Dear Fellow Shareholders and Associates:

When Marty Kimmel and I developed our first shopping center in 1958, our primary focus was on the cash flow that could be generated from tenant leases; this would amortize the mortgage loan and provide our investors with stable and predictable cash distributions. The investment thesis was simple: Construct a building where a retailer wanted to serve its customers and lease it at a rate that would pay the investors a safe and reasonable return over the life of the lease. We could earn money while we slept.

During the ‘70s and ‘80s, we shifted to acquiring properties with the same characteristics ­low rent relative to the anchor tenant‘s sales, strong locations in densely populated markets and a steady cash flow providing distributions to the investors.

In 1991, when we completed our initial public offering, we provided investors access to ownership of shopping centers in a new public vehicle for the first time in a very long time. Our shareholders enjoyed a safe and growing dividend and growth in cash flow from retail real estate, along with a vehicle to opportunistically capitalize on the needs of distressed, real-estate rich retailers.

Fast forward to Kimco‘s Investor Day in September 2010 when, after the worst recession since the Great Depression, we made a commitment to our

shareholders to simplify our strategy and once again focus on recurring cash flow from high-quality shopping centers. We are making excellent progress fulfilling that commitment. To put this transformation in perspective, in 2008 our non-retail investment balance was $1.1 billion. After the impending sale of the InTown Suites extended-stay portfolio, that balance is expected to be below $300 million.

Since our Investor Day, we‘ve also shed shopping centers that didn‘t fit our criteria, generating proceeds to Kimco of more than $500 million.

We have used these proceeds, together with those generated from our non-retail dispositions, to reduce debt and acquire higher-quality shopping centers in well­located areas.

The table on the next page illustrates our trans­formation.

Today, the demand for space for our type of retail property continues to improve. Absorptions are forecast to outpace completions of new construction for the foreseeable future. Despite prevailing economic uncertainties, planned store openings are at a multiyear high.

Our tenants are generally strong credits, including discounters, off-price retailers, drugstores, super­markets and warehouse clubs, supplying everyday

necessities. Many of our leases were entered into decades ago, and contain very low contract rents. Very few public companies have entered into leases 40 years ago; these legacy contract rents are obviously below market, and they form a basis for future rental growth as the leases expire. A recent illustration of this was a 41-year-old lease with a major retailer that provided us with annual rental revenues of $315,000. When the lease expired in the first quarter of 2012, we entered into a new ground lease with a credit tenant for over six times that rent. There are more such leases in our portfolio, which should result in additional rental growth as the leases expire.

Like other retail property owners, we are still navigating through some headwinds. Many consumers are feeling the impact from the end of the payroll tax holiday, and gasoline prices are up. And yet some major economic indicators are pointing in the right direction.

The unemployment rate, while still too high, is slowly improving, and home prices continue to recover. Interest rates remain low. We remain focused on leasing our space to smart retailers who will benefit from better economic conditions in the years ahead.

Having evolved from that first shopping center many years ago, there are three aspects of Kimco‘s business that distinguish us today.

1. We have a very large operating platform — 896 shopping centers with approximately 8,400 tenants — that enables us to service the needs of major national and regional retailers. Having this breadth of locations provides us with access to most, if not all, of the retailers that are experiencing the most rapid growth today. Among our peers, we are the largest landlord to Costco, TJX Companies (T.J. Maxx, Marshalls, etc.), Royal Ahold (Stop & Shop, Giant, etc.) and others. Home Depot and Walmart, two of the most creditworthy companies in America today, are among our largest tenants. Given our scale, we are afforded a seat at the table when a retailer is looking to expand or open a new store. In the retail real estate industry, size matters.

2. We are a manager and owner in joint ventures that hold approximately $10 billion of retail real estate. This platform has enabled us to acquire interests in numerous high-quality properties and to generate high returns on our shareholders‘ equity due to our management role. Recently, an added benefit of this business has been the opportunity to increase our investment in select assets when some of our partners have expressed a desire to monetize their investments or modify their investment allocations. Since our Investor Day in 2010, we have disposed of 55 joint venture properties that were not strategic

to our portfolio and acquired 10 properties from partners in which we had a minority interest stake and a management role. For example, during the year, we acquired Towson Marketplace in Towson, Maryland. This is a wonderful shopping center that is anchored by both Target and Walmart; there is also a full-line Weis Market on site. This is a property that should provide stable and growing cash flows to our shareholders for many years. Another recent example is Santee Trolley Square in Santee, California, where we increased our ownership from 45 percent to 100 percent. This 98-percent-occupied, 311,000-square-foot shopping center is anchored by several prominent national retailers such as T.J. Maxx, PetSmart, Party City, Bed Bath & Beyond, 24 Hour Fitness and Old Navy, and shadow-anchored by Target.

3. We have a long-term track record of capturing retail-related opportunities. Our history is illuminated by profitable transactions with Venture Stores, Gold Circle, Hechinger‘s, Montgomery Ward, Service Merchandise, Kmart, Ames, Albertsons, Woolworth, Frank‘s Nursery, Strawbridge & Clothier, Strauss Discount Auto, Penn Traffic, Save Mart and Shopko. While committed to our stable and growing base of recurring income, Kimco has always had an opportunistic culture, which is the "plus" in our "Income Plus" strategy. Our track record of generating profits from transactions with retailers that are real-estate rich has proven time and again that if you are fast with your footwork,

and well-known, reliable and trusted in the retail industry, you can generate outsized returns for your shareholders. Our most recent example of an opportunistic investment is our participation in a consortium to restructure Supervalu. This is the same group we partnered with in the Albertsons transaction, which made Kimco shareholders five times their initial investment — and we still maintain a valuable position in this investment. Kimco will continue to provide real estate advisory services to the new Supervalu venture.

In closing, please permit me to express a few thoughts about today‘s retail real estate market prices. The prices of high-quality shopping centers today appear "expensive" compared with long-term historical averages for market cap rates, which are the initial unleveraged yields available to property buyers. However, let‘s dig a little deeper. When compared with the risk-free interest rate available on the 10-year U.S. Treasury note, investment yields available on quality retail real estate may be at historically attractive levels. Let me explain. The interest rate on 10-year Treasuries was, as of this writing, approximately two percent. Treasury Inflation-Protected Securities (TIPS) for the same duration show negative yields. An argument can be made that real estate returns should be compared with TIPS, because the residual value of real estate often increases in value with inflation, in some ways similar to the increasing yield on a TIPS bond.

Clearly, by these measures, quality real estate bearing cap rates in the 5 to 6 percent range looks attractively priced. A similar conclusion might be reached if one compares real estate cap rates with yields presently available on investment-grade corporate bonds. All this considered, I‘ll put my money in shopping centers at today‘s cap rates any day. Our goal at Kimco is to continue to be the premier owner of retail properties in North America; this should enable us to deliver safe and growing cash flows from our investment portfolio, as well as increasing distributions to our shareholders. In addition, we seek to continue generating profits and create value from our retail-related opportunistic activities. In other words, "Income Plus." We continue to work very hard to achieve these objectives. I want to thank all of our associates for the wonderful job they are doing executing our business plan, and I‘m quite proud of their achievements on behalf of Kimco shareholders and stakeholders. I am very excited by the future opportunities I see ahead. It‘s indeed a great time to own high-quality, income-producing real estate and I‘m as proud as ever of our position in the industry.


Milton Cooper
Executive Chairman