate owned based upon an estimated useful life of 15 to 25 years (16,862) (5,239) -------- -------- Depreciation and amortization Pro Forma adjustment $ 1,475 ($655) -------- -------- 19 F. The adjustment to general and administrative expenses reflects the net estimated reduction of those costs which are anticipated to be eliminated or reduced as a result of the Merger, as follows: Year Ended Three Months Ended December 31, 1997 March 31, 1998 (000's) (000's) ----------------- ------------------ Net reduction in salary and benefit costs $ 700 $ 175 Net reduction in duplication of public company expenses 600 150 Net reduction in directors and officers' insurance and directors fees 200 50 ------ ------- General and administrative Pro Forma adjustment $1,500 $ 375 ------ ------ G. During April 1996, the Company and Price REIT formed a partnership to purchase a property in Phoenix, AZ. The Company has consolidated this partnership for financial reporting purposes and Price REIT has recorded their interest using the equity method. The adjustments of $15,248 and $168,000 to Equity in income of real estate joint ventures, net and Minority interest in partnerships both included in Other income (expenses), net reflect the elimination of the partnership accounting for this partnership as a result of the Merger, for the three months ended March 31, 1998 and the year ended December 31, 1997, respectively. H. Weighted average number of shares outstanding- The pro forma weighted average number of common shares outstanding for the year ended December 31, 1997 and the three months ended March 31, 1998 are computed as follows: Year Ended Three Months Ended December 31, 1997 March 31, 1998 (000's) (000's) ----------------- ------------------ Kimco's historical weighted average number of shares outstanding 37,388 40,409 Issuance of Kimco common stock at an exchange ratio of one for all Price REIT common stock outstanding in connection with the Merger 11,746 11,746 Add: Conversion of Price REIT stock options to Kimco common stock in connection with the Merger 176 176 ------ ------ Pro Forma weighted average number of Kimco common shares outstanding (Basic) 49,310 52,331 Effect of Dilutive Securities- Stock Options 462 509 ------ ------ Pro Forma weighted average number of Kimco common shares outstanding (Diluted) 49,772 52,840 ------ ------ The effect of the conversion of the Class D Convertible Preferred Stock would have an anti-dilutive effect. Accordingly, the impact of such conversion has not been included in the determination of diluted earnings per share. 20 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 hereunto duly authorized. Kimco Realty Corporation ------------------------ Registrant Date: August 5, 1998 By: /s/ Michael V. Pappagallo ------------------------- Michael V. Pappagallo Chief Financial Officer 21