<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 13-2744380
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3333 New Hyde Park Road, New Hyde Park, NY 11042
- --------------------------------------------------------------------------------
(Address of principal executive offices - zip code)
(516) 869-9000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(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.
Yes X 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.
60,730,510 shares outstanding as of October 29, 1999
================================================================================
1 of 18
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Financial Statements -
Condensed Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998.
Condensed Consolidated Statements of Income for the Three and Nine Months
Ended September 30, 1999 and 1998.
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998.
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 $7.9 million or 8.1% to $106.0
million for the three months ended September 30, 1999, as compared with $98.1
million for the corresponding quarter ended September 30, 1998. This net
increase resulted primarily from the combined effect of (i) the acquisition of
23 shopping center properties during 1999 providing revenues of $5.3 million for
the three month period ended September 30, 1999, (ii) acquisitions throughout
calendar year 1998 (62 shopping center properties and three retail properties)
providing incremental revenues of $2.8 million as compared to the corresponding
three month period in 1998 and (iii) new leasing, property redevelopments and
re-tenanting within the portfolio at improved rental rates providing incremental
revenues of $8.8 million. These increases were offset as a result of the
deconsolidation of 19 shopping center properties as of April 28, 1999 in
connection with the sale of a controlling interest in Kimco Income REIT ("KIR").
Revenues from these 19 properties totaled approximately $9.0 million for the
three months ended September 30, 1998.
2
<PAGE>
Revenues from rental property increased $94.5 million or 41.0% to
$325.0 million for the nine months ended September 30, 1999, as compared with
$230.5 million for the corresponding nine-month period ended September 30, 1998.
This increase resulted primarily from the combined effect of (i) the acquisition
of 25 shopping center properties during 1999 providing revenues of $9.6 million
for the nine month period ended September 30, 1999, two of which were
subsequently sold to KIR, (ii) acquisitions throughout calendar year 1998 (62
shopping center properties and three retail properties) providing incremental
revenues of $28.2 million as compared to the corresponding nine month period in
1998, (iii) the acquisition of The Price REIT, Inc. as of June 19, 1998 (the
"Price REIT Acquisition") providing incremental revenues of $33.9 million for
the nine month period ended September 30, 1999 and (iv) new leasing, property
redevelopments and re-tenanting within the portfolio at improved rental rates.
Rental property expenses, including depreciation and amortization,
increased $2.3 million or 3.7% to $63.4 million for the three months ended
September 30, 1999, as compared with $61.1 million for the corresponding quarter
ended September 30, 1998. The rental property expense components of real estate
taxes, operating and maintenance, and depreciation and amortization increased
$1.3 million, $.2 million and $.8 million, respectively, for the three month
period ended September 30, 1999, as compared with the corresponding quarter in
the preceding year. These rental property expense increases are primarily due to
property acquisitions during 1999 and 1998 reduced by rental property expenses
relating to the deconsolidation of 19 shopping center properties as of April 28,
1999 in connection with the sale of a controlling interest in KIR.
Rental property expenses, including depreciation and amortization,
increased $57.3 million or 40.6% to $198.5 million for the nine months ended
September 30, 1999, as compared with $141.2 million for the corresponding period
in the preceding year. The rental property expense components of real estate
taxes, operating and maintenance, and depreciation and amortization increased by
$10.6 million, $8.9 million and $16.5 million, respectively, for the nine month
period ended September 30, 1999 as compared with the corresponding period in the
preceding year. These rental property expense increases are primarily due to
property acquisitions during the nine months ended September 30, 1999 and
throughout 1998, including the incremental costs associated with the Price REIT
Acquisition. Interest expense increased $19.9 million for the nine month period
ended September 30, 1999, reflecting higher average outstanding borrowings as
compared to the corresponding period in 1998 resulting from (i) the issuance of
additional unsecured debt during 1999 and 1998 and the assumption of $250
million in connection with the Price REIT Acquisition, (ii) the assumption of
mortgage debt during 1998 and the nine months ended September 30, 1999 in
connection with certain property acquisitions and (iii)
3
<PAGE>
mortgage financing obtained on certain properties in 1999 and 1998, offset by
the deconsolidation of $252.4 million of mortgage debt on 19 properties as of
April 28, 1999 in connection with the sale of a controlling interest in KIR.
General and administrative expenses increased approximately $5.3
million for the nine months ended September 30, 1999, as compared to the
corresponding period in 1998. These increases are due primarily to an increase
in senior management and staff levels and other personnel costs in connection
with the growth of the Company and the Price REIT Acquisition.
During 1998, the Company formed KIR, a limited partnership established
to invest in high quality retail properties financed primarily through the use
of individual non-recourse mortgages. At the time of formation, the Company
contributed 19 property interests to KIR. On April 28, 1999, KIR sold a
significant interest in the partnership to an institutional investor for
approximately $70 million. Simultaneous with this transaction, KIR purchased
four properties for approximately $70.1 million. As a result of these
transactions, the Company holds a non-controlling limited partnership interest
in KIR and accounts for its investment in KIR under the equity method of
accounting. The Company's equity in income of KIR for the three months ended
September 30, 1999 and the period April 28, 1999 to September 30, 1999 was
approximately $2.1 million and $3.3 million, respectively.
During the nine months ended September 30, 1999, the Company disposed
of four shopping center properties. Cash proceeds from three of these
dispositions aggregated approximately $5.9 million, which approximated their
aggregate net book value. In addition, during July 1999, the Company disposed of
an additional shopping center property in New Port Richey, FL. Cash proceeds
from the disposition totaling $.5 million, together with an additional $5.5
million cash investment, were used to acquire an exchange shopping center
property located in Greensboro, NC during September 1999.
4
<PAGE>
During January 1998, the Company disposed of a shopping center property
in Pinellas Park, FL. Cash proceeds from the disposition totaling $2.3 million,
together with an additional $7.1 million cash investment, were used to acquire
an exchange shopping center property located in Cranston, RI during March 1998.
Net income for the three and nine months ended September 30, 1999 was
$45.6 million and $127.5 million, respectively. Net income for the three and
nine months ended September 30, 1998 was $31.3 million and $84.3 million,
respectively. On a per-basic share basis net income improved $.14 and $.28 for
the three and nine month periods ended September 30, 1999, respectively, after
adjusting for the extraordinary charge in the three and nine month periods ended
September 30, 1998 and the gains on sales of shopping center properties in the
respective periods in 1999 and 1998, reflecting the effect of property
acquisitions, including the Price REIT Acquisition, property redevelopments and
increased leasing activity and re-tenanting at improved rental rates which
strengthened operating profitability.
Liquidity and Capital Resources
- -------------------------------
Since the completion of the Company's IPO in 1991, the Company has utilized the
public debt and equity markets as its principal source of capital. Since the
IPO, the Company has completed additional offerings of its public unsecured debt
and equity, raising in the aggregate over $1.9 billion for the purposes of
repaying indebtedness, acquiring interests in neighborhood and community
shopping centers and for expanding and improving properties in the portfolio.
During August 1998, the Company established a $215 million, unsecured
revolving credit facility (the "Credit Facility"), which is scheduled to expire
in August 2001. This Credit Facility, which replaced both the Company's $100
million unsecured revolving credit facility and $150 million interim unsecured
credit facility, has made available funds to both finance the purchase of
properties and meet any short-term working capital requirements. As of September
30, 1999 there was $60.0 million outstanding under the Credit Facility.
The Company has also implemented a $200 million MTN 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, development and
redevelopment costs and (ii) managing the Company's debt maturities.
In addition to the public equity and debt markets as capital sources,
the Company may, from time to time, obtain mortgage financing on selected
properties. As of September 30, 1999, the Company had over 300 unencumbered
property interests in its portfolio.
5
<PAGE>
During 1998, the Company filed a shelf registration statement on Form
S-3 for up to $750 million of debt securities, preferred stock, depositary
shares, common stock and common stock warrants. As of September 30, 1999, the
Company had approximately $493.2 million available for issuance under this shelf
registration statement.
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, repayment of debt, 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 have access
to the capital resources necessary to expand and develop its business.
Accordingly, the Company may seek to obtain funds through additional equity
offerings, unsecured debt financings and/or mortgage financings in a manner
consistent with its intention to operate with a conservative debt capitalization
policy.
The Company anticipates that cash flows from operations will continue
to provide adequate capital 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. In addition, the Company
anticipates that cash on hand, availability under its revolving credit facility,
issuance of equity and public debt, as well as other debt and equity
alternatives, will provide the necessary capital required by the Company. Cash
flows from operations increased to $179.8 million for the nine months ended
September 30, 1999 as compared to $125.2 million for the corresponding period
ended September 30, 1998.
6
<PAGE>
Effects of Inflation
- --------------------
Many 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 often include increases
based upon changes 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 costs, 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.
Impact of Year 2000
- -------------------
Like most corporations, the Company depends upon its business and technical
information systems in operating its business. Many computer systems process
dates using two digits to identify the year, and some systems are unable to
properly process dates beginning with the year 2000. This problem is commonly
referred to as the "Year 2000" issue.
The Company believes it has completed the assessment, modification and
testing phases of its systems as to Year 2000 compliance and functionality. The
Company believes it has completed the identification and review of computer
hardware and software suppliers and is currently verifying the Year 2000
compliance of third-party suppliers, vendors and service providers that the
Company has deemed important to the ongoing operations of the business.
The total costs to date related to the Year 2000 issue have been
immaterial to the Company's operations. These costs have been expensed as
incurred and consist primarily of internal staff costs and other related
expenses. The Company does not believe that the remaining costs expected to be
incurred in addressing the Year 2000 issue will have a material adverse effect
on the Company's financial condition or results of operations.
7
<PAGE>
The Company believes it has addressed substantially all of its internal
Year 2000 compliance issues. However, the Company cannot guarantee that its
third party vendors, partners or others will be Year 2000 compliant. If the
Company or such third party vendors, partners and others encounter problems in
addressing the Year 2000 issue, the Company's ability to operate its properties
and to bill and collect revenues in a timely manner could be materially
adversely affected. The Company is currently addressing the development of a
contingency plan in the event that its systems or the systems of third party
vendors, partners or others fail to resolve the Year 2000 issue.
Forward-looking Statements
- --------------------------
This quarterly report on Form 10-Q, together with other statements and
information publicly disseminated by 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 include this statement for
purposes of complying with these 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 which 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 economic and local real estate conditions, (ii)
financing risks, such as the inability to obtain equity or debt financing on
favorable terms, (iii) changes in governmental laws and regulations, (iv) the
level and volatility of interest rates (v) the availability of suitable
acquisition opportunities and (vi) increases in operating costs. Accordingly,
there is no assurance that the Company's expectations will be realized.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As of September 30, 1999, the Company had approximately $238.7
million of floating-rate debt outstanding, including $60.0 million on its
unsecured line of credit. The interest rate risk on $160.0 million of such debt
has been mitigated through the use of interest rate swap agreements (the
"Swaps") with major financial institutions. The Company is exposed to credit
risk in the event of non-performance by the counter-parties to the Swaps. The
Company believes it mitigates its credit risk by entering into these Swaps with
major financial institutions.
8
<PAGE>
The Company believes the interest rate risk represented by the
remaining $78.7 million of floating-rate debt is not material in relation to the
total debt outstanding of the Company or its market capitalization.
The Company has not, and does not plan to, enter into any derivative
financial instruments for trading or speculative purposes. As of September 30,
1999, the Company had no other material exposure to market risk.
9
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
Assets:
Real estate, net of accumulated depreciation
of $310,840 and $255,950, respectively $ 2,538,998 $ 2,767,952
Investments and advances in KIR 114,178 -
Investments and advances in real estate joint ventures 58,609 64,263
Investment in retail store leases 13,941 15,172
Cash and cash equivalents 32,932 43,920
Accounts and notes receivable 36,898 31,821
Other assets 118,102 128,050
----------- -----------
$ 2,913,658 $ 3,051,178
=========== ===========
Liabilities:
Notes payable $ 945,250 $ 855,250
Mortgages payable 195,594 434,311
Other liabilities, including minority interests in partnerships 167,858 176,598
----------- -----------
1,308,702 1,466,159
----------- -----------
Stockholders' Equity:
Preferred stock, $1.00 par value, authorized 5,000,000 and 3,470,000 shares,
respectively
Class A Preferred Stock, $1.00 par value, authorized 345,000 shares
Issued and outstanding 300,000 shares 300 300
Aggregate liquidation preference $75,000
Class B Preferred Stock, $1.00 par value, authorized 230,000 shares
Issued and outstanding 200,000 shares 200 200
Aggregate liquidation preference $50,000
Class C Preferred Stock, $1.00 par value, authorized 460,000 shares
Issued and outstanding 400,000 shares 400 400
Aggregate liquidation preference $100,000
Class D Convertible Preferred Stock, $1.00 par value, authorized 700,000 shares
Issued and outstanding 428,514 and 429,159 shares, respectively 429 429
Aggregate liquidation preferences $107,129 and $107,290, respectively
Common stock, $.01 par value, authorized 200,000,000 and 100,000,000
shares, respectively
Issued and outstanding 60,719,965 and 60,133,704 shares, respectively 607 601
Paid-in capital 1,728,470 1,707,272
Cumulative distributions in excess of net income (125,450) (124,183)
----------- -----------
1,604,956 1,585,019
----------- -----------
$ 2,913,658 $ 3,051,178
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
10
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months ended September 30, 1999 and 1998
(in thousands, except per share information)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenues from rental property $ 106,044 $ 98,085 $ 324,992 $ 230,538
--------- -------- --------- ---------
Rental property expenses:
Rent 3,536 3,461 10,531 9,020
Real estate taxes 14,579 13,263 42,147 31,572
Interest 19,506 19,576 62,872 42,987
Operating and maintenance 9,440 9,223 32,014 23,144
Depreciation and amortization 16,294 15,543 50,959 34,433
--------- -------- --------- ---------
63,355 61,066 198,523 141,156
--------- -------- --------- ---------
Income from rental property 42,689 37,019 126,469 89,382
Income from investment in retail store leases 1,087 902 3,067 2,730
--------- -------- --------- ---------
43,776 37,921 129,536 92,112
Management fee income 1,576 999 3,719 2,530
General and administrative expenses (5,950) (5,489) (17,801) (12,494)
Equity in income of KIR 2,128 - 3,275 -
Other income, net 3,837 2,676 8,567 6,072
--------- -------- --------- ---------
Income before gain on sale of shopping center
property and extraordinary items 45,367 36,107 127,296 88,220
Gain on sale of shopping center property 247 - 247 901
--------- -------- --------- ---------
Income before extraordinary items 45,614 36,107 127,543 89,121
Extraordinary items - (4,852) - (4,852)
--------- -------- --------- ---------
Net Income $ 45,614 $ 31,255 $ 127,543 $ 84,269
========= ======== ========= =========
Net income applicable to common shares $ 38,996 $ 23,358 $ 107,683 $ 66,718
========= ======== ========= =========
Per common share:
Income before extraordinary items
Basic $0.64 $0.50 $1.78 $1.52
===== ===== ===== =====
Diluted $0.64 $0.49 $1.77 $1.50
===== ===== ===== =====
Net income
Basic $0.64 $0.41 $1.78 $1.42
===== ===== ===== =====
Diluted $0.64 $0.41 $1.77 $1.40
===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
11
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months ended September 30, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
Cash flow provided by operations $ 179,774 $ 125,185
--------- ---------
Cash flow from investing activities:
Acquisition of and improvements to real estate (169,075) (468,794)
Acquisition of real estate through joint venture investment - (18,664)
Investment in marketable securities (12,814) (7,930)
Proceeds from sale of marketable securities 11,443 -
Investments and advances to affiliated companies (950) -
Investments and advances to joint ventures (17,276) -
Investment in mortgage loans receivable - (1,981)
Repayment of mortgage loans receivable 4,545 1,456
Construction advances to real estate joint ventures (436) (1,674)
Reimbursement of advances to real estate joint ventures 7,500 -
Net proceeds from sale of interest in KIR 68,179 -
Proceeds from sale of shopping center properties 6,365 2,300
--------- ---------
Net cash flow used for investing activities (102,519) (495,287)
--------- ---------
Cash flow from financing activities:
Principal payments on debt, excluding
normal amortization of rental property debt (61,098) (61,808)
Principal payments on rental property debt (3,467) (3,318)
Proceeds from mortgage financing 28,424 9,000
Payment of unsecured obligation (20,984) -
Proceeds from issuance of senior notes 130,000 -
Repayment of senior notes (100,000) -
Proceeds from issuance of medium-term notes - 290,000
Repayment of medium-term notes - (50,000)
Borrowings under revolving credit facilities 95,000 220,000
Repayment of borrowings under revolving credit facilities (35,000) (145,000)
Dividends paid (126,657) (75,385)
Proceeds from issuance of stock 5,539 186,416
--------- ---------
Net cash flow (used for)/provided by financing activities (88,243) 369,905
--------- ---------
Change in cash and cash equivalents (10,988) (197)
Cash and cash equivalents, beginning of period 43,920 30,978
--------- ---------
Cash and cash equivalents, end of period $ 32,932 $ 30,781
========= =========
Interest paid during the period $ 52,234 $ 32,205
========= =========
Supplemental schedule of noncash investing/financing activity:
Acquisition of real estate interests by issuance of common stock,
preferred stock, and assumption of debt $ 81,402 $ 977,542
========= =========
Declaration of dividends paid in succeeding period $ 41,597 $ 33,661
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
12
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
-----------------
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 partnerships in which the Company has a
controlling interest. 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.
2. Property Acquisitions/Other Investments
On July 1, 1999, the Company exercised its option to acquire 13
shopping center properties comprising 1.6 million square feet of gross
leaseable area ("GLA") from KC Holdings, Inc. ("KC Holdings"), an entity formed
in connection with the Company's initial public stock offering in November 1991.
The properties were acquired for an aggregate option price of approximately
$39.8 million, paid $15.7 million in shares of the Company's common stock
(401,646 shares valued at $39.00 per share at July 1, 1999) and $24.1 million
through the assumption of mortgage debt encumbering the properties. Such
mortgage debt was repaid during September 1999. The members of the Company's
Board of Directors who are not also shareholders of KC Holdings, unanimously
approved the Company's purchase of these 13 shopping center properties.
During the nine months ended September 30, 1999, the Company and its
affiliates acquired interests in 12 shopping center properties, in separate
transactions, (two of which were subsequently sold to Kimco Income REIT ("KIR",
an unconsolidated real estate joint venture in which the Company has an
interest)) comprising approximately 1.2 million square feet of GLA in 11 states
for an aggregate purchase price of approximately $110.3 million, including the
assumption of approximately $16.9 million in mortgage debt.
During December 1998, the Company acquired a first mortgage interest on
a shopping center in Manhasset, NY for approximately $21 million. During April
1999, the Company acquired fee title to this property.
13
<PAGE>
During the nine months ended September 30, 1999, the Company acquired
one land parcel and, through separate partnership investments, interests in two
additional land parcels for the ground-up development of shopping centers for an
aggregate purchase price of approximately $17.3 million.
During June 1999, the Company, through an affiliated entity, invested
$17.3 million in a joint venture which acquired a mortgage participation
interest secured by 28 properties owned by a national retailer.
3. Property Dispositions
During the nine months ended September 30, 1999, the Company disposed
of four shopping center properties. Cash proceeds from three of these
dispositions aggregated approximately $5.9 million, which approximated their
aggregate net book value. In addition, during July 1999, the Company disposed of
an additional shopping center property in New Port Richey, FL. Cash proceeds
from the disposition totaling $.5 million, together with an additional $5.5
million cash investment, were used to acquire an exchange shopping center
property located in Greensboro, NC during September 1999.
4. Debt Financings
During February 1999, the Company issued $130 million of 6-7/8%
fixed-rate Senior Notes due 2009 (the "Notes"). Interest on the Notes is payable
semi-annually in arrears. The Notes were sold at 99.85% of par value. Net
proceeds from the issuance totaling approximately $128.9 million, after related
transaction costs of approximately $.9 million, were used, in part, to repay
$100 million floating-rate senior notes that matured during February 1999 and
for general corporate purposes.
5. Investment in Retail Store Leases
Income from the investment in retail store leases for the nine months
ended September 30, 1999 and 1998 represents sublease revenues of approximately
$15.3 million and $15.1 million, respectively, less related expenses of $11.1
million and $11.1 million, respectively, 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.
14
<PAGE>
6. Net Income Per Common Share
The following table sets forth the basic and diluted weighted average
numbers of common shares outstanding for each period used in the calculation of
basic and diluted net income per common share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Basic EPS - weighted
average number of common
shares outstanding 60,710,860 56,697,990 60,380,326 47,138,161
Effect of dilutive securities-
stock options 495,199 566,348 563,420 564,871
---------- ---------- ---------- ----------
Diluted EPS - weighted
average number of
common shares 61,206,059 57,264,338 60,943,746 47,703,032
========== ========== ========== ==========
</TABLE>
The effect of the conversion of the Class D Preferred Stock would have
an anti-dilutive effect upon the calculation of net income per common share.
Accordingly, the impact of such conversion has not been included in the
determination of diluted net income per common share.
7. Investment and Advances in KIR:
During 1998, the Company formed KIR, a limited partnership established
to invest in high quality retail properties financed primarily through the use
of individual non-recourse mortgages. At the time of formation, the Company
contributed 19 property interests to KIR. On April 28, 1999, the Company entered
into an agreement whereby an institutional investor purchased a significant
interest in KIR. Under the terms of the agreement, the agreed equity value for
the 19 shopping centers previously contributed to KIR by the Company was
approximately $107 million and the Company has agreed to contribute an
additional $10 million for a total investment of $117 million. The institutional
investor has subscribed for up to $117 million of equity in KIR, of which
approximately $70 million has been contributed. Simultaneous with these
transactions, KIR purchased four properties for approximately $70.1 million. As
a result of these transactions, the Company holds a non-controlling limited
partnership interest in KIR and accounts for its investment in KIR under the
equity method of accounting. The Company's equity in income from KIR for the
three months ended September 30, 1999 and the period April 28, 1999 to
September 30, 1999 was approximately $2.1 million and $3.3 million,
respectively.
15
<PAGE>
In addition, KIR entered into a master management agreement with the
Company, whereby, the Company will perform services for fee relating to the
management, operation, supervision and maintenance of the joint venture
properties. For the three months ended September 30, 1999 and the period from
April 28, 1999 to September 30, 1999, the Company earned management fees of
approximately $.3 million and $.5 million, respectively.
During August 1999, KIR entered into an agreement whereby three
additional institutional investors subscribed for an aggregate $35.0 million of
equity in KIR, of which approximately $6.0 million has been contributed.
During the period April 28, 1999 to September 30, 1999 KIR purchased
three additional properties, in separate transactions, for approximately $49.1
million.
8. Pro Forma Financial Information
As discussed in Notes 2 and 3, the Company and certain of its
affiliates acquired and disposed of interests in certain shopping center
properties during the nine months ended September 30, 1999. 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, 1999 and 1998, adjusted to give effect to these transactions as of January
1, 1998.
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, 1998, nor does it
purport to represent the results of future operations. (Amounts presented in
millions, except per share figures).
Nine Months Ended September 30,
1999 1998
---- ----
Revenues from rental property $ 331.0 $246.2
Income before extraordinary items $ 128.8 $ 94.0
Net income $ 128.8 $ 89.2
Per common share:
Income before extraordinary items:
Basic $ 1.80 $ 1.61
======= =======
Diluted $ 1.78 $ 1.59
======= =======
Net income:
Basic $ 1.80 $ 1.51
======= =======
Diluted $ 1.78 $ 1.49
======= =======
16
<PAGE>
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 required 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.
17
<PAGE>
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
November 12, 1999 /s/ Milton Cooper
- ---------------------------- -----------------------------
(Date) Milton Cooper
Chairman of the Board
November 12, 1999 /s/ Michael V. Pappagallo
- ---------------------------- ------------------------------
(Date) Michael V. Pappagallo
Chief Financial Officer
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 32,932
<SECURITIES> 27,691
<RECEIVABLES> 39,848
<ALLOWANCES> 2,950
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,849,838
<DEPRECIATION> 310,840
<TOTAL-ASSETS> 2,913,658
<CURRENT-LIABILITIES> 0
<BONDS> 1,140,844
0
1,329
<COMMON> 607
<OTHER-SE> 1,603,020
<TOTAL-LIABILITY-AND-EQUITY> 2,913,658
<SALES> 324,992
<TOTAL-REVENUES> 324,992
<CGS> 84,692
<TOTAL-COSTS> 84,692
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,872
<INCOME-PRETAX> 127,543
<INCOME-TAX> 0
<INCOME-CONTINUING> 127,543
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,543
<EPS-BASIC> 1.78
<EPS-DILUTED> 1.77
<FN>
Financial Data Schedule information has been extracted from the Registrant's
Condensed Consolidated Balance Sheet (non-classified) as of September 30, 1999
and the Consolidated Statement of Income for the nine months then ended.
</FN>
</TABLE>
