-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CTTbOIzipDeQsfqgbY4TUOtgVljnmJ3xr/73COROQstEklDiErRR4ZkdKEmL55z3 JaT+Cu3BoFDe18ln+vNbfQ== 0000889812-98-002847.txt : 19981207 0000889812-98-002847.hdr.sgml : 19981207 ACCESSION NUMBER: 0000889812-98-002847 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981116 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIMCO REALTY CORP CENTRAL INDEX KEY: 0000879101 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 132744380 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10899 FILM NUMBER: 98763787 BUSINESS ADDRESS: STREET 1: 3333 NEW HYDE PARK RD STREET 2: PO BOX 5020 CITY: NEW HYDE PARK STATE: NY ZIP: 11042 BUSINESS PHONE: 5168699000 MAIL ADDRESS: STREET 1: 3333 NEW HYDE PARK ROAD STREET 2: PO BOX 5020 CITY: NEW HYDE PARKQ STATE: NY ZIP: 11042 8-K 1 CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 16, 1998 (January 23, 1998) Kimco Realty Corporation (Exact name of registrant as specified in its charter) Maryland 1-10899 13-2744380 - ---------------------------- ------------------------ ------------------- (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 3333 New Hyde Park Road New Hyde Park, New York 11042-0020 - ------------------------------------- ----------------- (Address of principal (zip code) executive offices) 516/869-9000 ----------------------------------- Registrant's telelphone, including area code Not Applicable - ------------------------------------------------------------------------------- (former name or former address, if changed since last report.) Page 1 of 19 KIMCO REALTY CORPORATION AND SUBSIDIARIES CURRENT REPORT ON FORM 8-K Item 2. Acquisition or Disposition of Assets As previously reported on Current Report on Form 8-K dated June 24, 1998, on June 19, 1998, Kimco Realty Corporation (the "Company") and The Price REIT, Inc. ("Price REIT") consummated a merger (the "Merger") whereby the Company acquired control of Price REIT pursuant to an Agreement and Plan of Merger, dated as of January 13, 1998, as amended as of March 5, 1998 and May 14, 1998 (the "Merger Agreement"), among the Company, REIT Sub, Inc., a wholly owned subsidiary of the Company ("Merger Sub"), and Price REIT. Pursuant to the Merger, Price REIT was merged with and into Merger Sub, whereupon the separate existence of Price REIT ceased. Item 5. Other Events Shopping Center Acquisitions - During September and October 1998, certain subsidiaries of the Company acquired, in separate transactions, 3 neighborhood and community shopping center properties comprising approximately 417,000 square feet of gross leasable area ("GLA") in three states (the "September and October 1998 Acquired Properties"). The September and October 1998 Acquired Properties were purchased for an aggregate price of $54.7 million, including the assumption of $28.4 million of mortgage debt in connection with two of the acquisitions. These properties include (i) Northwest Square located in Columbus, Ohio, (ii) Oak Park Commons, located in Plainfield, New Jersey and (iii) Trolley Station, located in Memphis, Tennessee. More specific information with respect to each of the September and October 1998 Acquired Properties is as follows: Northwest Square, located on Sawmill Road in Columbus, Ohio, is anchored by Borders and contains approximately 113,000 square feet of GLA. Oak Park Commons, located on Route 17 North in Plainfield, New Jersey, is anchored by A & P Supermarkets and Sears, and contains approximately 137,000 square feet of GLA. Trolley Station, located on South Perkins Road in Memphis, Tennessee, is anchored by Toys "R" Us and Office Max, and contains approximately 167,000 square feet of GLA. Management believes that the current annualized net cash flow generated by the September and October 1998 Acquired Properties provides a weighted average annualized yield of approximately 10% on the Company's investment in such properties. 2 Although none of the above September and October 1998 Acquired Properties individually represent a "significant acquisition" pursuant to the rules governing the reporting of transactions under this Current Report on Form 8-K, this report has been filed for the purpose of providing certain historical financial information for the September and October 1998 Acquired Properties and updated pro forma financial information for (i) the September and October 1998 Acquired Properties, (ii) all previously reported 1998 acquisitions, which include the purchase of 15 shopping centers which were previously reported on Current Report on Form 8-K dated May 22, 1998, the purchase of 30 fee and leasehold positions acquired by the Company from the Metropolitan Life Insurance Company ("the "Met Life Acquisition") as previously reported on Current Report on Form 8-K dated July 9, 1998 and the purchase of 3 additional shopping centers acquired as previously reported on Current Report on Form 8-K dated August 10, 1998 (collectively, the "1998 Previously Reported Acquisitions") and (iii) the effects of the Merger. 3 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) (b) Financial Statements and Pro Forma Financial Information The financial statements and pro forma financial information filed herewith is as follows:
Page ---- Report of Independent Accountants.................................................................6 Combined Historical Summary of Revenues and Certain Operating Expenses of Certain Acquired Properties for the Year Ended December 31, 1997 and the Nine Months Ended September 30, 1998..........................................................7 Notes to Combined Historical Summary of Revenues and Certain Operating Expenses of Certain Acquired Properties.................................................8 Estimates of Net Income and Funds from Operations of Certain Acquired Properties...............................................................................9 Notes to Estimates of Net Income and Funds from Operations of Certain Acquired Properties.......................................................................10 Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1998...........................12 Pro Forma Condensed Consolidated Statements of Income for the Year Ended December 31, 1997 and the Nine Months Ended September 30, 1998..............................13 Notes to Pro Forma Condensed Consolidated Financial Statements....................................15 (c) Exhibits: * 23.1 Consent of PricewaterhouseCoopers LLP
--------------- *Filed herewith. 4 KIMCO REALTY CORPORATION AND SUBSIDIARIES CERTAIN ACQUIRED PROPERTIES COMBINED HISTORICAL SUMMARY OF REVENUES AND CERTAIN OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1997 5 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Kimco Realty Corporation: In our opinion, the accompanying Combined Historical Summary of Revenues and Certain Operating Expenses of Certain Acquired Properties, as defined in the accompanying Note 1, presents fairly in all material respects, the revenues and certain operating expenses of certain acquired properties for the year ended December 31, 1997 in accordance with generally accepted accounting principles. This combined historical summary is the responsibility of the management of Kimco Realty Corporation; our responsibility is to express an opinion on the combined historical summary based on our audit. We conducted our audit in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the combined historical summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined historical summary, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the combined historical summary. We believe that our audit provides a reasonable basis for our opinion. The accompanying Combined Historical Summary of Revenues and Certain Operating Expenses of Certain Acquired Properties has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 2, and is not intended to be a complete representation of the revenues and expenses of the Certain Acquired Properties. PricewaterhouseCoopers LLP New York, New York October 30, 1998 6 KIMCO REALTY CORPORATION AND SUBSIDIARIES CERTAIN ACQUIRED PROPERTIES COMBINED HISTORICAL SUMMARY OF REVENUES AND CERTAIN OPERATING EXPENSES Nine Months Ended Year Ended September December 31, 30, 1998 1997 (Unaudited) ---------- ---------- Revenues: Base rentals $2,570,204 $3,157,683 Operating reimbursements and other income 542,156 419,524 ---------- ---------- 3,112,360 3,577,207 ---------- ---------- Certain operating expenses: Real estate taxes 339,360 299,214 Repairs and maintenance 215,632 184,043 Other operating expenses 53,272 71,150 ---------- ---------- 608,264 554,407 ---------- ---------- Excess of revenues over certain operating expenses $2,504,096 $3,022,800 ========== ========== 7 KIMCO REALTY CORPORATION AND SUBSIDIARIES CERTAIN ACQUIRED PROPERTIES NOTES TO COMBINED HISTORICAL SUMMARY OF REVENUES AND CERTAIN OPERATING EXPENSES 1. Certain Acquired Properties The Combined Historical Summary of Revenues and Certain Operating Expenses for the year ended December 31, 1997 relates to the operations of the following certain acquired properties (the "Certain Acquired Properties"), while under ownership previous to Kimco Realty Corporation and Subsidiaries. Property Name Location - ------------- -------- Northwest Square Columbus, Ohio Trolley Station Memphis, Tennessee Oak Park Commons Plainfield, New Jersey (commenced operations in May 1998) 2. Basis of Presentation The Combined Historical Summary has been prepared on the accrual method of accounting. Certain operating expenses of the Certain Acquired Properties include operating and maintenance costs, real estate taxes, and insurance expense. In accordance with the regulations of the Securities and Exchange Commission, mortgage interest, depreciation and general and administrative expenses have been excluded as such costs are dependent upon a particular owner, purchase price or other financial arrangements. 3. Revenue Recognition Minimum revenues from rental property are recognized on a straight-line basis over the terms of the related leases. The future minimum revenues from rental property under the terms of all noncancellable tenant leases are approximately as follows: 1998 $ 3,208,000 1999 $ 3,190,000 2000 $ 3,060,000 2001 $ 2,965,000 2002 $ 2,828,000 Thereafter $19,209,000 8 KIMCO REALTY CORPORATION AND SUBSIDIARIES ESTIMATES OF NET INCOME AND FUNDS FROM OPERATIONS OF CERTAIN ACQUIRED PROPERTIES (Unaudited) The following represents an estimate of the net income and funds from operations expected to be generated from the operation of the Certain Acquired Properties based upon the Combined Historical Summary of Revenues and Certain Operating Expenses of Certain Acquired Properties for the year ended December 31, 1997. These estimated results do not purport to represent results of operations for these properties in the future and were prepared on the basis described in the accompanying notes which should be read in conjunction herewith. Estimated Net Income Excess of revenues over certain operating expenses $ 2,504,096 Less: Estimated depreciation (Note 1) (641,129) ----------- Estimated net income $ 1,862,967 =========== Estimated Funds from Operations Estimated net income $ 1,862,967 Add: Estimated depreciation (Note 1) 641,129 ----------- Estimated funds from operations $ 2,504,096 =========== 9 KIMCO REALTY COPRORATION AND SUBSIDIARIES NOTES TO ESTIMATES OF NET INCOME AND FUNDS FROM OPERATIONS OF CERTAIN ACQUIRED PROPERTIES 1. Basis of Presentation Depreciation has been estimated based upon an allocation of the purchase prices of the Certain Acquired Properties to land (20%) and building (80%) and assuming a 39-year useful life applied on a straight-line method. No income taxes have been provided because the Company is organized and operates in such a manner so as to qualify as a Real Estate Investment Trust ("REIT") under the provisions of the Internal Revenue Code (the "Code"). Accordingly, the Company generally will not pay Federal income taxes provided that distributions to its stockholders equal at least the amount of its REIT taxable income as defined under the Code. The accompanying calculation of Estimated Net Income and Funds From Operations exclude the impact of financing costs related to mortgage debt assumed in connection with the acquisition of the Certain Acquired Properties. 2. Acquisition Considerations In assessing the properties acquired, the Company's management considered the existing tenancies, which are the primary revenue source, the occupancy rates, which averaged 97.4% on the dates of acquisition, the terms of the mortgage debt assumed, the competitive nature of the markets and comparative rental rates. Furthermore, current and anticipated maintenance and repair costs, real estate taxes and capital improvement requirements were evaluated. Management is not aware of any material factors that would cause the reported financial information in the accompanying Combined Historical Summary of Revenues and Certain Operating Expenses and Estimates of Net Income and Funds from Operations of Certain Acquired Properties to be misleading. 10 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENTS OF INCOME The accompanying Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1998 gives effect to the purchase of two shopping centers acquired by the Company in October 1998 (the "October 1998 Acquisitions") as if these properties had been acquired as of September 30, 1998. The accompanying Pro Forma Condensed Consolidated Statements of Income for the year ended December 31, 1997 and the nine months ended September 30, 1998 reflect the historical results of the Company adjusted to give effect to (i) the September and October 1998 Acquired Properties and the 1998 Previously Reported Acquisitions, as if these transactions had been completed as of January 1, 1997 except for the acquisition of Oak Park Commons, which has been reflected as of May 1, 1998, the date the property commenced operations and (ii) the Merger as if it had occurred as of January 1, 1997 and been accounted for under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. The Pro Forma Condensed Consolidated Balance Sheet and Statements of Income have been prepared by the management of the Company. These pro forma statements may not be indicative of the results that would have actually occurred if the September and October 1998 Acquired Properties, the 1998 Previously Reported Acquisitions and the Merger had been in effect on the dates indicated. Also, they may not be indicative of the results that may be achieved in the future. The Pro Forma Condensed Consolidated Balance Sheet and Statements of Income should be read in conjunction with Kimco Realty Corporation's and Price REIT's audited financial statements as of December 31, 1997 and for the year then ended (which are included in each of the Companys' Annual Report on Form 10-K for the year ended December 31, 1997), and the unaudited condensed consolidated financial statements as of September 30, 1998 and for the nine months then ended (which are included in the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1998) and the accompanying notes thereto. 11 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1998 ----------------- (Unaudited)
Pro Forma Adjustments --------------- Kimco October 1998 Historical Acquisitions Pro Forma --------------- --------------- --------------- Assets: Real estate, net of accumulated depreciation $ 2,650,747,449 $ 39,658,000 $ 2,690,405,449 Investments in and advances to real estate joint ventures 58,780,260 -- 58,780,260 Investment in retail store leases 15,570,543 -- 15,570,543 Cash and cash equivalents 30,780,884 (11,244,000) 19,536,884 Accounts and notes receivable 24,117,472 -- 24,117,472 Other assets 94,589,966 -- 94,589,966 --------------- --------------- --------------- $ 2,874,586,574 $ 28,414,000 $ 2,903,000,574 =============== =============== =============== Liabilities: Notes payable $ 975,250,000 $ -- $ 975,250,000 Mortgages payable 156,906,342 28,414,000 185,320,342 Other liabilities, including minority interests in partnerships 182,567,371 -- 182,567,371 --------------- --------------- --------------- 1,314,723,713 28,414,000 1,343,137,713 --------------- --------------- --------------- Stockholders' Equity: Preferred stock, $1.00 par value, authorized 5,000,000 shares Class A Preferred Stock, $1.00 par value, authorized 345,000 shares Issued and outstanding 300,000 shares 300,000 -- 300,000 Aggregate liquidation preference $75,000,000 Class B Preferred Stock, $1.00 par value, authorized 230,000 shares Issued and outstanding 200,000 shares 200,000 -- 200,000 Aggregate liquidation preference $50,000,000 Class C Preferred Stock, $1.00 par value, authorized 460,000 shares Issued and outstanding 400,000 shares 400,000 -- 400,000 Aggregate liquidation preference $100,000,000 Class D Convertible Preferred Stock, $1.00 par value, authorized 700,000 shares Issued and outstanding 429,159 shares 429,159 -- 429,159 Aggregate liquidation preference $107,289,750 Class E Preferred Stock, $1.00 par value, Authorized, issued and outstanding 65,000 shares 65,000 -- 65,000 Aggregate liquidation preference $65,000,000 Common stock, $.01 par value, authorized 100,000,000 shares Issued and outstanding 55,446,111 shares 575,677 -- 575,677 Paid-in capital 1,675,767,238 -- 1,675,767,238 Cumulative distributions in excess of net income (117,874,213) -- (117,874,213) --------------- --------------- --------------- 1,559,862,861 -- 1,559,862,861 --------------- --------------- --------------- $ 2,874,586,574 $ 28,414,000 $ 2,903,000,574 =============== =============== ===============
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. 12 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 -------------------------------- (Unaudited)
Pro Forma Adjustments --------------------------------- 1998 Previously Kimco Price REIT Reported Historical Merger Acquisitions --------------------------------- ------------- Revenues from rental property $ 198,929,403 $ 77,787,000 $ 40,828,526 ------------- ------------- ------------- Rental property expenses: Rent 4,873,200 -- -- Real estate taxes 26,345,685 8,483,000 2,500,967 Interest 31,744,762 15,757,000 16,165,408 Operating and maintenance 22,194,628 6,668,000 2,553,608 Depreciation and amortization 30,052,714 18,749,154 7,103,854 ------------- ------------- ------------- 115,210,989 49,657,154 28,323,837 ------------- ------------- ------------- Income from rental property 83,718,414 28,129,846 12,504,689 Income from investment in retail store leases 3,571,946 -- -- ------------- ------------- ------------- 87,290,360 28,129,846 12,504,689 Management fee income 3,276,152 299,000 -- General and administrative expenses (11,651,341) (2,691,000) -- Other income (expenses), net 6,677,279 2,623,000 (1,042,856) ------------- ------------- ------------- Income before gain on sale of shopping center 85,592,450 28,360,846 11,461,833 Gain on sale of shopping center property 243,995 2,787,000 -- ------------- ------------- ------------- Net income $ 85,836,445 $ 31,147,846 $ 11,461,833 ============= ============= ============= Net income applicable to common shares $ 67,398,745 $ 18,109,115 $ 11,461,833 ============= ============= ============= Per share: Basic $1.80 ===== Diluted $1.78 ===== Pro Forma Adjustments ------------- September & October 1998 Acquired Properties Pro Forma ------------- ------------- Revenues from rental property $ 3,112,360 $ 320,657,289 ------------- ------------- Rental property expenses: Rent -- 4,873,200 Real estate taxes 339,360 37,669,012 Interest 290,000 63,957,170 Operating and maintenance 268,904 31,685,140 Depreciation and amortization 641,128 56,546,850 ------------- ------------- 1,539,392 194,731,372 ------------- ------------- Income from rental property 1,572,968 125,925,917 Income from investment in retail store leases -- 3,571,946 ------------- ------------- 1,572,968 129,497,863 Management fee income -- 3,575,152 General and administrative expenses -- (14,342,341) Other income (expenses), net (1,152,460) 7,104,963 ------------- ------------- Income before gain on sale of shopping center 420,508 125,835,637 Gain on sale of shopping center property -- 3,030,995 ------------- ------------- Net income $ 420,508 $ 128,866,632 ============= ============= Net income applicable to common shares $ 420,508 $ 97,390,201 ============= ============= Per share: Basic $1.98 ===== Diluted $1.96 =====
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. 13 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 ---------------------------------- (Unaudited)
Pro Forma Adjustments --------------------------------- 1998 Previously Kimco Price REIT Reported Historical Merger Acquisitions --------------------------------- ------------- Revenues from rental property $ 230,537,696 $ 45,526,846 $ 15,988,979 ------------- ------------- ------------- Rental property expenses: Rent 9,019,514 820,546 -- Real estate taxes 31,572,123 4,906,401 576,475 Interest 42,987,028 10,863,396 7,099,157 Operating and maintenance 23,143,929 3,512,059 854,818 Depreciation and amortization 34,433,287 9,492,014 2,878,987 ------------- ------------- ------------- 141,155,881 29,594,416 11,409,437 ------------- ------------- ------------- Income from rental property 89,381,815 15,932,430 4,579,542 Income from investment in retail store leases 2,729,684 -- -- ------------- ------------- ------------- 92,111,499 15,932,430 4,579,542 Management fee income 2,530,342 338,085 -- General and administrative expenses (12,493,986) (1,743,065) -- Other income (expenses), net 6,071,472 871,211 (460,428) ------------- ------------- ------------- Income before gain on sale of shopping center property and extraordinary items 88,219,327 15,398,661 4,119,114 Gain on sale of shopping center property 901,249 -- -- ------------- ------------- ------------- Income before extraordinary items 89,120,576 15,398,661 4,119,114 Extraordinary items (4,851,528) -- -- ------------- ------------- ------------- Net income $ 84,269,048 $ 15,398,661 $ 4,119,114 ============= ============= ============= Net income applicable to common shares $ 66,717,893 $ 9,313,919 $ 4,119,114 ============= ============= ============= Per common share: Income before extraordinary items Basic $1.52 ===== Diluted $1.50 ===== Net income Basic $1.42 ===== Diluted $1.40 ===== Pro Forma Adjustments ------------- September & October 1998 Acquired Properties Pro Forma ------------- ------------- Revenues from rental property $ 3,541,599 $ 295,595,120 ------------- ------------- Rental property expenses: Rent -- 9,840,060 Real estate taxes 299,214 37,354,213 Interest 1,235,000 62,184,581 Operating and maintenance 254,213 27,765,019 Depreciation and amortization 730,969 47,535,257 ------------- ------------- 2,519,396 184,679,130 ------------- ------------- Income from rental property 1,022,203 110,915,990 Income from investment in retail store leases -- 2,729,684 ------------- ------------- 1,022,203 113,645,674 Management fee income -- 2,868,427 General and administrative expenses -- (14,237,051) Other income (expenses), net (873,579) 5,608,676 ------------- ------------- Income before gain on sale of shopping center property and extraordinary items 148,624 107,885,726 Gain on sale of shopping center property -- 901,249 ------------- ------------- Income before extraordinary items 148,624 108,786,975 Extraordinary items -- (4,851,528) ------------- ------------- Net income $ 148,624 $ 103,935,447 ============= ============= Net income applicable to common shares $ 148,624 $ 80,299,550 ============= ============= Per common share: Income before extraordinary items Basic $1.56 ===== Diluted $1.54 ===== Net income Basic $1.47 ===== Diluted $1.46 =====
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1998 gives effect to the October 1998 Acquisitions as if these properties had been acquired as of September 30, 1998. The accompanying Pro Forma Condensed Consolidated Statements of Income for the year ended December 31, 1997 and the nine months ended September 30, 1998 reflect the historical results of the Company adjusted to give effect to (i) the September and October 1998 Acquired Properties and the 1998 Previously Reported Acquisitions, as if these transactions had been completed as of January 1, 1997 except for the acquisition of Oak Park Commons, which has been reflected as of May 1, 1998, the date the property commenced operations and (ii) the Merger as if it had occurred as of January 1, 1997 and been accounted for under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. 2. Pro Forma Adjustments (i) With respect to the September and October 1998 Acquired Properties: A. The adjustments to cash, real estate, net of accumulated depreciation and mortgages payable relate to the cash used and the mortgage debt assumed in connection with the October 1998 Acquisitions. B. The adjustment for depreciation was based upon an estimated useful life of 39 years using the straight-line method and purchase price allocations to land and building of 20% and 80%, respectively. C. The adjustment to interest expense relates to the assumption of mortgage debt in connection with the October 1998 Acquisitions. D. The adjustment to other income (expenses), net relates to the elimination of interest earned on funds assumed to have been expended as of January 1, 1997 in connection with the acquisitions of Northwest Square and Trolley Station and May 1, 1998 in connection with Oak Park Commons. 15 (ii) With respect to the 1998 Previously Reported Acquisitions: A. The adjustment to interest expense relates to (i) the assumption of mortgage debt encumbering four of the properties acquired and (ii) the issuance of $130.0 million medium-term notes and the additional borrowings under the Company's unsecured revolving credit facility. B. The adjustment for depreciation was based upon an estimated useful life of 39 years using the straight-line method and purchase price allocations to land and building of 20% and 80%, respectively for the fee simple properties and to building (100%) for the properties subject to ground leases. C. The adjustments to other income (expenses), net relates to (i) the elimination of interest earned on funds assumed to have been expended as of January 1, 1997 and (ii) the preferred return applicable to the partnership unitholders in connection with one of the 1998 Previously Reported Acquisitions. (iii) With respect to the Price REIT Merger: The Price REIT Merger column in the accompanying Pro Forma Condensed Consolidated Statements of Income include the results of Price REIT for the year ended December 31, 1997 and the period from January 1, 1998 to June 19, 1998 adjusted for the results of Price REIT's 1998 pre-merger acquisitions as if those acquisitions had occurred at January 1, 1997. Additionally, the Price REIT Merger column has been adjusted for the following: A. The adjustment to depreciation and amortization results from the net increase in real estate owned as a result of recording Price REIT's real estate assets at fair value versus historical cost. Depreciation is computed on the straight-line method based upon an estimated useful life of 39 years and an allocation of the stepped-up basis to land and building of 20% and 80%, respectively. Pro forma adjustments to depreciation of real estate for the year ended December 31, 1997 and the nine months ended September 30, 1998 are as follows:
Year Ended Nine Months Ended December 31, September 30, 1997 1998 (000's) (000's) ------------------------------- Depreciation expense based upon an estimated useful life of 39 years $ 18,337 $ 9,286 Less: Price REIT depreciation of real estate owned based upon an estimated useful life of 15 to 25 years (16,862) (9,722) -------- -------- Depreciation and amortization Pro Forma adjustment $ 1,475 ($436) -------- --------
16 B. The adjustment to general and administrative expenses reflects the net estimated reduction of those costs which are anticipated to be eliminated or reduced as a result of the Merger, as follows:
Year Ended Nine Months Ended December 31, 1997 September 30, 1998 (000's) (000's) ------------------------------------------ Net reduction in salary and benefit costs $ 700 $ 350 Net reduction in duplication of public company expenses 600 300 Net reduction in directors and officers' insurance and directors fees 200 100 ------ ------ General and administrative Pro Forma adjustment $1,500 $ 750 ------ ------
C. During April 1996, the Company and Price REIT formed a partnership to purchase a property in Phoenix, AZ. The Company has consolidated this partnership for financial reporting purposes and Price REIT has recorded their interest using the equity method. The adjustments to Equity in income of real estate joint ventures, net and Minority interest in partnerships both included in Other income (expenses), net reflect the elimination of the partnership accounting for this partnership as a result of the Merger, for the nine months ended September 30, 1998 and the year ended December 31, 1997, respectively. D. Weighted average number of shares outstanding- The pro forma weighted average number of common shares outstanding for the year ended December 31, 1997 and the nine months ended September 30, 1998 are computed as follows:
Year Ended Nine Months Ended December 31, 1997 September 30, 1998 (000's) (000's) -------------------------------------- Kimco's historical weighted average number of shares outstanding 37,388 47,138 Less: amount of historical weighted average number of shares outstanding that relate to the Merger -- (4,542) Issuance of Kimco common stock at 9 one for one exchange ratio for all Price REIT common stock outstanding in connection with the Merger 11,746 11,746 Add: Conversion of Price REIT stock options to Kimco common stock in connection with the Merger 176 176 ------- ------- Pro Forma weighted average number of Kimco common shares outstanding (Basic) 49,310 54,518 Effect of Dilutive Securities- Stock Options 462 565 ------- ------- Pro Forma weighted average number of Kimco common shares outstanding (Diluted) 49,772 55,083 ------- -------
The effect of the conversion of the Class D Convertible Preferred Stock would have an anti-dilutive effect upon the calculation of net income per common share. Accordingly, the impact of such conversion has not been included in the determination of diluted net income per share. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Kimco Realty Corporation ------------------------ Registrant Date: November 16, 1998 By: /s/ Michael V. Pappagallo --------------------------- Michael V. Pappagallo Chief Financial Officer 18 EX-23.1 2 CONSENT OF INDEPENDENT ACCOUNTANTS CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Kimco Realty Corporation on Form S-3, of our report dated October 30, 1998 on our audit of the Combined Historical Summary of Revenues and Certain Operating Expenses of Certain Acquired Properties as of December 31, 1997, which report is included in this Current Report on Form 8-K. PricewaterhouseCoopers LLP New York, New York December 3, 1998 19 -----END PRIVACY-ENHANCED MESSAGE-----