The Road Back...
After many years of stellar performance, our total return to shareholders was dismal last year–a situation that is not tolerable and very disappointing to all of us in management.
A clear strategy means little if we do not execute – but we intend to execute! Our priorities are clear:
- Focus our resources on the shopping center “vitals”–increase occupancy by filling vacant spaces, retain good tenants through lease renewals and exercise of options, realize the benefits from our below-market leases through solid leasing spreads, grow new sources of revenue from temporary leasing, storage rental, solar power, advertising and related revenue sources – and reduce operating costs. This requires investment–in people and incentives, in the properties, and in process and technology;
- Reduce our non-retail holdings. As part of the refinement of our strategic focus, we have committed to dispose of our non-retail investments in a disciplined and measured way over the next two to four years. It is important to recognize that “non-retail” does not mean “not earning” or “not good.” This portfolio of investments is diverse, generally contributes to net earnings and comprises less than 9% of our total balance sheet. However, monetizing these investments will help reduce leverage, strengthen our balance sheet position and is consistent with our strategy to focus exclusively on shopping centers and retail real estate opportunities;
- Reduce leverage. We determine the appropriateness of our leverage by measuring the relationship between Net Debt (debt on our balance sheet reduced by cash) and EBITDA, a traditional measure of earnings before interest and depreciation. Our goal is to reduce the ratio of Net Debt to EBITDA to 6 times by 2012, and closer to 5 times by 2014. This will be accomplished through the growth in net operating income, the disposition of non-retail assets and, where appropriate, the use of equity as growth capital for new value-creating investment activity;
- Establish new institutional joint venture relationships. As noted earlier, our investment management platform represents an important Kimco differentiator. We are focused on expanding our reach to include new sources of institutional capital. Access to new joint venture capital will allow us to acquire properties profitably and to maintain our ownership and management positions in existing properties should our current partners wish to exit;
- Remain poised to take advantage of shopping center and retailer-owned real estate opportunities in a tumultuous and changing environment.
