Tuesday, September 06, 2011

Short-Sell Real Estate Investment Trust Pick


This week I have a short-sell stock pick on Kimco Real Estate Investment Trust. The bears are in current control of the market in my opinion, and September has never been very nice to the longs in the market. Reviewing the latest index charts, its easy to see that more downside is in the works before any upside can be seen.

Back on July 27 Zacks Investment Research reported that Kimco Realty Ticker KIM a leading real estate investment trust (REIT), stated second quarter 2011 rental revenues of $219.2 million compared with $208.3 million in the year-earlier quarter – an increase of 5.2%. Total revenues for the reported quarter missed the Zacks Consensus Estimate of $221.0 million.

Kimco reported second quarter 2011 fund from operations (FFO)of $118.0 million or 29 cents per share compared with $105.6 million or 26 cents in the year-ago period. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Excluding certain non-recurring items, FFO (Funds From Operations) for the reported quarter was $121.4 million or 30 cents per share compared with $115.7 million or 28 cents in the year-earlier quarter. The recurring FFO for the quarter was in line with the Zacks Consensus Estimate.

Overall occupancy in Kimco’s combined shopping center portfolio was 93.1% at the end of the quarter, an increase of 30 bps compared with second quarter 2010. In the U.S. portfolio, occupancy was 92.9% as of June 30, 2011, an increase of 50 bps compared with the year-ago period. Same-store net operating income in the combined portfolio increased 3.1% year-over-year.

During the reported quarter, Kimco executed a total of 594 leases spanning 1.9 million square feet. These included 80 new leases in the same-store portfolio totaling 212,000 pro-rata square feet and 212 lease renewals and options for 927,000 pro-rata square feet in the U.S. portfolio. In addition, Kimco executed over 130 new leases totaling 617,000 square feet for spaces vacant for more than one year. Leasing spreads in the U.S. portfolio on a pro-rata basis increased 2.1% (cash basis).

The company acquired 3 shopping centers during the quarter for approximately $75 million. At the same time, Kimco sold 11 non-strategic assets spanning 1.0 million square feet for $48.5 million.

The reported quarter also saw the company recognizing $8.4 million of fee income related to its investment management business, including $7.2 million in management fees, $0.2 million in acquisition fees and $1.0 million in other ongoing fees. Kimco had 285 properties in investment management funds with 24 institutional partners at quarter-end.

During the reported quarter, the company generated $25.3 million of income from its structured investments and other non-retail assets, out of which $14.9 million was recurring in nature. As of June 30, 2011, Kimco reduced its non-retail assets to approximately $612 million compared to $1.2 billion at the end of first quarter 2009.

At quarter-end, Kimco had over $1.7 billion available under its revolving credit facilities. The company’s consolidated net debt to recurring EBITDA (earnings before interest, tax, depreciation and amortization) ratio improved to 6.0x from 6.6x in the year-ago quarter. For fiscal 2011, the company reiterated its earlier recurring FFO guidance in the range of $1.17 – $1.21 per share.

We maintain our ‘Neutral’ recommendation for the long term on the stock, which presently has a Zacks #4 Rank translating into a short-term ‘Sell’ rating.

Sell-Short Kimco Realty – Ticker KIM

Sell Entry: 17.23 to 16.59

Stop-Loss: 17.87

Take Profit Areas: 14.28 to 13.76, 12.62 to 12.17, 9.17 to 8.85, and potentially lower if current bear-market trend stays intact.

Kimco Company Profile

Kimco Realty Corporation is a publicly owned real estate investment trust. The firm engages in acquisitions, development, and management of neighborhood and community shopping centers. It also provides property management services relating to the management, leasing, operation, and maintenance of real estate properties. The firm primarily invests in real estate markets across the globe with a focus in North America. It also invests in operating properties. The firm also provides equity and mezzanine debt to developers and owners of commercial properties. It also makes secondary market investments including under performing mortgage loans, secured bank debt, and corporate securities. Kimco was formed in 1960 and is based in New Hyde Park, New York with additional office in Mesa, Arizona; Daly City, California; Granite Bay, California; Irvine, California; Carmichael, California; Vista, California; Walnut Creek, California; West Hartford, Connecticut; Largo, Florida; Margate, Florida; Sanford, Florida; Lisle, Illinois; Rosemont, Illinois; Columbia, Maryland; Lutherville, Maryland; Bellevue, Washington; Mesquite, Texas; Houston, Texas; Dallas, Texas; Austin, Texas; Ardmore, Pennsylvania; Portland, Oregon; Kettering, Ohio; Canfield, Ohio; Raleigh, North Carolina; Charlotte, North Carolina; New York, New York; and Las Vegas, Nevada.

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Click the Kimco Realty stock chart below for a larger view.