Fitch Rates Kimco's $350MM 3.125% Sr. Unsecured Notes due 2023 'BBB+';
NEW YORK -- May 16, 2013
Fitch Ratings assigns a 'BBB+' rating to the $350 million 3.125% senior
unsecured notes due 2023 issued by Kimco Realty Corporation (NYSE: KIM). The
notes were issued at a 125 basis point spread to Treasuries (with an effective
yield of 3.211%). Net proceeds from the offering are expected to be used for
general corporate purposes including the partial repayment of amounts
outstanding under the revolving credit facility and to prefund future debt
Fitch currently rates KIM as follows:
--Issuer Default Rating (IDR) 'BBB+';
--Unsecured revolving credit facility 'BBB+';
--Senior unsecured term loan 'BBB+';
--Senior unsecured notes 'BBB+';
--Preferred stock 'BBB-'.
The Rating Outlook is Stable.
KEY RATING DRIVERS
The ratings reflect Kimco's solid track record as a leading owner of community
and neighborhood shopping centers, the company's large and diversified pool of
retail properties, its experienced leasing and management team and its high
quality, diversified tenant mix with a well laddered lease expiration
schedule. The ratings also factor in the company's demonstrated track record
of accessing a wide variety of capital sources.
These positive rating elements are balanced by slightly low fixed charge
coverage for the rating category and a U.S. retailer environment where market
share defensibility remains a key challenge for many traditional retailers.
Kimco owns and operates a large and diversified portfolio of consolidated and
unconsolidated interests in 895 properties aggregating 88 million square feet
of pro-rata gross leaseable area (GLA), located throughout the United States,
Puerto Rico, Canada, Mexico, Chile, Brazil and Peru. The company's portfolio
is well diversified with the largest tenant accounting for less than 3% of
annualized base rent (ABR) and the top 10 tenants collectively accounting for
less than 20% of ABR. Additionally, Kimco continues to make progress reducing
the risk profile of the company through the disposition of non-core assets and
maintenance of a smaller development pipeline.
Lease maturities (based on square footage) are well-laddered with no more than
14% expiring in any one year and less than 3% expiring in any one year when
assuming the exercise of tenant renewal options. Lease maturities based on
annualized base rent are similarly well-laddered.
APPROPRIATE LEVERAGE AND COVERAGE
Leverage was 6.1 times (x) at March 31, 2013, up slightly, from 5.8x at Dec.
31, 2011 and 5.6x at Dec. 31, 2010. Fitch forecasts leverage will remain
around 6.0x through 2014, due to modestly positive same store NOI growth.
Fitch defines leverage as net debt to recurring operating EBITDA (including
Fitch's estimate of recurring cash distributions from unconsolidated joint
Kimco's fixed-charge coverage is adequate for the 'BBB+' rating level. Fixed
charge coverage was 2.2x for the trailing 12 months (TTM) ended March 31,
2013, consistent with 2.2x for 2011 and 2010, respectively. Fitch projects
fixed-charge coverage will improve modestly as the company retires higher
coupon preferred stock and unsecured notes. Fixed-charge coverage is defined
as recurring operating EBITDA plus Fitch's estimate of recurring cash
distributions from unconsolidated joint ventures less recurring capital
expenditures and non-cash straight line rental income divided by total
interest incurred and preferred stock dividends.
POSITIVE OPERATING PERFORMANCE
Despite wide product availability, increasing price transparency, and lack of
consumer loyalty that have threatened the long-term viability of certain
retailer business models, Kimco's same-store net operating income (SSNOI)
performance turned positive in 2010 and accelerated in 2012. SSNOI growth for
the first quarter 2013 (1Q'13) was 4%, the twelfth straight quarter of
Fitch expects SSNOI growth of 1-2% per year through 2014. In adverse scenarios
not anticipated by Fitch in which SSNOI growth is flat or experiences declines
worse than 2009, Kimco's metrics would deteriorate to levels weak for the
STRONG ACCESS TO CAPITAL & LIQUIDITY
Kimco has demonstrated a long track record of accessing a wide variety of
capital sources, including secured and unsecured debt, common and preferred
equity and joint venture capital. Since 2011, Kimco has demonstrated access to
the term loan market, senior unsecured market and preferred stock market.
Kimco maintains a large unencumbered asset pool to support its unsecured
borrowings. As of March 31, 2013, unencumbered asset coverage of unsecured
debt was 1.9x assuming an 8% capitalization rate, which is slightly low for
the 'BBB+' IDR.
Kimco's liquidity coverage ratio is appropriate for the rating at 1.3x pro
forma through 2014. Under a scenario where Kimco is able to refinance 80% of
its secured debt, the liquidity coverage ratio improves to 2.1x. Fitch defines
liquidity coverage as cash, availability under the company's unsecured
revolving facility and Fitch's expectation of retained cash flows from
operating activities after dividends and distributions divided by uses of
liquidity pro rata debt maturities and Fitch's expectation of recurring
PREFERRED STOCK NOTCHING
The two-notch differential between Kimco's IDR and its preferred stock rating
is consistent with Fitch's criteria for corporate entities with an IDR of
'BBB+'. Based on Fitch's criteria report, 'Treatment and Notching of Hybrids
in Nonfinancial Corporate and REIT Credit Analysis,' dated Dec. 13, 2012, the
company's preferred stock is deeply subordinated and has loss absorption
elements that would likely result in poor recoveries in the event of a
The Stable Outlook reflects Fitch's view that metrics will remain relatively
unchanged and the Company's demonstrated access to capital will offset an
adequate liquidity coverage ratio.
The following factors may have a positive impact on Kimco's ratings and/or
--Fitch's expectation of fixed-charge coverage sustaining above 2.5x (coverage
was 2.2x for the TTM ended March 31, 2013);
--Fitch's expectation of net debt to recurring operating EBITDA sustaining
below 5.0x (leverage was 6.1x as of March 31, 2013);
--Reducing the exposure to non-core assets.
The following factors may have a negative impact on Kimco's ratings and/or
--Fitch's expectation of fixed-charge coverage sustaining below 2.0x;
--Fitch's expectation of leverage sustaining above 6.5x;
--Increased exposure to non-retail assets or increased joint venture debt
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Rating U.S. Equity REITs and REOCs,' Feb. 26, 2013;
--'Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit
Analysis, ' Dec. 13, 2012;
--'Recovery Rating and Notching Criteria for Equity REITs,' Nov. 12, 2012;
--'Corporate Rating Methodology,' Aug. 8, 2012.
Applicable Criteria and Related Research
Criteria for Rating U.S. Equity REITs and REOCs
Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit
Recovery Ratings and Notching Criteria for Equity REITs
Corporate Rating Methodology
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