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, 2007

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

incorporation or organization)

 

(I.R.S. Employer Identification No.)


 

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 ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12-b of the Exchange Act.

Large Accelerated filer X

Accelerated filer ___          Non-accelerated filer ___

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act).

Yes ___

No X      

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.

 

252,708,502 shares outstanding as of October 22, 2007.

 



 

                                                                                  PART I

 

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

Condensed Consolidated Financial Statements -

 

Condensed Consolidated Balance Sheets as of September 30, 2007

 

and December 31, 2006.

3

 

Condensed Consolidated Statements of Income for the Three and

 

Nine Months Ended September 30, 2007 and 2006.

4

 

Condensed Consolidated Statements of Comprehensive Income for

 

the Three and Nine Months Ended September 30, 2007 and 2006.

5

 

Condensed Consolidated Statements of Cash Flows for the Nine

 

Months Ended September 30, 2007 and 2006.

6

 

Notes to Condensed Consolidated Financial Statements

7

 

Item 2.

Management’s Discussion and Analysis of Financial Condition

 

and Results of Operations

30

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

42

 

Item 4.

Controls and Procedures

43

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

45

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

 

Item 3.

Defaults Upon Senior Securities

45

 

Item 4.

Submission of Matters to a Vote of Security Holders

45

 

Item 5.

Other Information

45

 

Item 6.

Exhibits

45

 

 

2

 


 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share information)

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2007

 

 

2006

Assets:

 

 

 

 

 

 

Operating real estate, net of accumulated depreciation of $927,402 and
$806,670, respectively

 

$

5,022,221

 

$

4,156,667

Investments and advances in real estate joint ventures

 

 

1,310,014

 

 

1,067,918

Real estate under development

 

 

1,132,834

 

 

1,037,982

Other real estate investments

 

 

596,504

 

 

451,731

Mortgages and other financing receivables

 

 

171,813

 

 

162,669

Cash and cash equivalents

 

 

45,439

 

 

345,065

Marketable securities

 

 

213,385

 

 

202,659

Accounts and notes receivable

 

 

84,274

 

 

83,418

Other assets

 

 

321,894

 

 

361,171

 

 

 

 

 

 

 

Total Assets

 

$

8,898,378

 

$

7,869,280

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Notes payable

 

$

3,618,192

 

$

2,748,345

Mortgages payable

 

 

556,085

 

 

567,917

Construction loans payable

 

 

242,197

 

 

270,981

Dividends payable

 

 

103,976

 

 

93,222

Other liabilities

 

 

455,611

 

 

396,614

 

 

 

 

 

 

 

Total Liabilities

 

 

4,976,061

 

 

4,077,079

 

 

 

 

 

 

 

Minority interests

 

 

437,060

 

 

425,242

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock , $1.00 par value, authorized 3,600,000 shares

 

 

 

 

 

 

Class F Preferred Stock, $1.00 par value, authorized 700,000 shares

 

 

 

 

 

 

Issued and outstanding 700,000 shares

 

 

700

 

 

700

Aggregate liquidation preference $175,000

 

 

 

 

 

 

Common stock, $.01 par value, authorized 750,000,000 shares and 300,000,000 shares, respectively

 

 

 

 

 

 

Issued 253,213,968 and 251,416,749 shares; outstanding 252,667,388 and 250,870,169, respectively.

 

 

2,527

 

 

2,509

Paid-in capital

 

 

3,227,560

 

 

3,178,016

Retained earnings

 

 

209,018

 

 

140,509

 

 

 

3,439,805

 

 

3,321,734

Accumulated other comprehensive income

 

 

45,452

 

 

45,225

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

3,485,257

 

 

3,366,959

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

8,898,378

 

$

7,869,280

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

3

 


 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Three and Nine Months Ended September 30, 2007 and 2006

(Unaudited)

(in thousands, except per share data)

 

 

 

Three  Months  Ended 
September  30,

 

 

Nine  Months  Ended
September  30,

 

 

 

 

2007

 

 

 

2006

 

 

 

2007

 

 

 

2006

 

Revenues from rental property     

 

$

173,712

 

 

$

149,124

 

 

$

501,827

 

 

$

431,868

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental property expenses:     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rent     

 

 

(3,029

)

 

 

(2,914

)

 

 

(9,011

)

 

 

(8,643

)

Real estate taxes     

 

 

(21,026

)

 

 

(19,289

)

 

 

(59,500

)

 

 

(55,347

)

Operating and maintenance      

 

 

(21,752

)

 

 

(18,077

)

 

 

(65,184

)

 

 

(52,274

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage and other financing income     

 

 

4,084

 

 

 

2,847

 

 

 

11,809

 

 

 

15,758

 

Management and other fee income     

 

 

12,700

 

 

 

9,819

 

 

 

43,486

 

 

 

29,554

 

Depreciation and amortization     

 

 

(48,131

)

 

 

(35,666

)

 

 

(136,265

)

 

 

(98,021

)

General and administrative expenses     

 

 

(29,552

)

 

 

(22,618

)

 

 

(77,042

)

 

 

(55,899

)

Interest, dividends and other investment income     

 

 

16,083

 

 

 

14,109

 

 

 

30,641

 

 

 

38,453

 

Other (expense)/income, net     

 

 

(1,306

)

 

 

(159

)

 

 

(5,954

)

 

 

8,046

 

Interest expense     

 

 

(58,978

)

 

 

(44,863

)

 

 

(157,817

)

 

 

(125,690

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes, income from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

other real estate investments, equity in income of joint ventures,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

minority interests in income and gain on sale of development properties     

 

 

22,805

 

 

 

32,313

 

 

 

76,990

 

 

 

127,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Provision)/benefit for income taxes     

 

 

(348

)

 

 

(2,454

)

 

 

32,740

 

 

 

(775

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from other real estate investments     

 

 

19,846

 

 

 

27,192

 

 

 

66,815

 

 

 

60,939

 

Equity in income of joint ventures, net     

 

 

39,310

 

 

 

29,286

 

 

 

111,685

 

 

 

72,798

 

Minority interests in income, net     

 

 

(10,625

)

 

 

(5,722

)

 

 

(24,441

)

 

 

(19,479

)

Gain on sale of development properties,     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

net of tax of $3,352, $4,262, $8,487 and $9,893, respectively     

 

 

5,028

 

 

 

6,394

 

 

 

12,731

 

 

 

14,840

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations     

 

 

76,016

 

 

 

87,009

 

 

 

276,520

 

 

 

256,128

 

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations:     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operating properties      

 

 

1,558

 

 

 

3,172

 

 

 

32,363

 

 

 

9,924

 

Minority interests in income     

 

 

(212

)

 

 

(30

)

 

 

(5,771

)

 

 

(1,604

)

Loss on operating properties held for sale/sold     

 

 

 

 

 

 

 

 

(1,832

)

 

 

(813

)

Gain on disposition of operating properties, net of tax     

 

 

267

 

 

 

1,276

 

 

 

5,538

 

 

 

31,331

 

Income from discontinued operations     

 

 

1,613

 

 

 

4,418

 

 

 

30,298

 

 

 

38,838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on transfer of operating properties     

 

 

 

 

 

 

 

 

 

 

 

1,394

 

Gain on sale of operating properties, net of tax     

 

 

376

 

 

 

 

 

 

2,708

 

 

 

 

Total gain on transfer or sale of operating properties, net of tax     

 

 

376

 

 

 

 

 

 

2,708

 

 

 

1,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before extraordinary item     

 

 

78,005

 

 

 

91,427

 

 

 

309,526

 

 

 

296,360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Extraordinary gain from joint venture resulting from purchase price     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

allocation, net of tax and minority interest     

 

 

 

 

 

 

 

 

50,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income     

 

 

78,005

 

 

 

91,427

 

 

 

359,791

 

 

 

296,360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends     

 

 

(2,909

)

 

 

(2,909

)

 

 

(8,728

)

 

 

(8,728

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common shareholders

 

$

75,096

 

 

$

88,518

 

 

$

351,063

 

 

$

287,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-Basic

 

$

0.29

 

 

$

0.35

 

 

$

1.07

 

 

$

1.05

 

-Diluted

 

$

0.29

 

 

$

0.34

 

 

$

1.05

 

 

$

1.03

 

Net income :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-Basic

 

$

0.30

 

 

$

0.37

 

 

$

1.39

 

 

$

1.21

 

-Diluted

 

$

0.29

 

 

$

0.36

 

 

$

1.37

 

 

$

1.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding for net income calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-Basic

 

 

252,327

 

 

 

241,002

 

 

 

251,925

 

 

 

236,789

 

-Diluted

 

 

256,497

 

 

 

246,146

 

 

 

257,090

 

 

 

241,960

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

4

 


 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three and Nine Months Ended September 30, 2007 and 2006

(Unaudited)

(in thousands)

 

 

 

 

Three Months Ended
September 30,

 

 

 

Nine Months Ended
September 30,

 

 

 

2007

 

 

 

2006

 

 

 

2007

 

 

 

2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

78,005

 

 

 

$

91,427

 

 

 

$

359,791

 

 

 

$

296,360

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gain on marketable securities

 

 

(8,129

)

 

 

 

(1,429

)

 

 

 

(7,513

)

 

 

 

(23,709

)

Change in unrealized gain/(loss) on foreign currency hedge agreements

 

 

(197

)

 

 

 

(160

)

 

 

 

1,243

 

 

 

 

179

 

Foreign currency translation adjustment

 

 

3,385

 

 

 

 

3,493

 

 

 

 

6,497

 

 

 

 

5,415

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

(4,941

)

 

 

 

1,904

 

 

 

 

227

 

 

 

 

(18,115

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

73,064

 

 

 

$

93,331

 

 

 

$

360,018

 

 

 

$

278,245

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

5

 


 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

2007

 

 

2006

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

359,791

 

 

$

296,360

 

Adjustments to reconcile net income to net cash provided

 

 

 

 

 

 

 

 

by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

137,884

 

 

 

102,493

 

Extraordinary item

 

 

(50,265

)

 

 

 

Loss on operating properties held for sale/sold/transferred

 

 

1,832

 

 

 

813

 

Gain on sale of development properties

 

 

(21,218

)

 

 

(24,733

)

Gain on sale/transfer of operating properties

 

 

(9,800

)

 

 

(34,813

)

Minority interests in income of partnerships, net

 

 

30,212

 

 

 

21,083

 

Equity in income of joint ventures, net

 

 

(111,685

)

 

 

(72,798

)

Income from other real estate investments

 

 

(54,852

)

 

 

(50,954

)

Distributions from joint ventures

 

 

302,946

 

 

 

104,125

 

Cash retained from excess tax benefits

 

 

(2,408

)

 

 

 

Change in accounts and notes receivable

 

 

(997

)

 

 

(9,689

)

Change in accounts payable and accrued expenses

 

 

41,649

 

 

 

52,862

 

Change in other operating assets and liabilities

 

 

(62,762

)

 

 

(23,876

)

Net cash flow provided by operating activities

 

 

560,327

 

 

 

360,873

 

 

 

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

Acquisition of and improvements to operating real estate

 

 

(937,834

)

 

 

(484,113

)

Acquisition of and improvements to real estate under development

 

 

(502,998

)

 

 

(388,795

)

Investment in marketable securities

 

 

(35,127

)

 

 

(62,548

)

Proceeds from sale of marketable securities

 

 

32,670

 

 

 

52,774

 

Proceeds from transferred operating/development properties

 

 

61,211

 

 

 

129,880

 

Investments and advances to real estate joint ventures

 

 

(330,550

)

 

 

(226,214

)

Reimbursements of advances to real estate joint ventures

 

 

198,420

 

 

 

116,301

 

Other real estate investments

 

 

(177,030

)

 

 

(203,618

)

Reimbursements of advances to other real estate investments

 

 

81,380

 

 

 

41,060

 

Investment in mortgage loans receivable

 

 

(85,601

)

 

 

(111,701

)

Collection of mortgage loans receivable

 

 

65,906

 

 

 

87,294

 

Other investments

 

 

(20,439

)

 

 

(101,100

)

Reimbursements of other investments

 

 

53,228

 

 

 

 

Settlement of net investment hedges

 

 

 

 

 

(953

)

Proceeds from sale of operating properties

 

 

59,450

 

 

 

74,482

 

Proceeds from sale of development properties

 

 

175,871

 

 

 

122,408

 

Net cash flow used for investing activities

 

 

(1,361,443

)

 

 

(954,843

)

 

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

 

Principal payments on debt, excluding

 

 

 

 

 

 

 

 

normal amortization of rental property debt

 

 

(67,964

)

 

 

(45,225

)

Principal payments on rental property debt

 

 

(10,812

)

 

 

(8,126

)

Principal payments on construction loan financings

 

 

(53,903

)

 

 

(55,217

)

Proceeds from mortgage/construction loan financings

 

 

117,293

 

 

 

136,273

 

Borrowings under credit facilities

 

 

627,369

 

 

 

315,663

 

Repayment of borrowings under credit facilities

 

 

(938

)

 

 

(234,419

)

Proceeds from issuance of unsecured senior notes

 

 

300,000

 

 

 

478,947

 

Repayment of unsecured senior notes

 

 

(105,000

)

 

 

(130,000

)

Financing origination costs

 

 

(4,369

)

 

 

(10,774

)

Redemption of minority interests in real estate partnerships

 

 

(59,334

)

 

 

(28,388

)

Dividends paid

 

 

(280,526

)

 

 

(242,750

)

Cash retained from excess tax benefits

 

 

2,408

 

 

 

 

Proceeds from issuance of stock

 

 

37,266

 

 

 

444,508

 

Net cash flow provided by financing activities

 

 

501,490

 

 

 

620,492

 

 

 

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

 

(299,626

)

 

 

26,522

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

345,065

 

 

 

76,273

 

Cash and cash equivalents, end of period

 

$

45,439

 

 

$

102,795

 

 

 

 

 

 

 

 

 

 

Interest paid during the period (net of capitalized interest

 

 

 

 

 

 

 

 

of $19,549, and $15,335, respectively)

 

$

133,611

 

 

$

95,357

 

 

 

 

 

 

 

 

 

 

Income taxes paid during the period

 

$

12,323

 

 

$

6,850

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

6

 


 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS


 

1.

Interim Financial Statements

 

Principles of Consolidation -

 

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 entities in which the Company has a controlling interest, including where the Company has been determined to be a primary beneficiary of a variable interest entity, (“VIE”), in accordance with the provisions and guidance of Financial Accounting Standards Board (“FASB”) Interpretation No. 46(R), Consolidation of Variable Interest Entities (“FIN 46(R)”) or meets certain criteria of a sole general partner or managing member as identified, in accordance with Emerging Issues Task Force (“EITF”) Issue 04-5, Investors Accounting for an Investment in a Limited Partnership when the Investor is the Sole General Partner and the Limited Partners have Certain Rights (“EITF 04-5”). All inter-company balances and transactions have been eliminated in consolidation. 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 Company’s 2006 Annual Report on Form 10-K and current report on Form 8-K dated July 6, 2007.

 

Income Taxes -

 

The Company has made an election to qualify, and believes it is operating so as to qualify, as a Real Estate Investment Trust (a “REIT”) for federal income tax purposes. Accordingly, the Company generally will not be subject to federal income tax, provided that distributions to its stockholders equal at least the amount of its REIT taxable income as defined under Sections 856 through 860 of the Internal Revenue Code, as amended (the “Code”). However, in connection with the Tax Relief Extension Act of 1999, which became effective January 1, 2001, the Company is permitted to participate in certain activities which it was previously precluded from in order to maintain its qualification as a REIT, so long as these activities are conducted in entities which elect to be treated as taxable REIT subsidiaries under the Code. As such, the Company will be subject to federal and state income taxes on the income from these activities.

 

7

 


 

                 In June 2006, the FASB issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. The interpretation prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

 

The Company adopted the provisions of FIN 48 on January 1, 2007. The Company does not have any material unrecognized tax benefits, therefore the adoption of FIN 48 did not have a material impact on the Company’s financial position or results of operations.

 

The Company’s policy is to recognize estimated interest and penalties related to unrecognized tax benefits as other expense. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open years (after 2003 for federal and state and after 2001 for Canada) based on an assessment of many factors including past experience and interpretations of tax laws applied to the facts of each matter.

 

Earnings Per Share -

 

The following table sets forth the reconciliation of earnings and the weighted average number of shares used in the calculation of basic and diluted earnings per share (amounts presented in thousands except per share data):

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2007

 

2006

 

2007

 

2006

 

Computation of Basic Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before
extraordinary gain

 

$

76,016

 

$

87,009

 

$

276,520

 

$

256,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on transfer of operating properties

 

 

 

 

 

 

 

 

1,394

 

Gain on sale of operating properties, net of tax

 

 

376

 

 

 

 

2,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

(2,909

)

 

(2,909

)

 

(8,728

)

 

(8,728

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before
extraordinary gain applicable to common
shares

 

 

73,483

 

 

84,100

 

 

270,500

 

 

248,794

 

Income from discontinued operations

 

 

1,613

 

 

4,418

 

 

30,298

 

 

38,838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Extraordinary gain

 

 

 

 

 

 

50,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income applicable to common shares

 

$

75,096

 

$

88,518

 

$

351,063

 

$

287,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 


 

 

Weighted average common shares

 

 

 

 

 

 

 

 

 

 

 

 

 

outstanding

 

 

252,327

 

 

241,002

 

 

251,925

 

 

236,789

 

Basic Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before
extraordinary gain

 

$

0.29

 

$

0.35

 

$

1.07

 

$

1.05

 

Income from discontinued operations

 

 

0.01

 

 

0.02

 

 

0.12

 

 

0.16

 

Extraordinary gain

 

 

 

 

 

 

0.20

 

 

 

Net income

 

$

0.30

 

$

0.37

 

$

1.39

 

$

1.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Computation of Diluted Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before
extraordinary gain applicable to common
shares

 

$

73,483

 

$

84,100

 

$

270,500

 

$

248,794

 


Distributions on convertible units (a)

 

 

 

 

 

 

 

 

310

 


Income from continuing operations before
extraordinary gain for diluted earnings per
share

 

 

73,483

 

 

84,100

 

 

270,500

 

 

249,104

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations

 

 

1,613

 

 

4,418

 

 

30,298

 

 

38,838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Extraordinary gain

 

 

 

 

 

 

50,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income for diluted earnings per share

 

$

75,096

 

$

88,518

 

$

351,063

 

$

287,942

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares
outstanding – basic

 

 

252,327

 

 

241,002

 

 

251,925

 

 

236,789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:
Stock options

 

 

4,170

 

 

5,144

 

 

5,165

 

 

4,869

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assumed conversion of convertible units (a)

 

 

 

 

 

 

 

 

302

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares for diluted earnings per common share

 

 

256,497

 

 

246,146

 

 

257,090

 

 

241,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before
extraordinary gain

 

$

0.28

 

$

0.34

 

$

1.05

 

$

1.03

 

Income from discontinued operations

 

 

0.01

 

 

0.02

 

 

0.12

 

 

0.16

 

Extraordinary gain

 

 

 

 

 

 

0.20

 

 

 

Net income

 

$

0.29

 

$

0.36

 

$

1.37

 

$

1.19

 

 

 

(a)

For the three and nine months ended September 30, 2007 and 2006, the effect of certain convertible units would have an anti-dilutive effect upon the calculation of Income from continuing operations per share. Accordingly, the impact of such conversion has not been included in the determination of diluted earnings per share calculations.

 

9

 


 

                 There were approximately 2,971,150 and 2,455,900 stock options that were anti-dilutive at September 30, 2007 and 2006, respectively.

 

New Accounting Pronouncements -

 

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurement (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurement. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The impact of adopting SFAS No. 157 is not expected to have a material impact on the Company’s financial position or results of operations.

 

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The impact of SFAS No. 159 is not expected to have a material impact on the Company’s financial position or results of operations.

 

In June 2007, the AICPA issued Statement of Position 07-1, Clarification of the Scope of the Audit and Accounting Guide for Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies (“SOP 07-1”). SOP 07-1 sets forth more stringent criteria for qualifying as an investment company than does the predecessor Audit Guide. In addition, SOP 07-1 establishes new criteria for a parent company or equity method investor to retain investment company accounting in their consolidated financial statements. Investment companies record all their investments at fair value with changes in value reflected in earnings. SOP 07-1 was to be effective for the Company’s 2008 fiscal year, however, in October 2007 the FASB agreed to propose an indefinite delay of the effective date of SOP 07-1. The impact of adopting SOP 07-1 is not expected to have a material impact on the Company’s financial position or results of operations.

 

2.

Operating Property Activities

 

Acquisitions -

 

During the nine months ended September 30, 2007, the Company acquired, in separate transactions, 55 operating properties, comprising an aggregate 3.6 million square feet of a gross leasable area (“GLA”), for an aggregate purchase price of approximately $964.4 million including the assumption of approximately $68.8 million of non-recourse mortgage debt encumbering six of the properties. Details of these transactions are as follows (in thousands):

 

10

 


 

 

 

 

 

 

Purchase Price

 

 

 

 

Property Name

 

 

Location

 

MonthAcquired

 

 

Cash

 

 

Debt Assumed

 

 

 

Total

 

 

 

GLA

 

 

 

 

 

 

 

 

 

 

3 Properties

Various

Jan-07 (1)

$ 22,535

 

$19,480

 

$ 42,015

 

240

 

 

 

 

 

 

 

 

 

 

Embry Village

Atlanta, GA

Feb-07

46,800

 

-

 

46,800

 

215

 

 

 

 

 

 

 

 

 

 

Park Place

Morrisville, NC

Mar-07 (2)

10,700

 

10,700

 

21,400

 

170

 

 

 

 

 

 

 

 

 

 

35 North Third Street

Philadelphia, PA

Mar-07

2,100

 

-

 

2,100

 

2

 

 

 

 

 

 

 

 

 

 

Waldo’s Mexico Portfolio
(17 properties)

Various, Mexico

Mar-07

51,500

 

-

 

51,500

 

488

 

 

 

 

 

 

 

 

 

 

Cranberry Commons II

Pittsburgh, PA

Mar-07 (3)

1,431

 

3,108

 

4,539

 

17

 

 

 

 

 

 

 

 

 

 

Lake Grove

Lake Grove, NY

Apr-07 (4)

31,500

 

-

 

31,500

 

158

 

 

 

 

 

 

 

 

 

 

1628 Walnut St

Philadelphia, PA

Apr-07

3,500

 

-

 

3,500

 

2

 

 

 

 

 

 

 

 

 

 

2 Properties

Various

Apr-07 (5)

62,800

 

-

 

62,800

 

436

 

 

 

 

 

 

 

 

 

 

Flagler Park

Miami, FL

Apr-07

95,000

 

-

 

95,000

 

350

 

 

 

 

 

 

 

 

 

 

2 Properties

Various

May-07 (6)

36,801

 

16,800

 

53,601

 

169

 

 

 

 

 

 

 

 

 

 

Suburban Square

Ardmore, PA

May-07

215,000

 

-

 

215,000

 

359

 

 

 

 

 

 

 

 

 

 

1701 Walnut St

Philadelphia, PA

May-07

12,000

 

-

 

12,000

 

15

 

 

 

 

 

 

 

 

 

 

30 West 21st St

New York, NY

May-07

6,250

 

18,750

 

25,000

 

5

 

 

 

 

 

 

 

 

 

 

Chatham Plaza

Savannah, GA

June-07

44,600

 

-

 

44,600

 

199

 

 

 

 

 

 

 

 

 

 

2 Properties

Various

June-07 (7)

16,920

 

-

 

16,920

 

22

 

 

 

 

 

 

 

 

 

 

Birchwood Portfolio
(11 Properties)

Long Island, NY

July-07

92,090

 

-

 

92,090

 

280

 

 

11

 


 

 

493-497 Commonwealth Ave

Boston, MA

July-07

5,650

 

-

 

5,650

 

20

 

 

 

 

 

 

 

 

 

 

3 Properties

Philadelphia, PA

July-07 (8)

60,890

 

-

 

60,890