Retail Without Borders

David Henry

Age: 58

Company: Kimco Realty Corp.

Title: Vice Chairman and Chief Investment Officer

Time in current role: 7 years

Currently reading: “A Peculiar Grace” by Jeffrey Lent

Does nearly a quarter century as a company man at General Electric prepare one to lead a REIT in aggressive international growth and the formation of complex joint venture structures with investors? In the case of David Henry, vice chairman and chief investment officer of retail giant Kimco Realty Corp., the answer is “yes.”

“You can't spend 23 years at GE and not be influenced by it,” says Henry, referring to his time at GE Capital Real Estate, where he served as chief investment officer (CIO) during his last four years at the company. “GE is an opportunistic investor willing to go just about anywhere to find opportunity.”

It's a mindset that Henry brought with him to Kimco Realty Corp., based in New Hyde Park, N.Y. Under his guidance as CIO over the last seven years, the REIT has used the same sort of strategy, growing opportunistically not only in geographic terms but also by partnering with various institutional investors.

Kimco was a sizable neighborhood and community shopping center owner at the end of 2000, just before Henry joined the company. It had interests in about 500 retail properties totaling 66.5 million sq. ft., all in the U.S. By the end of 2007, the company owned interests in nearly 2,000 properties totaling 183 million sq. ft. — including 39 properties in Canada, 34 in Mexico and four in Chile.

Joint venture structures have also been a growth avenue during Henry's time at Kimco. When he joined the company, Kimco was a participant in exactly one joint venture. By the end of 2007, the company had 344 properties in investment management funds with 14 institutional partners.

“We were among the first to emphasize JVs, and we were criticized for putting together complicated structures that the Street didn't initially understand,” says Henry.

“But over time, most REITs have come to understand that they can't make money for their shareholders simply by buying stabilized properties,” he continues. “They need to be in the funds management business as well, and team up with providers of lower-cost capital.”

Kimco is doing well in today's uncertain economic climate. Funds from operations (FFO), a key measure of REIT performance, increased 17.2% to $669.8 million in 2007 compared with $554.3 million in 2006. The average occupancy in Kimco's portfolio reached 96.3% at the end of 2007, a rise of 60 basis points over the course of the year and a record high for the large company.

But Kimco stock isn't faring as well. As of Feb. 15, it was trading at $34.05, compared with $52.39 a year earlier. “What we do is meet often with shareholders, analysts and rating agencies and explain our business model and point out our track record, strong balance sheet, and the defensive nature of neighborhood shopping centers,” Henry says.

He expects continued international growth. Last year, Kimco partnered with Patio SA to buy four properties in Chile for $16.5 million, and announced a $150 million partnership with REP Desenvolvimento Imobiliario SA to develop retail properties in Brazil.

Mexico could offer an even bigger bonanza. Kimco is that country's largest single retail landlord, and it has 24 shopping centers under development there. The company has invested about $300 million in Mexico, and the total could reach $1 billion, Henry says.

Mexico is under-retailed, he says, with about 800 shopping centers for 160 million people with an expanding economy. Competitors include U.S.-based Regency Centers Corp. and Mexico-based Mexico Retail Properties. “We're going to keep investing in Mexico,” says Henry, “while the window is open.”

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