Moody's Sees Negative Outlook for Kimco

NEW YORK CITY-Moody’s has downgraded its outlook for Kimco Realty Corp. to negative, while affirming the rating on its senior debt, the agency said Wednesday. In downgrading the retail REIT’s outlook, Moody’s cites “the challenging retail and economic environment” pressuring Kimco’s credit metrics as it realigns its business.

In a release, Moody’s notes that while Kimco has “a good liquidity profile” with access to two revolving credit facilities totaling more than $1.5 billion, its overall effective and secured leverage profile, including pro-rata share of joint ventures, “has weakened over the past several years” as the REIT increased its funds management and other investment activities. EBITDA margins remain “healthy” at 68%, but still lower than the historical standards of 70% or more, the release states.

According to the release, “As the effects of the current economy continue to weigh on the REIT’s portfolio, Moody’s expects this factor to remain pressured over the intermediate term along with the potential for declining occupancy and rent spreads trending below prior levels.” Calls to the New Hyde Park, NY-based REIT were not returned by deadline.

Last month, Kimco reported that its second-quarter funds from operations was $113.8 million, compared to an FFO of $171.6 million for the same quarter in 2008. Occupancy at its 808 US properties averaged 91.8% at the end of Q2, Kimco reported in July.

In a GlobeSt.com retail webinar presented by Real Estate Forum in April, Kimco’s vice chairman and president, David Henry, called continuing job losses at “a horrible thing for real estate fundamentals. As long as real estate fundamentals are under attack in terms of rents and cap rates and so forth, it’s hard for the market to find its feet. I look towards the employment.”