Citi Upgrades Kimco Realty To Hold

Kimco Realty's KIM 3Q FFO was in line with Citi's expectations and 2011 guidance was a little better than expected. KIM has started to make some slow progress on its recently outlined strategy; selling weaker assets and slowly simplifying the preferred investments. Citi would like to see faster progress on divesting the $1.4bn non-retail, though this could accelerate next year. Citi's '11 estimate is at the low end of KIM's '11 guidance of $1.17-$1.21. 2010 guidance for FFO increased by 3c at the low end and 1c at the high end to $1.17-$1.19. Improved guidance follows a 12.5% increase in the quarterly dividend previously announced. 3Q FFO of 27c was in line with our estimate and 1c above the Street. Core NOI and income from other RE investments were both 2c above, offset by 1c higher interest expense along with 3c of debt extinguishment costs not included in its estimate. Over the quarter, KIM sold its interest in the Hyatt Cancun, sold or transferred 4 preferred equity interests and converted two Canadian retail preferred investments into traditional JVs. Preferred equity investments have declined $93m as a result. Citi has a Hold rating and $17 PT on KIM KIM closed Wednesday at $16.93