UPDATE 2-Kimco third-quarter FFO rises, cuts outlook

* Third-quarter FFO rises 20.7 percent

* Cuts full-year 2008 forecast

* Shares fall over 10 percent (Recasts, updates stock price, adds analyst quote, byline)

NEW YORK, Nov 5 (Reuters) - Kimco Realty Corp (KIM.N), owner of strip-malls anchored chiefly by grocery stores, said on Wednesday that quarterly funds from operations (FFO) rose 20.7 percent but slashed its full-year forecast, sending its stock down more than 10 percent.

Third-quarter FFO was $176.9 million, or 68 cents per share, meeting the average of analysts forecasts, according to Reuters Estimates.

For U.S. shopping centers open more than a year, net operating income, which measures performance on a property level, rose 2.6 percent in the third quarter.

In the year-earlier quarter the company reported FFO of $146.6 million, or 57 cents per share.

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

For 2008, Kimco slashed its 2008 FFO forecast to a range of $2.20 to $2.45 per share from a prior forecast of $2.70 to $2.78 a share, citing the tight credit markets and turmoil in the equity markets.

Analysts look for 2008 FFO of $2.69 per share.

"The leasing environment continues to get tougher," Bank of America analysts said in a research note. "The guidance reduction for the fourth quarter and lack of guidance for 2009 -- the company typically provides it with third-quarter results -- is an indication of just how low visibility is for Kimco today given the historically transactional nature of the company's earnings"

At the end of the quarter, Kimco had ownership stakes in 1,945 properties in the United States, Puerto Rico, Canada, Mexico, Chile, Brazil and Peru totaling 182 million square feet.

Kimco shares were down 10.4 percent at $20.88 on Wednesday on the New York Stock Exchange. (Reporting by Ilaina Jonas, editing by Maureen Bavdek)