UPDATE 2-Kimco first-quarter FFO falls, shares rise

* Shares jump 6.6 percent

* First-quarter FFO down 28 percent

* Cuts dividend (Adds operating details, analysts comment, byline, updates stock price)

By Ilaina Jonas

NEW YORK, April 30 (Reuters) - Kimco Realty Corp (KIM.N) one of the largest U.S. strip mall owners and developers, said quarterly funds from operations, a performance measure of real estate investment trusts, fell 28 percent, partly because of lower occupancy brought about by tenant bankruptcies.

But Kimco shares rose 6.6 percent as the company said it has taken steps to strengthen its balance sheet.

Kimco said on Thursday that first-quarter FFO slid to $117.8 million, or 43 cents per share, from $164.4 million, or 64 cents per share, a year earlier. The results trailed analysts' average forecast of 44 cents per share, according to Reuters Estimates.

FFO, a measure of performance of real estate investment trusts, removes the profit-reducing effect of depreciation, a noncash accounting item, on earnings.

The credit freeze has dealt a double blow to the shopping center sector. It has stifled the consumer and has forced some retailers out of business and others to cut down on their demand for new stores. It has also made credit to buy or refinance existing shopping centers more difficult to get.

The circumstances have prompted many property owners to beef up their balance sheets and streamline their operations. During the quarter, Kimco repaid some of its debt, ending the quarter with access to $1.6 billion of immediate liquidity under its U.S. and Canadian revolving credit facilities.

The company said on Thursday it would reduce its dividend to 6 cents a share from 44 cents per share, and earlier this month it netted $718 million from the sale of 105.2 million shares.

FOCUS ON SHOPPING CENTERS

The company also said it plans to shed its noncore investments, focusing instead on owning, investing in and operating shopping centers, usually anchored by grocery or drug stores.

Kimco's shopping center portfolio includes 921 operating properties, chiefly in the United States, though it has properties in Canada, Mexico, and Chile. It also has investments in other shopping center properties, bringing its total interests at the end of the quarter to 1,476 properties.

"Kimco has taken major steps to ensure not only that it will survive the current crises but that it also will thrive as we emerge into a new world order for commercial real estate," RBC Capital Markets analyst Rich Moore said.

But the company still needs to raise more capital, cautioned Sandler O'Neill analyst Alexander Goldfarb, who rated the stock a "hold."