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Kimco Realty Corp : Moody's affirms Kimco's Baa1 rating; stable outlook

01/16/2013 | 12:24pm US/Eastern
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Rating Action: Moody's affirms Kimco's Baa1 rating; stable outlook

Global Credit Research - 15 Jan 2013

Approximately $4 Billion of Debt Securities Affected

New York, January 15, 2013 -- Moody's Investors Service has affirmed the ratings of Kimco Realty Corporation
(senior debt at Baa1) with a stable outlook.
The following ratings were affirmed with a stable outlook:
Kimco Realty Corporation -- Senior unsecured debt at Baa1; senior unsecured debt shelf at (P)Baa1; preferred stock at Baa2; preferred stock shelf at (P)Baa2.
Kimco North Trust III -- Senior unsecured guaranteed Canadian debentures at Baa1. Pan Pacific Retail Properties, Inc. -- Senior unsecured debt at Baa1.
RATINGS RATIONALE
The current Baa1 senior debt ratings reflect the REIT's solid franchise in the community and shopping center business, large and well-diversified portfolio, good liquidity position, and excellent property management and
leasing platform. The REIT has re-aligned its business strategy over the past few years to concentrate on reducing the non-core businesses, such as merchant building and other ancillary businesses, to focus on its core operations.
The stable outlook reflects Moody's expectation that Kimco will continue to maintain its good credit profile coupled with adequate liquidity. It also reflects our expectation that the REIT will continue to realign its business to focus on its core retail business.
Kimco's has a good liquidity profile with access to a $1.75 billion revolving credit facility that provides liquidity to its US, Canadian and Mexican retail real estate operations. As of 3Q12, there was 99% available on the facility. Kimco's liquidity position was strengthened through issuances of approximately $1.2 billion of preferred stock and term notes in 2012. The REIT's FFO payout ratio is modest at 61%, enhancing its financial flexibility.
Kimco's overall effective and secured leverage profile, including pro-rata share of joint ventures and fixed charge coverage, has shown improvement. The REIT's consolidated effective leverage, which includes preferred stock, is
46% (without JV interests) as of 3Q12. Secured debt comprises a modest portion of the REIT's capital structure at
9% of gross assets at cost (without JV interests) at 3Q12. The unencumbered asset base of the REIT's core portfolio is solid at 83% of total assets on a gross book basis. Fixed charge coverage has improved to 2.3x at
3Q12 for the past few years -- up from 2.0x at YE09, but is still low for the REIT's current rating. EBITDA margins remain healthy at 67%, but are still lower than historical standards when the REIT enjoyed margins of over 70%.
Kimco has a strong and diverse franchise in the US and Canadian retail real estate business, focused principally
on owning and operating a portfolio of high quality necessity-based neighborhood and community shopping centers comprising 135 million square feet. Portfolio occupancy for its total shopping portfolio at 3Q12 was 93.7%. Kimco's portfolio is well-diversified with minimal geographic or tenant concentrations. As of 3Q12, the REIT derived approximately 12.6% of its annualized base rent from core portfolio properties located in California, 10.4% in Canada, 9.0% in Florida, and 7.9% in New York. Kimco's top 25 tenants, national retail and supermarket chains, accounted for approximately 33% of annualized based rent. Moody's also has a very high regard for Kimco's management team, which possesses a strong expertise in both the retail sector and retail real estate, and has a long and successful track record managing the REIT's diverse business lines.
Upward rating movement would be challenging as Kimco needs to further solidify its metrics within the Baa1 rating range. A downgrade of Kimco's ratings would be prompted by fixed charge coverage (not including JVs) falling below 2.1x; net debt to EBITDA (not including JVs) above 6.0x; and prolonged deterioration in NOI (three-plus quarters). Any pressure on the REIT's liquidity position would also result in a downgrade.
The last rating action for Kimco was taken on September 21, 2010, at which time Moody's affirmed Kimco's Baa1 ratings and changed the outlook to stable, from negative.
Kimco Realty Corporation [NYSE: KIM], headquartered in New Hyde Park, New York, USA, is a real estate investment trust (REIT) that owns and operates North America's largest portfolio of neighborhood and community shopping centers, with interests in 922 retail properties comprising approximately 135 million square feet of leasable space located across 44 US states, Puerto Rico, Canada, Mexico and South America. At September 30,
2012, Kimco had book assets of $10.1 billion and total equity of $5.2 billion.
The principal methodology used in this rating was Moody's Approach for REITs and Other Commercial Property Firms published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Merrie S. Frankel
VP - Senior Credit Officer Commercial Real Estate Finance Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Nick Levidy
MD - Structured Finance Commercial Real Estate Finance JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable, including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS
OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services

rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy."
For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act
2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for retail clients to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.

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