NEW YORK – Kimco Realty Corp. – which warmed up for its blockbuster $4 billion acquisition of Pan Pacific Retail Properties – also had $537 million in acquisitions in the second quarter, during which the company raked in a net income of $108.7 million, or 43 cents per diluted share, up from $83.8 million, or 35 cents per share, a year ago.
All told, the real estate investment trust added some 180 new properties to its portfolio in the past several months, on the continental U.S., Canada, Mexico and Puerto Rico.
Jeffrey Donnelly, an analyst with Wachovia Securities made the mistake of asking chairman and chief executive officer Milton Cooper during a conference call if it was fair to assume that the REIT was on the sidelines for big acquisitions for awhile, a safe assumption given the massive numbers of properties that need to be digested. Cooper’s response? “Not fair at all. Our balance sheet is stretched, but [our investment in Pan Pacific] just fuels our appetite.”
Still, the real estate luminary maintains that there has never been a real estate cycle that has been quite as risky as this one, when it comes to the confluence of the fear of terrorism, rising interest rates and gas prices, escalating debt on retailer’s balance sheets and waning consumer spending. “It’s a different phenomena,” he said. “It will all boil down to consumer spending.”
Developers Diversified, meanwhile, focused on improving its balance sheet in the most recent quarter, reported net income this week of $78.7 million, or 59 cents per diluted share, up from $67.9 million, or 50 cents per share a year ago. The company’s more important achievement, however, may have been its upgraded credit rating from Moody’s. The agency upgraded the company to Baa2, which allows the REIT to flex its acquisition and investment muscles a bit more freely going forward.
During its company conference call, Glimcher Realty Trust’s ceo Michael Glimcher fended off REIT analyst David Fick, from Stifel Nicolaus, who persisted in asking the REIT’s executive team how they felt about “overpromising and underdelivering” on the repositioning and redevelopment of their mall portfolio. The mall developer, which has been selling off its underperforming assets and revamping its existing properties, reported a net loss of $43 million, or $1.17 per diluted common share in the second quarter, down from a loss of $1.1 million, or 3 cents per share, a year prior. “Am I somewhat frustrated or disappointed? Certainly,” responded Glimcher. “We would never intend to be in this position but is there very clearly light at the end of the tunnel and traction being made? Absolutely.”
Pennsylvania Real Estate Investment Trust, on the other hand, got off easy from Wall Street analysts. There was but one question from the analyst community, which chairman and ceo Ron Rubin found startling. “I guess this means we gave a good presentation,” he said before concluding the call. The REIT, which recently acquired several flagship Strawbridge’s stores in its native Philadelphia, reported a net income of $500,000 in the second quarter, or 1 cent per diluted share, down from $5.5 million, or 14 cents per share, a year prior. To date this year it has spent $115 million in redevelopment projects and $91 million in ground-up development, and expects to invest between $100-$125 million on development during the second half of 2006.