This month's REIT Focus is on Kimco Realty Corporation (KIM), a real estate investment trust that owns and operates North America's largest portfolio of neighborhood and community shopping centers. KIM is one of the few REITs that is not structured as an UpReit partnership. KIM owns an interest in 926 shopping centers comprising 136 million sq. ft. and located in 44 states, Puerto Rico, Canada, Mexico and South America. The average occupancy of KIM's portfolio as of 6/30/12 was 92.8%. KIM was incorporated in the State of Maryland in 1994 and is based in Hyde Park, NY.
KIM has 407 million shares outstanding, a stock price of $21/sh. and a market capitalization of approximately $8.54 billion. KIM has a solid and well regarded management team including commercial real estate veteran, Milton Cooper, Founder and Executive Chairman of the Board, David Henry, Vice Chairman, Chief Executive Officer and President and Glenn Cohen, Executive Vice President, Chief Financial Officer and Treasurer.
Select financial data for KIM as of the 6/30/12 10Q and for the period 1/1-6/30/12 is as follows (in millions where applicable):
|Real Estate Assets, Gross||$10,737|
|Notes, Mortgages and Construction Loans||$4,192|
|Earnings Per Share||$.21|
|Cash Flow from Operations||$275|
|Unsecured Revolving Credit Facility ($1.73 billion available)||$1,750|
|Market Capitalization (equity value only)||49%|
|Gross Real Estate Assets||39%|
|Real Estate Assets Per Sq. Ft.||$79|
|Dividend and Yield ($.76/sh)||3.70%|
|NOI and Value Calculation:|
|Revenue Per Above Annualized||$930|
|Less: Operating Expenses||$231|
|Projected NOI 2012||$699|
|Projected Inflation Rate||x103.5%|
|Projected NOI for Next Year||$723|
|Projected Cap Rate||8%|
|Projected Value of Company||$9,037|
|Less: Total Debt||($4,192)|
|Projected Value of Company Equity||$4,845|
|Projected Value Per Share||$12|
|Market Price Per Share (9/14/12)||$21|
As shown above, our value for KIM is $12 per share versus a market price of $20 per share. Kim hit a 52 week high on 9/13/12 at $20.80/sh. The market is valuing KIM at a cap rate of approximately 6%. Current cap rates for retail properties per CBRE and Real Capital Analytics investment surveys are in the 6.5% to 9% range, depending on the location and tenancy. We have used a cap rate of 8% due to KIM's portfolio being primarily neighborhood shopping centers. KIM is a well managed REIT and its gross real estate assets, net income and cash flow from operations for 2010 to 6/30/12 are shown below.
|Gross Real Estate Assets||$10,393||$10,426||$10,737|
|CF from Operations||$480||$449||$275|
KIM has an attractive dividend yield of 3.7% and a low debt level at 49% of market capitalization and 39% of gross real estate assets. KIM is a high quality owner and manager of shopping center assets, however we do not recommend purchase of the stock until it falls below $15 per share. A five year price chart of KIM is shown below.
Author: Joseph Ori, Managing Director, Paramount Capital Corporation