Kimco Shares Rise On Balance Sheet Positive Measures

Despite inflicting short-term pain on shareholders, key measures announced by shopping center developer Kimco Realty Corp. (KIM) is receiving kudos from Wall Street as balance-sheet friendly.

The company's share price rose 22% to $9.16 in recent trading after Kimco said late Thursday it had cut its dividend 86% to 6 cents in the third and fourth quarters. In addition, the company priced Friday 91.5 million shares of common stock at $7.10 per share. Such a deal is commonly dilutive to shareholders and could be expensive for companies, particularly in weak market conditions.

"While dilutive to earnings per share, it's very stabilizing to the balance sheet," said Rich Moore, an analyst at RBC Capital Markets.

The real-estate investment trust's shares have declined about 50% year-to-date amid fears the highly leveraged company will struggle to refinance upcoming debt maturities over the next couple of years.

"For all REITs, balance sheet (issues) are front and center," said Jim Sullivan, an analyst at Green Street Advisors.

Sullivan said while Kimco's equity sale was painful and dilutive, the market saw the transaction as "necessary to ensure the survival of this company well past" 2011.

Kimco also reduced the top end of its projected range for 2009 funds from operations, a key measure of REIT profitability. It now estimates FFO of $1.70 to $1.85 a share, compared with $1.70 to $1.90 a share in February. That forecast was far below Wall Street's then-expected $2.22.

Analysts last estimated $1.73, according to a poll by Thomson Reuters.

The company also said it is marketing a new $200 million unsecured term loan with a group of banks.

-By A.D. Pruitt, Dow Jones Newswires, 201-938-2269, [e-mail]