UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period endedSeptember 30, 2017
March 31, 2020
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:1-10899
Kimco Realty Corporation
(Exact name of registrant as specified in its charter)
Maryland | 13-2744380 | |
(State or other jurisdiction of incorporation or organization) |
|
|
| (I.R.S. Employer Identification No.) |
3333 New Hyde Park Road, New Hyde Park,500 North Broadway, Suite 201, Jericho, NY 1104211753
(Address of principal executive offices) (Zip Code)
(516) 869-9000
(Registrant’sRegistrant’s telephone number, including area code)
N/A
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading | Name of each exchange on |
Symbol(s) | which registered | |
Common Stock, par value $.01 per share. | KIM | New York Stock Exchange |
Depositary Shares, each representing one-thousandth of a share of 5.125% Class L Cumulative Redeemable, Preferred Stock, $1.00 par value per share. | KIMprL | New York Stock Exchange |
Depositary Shares, each representing one-thousandth of a share of 5.250% Class M Cumulative Redeemable, Preferred Stock, $1.00 par value per share. | KIMprM | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12-b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | ||
Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-212b-2 of the Exchange Act). Yes ☐ No ☒
As of October 16, 2017,April 14, 2020, the registrant had 425,653,409432,525,409 shares of common stock outstanding.
PART I - FINANCIAL INFORMATION
Financial |
| ||||
|
| ||||
| |||||
|
| ||||
| |||||
| |||||
| |||||
| |||||
Notes to Condensed Consolidated Financial | |||||
Management's Discussion and Analysis of Financial Condition and Results of | |||||
Quantitative and Qualitative Disclosures About Market | |||||
Controls and | |||||
PART II - OTHER INFORMATION | |||||
Legal Proceedings. | |||||
Risk Factors. | |||||
Unregistered Sales of Equity Securities and Use of | |||||
Defaults Upon Senior | |||||
Mine Safety | |||||
Other Information. | |||||
Exhibits. | |||||
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share information)
September 30, | December 31, | |||||||||||||||
2017 | 2016 | March 31, 2020 | December 31, 2019 | |||||||||||||
Assets: | ||||||||||||||||
Operating real estate, net of accumulated depreciation of $2,458,806 and $2,278,292 respectively | $ | 9,771,654 | $ | 9,394,755 | ||||||||||||
Real estate, net of accumulated depreciation and amortization of $2,552,669 and $2,500,053, respectively | $ | 9,179,554 | $ | 9,209,053 | ||||||||||||
Real estate under development | 230,602 | 220,170 | ||||||||||||||
Investments in and advances to real estate joint ventures | 509,448 | 504,209 | 585,591 | 578,118 | ||||||||||||
Real estate under development | 361,264 | 335,028 | ||||||||||||||
Other real estate investments | 213,859 | 209,146 | 178,393 | 194,400 | ||||||||||||
Mortgages and other financing receivables | 22,538 | 23,197 | ||||||||||||||
Cash and cash equivalents | 156,588 | 142,486 | 451,796 | 123,947 | ||||||||||||
Marketable securities | 14,044 | 8,101 | ||||||||||||||
Accounts and notes receivable, net | 182,012 | 181,823 | 220,215 | 218,689 | ||||||||||||
Operating lease right-of-use assets, net | 97,790 | 99,125 | ||||||||||||||
Other assets | 470,834 | 431,855 | 361,193 | 354,365 | ||||||||||||
Total assets (1) | $ | 11,702,241 | $ | 11,230,600 | $ | 11,305,134 | $ | 10,997,867 | ||||||||
Liabilities: | ||||||||||||||||
Notes payable, net | $ | 4,700,423 | $ | 3,927,251 | $ | 5,303,656 | $ | 4,831,759 | ||||||||
Mortgages payable, net | 850,848 | 1,139,117 | ||||||||||||||
Mortgages and construction loan payable, net | 404,879 | 484,008 | ||||||||||||||
Dividends payable | 123,270 | 124,517 | 126,473 | 126,274 | ||||||||||||
Operating lease liabilities | 91,546 | 92,711 | ||||||||||||||
Other liabilities | 603,417 | 549,888 | 488,168 | 516,265 | ||||||||||||
Total liabilities (2) | 6,277,958 | 5,740,773 | 6,414,722 | 6,051,017 | ||||||||||||
Redeemable noncontrolling interests | 16,139 | 86,953 | 17,943 | 17,943 | ||||||||||||
Commitments and Contingencies | ||||||||||||||||
Stockholders' equity: | ||||||||||||||||
Preferred stock, $1.00 par value, authorized 6,017,400 and 6,029,100 shares, respectively, 32,000 shares issued and outstanding (in series) Aggregate liquidation preference $800,000 | 32 | 32 | ||||||||||||||
Common stock, $.01 par value, authorized 750,000,000 shares issued and outstanding 425,633,409 and 425,034,113 shares, respectively | 4,256 | 4,250 | ||||||||||||||
Preferred stock, $1.00 par value, authorized 7,054,000 shares; Issued and outstanding (in series) 19,580 shares; Aggregate liquidation preference $489,500 | 20 | 20 | ||||||||||||||
Common stock, $.01 par value, authorized 750,000,000 shares; Issued and outstanding 432,525,409 and 431,814,951 shares, respectively | 4,325 | 4,318 | ||||||||||||||
Paid-in capital | 5,926,392 | 5,922,958 | 5,747,277 | 5,765,233 | ||||||||||||
Cumulative distributions in excess of net income | (715,621 | ) | (676,867 | ) | (942,031 | ) | (904,679 | ) | ||||||||
Accumulated other comprehensive income | (1,727 | ) | 5,766 | |||||||||||||
Total stockholders' equity | 5,213,332 | 5,256,139 | 4,809,591 | 4,864,892 | ||||||||||||
Noncontrolling interests | 194,812 | 146,735 | 62,878 | 64,015 | ||||||||||||
Total equity | 5,408,144 | 5,402,874 | 4,872,469 | 4,928,907 | ||||||||||||
Total liabilities and equity | $ | 11,702,241 | $ | 11,230,600 | $ | 11,305,134 | $ | 10,997,867 |
(1) | Includes restricted assets of consolidated variable interest entities (“VIEs”) at |
(2) | Includes non-recourse liabilities of consolidated VIEs at |
The accompanying notes are an integral part of these condensed consolidated financial statements.
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSINCOME
(Unaudited)
(in thousands,thousands, except per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues | ||||||||||||||||
Revenues from rental properties | $ | 290,919 | $ | 279,286 | $ | 873,153 | $ | 859,492 | ||||||||
Management and other fee income | 3,926 | 5,790 | 12,456 | 14,274 | ||||||||||||
Total revenues | 294,845 | 285,076 | 885,609 | 873,766 | ||||||||||||
Operating expenses | ||||||||||||||||
Rent | 2,764 | 2,728 | 8,312 | 8,274 | ||||||||||||
Real estate taxes | 38,363 | 37,703 | 115,379 | 107,966 | ||||||||||||
Operating and maintenance | 33,197 | 32,590 | 102,862 | 100,366 | ||||||||||||
General and administrative | 28,588 | 27,983 | 86,395 | 89,840 | ||||||||||||
Provision for doubtful accounts | 701 | 1,092 | 4,201 | 5,752 | ||||||||||||
Impairment charges | 2,944 | 10,073 | 34,280 | 68,126 | ||||||||||||
Depreciation and amortization | 88,443 | 96,827 | 275,787 | 264,436 | ||||||||||||
Total operating expenses | 195,000 | 208,996 | 627,216 | 644,760 | ||||||||||||
Operating income | 99,845 | 76,080 | 258,393 | 229,006 | ||||||||||||
Other income/(expense) | ||||||||||||||||
Other income, net | 1,101 | 4,358 | 3,813 | 3,176 | ||||||||||||
Interest expense | (47,258 | ) | (46,552 | ) | (139,830 | ) | (149,482 | ) | ||||||||
Early extinguishment of debt charges | (1,753 | ) | (45,674 | ) | (1,753 | ) | (45,674 | ) | ||||||||
Income/(loss) from continuing operations before income taxes, net, equity in income of joint ventures, net, gain on change in control of interests and equity in income from other real estate investments, net | 51,935 | (11,788 | ) | 120,623 | 37,026 | |||||||||||
Benefit/(provision) for income taxes, net | 697 | (61,426 | ) | 2,224 | (73,292 | ) | ||||||||||
Equity in income of joint ventures, net | 9,142 | 11,537 | 37,044 | 190,155 | ||||||||||||
Gain on change in control of interests | - | 6,584 | 71,160 | 53,096 | ||||||||||||
Equity in income of other real estate investments, net | 19,909 | 3,774 | 61,952 | 22,532 | ||||||||||||
Income/(loss) from continuing operations | 81,683 | (51,319 | ) | 293,003 | 229,517 | |||||||||||
Gain on sale of operating properties, net of tax | 40,533 | 9,771 | 62,102 | 75,935 | ||||||||||||
Net income/(loss) | 122,216 | (41,548 | ) | 355,105 | 305,452 | |||||||||||
Net income attributable to noncontrolling interests | (1,186 | ) | (1,997 | ) | (13,926 | ) | (4,875 | ) | ||||||||
Net income/(loss) attributable to the Company | 121,030 | (43,545 | ) | 341,179 | 300,577 | |||||||||||
Preferred stock redemption charge | (7,014 | ) | - | (7,014 | ) | - | ||||||||||
Preferred stock dividends | (12,059 | ) | (11,555 | ) | (35,169 | ) | (34,665 | ) | ||||||||
Net income/(loss) available to the Company's common shareholders | $ | 101,957 | $ | (55,100 | ) | $ | 298,996 | $ | 265,912 | |||||||
Per common share: | ||||||||||||||||
Net income/(loss) available to the Company: | ||||||||||||||||
-Basic | $ | 0.24 | $ | (0.13 | ) | $ | 0.70 | $ | 0.63 | |||||||
-Diluted | $ | 0.24 | $ | (0.13 | ) | $ | 0.70 | $ | 0.63 | |||||||
Weighted average shares: | ||||||||||||||||
-Basic | 423,688 | 420,073 | 423,574 | 416,829 | ||||||||||||
-Diluted | 424,311 | 420,073 | 424,193 | 418,234 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Revenues | ||||||||
Revenues from rental properties, net | $ | 286,004 | $ | 290,634 | ||||
Management and other fee income | 3,740 | 4,376 | ||||||
Total revenues | 289,744 | 295,010 | ||||||
Operating expenses | ||||||||
Rent | (2,835 | ) | (2,692 | ) | ||||
Real estate taxes | (39,652 | ) | (39,347 | ) | ||||
Operating and maintenance | (42,408 | ) | (40,896 | ) | ||||
General and administrative | (21,017 | ) | (25,831 | ) | ||||
Impairment charges | (2,974 | ) | (4,175 | ) | ||||
Depreciation and amortization | (69,397 | ) | (71,561 | ) | ||||
Total operating expenses | (178,283 | ) | (184,502 | ) | ||||
Gain on sale of properties | 3,847 | 23,595 | ||||||
Operating income | 115,308 | 134,103 | ||||||
Other income/(expense) | ||||||||
Other (expense)/income, net | (3,422 | ) | 2,622 | |||||
Interest expense | (46,060 | ) | (44,395 | ) | ||||
Income before income taxes, net, equity in income of joint ventures, net, and equity in income from other real estate investments, net | 65,826 | 92,330 | ||||||
Provision for income taxes, net | (43 | ) | (630 | ) | ||||
Equity in income of joint ventures, net | 13,648 | 18,754 | ||||||
Equity in income of other real estate investments, net | 10,958 | 6,224 | ||||||
Net income | 90,389 | 116,678 | ||||||
Net income attributable to noncontrolling interests | (289 | ) | (509 | ) | ||||
Net income attributable to the Company | 90,100 | 116,169 | ||||||
Preferred dividends | (6,354 | ) | (14,534 | ) | ||||
Net income available to the Company's common shareholders | $ | 83,746 | $ | 101,635 | ||||
Per common share: | ||||||||
Net income available to the Company: | ||||||||
-Basic | $ | 0.19 | $ | 0.24 | ||||
-Diluted | $ | 0.19 | $ | 0.24 | ||||
Weighted average shares: | ||||||||
-Basic | 429,735 | 419,464 | ||||||
-Diluted | 430,505 | 420,763 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECHANGES IN EQUITY
For the Three Months Ended March 31, 2020 and 2019
(Unaudited)
(in thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income/(loss) | $ | 122,216 | $ | (41,548 | ) | $ | 355,105 | $ | 305,452 | |||||||
Other comprehensive income: | ||||||||||||||||
Change in unrealized loss/gain on marketable securities | 153 | 51 | (1,466 | ) | 18 | |||||||||||
Change in unrealized loss on interest rate swaps | 103 | 327 | 308 | (432 | ) | |||||||||||
Change in foreign currency translation adjustment | (8,056 | ) | (1,383 | ) | (6,335 | ) | 971 | |||||||||
Other comprehensive (loss)/income: | (7,800 | ) | (1,005 | ) | (7,493 | ) | 557 | |||||||||
Comprehensive income/(loss) | 114,416 | (42,553 | ) | 347,612 | 306,009 | |||||||||||
Comprehensive income attributable to noncontrolling interests | (1,186 | ) | (1,997 | ) | (13,926 | ) | (4,875 | ) | ||||||||
Comprehensive income/(loss) attributable to the Company | $ | 113,230 | $ | (44,550 | ) | $ | 333,686 | $ | 301,134 |
Cumulative | Total | |||||||||||||||||||||||||||||||||||
Distributions in | Preferred Stock | Common Stock | Paid-in | Stockholders' | Noncontrolling | Total | ||||||||||||||||||||||||||||||
Excess of Net Income | Issued | Amount | Issued | Amount | Capital | Equity | Interests | Equity | ||||||||||||||||||||||||||||
Balance at January 1, 2019 | $ | (787,707 | ) | 43 | $ | 43 | 421,389 | $ | 4,214 | $ | 6,117,254 | $ | 5,333,804 | $ | 77,249 | $ | 5,411,053 | |||||||||||||||||||
Net income | 116,169 | - | - | - | - | - | 116,169 | 509 | 116,678 | |||||||||||||||||||||||||||
Redeemable noncontrolling interests income | - | - | - | - | - | - | - | (92 | ) | (92 | ) | |||||||||||||||||||||||||
Dividends declared to common and preferred shares | (132,703 | ) | - | - | - | - | - | (132,703 | ) | - | (132,703 | ) | ||||||||||||||||||||||||
Distributions to noncontrolling interests | - | - | - | - | - | - | - | (685 | ) | (685 | ) | |||||||||||||||||||||||||
Issuance of common stock | - | - | - | 783 | 8 | (8 | ) | - | - | - | ||||||||||||||||||||||||||
Surrender of restricted stock | - | - | - | (187 | ) | (2 | ) | (3,250 | ) | (3,252 | ) | - | (3,252 | ) | ||||||||||||||||||||||
Exercise of common stock options | - | - | - | 52 | - | 681 | 681 | - | 681 | |||||||||||||||||||||||||||
Amortization of equity awards | - | - | - | - | - | 5,178 | 5,178 | - | 5,178 | |||||||||||||||||||||||||||
Balance at March 31, 2019 | $ | (804,241 | ) | 43 | $ | 43 | 422,037 | $ | 4,220 | $ | 6,119,855 | $ | 5,319,877 | $ | 76,981 | $ | 5,396,858 | |||||||||||||||||||
Balance at January 1, 2020 | $ | (904,679 | ) | 20 | $ | 20 | 431,815 | $ | 4,318 | $ | 5,765,233 | $ | 4,864,892 | $ | 64,015 | $ | 4,928,907 | |||||||||||||||||||
Net income | 90,100 | - | - | - | - | - | 90,100 | 289 | 90,389 | |||||||||||||||||||||||||||
Redeemable noncontrolling interests income | - | - | - | - | - | - | - | (262 | ) | (262 | ) | |||||||||||||||||||||||||
Dividends declared to common and preferred shares | (127,452 | ) | - | - | - | - | - | (127,452 | ) | - | (127,452 | ) | ||||||||||||||||||||||||
Distributions to noncontrolling interests | - | - | - | - | - | - | - | (555 | ) | (555 | ) | |||||||||||||||||||||||||
Issuance of common stock | - | - | - | 921 | 9 | (9 | ) | - | - | - | ||||||||||||||||||||||||||
Surrender of restricted common stock | - | - | - | (274 | ) | (3 | ) | (5,156 | ) | (5,159 | ) | - | (5,159 | ) | ||||||||||||||||||||||
Exercise of common stock options | - | - | - | 63 | 1 | 980 | 981 | - | 981 | |||||||||||||||||||||||||||
Amortization of equity awards | - | - | - | - | - | 5,729 | 5,729 | - | 5,729 | |||||||||||||||||||||||||||
Acquisition of noncontrolling interests | - | - | - | - | - | (19,500 | ) | (19,500 | ) | (609 | ) | (20,109 | ) | |||||||||||||||||||||||
Balance at March 31, 2020 | $ | (942,031 | ) | 20 | $ | 20 | 432,525 | $ | 4,325 | $ | 5,747,277 | $ | 4,809,591 | $ | 62,878 | $ | 4,872,469 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
`
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2017 and 2016CASH FLOWS
(Unaudited)
(in thousands)
Cumulative | Accumulated | |||||||||||||||||||||||||||||||||||||||
Distributions | Other | Total | ||||||||||||||||||||||||||||||||||||||
in Excess | Comprehensive | Preferred Stock | Common Stock | Paid-in | Stockholders' | Noncontrolling | Total | |||||||||||||||||||||||||||||||||
of Net Income | Income | Issued | Amount | Issued | Amount | Capital | Equity | Interests | Equity | |||||||||||||||||||||||||||||||
Balance, January 1, 2016 | $ | (572,335 | ) | $ | 5,588 | 32 | $ | 32 | 413,431 | $ | 4,134 | $ | 5,608,881 | $ | 5,046,300 | $ | 135,651 | $ | 5,181,951 | |||||||||||||||||||||
Contributions/deemed contributions from noncontrolling interests | - | - | - | - | - | - | - | - | 507 | 507 | ||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||
Net income | 300,577 | - | - | - | - | - | - | 300,577 | 4,875 | 305,452 | ||||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||||||||||
Change in unrealized gain on marketable securities | - | 18 | - | - | - | - | - | 18 | - | 18 | ||||||||||||||||||||||||||||||
Change in unrealized loss on interest rate swaps | - | (432 | ) | - | - | - | - | - | (432 | ) | - | (432 | ) | |||||||||||||||||||||||||||
Change in foreign currency translation adjustment, net | - | 971 | - | - | - | - | �� | - | 971 | - | 971 | |||||||||||||||||||||||||||||
- | - | |||||||||||||||||||||||||||||||||||||||
Redeemable noncontrolling interests income | - | - | - | - | - | - | - | - | (3,240 | ) | (3,240 | ) | ||||||||||||||||||||||||||||
Dividends ($0.765 per common share; $1.1250 per | ||||||||||||||||||||||||||||||||||||||||
Class I Depositary Share, and $1.0313 per | ||||||||||||||||||||||||||||||||||||||||
Class J Depositary Share, and $1.0547 per | ||||||||||||||||||||||||||||||||||||||||
Class K Depositary Share, respectively) | (357,068 | ) | - | - | - | - | - | - | (357,068 | ) | - | (357,068 | ) | |||||||||||||||||||||||||||
Distributions to noncontrolling interests | - | - | - | - | - | - | - | - | (7,288 | ) | (7,288 | ) | ||||||||||||||||||||||||||||
Issuance of common stock, net | - | - | - | - | 10,701 | 107 | 285,757 | 285,864 | - | 285,864 | ||||||||||||||||||||||||||||||
Surrender of restricted stock | - | - | - | - | (270 | ) | (3 | ) | (6,901 | ) | (6,904 | ) | - | (6,904 | ) | |||||||||||||||||||||||||
Exercise of common stock options | - | - | - | - | 1,151 | 12 | 20,732 | 20,744 | - | 20,744 | ||||||||||||||||||||||||||||||
Amortization of equity awards | - | - | - | - | - | - | 11,387 | 11,387 | - | 11,387 | ||||||||||||||||||||||||||||||
Balance, September 30, 2016 | $ | (628,826 | ) | $ | 6,145 | 32 | $ | 32 | 425,013 | $ | 4,250 | $ | 5,919,856 | $ | 5,301,457 | $ | 130,505 | $ | 5,431,962 | |||||||||||||||||||||
Balance, January 1, 2017 | $ | (676,867 | ) | $ | 5,766 | 32 | $ | 32 | 425,034 | $ | 4,250 | $ | 5,922,958 | $ | 5,256,139 | $ | 146,735 | $ | 5,402,874 | |||||||||||||||||||||
Contributions/deemed contributions from noncontrolling interests | - | - | - | - | - | - | - | - | 48,867 | 48,867 | ||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||
Net income | 341,179 | - | - | - | - | - | - | 341,179 | 13,926 | 355,105 | ||||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||||||||||
Change in unrealized loss on marketable securities | - | (1,466 | ) | - | - | - | - | - | (1,466 | ) | - | (1,466 | ) | |||||||||||||||||||||||||||
Change in unrealized loss on interest rate swaps | - | 308 | - | - | - | - | - | 308 | - | 308 | ||||||||||||||||||||||||||||||
Change in foreign currency translation adjustment | - | (6,335 | ) | - | - | - | - | - | (6,335 | ) | - | (6,335 | ) | |||||||||||||||||||||||||||
Redeemable noncontrolling interests income | - | - | - | - | - | - | - | - | (1,203 | ) | (1,203 | ) | ||||||||||||||||||||||||||||
Dividends ($0.81 per common share; $1.1250 per Class I Depositary Share, and $0.9625 per Class I Depositary Share Redeemed, and $1.0313 per Class J Depositary Share, and $1.0547 per Class K Depositary Share, and $0.1602 per Class L Depositary Share, respectively) | (379,933 | ) | - | - | - | - | - | - | (379,933 | ) | - | (379,933 | ) | |||||||||||||||||||||||||||
Distributions to noncontrolling interests | - | - | - | - | - | - | - | - | (13,513 | ) | (13,513 | ) | ||||||||||||||||||||||||||||
Issuance of common stock | - | - | - | - | 776 | 8 | (8 | ) | - | - | - | |||||||||||||||||||||||||||||
Issuance of preferred stock | 9 | 9 | 217,566 | 217,575 | 217,575 | |||||||||||||||||||||||||||||||||||
Surrender of restricted stock | - | - | - | - | (239 | ) | (2 | ) | (5,597 | ) | (5,599 | ) | - | (5,599 | ) | |||||||||||||||||||||||||
Exercise of common stock options | - | - | - | - | 62 | - | 1,174 | 1,174 | - | 1,174 | ||||||||||||||||||||||||||||||
Amortization of equity awards | - | - | - | - | - | - | 15,290 | 15,290 | - | 15,290 | ||||||||||||||||||||||||||||||
Redemption of preferred stock | - | - | (9 | ) | (9 | ) | - | - | (224,991 | ) | (225,000 | ) | - | (225,000 | ) | |||||||||||||||||||||||||
Balance, September 30, 2017 | $ | (715,621 | ) | $ | (1,727 | ) | 32 | $ | 32 | 425,633 | $ | 4,256 | $ | 5,926,392 | $ | 5,213,332 | $ | 194,812 | $ | 5,408,144 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cash flow from operating activities: | ||||||||
Net income | $ | 90,389 | $ | 116,678 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 69,397 | 71,561 | ||||||
Impairment charges | 2,974 | 4,175 | ||||||
Equity award expense | 5,905 | 5,477 | ||||||
Gain on sale of properties | (3,847 | ) | (23,595 | ) | ||||
Equity in income of joint ventures, net | (13,648 | ) | (18,754 | ) | ||||
Equity in income of other real estate investments, net | (10,958 | ) | (6,224 | ) | ||||
Distributions from joint ventures and other real estate investments | 35,894 | 28,524 | ||||||
Change in accounts and notes receivable | (1,526 | ) | 878 | |||||
Change in accounts payable and accrued expenses | 5,456 | 2,837 | ||||||
Change in other operating assets and liabilities | (24,787 | ) | (26,299 | ) | ||||
Net cash flow provided by operating activities | 155,249 | 155,258 | ||||||
Cash flow from investing activities: | ||||||||
Acquisition of operating real estate | (7,073 | ) | - | |||||
Improvements to operating real estate | (54,973 | ) | (51,345 | ) | ||||
Improvements to real estate under development | (16,578 | ) | (26,286 | ) | ||||
Investments in marketable securities | - | (157 | ) | |||||
Proceeds from sale of marketable securities | 163 | 39 | ||||||
Investments in and advances to real estate joint ventures | (5,282 | ) | (5,638 | ) | ||||
Reimbursements of investments in and advances to real estate joint ventures | 1,914 | 1,435 | ||||||
Investments in and advances to other real estate investments | (478 | ) | (6,771 | ) | ||||
Investment in other financing receivable | - | (48 | ) | |||||
Collection of mortgage loans receivable | 40 | 160 | ||||||
Proceeds from sale of operating properties | 13,264 | 72,069 | ||||||
Proceeds from insurance casualty claims | 2,450 | 1,000 | ||||||
Net cash flow used for investing activities | (66,553 | ) | (15,542 | ) | ||||
Cash flow from financing activities: | ||||||||
Principal payments on debt, excluding normal amortization of rental property debt | (75,681 | ) | (3,224 | ) | ||||
Principal payments on rental property debt | (2,742 | ) | (3,137 | ) | ||||
Proceeds from construction loan financing | - | 3,300 | ||||||
Proceeds under the unsecured revolving credit facility, net | 475,000 | - | ||||||
Financing origination costs | (5,145 | ) | (3 | ) | ||||
Payment of early extinguishment of debt charges | - | (771 | ) | |||||
Redemption/distribution of noncontrolling interests | (20,926 | ) | (773 | ) | ||||
Dividends paid | (127,255 | ) | (132,521 | ) | ||||
Proceeds from issuance of stock, net | 981 | 681 | ||||||
Change in other financing liabilities | (5,079 | ) | (3,176 | ) | ||||
Net cash flow provided by/(used for) financing activities | 239,153 | (139,624 | ) | |||||
Net change in cash and cash equivalents | 327,849 | 92 | ||||||
Cash and cash equivalents, beginning of the period | 123,947 | 143,581 | ||||||
Cash and cash equivalents, end of the period | $ | 451,796 | $ | 143,673 | ||||
Interest paid during the period including payment of early extinguishment of debt charges of $0 and $771, respectively (net of capitalized interest of $4,364 and $3,137 respectively) | $ | 25,383 | $ | 27,026 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Cash flow from operating activities: | ||||||||
Net income | $ | 355,105 | $ | 305,452 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 275,787 | 264,436 | ||||||
Impairment charges | 34,280 | 68,126 | ||||||
Deferred taxes | (238 | ) | 56,143 | |||||
Early extinguishment of debt charges | 1,753 | 45,674 | ||||||
Equity award expense | 17,836 | 15,292 | ||||||
Gain on sale of operating properties | (62,102 | ) | (81,873 | ) | ||||
Gain on change in control of interests | (71,160 | ) | (53,096 | ) | ||||
Equity in income of joint ventures, net | (37,044 | ) | (190,155 | ) | ||||
Equity in income from other real estate investments, net | (61,952 | ) | (22,532 | ) | ||||
Distributions from joint ventures and other real estate investments | 41,071 | 70,043 | ||||||
Change in accounts and notes receivable | (189 | ) | 3,779 | |||||
Change in accounts payable and accrued expenses | 37,884 | 23,931 | ||||||
Change in Canadian withholding tax receivable | 4,138 | (5,257 | ) | |||||
Change in other operating assets and liabilities | (41,353 | ) | (55,437 | ) | ||||
Net cash flow provided by operating activities | 493,816 | 444,526 | ||||||
Cash flow from investing activities: | ||||||||
Acquisition of operating real estate and other related net assets | (110,802 | ) | (181,548 | ) | ||||
Improvements to operating real estate | (136,534 | ) | (102,084 | ) | ||||
Acquisition of real estate under development | (10,010 | ) | (51,588 | ) | ||||
Improvements to real estate under development | (121,764 | ) | (42,042 | ) | ||||
Investment in marketable securities | (9,822 | ) | (2,466 | ) | ||||
Proceeds from sale of marketable securities | 2,442 | 1,907 | ||||||
Investments in and advances to real estate joint ventures | (26,788 | ) | (50,058 | ) | ||||
Reimbursements of investments in and advances to real estate joint ventures | 17,529 | 70,669 | ||||||
Distributions from liquidation of real estate joint ventures | - | 135,648 | ||||||
Return of investment from liquidation of real estate joint ventures | - | 190,102 | ||||||
Investment in other real estate investments | (666 | ) | (233 | ) | ||||
Reimbursements of investments and advances to other real estate investments | 40,514 | 11,489 | ||||||
Collection of mortgage loans receivable | 760 | 688 | ||||||
Reimbursements of other investments | - | 500 | ||||||
Proceeds from sale of operating properties | 76,869 | 262,708 | ||||||
Proceeds from sale of development properties | - | 4,551 | ||||||
Net cash flow (used for)/provided by investing activities | (278,272 | ) | 248,243 | |||||
Cash flow from financing activities: | ||||||||
Principal payments on debt, excluding normal amortization of rental property debt | (678,939 | ) | (602,079 | ) | ||||
Principal payments on rental property debt | (11,508 | ) | (15,316 | ) | ||||
Proceeds from mortgage loan financings | 206,000 | - | ||||||
(Repayments)/proceeds from unsecured revolving credit facility, net | (42 | ) | 226,447 | |||||
Proceeds from issuance of unsecured notes | 1,250,000 | 650,000 | ||||||
Repayments under unsecured term loan/notes | (460,988 | ) | (861,850 | ) | ||||
Financing origination costs | (22,975 | ) | (14,033 | ) | ||||
Payment of early extinguishment of debt charges | (2,461 | ) | (45,674 | ) | ||||
Change in tenants' security deposits | 891 | 1,240 | ||||||
Contributions from noncontrolling interests | 1,422 | - | ||||||
Conversion/distribution of noncontrolling interests | (95,410 | ) | (3,190 | ) | ||||
Dividends paid | (381,182 | ) | (354,112 | ) | ||||
Proceeds from issuance of stock, net | 218,750 | 306,809 | ||||||
Redemption of preferred stock | (225,000 | ) | - | |||||
Net cash flow used for financing activities | (201,442 | ) | (711,758 | ) | ||||
Change in cash and cash equivalents | 14,102 | (18,989 | ) | |||||
Cash and cash equivalents, beginning of period | 142,486 | 189,534 | ||||||
Cash and cash equivalents, end of period | $ | 156,588 | $ | 170,545 | ||||
Interest paid during the period (net of capitalized interest of $10,671 and $3,762, respectively) | $ | 118,736 | $ | 194,234 | ||||
Income taxes paid during the period (net of refunds received of $8,323 and $86,100, respectively) | $ | (6,694 | ) | $ | 34,296 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.Interim Financial StatementsBusiness and Organization
Business -
Kimco Realty Corporation, a Maryland corporation, is one of North America’s largest publicly traded owners and operators of open-air shopping centers and mixed-use properties. The terms “Kimco,” the “Company,” “we,” “our” and “us” each refer to Kimco Realty Corporation and our subsidiaries, (the "Company"),unless the context indicates otherwise. The Company, its affiliates and related real estate joint ventures are engaged principally in the ownership, management, development and operation of open-air shopping centers, which are anchored generally by discount department stores, grocery stores, off-price retailers, home improvement centers, discounters and/or drugstores.service-oriented tenants. Additionally, the Company provides complementary services that capitalize on the Company’sCompany’s established retail real estate expertise.
The Company elected status as a Real Estate Investment Trust (a “REIT”) for federal income tax purposes beginning in its taxable year ended December 31, 1991 and operates in a manner that enables the Company to maintain its status as a REIT. As a REIT, with respect to each taxable year, the Company must distribute at least 90 percent of its taxable income (excluding capital gain) and does not pay federal income taxes on the amount distributed to its shareholders. The Company is not generally subject to federal income taxes if it distributes 100 percent of its taxable income. Most states where the Company holds investments in real estate, conform to the federal rules recognizing REITs. Certain subsidiaries have made a joint election with the Company to be treated as taxable REIT subsidiaries (“TRSs”), which permit the Company to engage in certain business activities which the REIT may not conduct directly. A TRS is subject to federal and state income taxes on its income, and the Company includes, when applicable, a provision for taxes in its condensed consolidated financial statements. The Company is subject to and also includes in its tax provision non-U.S. income taxes on certain investments located in jurisdictions outside the U.S. These investments are held by the Company at the REIT level and not in the Company’s taxable REIT subsidiaries. Accordingly, the Company does not expect a U.S. income tax impact associated with the repatriation of undistributed earnings from the Company’s foreign subsidiaries.
The Company’s response to the COVID-19 pandemic -
In March 2020, coronavirus disease 2019 (“COVID-19”) was recognized as a pandemic by the World Health Organization (WHO). Shortly thereafter, the President of the United States declared a national emergency throughout the United States. The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies, and financial markets worldwide, and has caused significant volatility in U.S. and international debt and equity markets. The impact of COVID-19 on the retail industry for both landlords and tenants has been wide ranging, including, but not limited to, the temporary closures of many businesses, "shelter in place" orders, social distancing guidelines and other governmental, business and individual actions taken in response to the COVID-19 pandemic. There has also been reduced consumer spending due to job losses, government restrictions in response to COVID-19 and other effects attributable to COVID-19.
The COVID-19 pandemic, while still unfolding, has significantly impacted each of the Company’s stakeholders. The Company is aware of the critical role its shopping centers play in the communities they serve, often providing access to essential goods and services such as groceries, drug stores, and medical care. With very few exceptions, the Company’s shopping centers generally remain open to continue to provide access to these essential goods and services, and the Company has taken steps to protect the shoppers and tenants at its sites, following the guidance of the Centers for Disease Control and Prevention (CDC) and the WHO.
On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, a substantial tax and spending package intended to provide additional economic stimulus to address the impact of the COVID-19 pandemic. The Company continues to monitor the impact of the COVID-19 pandemic closely, as well as any effects that may result from the CARES Act.
As of March 31, 2020, the Company has not incurred any significant disruptions to its business activities. Management cannot, at this point, estimate ultimate losses related to the COVID-19 pandemic, and accordingly no impairment charges were reflected in the Company’s Condensed Consolidated Statements of Income related to this matter. The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will assess its asset portfolio for any impairment indicators. In addition, the extent to which the COVID-19 pandemic impacts the Company’s financial condition, results of operations and cash flows, in the near term, will depend on future developments, which are highly uncertain and cannot be predicted at this time. The Company will continue to monitor for any material or adverse effects resulting from the COVID-19 pandemic. See Footnote 16 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional discussion.
The health and safety of the Company’s employees and their families is a top priority. The Company has taken the necessary steps to protect its employees and to empower them to work from home and care for their family members and children whose lives have also been impacted.
● | Beginning March 11, 2020, the Company transitioned nearly 100% of its workforce to work from home, ensuring they are safely situated during this critical social distancing period. |
● | All business travel has been stopped until further notice. |
● | The Company has benefited from recent investments in new technology and software over the last year, as its entire team is equipped with new laptops and cellular capability to enable them to work remotely. |
● | Daily webinar training is being provided to ensure associates are fully supported to work from home. The Company’s human resources and information technology teams are available to all employees to address any needs or concerns they may have. |
● | Associates will be provided paid time off to care for themselves or family members diagnosed with COVID-19. |
● | The Company has ramped up communications at all levels and has initiated Company-wide virtual meetings such that executives are accessible, able to keep associates informed, and able to answer questions. |
The Company will continue to evaluate individual situations as they arise and adjust its approach as appropriate, with the goal to enable its employees to be as productive as possible while offering them the flexibility they need to care for themselves and their families.
2.Summary of Significant Accounting Policies
Principles of Consolidation -
The accompanying Condensed Consolidated Financial Statements include the accounts of the Company. The Company’sCompany’s subsidiaries include subsidiaries which are wholly-owned and all entities inor which the Company has a controlling financial interest, including where the Company has been determined to be a primary beneficiary of a variable interest entity (“VIE”) in accordance with the Consolidation guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). All inter-company balances and transactions have been eliminated in consolidation. The information presented in the accompanying Condensed Consolidated Financial Statements is unaudited and reflects all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature. These Condensed Consolidated Financial Statements should be read in conjunction with the Company's audited Annual Report on Form 10-K10-K for the year ended December 31, 2016 (the “10-K”2019 (the “10-K”), as certain disclosures in this Quarterly Report on Form 10-Q10-Q for the quarterly period ended September 30, 2017, March 31, 2020, that would duplicate those included in the 10-K10-K are not included in these Condensed Consolidated Financial Statements.
Subsequent Events -
The Company has evaluated subsequent events and transactions for potential recognition or disclosure in the its condensed consolidated financial statements (see Footnote 9)(See Footnotes 8 and 16 to the Notes to the Company’s Condensed Consolidated Financial Statements).
New Accounting Pronouncements –
In April 2020, the FASB staff developed a question-and-answer document, Topic 842 and Topic 840: Accounting for Lease Concessions related to the Effects of the COVID-19 Pandemic, which focuses on the application of the lease guidance in Topic 842, Leases, and Topic 840, Leases (if Topic 842 has not yet been adopted) for lease concessions related to the effects of the COVID-19 pandemic. The FASB staff has been made aware that, given the unprecedented and global nature of the COVID-19 pandemic, it may be exceedingly challenging for entities to determine whether existing contracts provide enforceable rights and obligations for lease concessions and, if so, whether those concessions are consistent with the terms of the contract or are modifications to a contract. As such, an entity can elect not to evaluate whether certain relief provided by a lessor in response to the COVID-19 pandemic is a lease modification. An entity that makes this election can then elect to apply the modification guidance to that relief or account for the concession as if it were contemplated as part of the existing contract. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.
Some concessions will provide a deferral of payments with no substantive changes to the consideration in the original contract. A deferral affects the timing of cash receipts, but the amount of the consideration is substantially the same as that required by the original contract. The FASB staff expects that there will be multiple ways to account for those deferrals, none of which the FASB staff believes are preferable to the others. Two of those methods are:
(i) | Account for the concessions as if no changes to the lease contract were made. Under that accounting, a lessor would increase its lease receivable, and a lessee would increase its accounts payable as receivables/payments accrue. In its income statement, a lessor would continue to recognize income, and a lessee would continue to recognize expense during the deferral period. |
(ii) | Account for the deferred payments as variable lease payments. |
As of March 31, 2020, the Company did not provide and/or enter into lease concessions related to the COVID-19 pandemic as a lessor or lessee related to rental income/expense recognized during the three months ended March 31, 2020. The Company is currently assessing and continuing to evaluate the impact of this lease guidance for any lease concessions related to the effects of the COVID-19 pandemic on the Company’s financial position and/or results of operations subsequent to March 31, 2020.
The following table sets forth the reconciliation of earnings and the weighted average number of shares used in the calculation of basic and diluted earnings per share (amounts presented in thousands except per share data):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Computation of Basic and Diluted Earnings/(Loss) Per Share: | ||||||||||||||||
Net income/(loss) available to the Company's common shareholders | 101,957 | (55,100 | ) | 298,996 | 265,912 | |||||||||||
Earnings attributable to participating securities | (526 | ) | (502 | ) | (1,596 | ) | (1,493 | ) | ||||||||
Net income/(loss) available to the Company’s common shareholders for basic earnings/(loss) per share | 101,431 | (55,602 | ) | 297,400 | 264,419 | |||||||||||
Distributions on convertible units | 24 | - | 43 | - | ||||||||||||
Net income/(loss) available to the Company’s common shareholders for diluted earnings/(loss) per share | 101,455 | (55,602 | ) | 297,443 | 264,419 | |||||||||||
Weighted average common shares outstanding – basic | 423,688 | 420,073 | 423,574 | 416,829 | ||||||||||||
Effect of dilutive securities (a): | ||||||||||||||||
Equity awards | 513 | - | 556 | 1,405 | ||||||||||||
Assumed conversion of convertible units | 110 | - | 63 | - | ||||||||||||
Weighted average common shares outstanding – diluted | 424,311 | 420,073 | 424,193 | 418,234 | ||||||||||||
Net income/(loss) available to the Company's common shareholders: | ||||||||||||||||
Basic earnings/(loss) per share | 0.24 | (0.13 | ) | 0.70 | 0.63 | |||||||||||
Diluted earnings/(loss) per share | 0.24 | (0.13 | ) | 0.70 | 0.63 |
|
|
The Company's unvested restricted share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the unvested restricted share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted share awards based on dividends declared and the unvested restricted shares' participation rights in undistributed earnings.
New Accounting Pronouncements –
The following table represents Accounting Standard Updates (“ASU”)ASUs to the FASB’s Accounting Standards Codification (“ASC”)ASC that, as of March 31, 2020, are not yet effective for the Company and for which the Company has not elected early adoption, where permitted:
ASU | Description | Effective Date | Effect on the financial statements or other significant matters | ||||||||
ASU | The method. | January 1, | The adoption of this ASU is not expected to have a material |
The following ASUs to the FASB’s ASC have been adopted by the Company as of the date listed:
ASU | Description | Adoption Date | Effect on the financial statements or other significant matters | ||||||||
ASU | This ASU improves and | The amendment | The Company adopted issues 1-7 of this ASU, the adoption did not have a material impact on the Company’s financial | ||||||||
ASU 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting | This ASU is | This guidance is | The adoption of this ASU did not have a material impact on the Company’s financial position and/or results of operations. | ||||||||
ASU 2018-17, Consolidation (Topic 810) – Targeted Improvements to Related Party Guidance for Variable Interest Entities | The amendment to Topic 810 clarifies the following areas: (i) Applying the variable interest entity (VIE) guidance to private companies under common control, and (ii) Considering indirect interests held through related parties under common control, for determining whether fees paid to decision makers and service providers are variable interests. This update improves the accounting for those areas, thereby improving general purpose financial reporting. Retrospective adoption is required. | January 1, 2020; Early adoption permitted | The adoption of this ASU did not have a material impact on the Company’s financial position and/or results of operations | ||||||||
ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in | The amendment aligns the requirements for capitalizing implementation costs incurred in | January 1, | The |
ASU | The amendment modifies the disclosure requirements for fair value measurements in Topic 820, based on the concepts in the FASB Concepts Statement, Conceptual Framework for Financial Reporting – Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. | January 1, 2020; Early adoption permitted | The adoption of this ASU did not have a material impact on the Company’s financial position and/or results of operations. | ||||||||
ASU 2016-13, Financial Instruments – Credit Losses (Topic ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses ASU 2019-05, Financial Instruments – Credit Losses (Topic 326), Targeted Transition Relief ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses | The new guidance introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments. ASU |
|
| ||||||||
|
In
|
In May 2019, the FASB issued ASU 2019-05, which amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption |
In November 2019, the FASB issued ASU 2019-11, which clarifies treatment of | January 1, 2020; Early adoption permitted | The Company
| ||||||
|
|
|
|
The following ASU’s to the FASB’s ASC have been adopted by the Company:
|
|
|
|
|
|
|
|
|
|
|
|
2. Operating Property Activities3.Real Estate
Acquisitions of Operating Real EstateProperties -
During the ninethree months ended September 30, 2017, March 31, 2020, the Company acquired the following operating properties, in separate transactions,property, through a direct asset purchases or consolidation due to change in control resulting from the purchase of additional interests or obtaining control through the modification of a joint venture investment:(in thousands):
Purchase Price (in thousands) | ||||||||||||||||||||||
Property Name | Location | Month Acquired/ Consolidated | Cash* | Debt | Other Consideration** | Total | GLA*** | |||||||||||||||
Plantation Commons | Plantation, FL (1)(3) | Jan-17 | $ | - | $ | - | $ | 12,300 | $ | 12,300 | 60 | |||||||||||
Gordon Plaza | Woodbridge, VA (1)(3) | Jan-17 | - | - | 3,100 | 3,100 | 184 | |||||||||||||||
Plaza del Prado | Glenview, IL | Jan-17 | 39,063 | - | - | 39,063 | 142 | |||||||||||||||
Columbia Crossing Parcel | Columbia Crossing, MD | Jan-17 | 5,100 | - | - | 5,100 | 25 | |||||||||||||||
The District at Tustin Legacy | Tustin, CA (2)(3) | Apr-17 | - | 206,000 | 98,698 | 304,698 | 688 | |||||||||||||||
Jantzen Beach Center | Portland, OR | Jul-17 | 131,927 | - | - | 131,927 | 722 | |||||||||||||||
Del Monte Plaza Parcel | Reno, NV | Jul-17 | 24,152 | - | - | 24,152 | 83 | |||||||||||||||
Gateway Station Phase II | Burleson, TX | Aug-17 | 15,355 | - | - | 15,355 | 79 | |||||||||||||||
Jantzen Beach Center Parcel | Portland, OR | Sep-17 | 6,279 | - | - | 6,279 | 25 | |||||||||||||||
Webster Square Outparcel | Nashua, NH | Sep-17 | 4,985 | - | - | 4,985 | 22 | |||||||||||||||
$ | 226,861 | $ | 206,000 | $ | 114,098 | $ | 546,959 | 2,030 |
Purchase Price | ||||||||||
Property Name | Location | Month Acquired | Cash | GLA* | ||||||
North Valley Parcel | Peoria, AZ | Feb-20 | $ | 7,073 | 9 |
* The Company utilized an aggregate $115.9 million associated with Internal Revenue Code §1031 sales proceeds.
** Includes the Company’s previously held equity interest investment.
**
* Gross leasable area ("GLA")
|
|
|
|
|
|
Property Name | Current Ownership Interest | Gain on change in control of interests | ||||||
Plantation Commons | 76.25% | $ | 9,793 | |||||
Gordon Plaza | 40.62% | 395 | ||||||
The District at Tustin Legacy | (a) | 60,972 | ||||||
$ | 71,160 |
|
|
Included in the Company’s Condensed Consolidated Statements of Operations are $17.8 million and $12.1 million in revenues from rental properties from the date of acquisition through September 30, 2017 and 2016, respectively, for operating properties acquired during each of the respective years.
The Company adopted ASU 2017-01 effective January 1, 2017 and applied the guidance to its operating property acquisitions during the nine months ended September 30, 2017. Purchase Price Allocation -
The purchase price for these acquisitionsthis acquisition is allocated to real estate and related intangible assets acquired, and liabilities assumed, as applicable, in accordance with our accounting policies for asset acquisitions.
The purchase price allocationsallocation for properties acquired/consolidatedthe property acquired during the ninethree months ended September 30, 2017, areMarch 31, 2020, is as follows (in thousands):
Allocation as of March 31, 2020 | Weighted-Average | ||||||||||
Land | $ | 190,226 | $ | 935 | n/a | ||||||
Buildings | 293,355 | 4,610 | 50.0 | ||||||||
Above-market leases | 11,992 | ||||||||||
Below-market leases | (30,246 | ) | |||||||||
In-place leases | 42,412 | ||||||||||
Building improvements | 30,917 | 221 | 45.0 | ||||||||
Tenant improvements | 12,737 | 382 | 19.4 | ||||||||
Mortgage fair value adjustment | (6,222 | ) | |||||||||
Other assets | 5,090 | ||||||||||
Other liabilities | (3,302 | ) | |||||||||
In-place leases | 925 | 19.4 | |||||||||
Net assets acquired | $ | 546,959 | $ | 7,073 |
Real Estate Under Development –
The Company is engaged in a real estate development project located in Dania Beach, FL for long-term investment. Construction is currently planned to continue on this real estate development project during the COVID-19 pandemic. As of September 30, 2017, March 31, 2020, and December 31, 2019, the allocation adjustmentscosts incurred for this real estate development project were $230.6 million and revised allocations for properties accounted for as business combinations$220.2 million, respectively, including capitalized costs of $28.4 million and $21.3 million, respectively. The Company capitalized (i) interest of $2.0 million and $1.9 million, (ii) real estate taxes, insurance and legal costs of $0.4 million and $0.3 million and (iii) payroll of $0.5 million and $0.5 million during the yearthree months ended DecemberMarch 31, 2016, are as follows (in thousands): 2020 and 2019, respectively, in connection with this real estate development project.
Allocation as of December 31, 2016 | Allocation Adjustments | Revised Allocation as of September 30, 2017 | ||||||||||
Land | $ | 179,150 | $ | (5,150 | ) | $ | 174,000 | |||||
Buildings | 309,493 | (30,696 | ) | 278,797 | ||||||||
Above-market leases | 11,982 | 885 | 12,867 | |||||||||
Below-market leases | (31,903 | ) | (4,716 | ) | (36,619 | ) | ||||||
In-place leases | 44,094 | (1,063 | ) | 43,031 | ||||||||
Building improvements | 124,105 | 41,895 | 166,000 | |||||||||
Tenant improvements | 12,788 | (1,155 | ) | 11,633 | ||||||||
Mortgage fair value adjustment | (4,292 | ) | - | (4,292 | ) | |||||||
Other assets | 234 | - | 234 | |||||||||
Other liabilities | (27 | ) | - | (27 | ) | |||||||
Net assets acquired | $ | 645,624 | $ | - | $ | 645,624 |
Redevelopment –
Due to the recent COVID-19 pandemic mentioned above, the Company is re-evaluating its current redevelopment and re-tenanting projects and will only move forward with the projects it feels are necessary.
Dispositions -
The table below summarizes the Company’s disposition activity relating to consolidated operating properties and Assets Held for Sale parcels (dollars in millions):
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Aggregate sales price | $ | 13.5 | $ | 74.2 | ||||
Gain on sale of properties | $ | 3.8 | $ | 23.6 | ||||
Number of properties sold | 1 | 5 | ||||||
Number of out-parcels sold | - | 2 |
Impairments–-
During the ninethree months ended September 30, 2017, the Company disposed of 15 consolidated operating properties March 31, 2020 and eight parcels, in separate transactions, for an aggregate sales price of $230.2 million. These transactions resulted in (i) an aggregate gain of $62.1 million and (ii) aggregate impairment charges of $13.0 million.
At September 30, 2017, the Company had one property classified as held-for-sale at a carrying amount of $14.9 million, net of accumulated depreciation of $2.9 million, which is included in Other assets on the Company’s Condensed Consolidated Balance Sheets. The Company’s determination of the fair value of the property was based upon an executed contract of sale with a third party.
Impairments–
During the nine months ended September 30, 2017,2019, the Company recognized aggregate impairment charges of $34.3 million. These impairment charges consist of (i) $13.0$3.0 million related to the sale of certain operating properties, as discussed above, (ii) $5.1and $4.2 million, respectively, related to adjustments to property carrying values for properties which the Company has marketed for sale as part of its active capital recycling program and as such has adjusted the anticipated hold periodsperiod for such properties and (iii) $16.2 million related to a property for which the Company has re-evaluated its long-term plan for the property due to unfavorable local market conditions.properties. The Company’s estimated fair values of these properties were primarily based upon estimated sales prices from (i) signed contracts or letters of intent from third party offers or (ii) a discounted cash flow model.offers. See Footnote 11 to the Notes to the Company’s Condensed Consolidated Financial Statements for fair value disclosure.
Hurricane Impact –
The impactCOVID-19 pandemic has significantly impacted the retail sector in which the Company operates and if the effects of Hurricanes Harvey, which hit Texas on August 25, 2017, and Irma, which hit Florida on September 10, 2017, resulted in minimal damagethe pandemic are prolonged, it could have a significant adverse impact to the Company’s properties locatedunderlying industries of many of the Company’s tenants. Management cannot, at this point, estimate ultimate losses related to the COVID-19 pandemic, and accordingly no impairment charges were reflected in Texasthe accompanying financial statements related to this matter. The Company will continue to monitor the economic, financial, and Florida.
With respect to Hurricane Maria, which hit the island of Puerto Rico on September 20, 2017,social conditions resulting from this pandemic and will assess its asset portfolio for any impairment indicators. If the Company is currently assessing damages athas determined that any of its seven operating properties located throughout Puerto Rico, aggregating 2.2 million square feet of GLA. Two of these operating properties, located in the southern region of the island were less impacted and most tenants have resumed operations, while the remaining five operating properties in the northern region sustained varying amounts of damage. Initial repairsassets are in progress, however, a final assessment and recovery plan will require additional time. The Company maintains a comprehensive property insurance policy on these properties with total coverage of up to $62.0 million, as well as business interruption insurance with coverage up to $39.3 million in the aggregate, subject to a collective deductible of $1.2 million. The Company anticipates that all damages and any loss of operations sustained will be covered under these existing policies. As further detailed information becomes available,impaired the Company expects to recognize a charge, which it believes will not have a material effect on the Company’s financial position and/or results of operations. This charge will result from the write-down of the undepreciated portion of the property that has been permanently damaged, which would be less than the replacement costsrequired to take impairment charges and offset by insurance proceeds received by the Company. such amounts could be material.
3. Real Estate Under Development
The Company is engaged in various real estate development projects for long-term investment. As of September 30, 2017, the Company had in progress a total of five active real estate development projects and two additional projects held for future development.
The costs incurred to date for these real estate development projects are as follows (in thousands):
Property Name | Location | September 30, 2017 | December 31, 2016 | ||||||
Grand Parkway Marketplace (1) | Spring, TX | $ | 41,222 | $ | 94,841 | ||||
Dania Pointe | Dania Beach, FL | 137,743 | 107,113 | ||||||
Promenade at Christiana | New Castle, DE | 31,563 | 25,521 | ||||||
Owings Mills | Owings Mills, MD | 30,746 | 25,119 | ||||||
Lincoln Square (2) | Philadelphia, PA | 62,022 | - | ||||||
Avenues Walk (3) | Jacksonville, FL | 48,573 | 73,048 | ||||||
Staten Island Plaza (4) | Staten Island, NY | 9,395 | 9,386 | ||||||
$ | 361,264 | $ | 335,028 |
|
|
|
|
|
|
|
|
During the nine months ended September 30, 2017, the Company capitalized (i) interest of $8.4 million, (ii) real estate taxes, insurance and legal costs of $3.7 million and (iii) payroll of $2.8 million,
4.Investments in connection with these real estate development projects.
4. Investments in and Advances to Real Estate Joint Ventures
The Company and its subsidiaries havehas investments in and advances to various real estate joint ventures. These joint ventures are engaged primarily in the operation of shopping centers which are either owned or held under long-term operating leases. The Company and the joint venture partners have joint approval rights for major decisions, including those regarding property operations. As such, the Company holds noncontrolling interests in these joint ventures and accounts for them under the equity method of accounting.
The table below presents joint venture investments for which the Company held an ownership interest at September 30, 2017 March 31, 2020 and December 31, 2016 (in millions, except number of properties)2019 (dollars in millions):
As of September 30, 2017 | As of December 31, 2016 | Ownership | The Company’s Investment | ||||||||||||||||||||||||||||||||
Venture | Ownership Interest | Number of Properties | The Company's Investment | Ownership Interest | Number of Properties | The Company's Investment | |||||||||||||||||||||||||||||
Prudential Investment Program (“KimPru” and “KimPru II”) (1) (2) | 15.0 | % | 46 | $ | 179.0 | 15.0 | % | 48 | $ | 182.5 | |||||||||||||||||||||||||
Joint Venture | Interest | March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||
Prudential Investment Program (1) | 15.0% | $ | 169.6 | $ | 169.5 | ||||||||||||||||||||||||||||||
Kimco Income Opportunity Portfolio (“KIR”) | 48.6 | % | 44 | 149.6 | 48.6 | % | 45 | 145.2 | 48.6% | 177.7 | 175.0 | ||||||||||||||||||||||||
Canada Pension Plan Investment Board (“CPP”) | 55.0 | % | 5 | 122.4 | 55.0 | % | 5 | 111.8 | 55.0% | 156.6 | 151.7 | ||||||||||||||||||||||||
Other Joint Venture Programs | Various | 31 | 58.4 | Various | 37 | 64.7 | Various | 81.7 | 81.9 | ||||||||||||||||||||||||||
Total* | 126 | $ | 509.4 | 135 | $ | 504.2 | |||||||||||||||||||||||||||||
Total* | $ | 585.6 | $ | 578.1 |
* Representing 24.6 million98 property interests and 26.221.3 million square feet of GLA, as of September 30, 2017 both March 31, 2020 and December 31, 2016, respectively.2019.
|
|
| The Company manages these joint venture investments and, where applicable, earns |
The table below presents the Company’sCompany’s share of net income for the above investments which is included in Equity in income of joint ventures, net on the Company’s Condensed Consolidated Statements of OperationsIncome for the three and nine months ended September 30, 2017 March 31, 2020 and 20162019 (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
KimPru and KimPru II | $ | 3.2 | 2.2 | $ | 9.7 | 7.5 | ||||||||||
KIR | 8.2 | 7.9 | 24.7 | 27.4 | ||||||||||||
CPP | 1.3 | 1.3 | 4.3 | 6.2 | ||||||||||||
Other Joint Venture Programs (1) | (3.6 | ) | 0.1 | (1.7 | ) | 149.1 | ||||||||||
Total | $ | 9.1 | $ | 11.5 | $ | 37.0 | $ | 190.2 |
|
|
Three Months Ended March 31, | ||||||||
Joint Venture | 2020 | 2019 | ||||||
Prudential Investment Program | $ | 2.6 | $ | 2.9 | ||||
KIR | 9.8 | 14.5 | ||||||
CPP | 1.0 | 1.4 | ||||||
Other Joint Venture Programs | 0.2 | - | ||||||
Total | $ | 13.6 | $ | 18.8 |
During the ninethree months ended September 30, 2017, March 31, 2019, certain of the Company’s real estate joint ventures disposed of sixfour operating properties, and a portion of one property, in separate transactions, for an aggregate sales price of $49.3$54.5 million. These transactions resulted in an aggregate net gain to the Company of $0.1$3.4 million before income taxes, for the ninethree months ended September 30, 2017. In addition, during the nine months ended September 30, 2017, the Company acquired a controlling interest in three operating properties from certain joint ventures, in separate transactions, for a gross fair value of $320.1 million. See Footnote 2 for the operating properties acquired by the Company.March 31, 2019.
During the nine months ended September 30, 2016, certain of the Company’s real estate joint ventures disposed of or transferred interests to joint venture partners in 39 operating properties, in separate transactions, for an aggregate sales price of $959.2 million. These transactions resulted in an aggregate net gain to the Company of $143.3 million, before income taxes, for the nine months ended September 30, 2016. In addition, during the nine months ended September 30, 2016, the Company acquired a controlling interest in six operating properties and one development project from certain joint ventures, in separate transactions, for a gross fair value of $486.2 million.
The table below presents debt balances within the Company’sCompany’s unconsolidated joint venture investments for which the Company held noncontrolling ownership interests at September 30, 2017 March 31, 2020 and December 31, 2016 (dollars2019 (dollars in millions):
As of September 30, 2017 | As of December 31, 2016 | As of March 31, 2020 | As of December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Venture | Mortgages and Notes Payable, Net | Weighted Average Interest Rate | Weighted Average Remaining Term (months)* | Mortgages and Notes Payable, Net | Weighted Average Interest Rate | Weighted Average Remaining Term (months)* | |||||||||||||||||||||||||||||||||||||||||||
KimPru and KimPru II | $ | 626.9 | 3.35 | % | 62.9 | $ | 647.4 | 3.07 | % | 67.5 | |||||||||||||||||||||||||||||||||||||||
Joint Venture | Mortgages and Notes Payable, Net | Weighted Average Interest Rate | Weighted Average Remaining Term (months)* | Mortgages and Notes Payable, Net | Weighted Average Interest Rate | Weighted Average Remaining Term (months)* | |||||||||||||||||||||||||||||||||||||||||||
Prudential Investment Program | $ | 537.0 | 2.91 | % | 43.8 | $ | 538.1 | 3.46 | % | 46.8 | |||||||||||||||||||||||||||||||||||||||
KIR | KIR | 725.7 | 4.54 | % | 49.7 | 746.5 | 4.64 | % | 54.9 | 561.4 | 4.15 | % | 32.0 | 556.0 | 4.39 | % | 28.4 | ||||||||||||||||||||||||||||||||
CPP | CPP | 84.9 | 2.78 | % | 7.0 | 84.8 | 2.17 | % | 16.0 | 84.9 | 3.25 | % | 39.0 | 84.8 | 3.25 | % | 42.0 | ||||||||||||||||||||||||||||||||
Other Joint Venture Programs | Other Joint Venture Programs | 289.0 | 4.37 | % | 29.8 | 584.3 | 5.40 | % | 23.4 | 414.4 | 3.62 | % | 78.5 | 415.2 | 3.87 | % | 80.9 | ||||||||||||||||||||||||||||||||
Total | Total | $ | 1,726.5 | $ | 2,063.0 | $ | 1,597.7 | $ | 1,594.1 |
* Includes extension options
5. 5.Other Real Estate Investments
Preferred Equity Capital -
The Company previouslyhas provided capital to owners and developers of real estate properties through its Preferred Equity Program. The Company’s maximum exposure to losses associated with its preferred equity investments is primarily limited to its net investment. As of September 30, 2017, March 31, 2020, the Company’s net investment under the Preferred Equity Program was $198.1$159.6 million relating to 357205 properties, including 345195 net leased properties. During the ninethree months ended September 30, 2017, March 31, 2020, the Company recognized income of $27.2$11.1 million from its preferred equity investments, including $14.8 millionprofit participation of cumulative foreign currency translation gain recognized as a result of the substantial liquidation of the Company’s investments in Canada during 2017.$6.3 million. During the ninethree months ended September 30, 2016, March 31, 2019, the Company earned $22.3recognized income of $6.5 million from its preferred equity investments, including $10.1 million in profit participation earned from four capital transactions.of $1.0 million. These amounts are included in Equity in income of other real estate investments, net on the Company’s Condensed Consolidated Statements of Operations.Income.
6.Leases
Kimsouth Lessor Leases(Albertsons) -
Kimsouth Realty Inc. (“Kimsouth”)The Company's primary source of revenues are derived from lease agreements, which includes rental income and expense reimbursement. The Company's lease income is a wholly-owned subsidiarycomprised of minimum base rent, expense reimbursements, percentage rent, lease termination fee income, ancillary income, amortization of above-market and below-market rent adjustments and straight-line rent adjustments.
The disaggregation of the Company. KRS AB Acquisition, LLC (the “ABS Venture”) is a subsidiary of Kimsouth that has a 14.35% noncontrolling interest (ofCompany's lease income, which the Company’s share is 9.8%), in AB Acquisition, LLC (“AB Acquisition”), a joint venture which owns Albertsons LLC (“Albertsons”), NAI Group Holdings Inc. and Safeway Inc. The Company holds a controlling interest in the ABS Venture and consolidates this entity.
During June 2017, the Company and ABS Venture received an aggregate cash distribution of $34.6 million from Albertsons, of which the Company’s combined share was $23.7 million with the remaining $10.9 million distributed to the two noncontrolling interest members in the ABS Venture. This distribution exceeded the Company’s carrying basis and as such was recognized as income and is included in EquityRevenue from rental properties on the Company's Condensed Consolidated Statements of Income, as either fixed or variable lease income based on the criteria specified in income from otherASC 842, for the three months ended March 31, 2020 and 2019, is as follows (in thousands):
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Lease income: | ||||||||
Fixed lease income (1) | $ | 217,155 | $ | 214,804 | ||||
Variable lease income (2) | 58,907 | 66,516 | ||||||
Above-market and below-market leases amortization, net | 9,942 | 9,314 | ||||||
Total lease cost | $ | 286,004 | $ | 290,634 |
(1) | Includes minimum base rents, expense reimbursements, ancillary income and straight-line rent adjustments. |
(2) | Includes minimum base rents, expense reimbursements, percentage rent, lease termination fee income and ancillary income. |
Lessee Leases
The Company currently leases real estate investments, netspace under noncancelable operating lease agreements for ground leases and administrative office leases. The Company’s leases have remaining lease terms ranging from less than one year to 51.9 years, some of which include options to extend the terms for up to an additional 75 years. The Company does not include any of its renewal options in its lease terms for calculating its lease liability as the renewal options allow the Company to maintain operational flexibility, and the Company is not reasonably certain it will exercise these renewal options at this time. The weighted-average remaining non-cancelable lease term for the Company’s operating leases was 21.0 years at March 31, 2020. The weighted-average discount rate was 6.65% at March 31, 2020. The Company’s operating lease liabilities are determined based on the estimated present value of the Company’s minimum lease payments under its lease agreements. The discount rate used to determine the lease liabilities is based on the estimated incremental borrowing rate on a lease by lease basis. When calculating the incremental borrowing rates, the Company utilized data from (i) its recent debt issuances, (ii) publicly available data for instruments with similar characteristics, (iii) observable mortgage rates and (iv) unlevered property yields and discount rates. The Company then applied adjustments to account for considerations related to term and security that may not be fully incorporated by the data sets.
The components of the Company’s lease expense, which are included in rent expense and general and administrative expense on the Company’s Condensed Consolidated Statements of Operations.Income for the three months ended March 31, 2020 and 2019, were as follows (in thousands):
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Lease cost: | ||||||||
Operating lease cost | $ | 2,598 | $ | 3,328 | ||||
Variable lease cost | 727 | 269 | ||||||
Total lease cost | $ | 3,325 | $ | 3,597 |
7.Other Assets
6Mortgages and Other Financing Receivables -
The Company has various mortgages and other financing receivables which consist of loans acquired and loans originated by the Company. The Company reviews payment status to identify performing versus non-performing loans. As of March 31, 2020, the Company had a total of seven loans aggregating $7.8 million, all of which were identified as performing loans.
Assets Held-For-Sale -
At March 31, 2020, the Company had a property classified as held-for-sale at a net carrying amount of $1.3 million (including accumulated depreciation and amortization of $1.1 million). The Company’s determination of the fair value of the property was based upon an executed contract of sale with a third party, which is in excess of the book value of this property.
8.Notes, Mortgages and Construction Loan Payable
Notes Payable –
In February 2020, the Company closed on a new $2.0 billion unsecured revolving credit facility (the “Credit Facility”) with a group of banks, which replaced the Company’s existing $2.25 billion unsecured revolving credit facility. The Credit Facility is scheduled to expire in March 2024, with two additional six-month options to extend the maturity date, at the Company’s discretion, to March 2025. The Credit Facility, which accrues interest at a rate of LIBOR plus 77.5 basis points (1.76% as of March 31, 2020), can be increased to $2.75 billion through an accordion feature. Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to covenants requiring the maintenance of (i) maximum indebtedness ratios and (ii) minimum interest and fixed charge coverage ratios. As of March 31, 2020, the Credit Facility had an outstanding balance of $675.0 million and $0.3 million appropriated for letters of credit and the Company was in compliance with its covenants.
On April 1, 2020, the Company entered into a new $375.0 million unsecured term loan credit facility pursuant to a credit agreement (the “Term Loan”), with a group of banks, which is scheduled to expire in April 2021, with a one-year extension option to extend the maturity date, at the Company’s discretion, to April 2022. The Term Loan accrues interest at a rate of LIBOR plus 140 basis points or, at the Company’s option, a spread of 40 basis points to the base rate defined in the Term Loan, that in each case fluctuates in accordance with changes in the Company’s senior debt ratings. The Term Loan can be increased by an additional $750.0 million through an accordion feature. Pursuant to the terms of the Term Loan, the Company is subject to covenants that are substantially the same as those in the Credit Facility. During April 2020, borrowings under the Term Loan were increased to $590.0 million through the accordion feature.
Mortgages and Construction Loan Payable -
In August 2018, the Company closed on a construction loan commitment of $67.0 million relating to one development property. This loan commitment was scheduled to mature in August 2020, with six additional six-month options to extend the maturity date to August 2023, and bore interest at a rate of LIBOR plus 180 basis points. During the three months ended March 31, 2020, this construction loan was fully repaid.
During the three months ended March 31, 2020, the Company repaid $8.8 million of mortgage debt (including fair market value adjustment of $0.1 million) that encumbered an operating property.
9.Noncontrolling Interests
Noncontrolling interests represent the portion of equity that the Company does not own in entities it consolidates as a result of having a controlling interest or determining that the Company was the primary beneficiary of a VIE in accordance with the provisions of the FASB’s Consolidation guidance. The Company accounts and reports for noncontrolling interests in accordance with the Consolidation guidance and the Distinguishing Liabilities from Equity guidance issued by the FASB. The Company identifies its noncontrolling interests separately within the equity section on the Company’s Condensed Consolidated Balance Sheets. The amounts of consolidated net income attributable to the Company and to the noncontrolling interests are presented separately on the Company’s Condensed Consolidated Statements of Income.
During the three months ended March 31, 2020, the Company acquired its partner’s interests in a consolidated entity for a purchase price of $20.0 million. This transaction resulted in a net decrease in Noncontrolling interests of $0.5 million and a corresponding net increase in Paid-in capital of $19.5 million on the Company’s Condensed Consolidated Balance Sheets. There are no remaining partners in this consolidated entity.
Included within noncontrolling interests are units that were determined to be contingently redeemable that are classified as Redeemable noncontrolling interests and presented in the mezzanine section between Total liabilities and Stockholder’s equity on the Company’s Condensed Consolidated Balance Sheets.
The following table presents the change in the redemption value of the Redeemable noncontrolling interests for the three months ended March 31, 2020 and 2019 (in thousands):
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Balance at January 1, | $ | 17,943 | $ | 23,682 | ||||
Income | 262 | 92 | ||||||
Distributions | (262 | ) | (90 | ) | ||||
Balance at March 31, | $ | 17,943 | $ | 22,684 |
10.Variable Interest Entities(“ (“VIE”)
Included within the Company’sCompany’s consolidated operating properties at September 30, 2017, both March 31, 2020 and December 31, 2019, are 2422 consolidated partnership entities that are VIEs, for which the Company is the primary beneficiary. These entities have been established to own and operate real estate property. The Company’s involvement with these entities is through its majority ownership and management of the properties. The entities were deemed VIEs primarily based on the fact thatbecause the unrelated investors do not have substantialsubstantive kick-out rights to remove the general or managing partner by a vote of a simple majority or less and they do not have substantive participating rights. The Company determined that it was the primary beneficiary of these VIEs as a result of its controlling financial interest. At September 30, 2017, March 31, 2020, total assets of these VIEs were $1.2$1.0 billion and total liabilities were $385.6$65.5 million. At December 31, 2019, total assets of these VIEs were $0.9 billion and total liabilities were $70.9 million.
The majority of the operations of these VIEs are funded with cash flows generated from the properties. The Company has not provided financial support to any of these VIEs that it was not previously contractually required to provide, which consists primarily of funding any capital expenditures, including tenant improvements, which are deemed necessary to continue to operate the entity and any operating cash shortfalls that the entity may experience.
Additionally, includedincluded within the Company’s real estate development projects at September 30, 2017, are threeDecember 31, 2019, is one consolidated partnership entitiesentity that are VIEs,was a VIE, for which the Company iswas the primary beneficiary. These entities haveThis entity had been established to develop a real estate propertiesproperty to hold as a long-term investments.investment. The Company’s involvement with these entitiesthis entity is through its majority ownership and management of the properties. These entities wereproperty. This entity was deemed VIEsa VIE primarily based on the fact thatbecause the equity investments at risk are were not sufficient to permit the entitiesentity to finance theirits activities without additional financial support. The initial equity contributed to these entitiesthis entity was not sufficient to fully finance the real estate construction as development costs are funded by the partners throughout the construction period. The Company determined that it was the primary beneficiary of these VIEsthis VIE as a result of its controlling financial interest. At September 30, 2017, December 31, 2019, total assets of thesethis real estate development VIEsVIE were $269.3$346.9 million and total liabilities were $22.5$82.5 million.
Substantially all During the projected development costs to be funded for these three real estate development projects, aggregating $129.3 million, will be funded with capital contributions from months ended March 31, 2020 the Company when contractually obligated. The Company has not provided financial support to these VIEs that it was not previously contractually required to provide.purchased the partner’s noncontrolling interest and maintains full ownership of the entity. As a result, the entity is no longer a VIE.
All liabilities of these consolidated VIEs are non-recourse to the Company (“VIE Liabilities”). Of the 27 total VIEs, 22 are unencumbered and theThe assets of thesethe unencumbered VIEs are not restricted for use to settle only the obligations of these VIEs. The remaining five VIEsVIE assets are encumbered by third party non-recourse mortgage debt.debt and a construction loan. The assets associated with these encumbered VIEs (“Restricted Assets”) are collateral under the respective mortgages and a construction loan and are therefore restricted and can only be used to settle the corresponding liabilities of the VIE. The table below summarizes the consolidated VIEs and the classification of the Restricted Assets and VIE Liabilities on the Company’s Condensed Consolidated Balance Sheets are as follows (in(dollars in millions):
September 30, 2017 | December 31, 2016 | |||||||
Restricted Assets: | ||||||||
Real estate, net | $ | 630.9 | $ | 326.9 | ||||
Cash and cash equivalents | 10.5 | 3.8 | ||||||
Accounts and notes receivable, net | 2.8 | 1.6 | ||||||
Other assets | 3.0 | 1.4 | ||||||
Total Restricted Assets | $ | 647.2 | $ | 333.7 | ||||
VIE Liabilities: | ||||||||
Mortgages payable, net | $ | 341.4 | $ | 138.6 | ||||
Other liabilities | 66.7 | 37.6 | ||||||
Total VIE Liabilities | $ | 408.1 | $ | 176.2 |
7. Mortgages and Other Financing Receivables
The Company has various mortgages and other financing receivables which consist of loans acquired and loans originated by the Company. The Company reviews payment status to identify performing versus non-performing loans. As of September 30, 2017, the Company had a total of 11 loans aggregating $22.5 million, of which all were identified as performing loans.
8. Marketable Securities
During the nine months ended September 30, 2017, the Company acquired available-for-sale marketable equity securities for an aggregate purchase price of $9.8 million. At September 30, 2017, the Company’s investment in marketable securities was an aggregate of $14.0 million, which includes an unrealized loss of $1.1 million.
9. Notes and Mortgages Payable
Notes Payable -
In February 2017, the Company closed on a $2.25 billion unsecured revolving credit facility (the “Credit Facility”) with a group of banks, which is scheduled to expire in March 2021, with two additional six month options to extend the maturity date, at the Company’s discretion, to March 2022. This Credit Facility, which accrues interest at a rate of LIBOR plus 87.5 basis points (2.10% as of September 30, 2017), can be increased to $2.75 billion through an accordion feature. The Credit Facility replaced the Company’s $1.75 billion unsecured revolving credit facility that was scheduled to mature in March 2018. In addition, the Credit Facility includes a $500.0 million sub-limit which provides the company the opportunity to borrow in alternative currencies including Canadian Dollars, British Pounds Sterling, Japanese Yen or Euros. Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to covenants requiring the maintenance of (i) maximum leverage ratios on both unsecured and secured debt and (ii) minimum interest and fixed coverage ratios. As of September 30, 2017, the Credit Facility had a balance of $25.0 million outstanding and $0.5 million appropriated for letters of credit.
As of March 31, 2020 | As of December 31, 2019 | |||||||
Number of unencumbered VIEs | 19 | 19 | ||||||
Number of encumbered VIEs | 3 | 4 | ||||||
Total number of consolidated VIEs | 22 | 23 | ||||||
Restricted Assets: | ||||||||
Real estate, net | $ | 99.1 | $ | 228.9 | ||||
Cash and cash equivalents | 1.6 | 9.2 | ||||||
Accounts and notes receivable, net | 2.0 | 3.8 | ||||||
Other assets | 1.5 | 3.6 | ||||||
Total Restricted Assets | $ | 104.2 | $ | 245.5 | ||||
VIE Liabilities: | ||||||||
Mortgages and construction loan payable, net | $ | 37.6 | $ | 104.5 | ||||
Other liabilities | 27.9 | 48.9 | ||||||
Total VIE Liabilities | $ | 65.5 | $ | 153.4 |
During the nine months ended September 30, 2017, the Company issued the following Senior Unsecured Notes (amounts in millions):
Date Issued | Maturity Date | Amount Issued | Interest Rate | |||||||
Mar-17 | Apr-27 | $ | 400.0 | 3.80 | % | |||||
Aug-17 | Feb-25 | $ | 500.0 | 3.30 | % | |||||
Aug-17 | Sept-47 | $ | 350.0 | 4.45 | % |
During the nine months ended September 30, 2017, the Company repaid the following notes (amounts in millions):
Type | Date Paid | Amount Repaid | Interest Rate | Maturity Date | |||||||
Term Loan | Jan-17 | $ | 250.0 | (a) | Jan-17 | ||||||
Medium Term Notes (“MTN”) (b) | Aug-17 | $ | 211.0 | 4.30% | Feb-18 |
|
|
|
Mortgages Payable -
During the nine months ended September 30, 2017, the Company (i) consolidated $212.2 million of individual non-recourse mortgage debt (including a fair market value adjustment of $6.2 million) relating to a joint venture operating property which the Company now controls, (ii) paid off $684.6 million of maturing mortgage debt (including fair market value adjustments of $5.7 million) that encumbered 25 operating properties and (iii) obtained a $206.0 million non-recourse mortgage relating to one operating property.
10. Redeemable Noncontrolling Interests
Redeemable noncontrolling interests includes amounts related to partnership units issued by consolidated subsidiaries of the Company in connection with certain property acquisitions. Partnership units which are determined to be contingently redeemable under the FASB’s Distinguishing Liabilities from Equity guidance are classified as Redeemable noncontrolling interests and presented in the mezzanine section between Total liabilities and Stockholder’s equity on the Company’s Condensed Consolidated Balance Sheets. The amounts of consolidated net income attributable to the Company and to the noncontrolling interests are presented on the Company’s Condensed Consolidated Statements of Operations.
The following table presents the change in the redemption value of the Redeemable noncontrolling interests for the nine months ended September 30, 2017 and 2016 (amounts in thousands):
2017 | 2016 | |||||||
Balance at January 1, | $ | 86,953 | $ | 86,709 | ||||
Issuance of redeemable partnership interests (1) | 10,000 | - | ||||||
Income (2) | 1,203 | 3,240 | ||||||
Distributions | (2,448 | ) | (3,093 | ) | ||||
Redemption/conversion of redeemable units (3) | (79,569 | ) | - | |||||
Balance at September 30, | $ | 16,139 | $ | 86,856 |
|
|
|
|
|
|
11. 11.Fair Value Measurements
All financial instruments of the Company are reflected in the accompanying Condensed Consolidated Balance Sheets at amounts which, in management’s estimation, based upon an interpretation of available market information and valuation methodologies, reasonably approximate their fair values except those listed below, for which fair values are disclosed. The valuation method used to estimate fair value for fixed-rate and variable-rate debt is based on discounted cash flow analyses, with assumptions that include credit spreads, market yield curves, trading activity, loan amounts and debt maturities. The fair values for marketable securities are based on published values, securities dealers’ estimated market values or comparable market sales. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition.
As a basis for considering market participant assumptions in fair value measurements, the FASB’sFASB’s Fair Value Measurements and Disclosures guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
The following are financial instruments for which the Company’s estimate ofCompany’s estimated fair value differs from the carrying amountsvalue (in thousands):
September 30, 2017 | December 31, 2016 | March 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||
Carrying Amounts | Estimated Fair Value | Carrying Amounts | Estimated Fair Value | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||||
Notes payable, net (1) | $ | 4,700,423 | $ | 4,676,777 | $ | 3,927,251 | $ | 3,890,797 | ||||||||||||||||||||||||
Mortgages payable, net (2) | $ | 850,848 | $ | 852,165 | $ | 1,139,117 | $ | 1,141,047 | ||||||||||||||||||||||||
Notes payable, net (1) | $ | 5,303,656 | $ | 5,041,889 | $ | 4,831,759 | $ | 4,983,763 | ||||||||||||||||||||||||
Mortgages and construction loan payable, net (2) | $ | 404,879 | $ | 405,562 | $ | 484,008 | $ | 486,042 |
| The Company determined that the valuation of its Senior Unsecured Notes |
| The Company determined that its valuation of |
The Company has certain financial instruments that must be measured under the FASB’sFASB’s Fair Value Measurements and Disclosures guidance, including available for sale securities. The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.
The tablestables below present the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2017 at March 31, 2020 and December 31, 2016, 2019, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):
Balance at September 30, 2017 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Marketable equity securities | $ | 12,715 | $ | 12,715 | $ | - | $ | - | ||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps | $ | 667 | $ | - | $ | 667 | $ | - |
Balance at March 31, 2020 | Level 1 | Level 2 | Level 3 | |||||||||||||
Marketable equity securities | $ | 4,524 | $ | 4,524 | $ | - | $ | - |
Balance at December 31, 2016 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Marketable equity securities | $ | 6,502 | $ | 6,502 | $ | - | $ | - | ||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps | $ | 975 | $ | - | $ | 975 | $ | - |
Balance at December 31, 2019 | Level 1 | Level 2 | Level 3 | |||||||||||||
Marketable equity securities | $ | 9,353 | $ | 9,353 | $ | - | $ | - |
Assets measured at fair value on a non-recurring basis at September 30, 2017 March 31, 2020 and December 31, 2016, 2019, are as follows (in thousands):
Balance at September 30, 2017 | Level 1 | Level 2 | Level 3 | |||||||||||||
Real estate | $ | 40,558 | $ | - | $ | - | $ | 40,558 |
Balance at March 31, 2020 | Level 1 | Level 2 | Level 3 | |||||||||||||
Real estate | $ | 5,300 | $ | - | $ | - | $ | 5,300 |
Balance at December 31, 2016 | Level 1 | Level 2 | Level 3 | |||||||||||||
Real estate | $ | 117,930 | $ | - | $ | - | $ | 117,930 |
Balance at December 31, 2019 | Level 1 | Level 2 | Level 3 | |||||||||||||
Real estate | $ | 39,510 | $ | - | $ | - | $ | 39,510 | ||||||||
Other real estate investments | $ | 32,974 | $ | - | $ | - | $ | 62,429 |
During the ninethree months ended September 30, 2017 March 31, 2020 and 2016,2019, the Company recognized impairment charges related to adjustments to property carrying values of $34.3$3.0 million and $68.1$4.2 million, respectively. The Company’s estimated fair values of these properties were primarily based upon estimated sales prices from (i) signed contracts or letters of intent from third party offers or (ii) a discounted cash flow model.offers. The Company does not have access to the unobservable inputs used to determine the estimated fair values of third party offers. For the discounted cash flow model, a capitalization rate of 8.50% and a discount rate of 10.00% were utilized in the model based upon unobservable rates that the Company believes to be within a reasonable range of current market rates for this respective investment. Based on these inputs, the Company determined that its valuation of these investments was classified within Level 3 of the fair value hierarchy. (See Footnote 23 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional discussion regarding impairment charges).
12. Preferred Stock and Common Stock
The Company’s outstanding Preferred Stock is detailed below:
As of September 30, 2017 | |||||||||||||||||||||||||
Series of Preferred Stock | Shares Authorized | Shares Issued and Outstanding | Liquidation Preference (in thousands) | Dividend Rate | Annual Dividend per Depositary Share |
Par Value | Optional Redemption Date | ||||||||||||||||||
Series I | 18,400 | 7,000 | $ | 175,000 | 6.00 | % | $ | 1.50000 | $ | 1.00 | 3/20/2017 | ||||||||||||||
Series J | 9,000 | 9,000 | 225,000 | 5.50 | % | $ | 1.37500 | $ | 1.00 | 7/25/2017 | |||||||||||||||
Series K | 8,050 | 7,000 | 175,000 | 5.625 | % | $ | 1.40625 | $ | 1.00 | 12/7/2017 | |||||||||||||||
Series L | 10,350 | 9,000 | 225,000 | 5.125 | % | $ | 1.28125 | $ | 1.00 | 8/16/2022 | |||||||||||||||
45,800 | 32,000 | $ | 800,000 |
As of December 31, 2016 | |||||||||||||||||||||||||
Series of Preferred Stock | Shares Authorized | Shares Issued and Outstanding | Liquidation Preference (in thousands) | Dividend Rate | Annual Dividend per Depositary Share |
Par Value | Optional Redemption Date | ||||||||||||||||||
Series I | 18,400 | 16,000 | $ | 400,000 | 6.00 | % | $ | 1.50000 | $ | 1.00 | 3/20/2017 | ||||||||||||||
Series J | 9,000 | 9,000 | 225,000 | 5.50 | % | $ | 1.37500 | $ | 1.00 | 7/25/2017 | |||||||||||||||
Series K | 8,050 | 7,000 | 175,000 | 5.625 | % | $ | 1.40625 | $ | 1.00 | 12/7/2017 | |||||||||||||||
35,450 | 32,000 | $ | 800,000 |
The following Preferred Stock series was issued during the nine months ended September 30, 2017:
Series of Preferred Stock | Date Issued | Depositary Shares Issued | Fractional Interest per Share | Net Proceeds, After Expenses (in millions) | Offering Price | Optional Redemption Date | ||||||||||
Series L | 8/16/2017 | 9,000,000 | 1/1000 | $ | 217.6 | 25.00 | 8/16/2022 |
The following Preferred Stock series was partially redeemed during the nine months ended September 30, 2017:
Series of Preferred Stock | Date Issued | Depositary Shares Redeemed | Redemption Amount (in millions) | Redemption Price | Redemption Date | ||||||||||
Series I (1) | 3/20/2012 | 9,000,000 | $ | 225.0 | $ | 25.00 | 9/6/2017 |
|
|
During February 2015, the Company established an at the market continuous offering program (the “ATM program”) which is effective for a term of three years, pursuant to which the Company may offer and sell shares of its common stock, par value $0.01 per share, with an aggregate gross sales price of up to $500.0 million through a consortium of banks acting as sales agents. Sales of the shares of common stock may be made, as needed, from time to time in “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, including by means of ordinary brokers’ transactions on the New York Stock Exchange (the “NYSE”) or otherwise (i) at market prices prevailing at the time of sale, (ii) at prices related to prevailing market prices or (iii) as otherwise agreed to with the applicable sales agent. The Company did not offer for sale any shares of common stock under the ATM program during the nine months ended September 30, 2017. As of September 30, 2017, the Company had $211.9 million available under this ATM program.
13. Supplemental Schedule of Non-Cash Investing / Financing Activities
The following schedule summarizes the non-cash investing and financing activities of the Company for the nine months ended September 30, 2017 and 2016 (in thousands):
2017 | 2016 | |||||||
Proceeds deposited in escrow through sale of real estate interests | $ | 150,697 | $ | 66,431 | ||||
Acquisition of real estate interests through proceeds held in escrow | $ | 115,853 | $ | 66,044 | ||||
Acquisition of real estate interests by assumption of mortgage debt | $ | - | $ | 33,174 | ||||
Issuance of common stock | $ | - | $ | 85 | ||||
Surrender of restricted common stock | $ | (5,599 | ) | $ | (6,904 | ) | ||
Declaration of dividends paid in succeeding period | $ | 123,270 | $ | 118,136 | ||||
Capital expenditures accrual | $ | 56,879 | $ | 17,604 | ||||
Deemed contribution from noncontrolling interest | $ | 10,000 | $ | - | ||||
Consolidation of Joint Ventures: | - | |||||||
Increase in real estate and other assets | $ | 325,981 | $ | 316,772 | ||||
Increase in mortgages payable, other liabilities and non-controlling interests | $ | 258,626 | $ | 194,964 |
14.
12.Incentive Plans
The Company accounts for equity awards in accordance with FASB’sFASB’s Compensation – Stock Compensation guidance which requires that all share basedshare-based payments to employees, including grants of employee stock options, restricted stock and performance shares, be recognized in the Condensed Consolidated Statements of OperationsIncome over the service period based on their fair values. Fair value is determined, depending on the type of award, using either the Black-Scholes option pricing formula or the Monte Carlo method for performance shares, both of which are intended to estimate the fair value of the awards at the grant date. Fair value of restricted shares is calculated based on the price on the date of grant.
The Company recognized expensesexpenses associated with its equity awards of $17.8$5.9 million and $15.3$5.5 million for the ninethree months ended September 30, 2017 March 31, 2020 and 2016,2019, respectively. As of September 30, 2017, March 31, 2020, the Company had $32.8$52.0 million of total unrecognized compensation cost related to unvested stock compensation granted under the Plans. That cost is expected to be recognized over a weighted average period of approximately 2.93.3 years.
15. Accumulated Other Comprehensive Income (“AOCI”)13.Earnings Per Share
The following tables display sets forth the changereconciliation of earnings and the weighted average number of shares used in the componentscalculation of accumulated other comprehensive income for the nine months ended September 30, 2017basic and 2016:diluted earnings per share (amounts presented in thousands except per share data):
Foreign Currency Translation Adjustments | Unrealized Gain/(Loss) on Available-for- Sale Investments | Unrealized Loss on Interest Rate Swaps | Total | |||||||||||||
Balance as of January 1, 2017 | $ | 6,335 | $ | 406 | $ | (975 | ) | $ | 5,766 | |||||||
Other comprehensive income before reclassifications | 3,711 | (1,466 | ) | 308 | 2,553 | |||||||||||
Amounts reclassified from AOCI (1) | (10,046 | ) | - | - | (10,046 | ) | ||||||||||
Net current-period other comprehensive income | (6,335 | ) | (1,466 | ) | 308 | (7,493 | ) | |||||||||
Balance as of September 30, 2017 | $ | - | $ | (1,060 | ) | $ | (667 | ) | $ | (1,727 | ) |
Three Months Ended | ||||||||
March 31, | ||||||||
2020 | 2019 | |||||||
Computation of Basic and Diluted Earnings Per Share: | ||||||||
Net income available to the Company's common shareholders | $ | 83,746 | $ | 101,635 | ||||
Earnings attributable to participating securities | (686 | ) | (625 | ) | ||||
Net income available to the Company’s common shareholders for basic earnings per share | 83,060 | 101,010 | ||||||
Distributions on convertible units | - | 25 | ||||||
Net income available to the Company’s common shareholders for diluted earnings per share | $ | 83,060 | $ | 101,035 | ||||
Weighted average common shares outstanding – basic | 429,735 | 419,464 | ||||||
Effect of dilutive securities (1): | ||||||||
Equity awards | 717 | 1,182 | ||||||
Assumed conversion of convertible units | 53 | 117 | ||||||
Weighted average common shares outstanding – diluted | 430,505 | 420,763 | ||||||
Net income available to the Company's common shareholders: | ||||||||
Basic earnings per share | $ | 0.19 | $ | 0.24 | ||||
Diluted earnings per share | $ | 0.19 | $ | 0.24 |
|
|
Foreign Currency Translation Adjustments | Unrealized Gains on Available-for- Sale Investments | Unrealized Loss on Interest Rate Swaps | Total | |||||||||||||
Balance as of January 1, 2016 | $ | 6,616 | $ | 398 | $ | (1,426 | ) | $ | 5,588 | |||||||
Other comprehensive income before reclassifications | 971 | 18 | (432 | ) | 557 | |||||||||||
Amounts reclassified from AOCI | - | - | - | - | ||||||||||||
Net current-period other comprehensive income | 971 | 18 | (432 | ) | 557 | |||||||||||
Balance as of September 30, 2016 | $ | 7,587 | $ | 416 | $ | (1,858 | ) | $ | 6,145 |
The Company's unvested restricted share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the unvested restricted share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted share awards based on dividends declared and the unvested restricted shares' participation rights in undistributed earnings.
14.Stockholders’ Equity
Preferred Stock -
The Company’s outstanding Preferred Stock is detailed below:
As of March 31, 2020 and December 31, 2019 | |||||||||||||||||||||||||
Class of Preferred Stock | Shares Authorized | Shares Issued and Outstanding | Liquidation Preference (in thousands) | Dividend Rate | Annual Dividend per Depositary Share |
Par Value | Optional Redemption Date | ||||||||||||||||||
Class L | 10,350 | 9,000 | $ | 225,000 | 5.125 | % | $ | 1.28125 | $ | 1.00 | 8/16/2022 | ||||||||||||||
Class M | 10,580 | 10,580 | 264,500 | 5.250 | % | $ | 1.31250 | $ | 1.00 | 12/20/2022 | |||||||||||||||
19,580 | $ | 489,500 |
Common Stock-
During February 2020, the Company extended its share repurchase program for a term of two years, which will expire in February 2022, pursuant to which the Company may repurchase shares of its common stock, par value $0.01 per share, with an aggregate gross purchase price of up to $300.0 million. The Company did not repurchase any shares under the share repurchase program during the three months ended March 31, 2020. As of March 31, 2020, the Company had $224.9 million available under this share repurchase program.
During September 2019, the Company established an at the market continuous offering program (“ATM program”), pursuant to which the Company may offer and sell from time to time shares of its common stock, par value $0.01 per share, with an aggregate gross sales price of up to $500.0 million through a consortium of banks acting as sales agents. Sales of the shares of common stock may be made, as needed, from time to time in “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, including by means of ordinary brokers’ transactions on the New York Stock Exchange or otherwise (i) at market prices prevailing at the time of sale, (ii) at prices related to prevailing market prices or (iii) as otherwise agreed to with the applicable sales agent. The Company did not offer for sale any shares of common stock under the ATM program during the three months ended March 31, 2020.
Dividends Declared -
The following table provides a summary of the dividends declared per share:
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Common Shares | $ | 0.28000 | $ | 0.28000 | ||||
Class I Depositary Shares (1) | $ | - | $ | 0.37500 | ||||
Class J Depositary Shares (1) | $ | - | $ | 0.34375 | ||||
Class K Depositary Shares (1) | $ | - | $ | 0.35156 | ||||
Class L Depositary Shares | $ | 0.32031 | $ | 0.32031 | ||||
Class M Depositary Shares | $ | 0.32813 | $ | 0.32813 |
(1) | Shares were fully redeemed during 2019 |
15.Supplemental Schedule of Non-Cash Investing / Financing Activities
The following schedule summarizes the non-cash investing and financing activities of the Company for the three months ended March 31, 2020 and 2019 (in thousands):
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Acquisition of real estate interests through proceeds held in escrow | $ | - | $ | 30,970 | ||||
Surrender of restricted common stock | $ | 5,159 | $ | 3,252 | ||||
Declaration of dividends paid in succeeding period | $ | 126,473 | $ | 130,444 | ||||
Capital expenditures accrual | $ | 47,533 | $ | 70,976 |
16.Subsequent Events
During and subsequent to the first quarter 2020, the world has been impacted by the COVID-19 pandemic. It has created significant economic uncertainty and volatility. The extent to which the COVID-19 pandemic impacts the Company’s business, operations and financial results will depend on numerous evolving factors that the Company is not be able to predict at this time, including the duration and scope of the pandemic, governmental, business and individual actions that have been and continue to be taken in response to the pandemic, the impact on economic activity from the pandemic and actions taken in response, the effect on the Company’s tenants and their businesses, the ability of tenants to make their rental payments and any additional closures of tenants’ businesses. Any of these events could materially adversely impact the Company’s business, financial condition, results of operations or stock price.
As of April 30, 2020, the Company’s shopping centers generally remain open, however, a substantial number of tenants have temporarily closed their businesses, have shortened their operating hours or are offering reduced services. The Company has also observed a substantial increase in the number of tenants that have made late or partial rent payments, requested a deferral of rent payments or defaulted on rent payments.
As a result of these requests and the current economic uncertainty, the Company has taken important steps to offer its support:
● | The Company has worked with these tenants to potentially grant rent deferrals on a tenant-by-tenant basis. The deferrals are anticipated to be paid within a period of one year or less. |
● | During April 2020, the Company began piloting a Tenant Assistance Program to assist small business tenants in identifying and applying for federal and state aid to help support their businesses during the COVID-19 pandemic. The Company is working in partnership with law firms to provide assistance with the application process at the Company’s expense. Legal professionals will assist tenants in identifying suitable loan programs, identifying potential lending institutions, and preparing and submitting applications. |
● | The Company is closely monitoring recommendations and mandates of federal, state and local governments and health authorities. |
● | At the onset of the COVID-19 pandemic in the U.S., the Company immediately increased the frequency and intensity of its janitorial services to help prevent the spread of the virus. Areas such as public bathrooms, interior concourses and hallways, vestibules and shared doors, and elevators and escalators are being sanitized multiple times per day. |
● | The Company’s teams are also working quickly to provide additional assistance in the communities where it operates, finding creative ways to use its conveniently located shopping centers during this difficult time. The Company is fast-tracking the approval of drive-thru testing centers, blood drive locations, and school lunch pick-ups, and several of its shopping centers are already offering these services. | |
● | The Company launched the Kimco Curbside Pickup™ program designating dedicated parking spots for curbside pickup at its centers for use by all tenants and their customers. |
In addition, on April 1, 2020, the Company entered into a new $375.0 million unsecured term loan credit facility, that was subsequently increased to $590.0 million through an accordion feature. See Footnote 8 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional discussion regarding the Term Loan.
ItemItem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q, together with other statements and information publicly disseminated by the CompanyKimco Realty Corporation (the “Company”) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with the safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “will,” “target,” “forecast” or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and could materially affect actual results, performances or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) general adverse economic and local real estate conditions, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business, (iii) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms to the Company, (iv) the Company’s ability to raise capital by selling its assets, (v) changes in governmental laws and regulations and management’s ability to estimate the impact of such changes, (vi) the level and volatility of interest rates and foreign currency exchange rates and managements’management’s ability to estimate the impact thereof, (vii) risks related to the Company’s international operations,pandemics or other health crises, such as coronavirus disease 2019 (“COVID-19”), (viii) the availability of suitable acquisition, disposition, development and redevelopment opportunities, , and risks related to acquisitions not performing in accordance with our expectations, (ix) valuation and risks related to the Company’s joint venture and preferred equity investments, (x) valuation of marketable securities and other investments, (xi) increases in operating costs, (xii) changes in the dividend policy for the Company’s common and preferred stock and the Company’s ability to pay dividends at current levels, (xiii) the reduction in the Company’s income in the event of multiple lease terminations by tenants or a failure by multiple tenants to occupy their premises in a shopping center, (xiv) impairment charges (xv) unanticipated changes in the Company’s intention or ability to prepay certain debt prior to maturity and/or hold certain securities until maturity and (xvi) the risks and uncertainties identified under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year endedyear-ended December 31, 2016.2019. Accordingly, there is no assurance that the Company’s expectations will be realized. The Company disclaims any intention or obligation to update the forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to refer to any further disclosures the Company makes or related subjects in the Company’s Current Reports on Form 8-K that the Company files with the Securities and Exchange Commission (“SEC”).
The following discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes thereto. These unaudited financial statements include all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature.
Executive SummaryOverview
Kimco Realty Corporation, a Maryland corporation, is one of the nation’sNorth America’s largest publicly-tradedpublicly traded owners and operators of open-air, grocery-anchored shopping centers.centers and mixed-use assets. The terms “Kimco,” the “Company,” “we,” “our” and “us” each refer to Kimco Realty Corporation and our subsidiaries, unless the context indicates otherwise. The Company’s mission is to create destinations for everyday living that inspire a sense of community and deliver value to our many stakeholders.
The Company is a self-administered real estate investment trust (“REIT”) and has owned and operated open-air shopping centers for over 60 years. The Company has not engaged, nor does it expect to retain, any REIT advisors in connection with the operation of its properties. As of September 30, 2017,March 31, 2020, the Company had interests in 508401 U.S. shopping center properties, aggregating 84.270.0 million square feet of gross leasable area (“GLA”), located in 32 states, Puerto Rico and Canada.27 states. In addition, the Company had 374215 other property interests, primarily through the Company’s preferred equity investments and other real estate investments, totaling 5.96.0 million square feet of GLA. The Company’s ownership interests in real estate consist of its consolidated portfolio and portfolios where the Company owns an economic interest, such as properties in the Company’s investment real estate management programs, where the Company partners with institutional investors and also retains management.
The executive officersCompany’s operating strategies are engagedto (i) own and operate its shopping center properties at their highest potential through maximizing and maintaining rental income and occupancy levels, (ii) attract local area customers to its shopping centers, which offer buy online and pick up in thestore, off-price merchandise and day-to-day managementnecessities rather than high-priced luxury items, and operation of real estate exclusively with the Company, with nearly all operating functions, including leasing, asset management, maintenance, construction, legal, finance and accounting, administered by the Company.(iii) maintain a strong balance sheet.
The Company’sCompany’s investment strategy is to be the premier owner and operator of open-air shopping centers through investments primarilyinvest capital into its high-quality assets which are tightly clustered in the U.S. To achieve this strategy the Company is (i) continuing to transform the quality of its portfolio bymajor metropolitan markets that provide opportunity for growth while disposing of lesser quality assets and acquiring larger, higher quality properties in key markets identified byless desirable locations. Through this strategy, the Company has transformed its portfolio and will continue these efforts as deemed necessary to maximize the quality and growth of its portfolio. Property acquisitions are focused in major metropolitan areas allowing tenants to generate higher foot traffic resulting in higher sales volume accompanied with a potential for which substantial progress has been achieved asa mixed-use component. The Company believes that this will enable it to maintain higher occupancy levels, rental rates and rental growth.
The Company’s investment strategy also includes the retail re-tenanting, renovation and expansion of its business by: (a) reducing the number of joint venture investmentsexisting centers and (b) exiting Mexico, South America and Canada, for which the exit of South America has been completed and Mexico and Canada have been substantially completed, (iii)acquired centers, while also pursuing redevelopment opportunities within its portfolio to increase overall value within its portfolio. The Company may selectively acquire established income-producing real estate properties and (iv)properties requiring significant re-tenanting and redevelopment, primarily in geographic regions in which the Company presently operates. Additionally, the Company may selectively acquiringacquire land parcels in ourits key markets for real estate development projects for long-term investment. The Company may consider investments in other real estate sectors and in geographic markets where it does not presently operate should suitable opportunities arise. The Company also continues to simplify its business by reducing the number of joint venture investments.
As part of the Company’s investment strategy each property is evaluated for its highest and best use, which may include residential and mixed-use components. In addition, the Company may consider other opportunistic investments related to retailer controlled real estate such as repositioning underperforming retail locations, retail real estate financing and bankruptcy transaction support. The Company has an activea capital recycling program whichthat provides for the disposition of certain U.S. properties.lesser quality assets. If the Company accepts sales pricesestimated fair value for any of these assets that areis less than their net carrying values, the Company would be required to take impairment charges and such amounts could be material. In order to execute
COVID-19 Pandemic
The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide, and has caused significant volatility in U.S. and international debt and equity markets. The COVID-19 pandemic has significantly impacted the retail sector in which the Company operates, and if the effects of the pandemic are prolonged, it could have a significant adverse impact on the underlying industries of many of the Company’s strategy,tenants. Accordingly, the Company’s tenants and their operations, and, thus, their ability to pay rent, have been impacted and may continue to be impacted. At the end of April 2020, all the Company’s shopping centers remain open and operational continuing to provide access to tenants providing essential goods and services. However, a substantial number of tenants have temporarily closed their business, have shortened their operating hours or are offering reduced services. Based on information currently available to us, approximately 44% of annual base rent across the portfolio comes from tenants that are subject to some form of mandatory closure or have voluntarily closed. As a result, the Company intendshas observed a substantial increase in the number of tenants that have made late or partial rent payments, requested a deferral of rent payments, or defaulted on rent payments, and it is likely that more of our tenants will be similarly impacted in the future. The Company received rent deferral requests approximating 35% of the Company’s pro-rata minimum base rent for the month of April, with the Company selectively granting deferrals for 14% of the minimum base rent for this period. The Company continues to negotiate for the payment of the remaining April rent not yet collected.
The impact of COVID-19 on the Company’s future results could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19, the success of governmental, business and individual actions that have been and continue to strengthenbe taken in response to COVID-19, the impact of COVID-19 on economic activity, the effect of COVID-19 on the Company’s tenants and their businesses, the ability of tenants to make their rental payments and any additional closures of tenants’ businesses.
The Company is continuing to monitor the impact of COVID-19 on the Company’s business, tenants and industry as a whole. The magnitude and duration of the COVID-19 pandemic and its balance sheet by pursuing deleveraging efforts over time, providing itimpact on the necessary flexibilityCompany’s operations and liquidity is uncertain as of the filing date of this Quarterly Report on Form 10-Q as this pandemic continues to invest opportunisticallyevolve globally. However, if the COVID-19 pandemic continues its current trajectory, such impacts could grow and selectively, primarily focusingbecome material and could materially disrupt the Company’s business operations. See Part II. Item 1A. "Risk Factors" of this Quarterly Report on U.S. open-air shopping centers.Form 10-Q and Footnotes 1, 2, 8 and 16 to the Notes to the Company’s Condensed Consolidated Financial Statements for further discussion of the possible impact of the COVID-19 pandemic on the Company’s business.
As of March 31, 2020, the Company has not incurred any significant disruptions to its business activities. Management cannot, at this point, estimate ultimate losses related to the COVID-19 pandemic, and accordingly no impairment charges were reflected in the accompanying financial statements related to this matter. The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will assess its asset portfolio for any impairment indicators. If the Company determines that any of its assets are impaired, the Company would be required to take impairment charges and such amounts could be material. See Footnote 3 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional discussion regarding impairment charges.
Also, in response to the COVID-19 pandemic, in April 2020, the Company closed on a $375.0 million unsecured term loan credit facility (the "Term Loan") that was subsequently increased to $590.0 million through an accordion feature.
Results of Operations
Comparison of the three months ended March 31, 2020 and 2019
The following table presents the comparative results from the Company’s Condensed Consolidated Statements of Income for the three months ended September 30, 2017and 2016March 31, 2020, as compared to the corresponding periods in 2019 (in thousands, except per share data):
Three Months Ended | ||||||||||||||||
September 30, | ||||||||||||||||
(amounts in millions) | ||||||||||||||||
2017 | 2016 | Change | % change | |||||||||||||
Revenues from rental property (1) | $ | 290.9 | $ | 279.3 | $ | 11.6 | 4.2 | % | ||||||||
Rental property expenses: (3) | ||||||||||||||||
Rent | $ | 2.8 | $ | 2.7 | $ | 0.1 | 3.7 | % | ||||||||
Real estate taxes | 38.4 | 37.7 | 0.7 | 1.9 | % | |||||||||||
Operating and maintenance | 33.2 | 32.6 | 0.6 | 1.8 | % | |||||||||||
$ | 74.4 | $ | 73.0 | $ | 1.4 | 1.9 | % | |||||||||
Depreciation and amortization (4) | $ | 88.4 | $ | 96.8 | $ | (8.4 | ) | (8.7% | ) |
Three Months Ended March 31, | ||||||||||||
2020 | 2019 | Change | ||||||||||
Revenues | ||||||||||||
Revenues from rental properties, net | $ | 286,004 | $ | 290,634 | $ | (4,630 | ) | |||||
Management and other fee income | 3,740 | 4,376 | (636 | ) | ||||||||
Operating expenses | ||||||||||||
Rent (1) | (2,835 | ) | (2,692 | ) | (143 | ) | ||||||
Real estate taxes | (39,652 | ) | (39,347 | ) | (305 | ) | ||||||
Operating and maintenance (2) | (42,408 | ) | (40,896 | ) | (1,512 | ) | ||||||
General and administrative (3) | (21,017 | ) | (25,831 | ) | 4,814 | |||||||
Impairment charges | (2,974 | ) | (4,175 | ) | 1,201 | |||||||
Depreciation and amortization | (69,397 | ) | (71,561 | ) | 2,164 | |||||||
Gain on sale of properties | 3,847 | 23,595 | (19,748 | ) | ||||||||
Other income/(expense) | ||||||||||||
Other (expense)/income, net | (3,422 | ) | 2,622 | (6,044 | ) | |||||||
Interest expense | (46,060 | ) | (44,395 | ) | (1,665 | ) | ||||||
Provision for income taxes, net | (43 | ) | (630 | ) | 587 | |||||||
Equity in income of joint ventures, net | 13,648 | 18,754 | (5,106 | ) | ||||||||
Equity in income of other real estate investments, net | 10,958 | 6,224 | 4,734 | |||||||||
Net income attributable to noncontrolling interests | (289 | ) | (509 | ) | 220 | |||||||
Preferred dividends | (6,354 | ) | (14,534 | ) | 8,180 | |||||||
Net income available to the Company's common shareholders | $ | 83,746 | $ | 101,635 | $ | (17,889 | ) | |||||
Net income available to the Company: | ||||||||||||
Diluted per common share | $ | 0.19 | $ | 0.24 | $ | (0.05 | ) |
Comparison of the nine months ended September 30, 2017and 2016
Nine Months Ended | ||||||||||||||||
September 30, | ||||||||||||||||
(amounts in millions) | ||||||||||||||||
2017 | 2016 | Change | % change | |||||||||||||
Revenues from rental property (2) | $ | 873.2 | $ | 859.5 | $ | 13.7 | 1.6 | % | ||||||||
Rental property expenses: (3) | ||||||||||||||||
Rent | $ | 8.3 | $ | 8.3 | $ | - | - | |||||||||
Real estate taxes | 115.4 | 108.0 | 7.4 | 6.9 | % | |||||||||||
Operating and maintenance | 102.9 | 100.4 | 2.5 | 2.5 | % | |||||||||||
$ | 226.6 | $ | 216.7 | $ | 9.9 | 4.6 | % | |||||||||
Depreciation and amortization (5) | $ | 275.8 | $ | 264.4 | $ | 11.4 | 4.3 | % |
(1) |
| |
|
|
|
|
(2) | Operating and maintenance expense |
|
|
|
|
General and administrative costs include employee-related expenses (salaries, bonuses, equity awards, benefits, severance costs and payroll taxes), professional fees, office rent, travel expense and other company-specific expenses. General and administrative expenses decreased $3.4Net income available to the Company’s common shareholders was $83.7 million for the ninethree months ended September 30, 2017,March 31, 2020, as compared to $101.6 million for the comparable period in 2019. On a diluted per common share basis, net income available to the Company for the three months ended March 31, 2020 was $0.19 as compared to $0.24 for the comparable period in 2019.
The following describes the changes of certain line items included on the Company’s Condensed Consolidated Statements of Income, that the Company believes changed significantly and affected Net income available to the Company's common shareholders during the three months ended March 31, 2020, as compared to the corresponding period in 2016,2019:
Revenue from rental properties, net –
The decrease in Revenues from rental properties, net of $4.6 million is primarily from (i) a decrease in revenues of $13.1 million due to reductionsproperties sold during 2020 and 2019, partially offset by (ii) the completion of certain redevelopment and development projects included in professional fees, public company costs and other personnel related costs.
During the nine months ended September 30, 2017 and 2016, the Company recognized impairment charges related to adjustments to property carrying values of $34.3 million and $68.1 million, respectively, for which the Company’s estimated fair values of these properties were primarily based upon estimated sales prices from (i) signed contracts or letters of intent from third party offers or (ii) discounted cash flow models. These adjustments to property carrying values were recognized in connection with the Company’s efforts to market certain properties and management’s assessment as to the likelihood and timing of such potential transactions and the long-term plan for certain properties. Certain of the calculations to determine fair value utilized unobservable inputs and as such are classified as Level 3 of the fair value hierarchy.
Other income, net decreased $3.3Signature Series™, which provided incremental revenues for the three months ended September 30, 2017,March 31, 2020 of $4.5 million, as compared to the corresponding period in 2016. This decrease is primarily due to a decrease2019 and (iii) acquisitions, tenant buyouts and net growth in income from the Company’s investment in retail store leases related to the termination of a lease duringcurrent portfolio, which provided incremental revenues for the three months ended September 30, 2016.
Interest expense decreased $9.7March 31, 2020 of $4.0 million, for the nine months ended September 30, 2017, as compared to the corresponding period in 2016. This2019.
General and administrative –
The decrease in General and administrative expense of $4.8 million is primarily due to (i) a reduction of $2.6 million primarily due to the Company’s utilizationfluctuations in value of net proceeds from unsecured debt offeringsvarious directors’ deferred stock during 2017 and 2016 to payoff secured debt which had higher interest rates. As a result, the Company effectively lowered its overall interest rate on borrowings for the ninethree months ended September 30, 2017,March 31, 2020, as compared to the corresponding period in 2016.
During the nine months ended September 30, 2017, the Company incurred early extinguishment of debt charges aggregating $1.8 million2019, (ii) a reduction in connection with the tender premium on Medium Term Notes that were partially tendered prior to maturity.
During the nine months ended September 30, 2016, the Company incurred early extinguishment of debt charges aggregating $45.7 million in connection with the optional make-whole provisions of unsecured notes that were repaid prior to maturitysalary and prepayment penalties on a mortgage encumbering 10 operating properties, which the Company also paid prior to the scheduled maturity date.
Benefit/(provision) for income taxes, net changed $62.1 million to a benefit of $0.7 millionseverance expense for the three months ended September 30, 2017,March 31, 2020 of $1.8 million, as compared to a provision of $61.4 million for the corresponding period in 2016. This2019, and (iii) a reduction in office rent expense of $0.4 million as compared to the corresponding period in 2019.
Gain on sale of properties –
During the three months ended March 31, 2020, the Company disposed of an operating property for a sales price of $13.5 million, which resulted in a gain of $3.8 million.
During the three months ended March 31, 2019, the Company disposed of five operating properties and two out-parcels, in separate transactions, for an aggregate sales price of $74.2 million. These transactions resulted in aggregate gains of $23.6 million.
Other (expense)/income, net –
The change in Other (expense)/income, net of $6.0 million is primarily due to (i) a decreasechanges in tax provisionthe fair value of $63.5 million resulting from the recognition of a valuation allowance as a result of the Company’s merger of its taxable REIT subsidiary into a wholly-owned LLC of the Company on August 1, 2016.available-for-sale marketable securities.
Benefit/(provision) for income taxes, net changed $75.5 million to a benefit of $2.2 million for the nine months ended September 30, 2017, as compared to a provision of $73.3 million for the corresponding period in 2016. This change is primarily due to (i) a decrease of $63.5 million resulting from the recognition of a valuation allowance as a result of the Company’s merger of its taxable REIT subsidiary into a wholly-owned LLC of the Company on August 1, 2016 and (ii) a decrease in foreign tax expense of $31.0 million primarily relating to the sale of certain unconsolidated properties during 2016 within the Company’s Canadian portfolio which were subject to foreign taxes at a consolidated reporting entity level, partially offset by (iii) a decrease in tax benefit of $17.1 million primarily related to impairments recognized during the nine months ended September 30, 2016 and (iv) an increase of $2.0 million resulting from the favorable settlement of a tax audit during the nine months ended September 30, 2016.
Equity in income of joint ventures, net decreased $153.1–
The decrease in Equity in income of joint ventures, net of $5.1 million foris primarily due to (i) the ninerecognition of net gains of $3.7 million resulting from the sale of properties within various joint venture investments during the three months ended September 30, 2017,March 31, 2019 and (ii) lower equity in income of $1.4 million within various joint venture investments during 2020, as compared to the corresponding period in 2016. This decrease is primarily due to (i) a decrease in net gains of $149.8 million resulting from fewer sales of properties and ownership interests within various joint venture investments, during the nine months ended September 30, 2017, as compared to the corresponding period in 2016, (ii) the recognition of cumulative foreign currency translation loss of $4.8 million as a result of the substantial liquidation of the Company’s investments in Canada during 2017 and (iii) lower equity in income of $4.6 million primarily2019, resulting from the salessale of properties within various joint venture investments and the acquisition of partnership interests in joint ventures by the Company during 2017 and 2016, partially offset by (iv) a decrease in impairment charges of $6.1 million recognized during 2017, as compared to 2016.2019.
During the nine months ended September 30, 2017, the Company acquired,Equity in separate transactions, a controlling interestincome of other real estate investments, net –
The increase in three operating properties from certain joint venture partners in which the Company had noncontrolling interests. As a result of these transactions, the Company recorded an aggregate gain on change in control of interests of $71.2 million related to the fair value adjustments associated with its previously held equity interest in the operating properties.
During the nine months ended September 30, 2016, the Company acquired six operating properties and one development project from a joint venture in which the Company had a noncontrolling interest. As a result of these transactions, the Company recorded an aggregate gain on change in control of interests of $53.1 million related to the fair value adjustments associated with its previously held equity interest in the operating properties.
Equity in income of other real estate investments, net increased $16.1of $4.7 million foris primarily due to a net increase in profit participation from the three months ended September 30, 2017,sale of properties within the Company’s Preferred Equity Program during 2020, as compared to the corresponding period in 2016. This increase2019.
Preferred dividends –
The decrease in Preferred dividends of $8.2 million is primarily due to (i) the recognitionredemption of cumulative foreign currency translation gain of $14.8 million as a result of the substantial liquidation of the Company’s investments in Canadapreferred shares (Classes I, J and K) during 2017 and (ii) an increase in earnings and profit participation from capital transactions within the Company’s Preferred Equity Program of $1.3 million during the three months ended September 30, 2017, as compared to the corresponding period in 2016.
Equity in income of other real estate investments, net increased $39.4 million for the nine months ended September 30, 2017, as compared to the corresponding period in 2016. This increase is primarily due to (i) an increase of $34.6 million in equity in income from the Albertsons joint venture resulting from cash distributions received in excess of the Company’s carrying basis during the nine months ended September 30, 2017, and (ii) the recognition of cumulative foreign currency translation gain of $14.8 million as a result of the substantial liquidation of the Company’s investments in Canada during 2017, partially offset by (iii) a decrease in earnings and profit participation from capital transactions within the Company’s Preferred Equity Program of $10.0 million during the nine months ended September 30, 2017, as compared to the corresponding period in 2016.2019.
During the nine months ended September 30, 2017, the Company disposed of 15 consolidated operating properties and eight parcels, in separate transactions, for an aggregate sales price of $230.2 million. These transactions resulted in (i) an aggregate gain of $62.1 million and (ii) aggregate impairment charges of $13.0 million.
During the nine months ended September 30, 2016, the Company disposed of 26 consolidated operating properties and one out-parcel, in separate transactions, for an aggregate sales price of $334.9 million. These transactions resulted in (i) an aggregate gain of $75.9 million, after income tax expense, and (ii) aggregate impairment charges of $7.8 million, before noncontrolling interest expense of $0.2 million.
Net income attributable to noncontrolling interests increased $9.1 million for the nine months ended September 30, 2017, as compared to the corresponding period in 2016. This increase is primarily due to an increase in equity in income attributable to the Company’s noncontrolling partners in the Albertsons joint venture during 2017.
Net income available to the Company's common shareholders was $102.0 million for the three months ended September 30, 2017, as compared to a net loss of $55.1 million for the three months ended September 30, 2016. On a diluted per share basis, net income available to the Company’s common shareholders for the three months ended September 30, 2017, was $0.24 per share, as compared to a net loss of $0.13 per share for the three months ended September 30, 2016. These changes are primarily attributable to (i) a decrease in provision for income taxes, net, (ii) an increase in gains on sale of operating properties, (iii) a decrease in early extinguishment of debt charges, (iv) an increase in equity in income of other real estate investments, net, (v) a decrease in impairment charges of operating properties, (vi) a decrease in depreciation and amortization expense, (vii) incremental earnings due to the acquisition of operating properties during 2017 and 2016 as well as increased profitability from the Company’s operating properties, partially offset by (viii) an increase in preferred stock redemption costs and (ix) a decrease from gain on change of control of interests.
Net income available to the Company's common shareholders was $299.0 million for the nine months ended September 30, 2017, as compared to $265.9 million for the nine months ended September 30, 2016. On a diluted per share basis, net income available to the Company’s common shareholders for the nine months ended September 30, 2017, was $0.70 as compared to $0.63 for the nine months ended September 30, 2016. These changes are primarily attributable to (i) a decrease in provision for income taxes, net, (ii) a decrease in early extinguishment of debt charges, (iii) an increase in equity in income of other real estate investments, net, (iv) a decrease in impairment charges of operating properties, (v) a decrease in interest expense, (vi) an increase from gain on change of control of interests and (vii) incremental earnings due to the acquisition of operating properties during 2017 and 2016 as well as increased profitability from the Company’s operating properties, partially offset by (viii) a decrease in equity in income of joint ventures, net, resulting from the sales of properties within various joint venture investments and the acquisition of partnership interests in joint ventures by the Company during 2017 and 2016, (ix) a decrease in gains on sale of operating properties, (x) an increase in preferred stock redemption costs and (xi) an increase in depreciation and amortization expense.
Tenant Concentration
The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties avoiding dependence on any single property, and a large tenant base. At September 30, 2017,March 31, 2020, the Company’s five largest tenants were TJX Companies, The Home Depot, Ahold Delhaize Bed Bath & BeyondUSA, Albertsons and Albertsons,Ross Stores, which represented 3.7%3.9%, 2.5%, 2.1%, 1.9%2.0% and 1.7%1.8%, respectively, of the Company’s annualized base rental revenues, including the proportionate share of base rental revenues from properties in which the Company has less than a 100% economic interest. As discussed above, as a result of the COVID-19 pandemic, the Company has observed a substantial increase in the number of tenants that have made late or partial rent payments, requested a deferral of rent payments, or defaulted on rent payments, and it is likely that more of our tenants will be similarly impacted in the future.
Liquidity and Capital Resources
The Company’sCompany’s capital resources include accessing the public debt and equity capital markets, mortgageterm loan, mortgages and construction loan financing, borrowings under term loans and immediate access to an unsecured revolving credit facility (the “Credit Facility”)the Credit Facility with bank commitments of $2.25$2.0 billion which can be increased to $2.75 billion through an accordion feature.
The Company’sCompany’s cash flow activities are summarized as follows (in millions)thousands):
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Net cash flow provided by operating activities | $ | 493.8 | $ | 444.5 | ||||
Net cash flow (used for)/provided by investing activities | $ | (278.3 | ) | $ | 248.2 | |||
Net cash flow used for financing activities | $ | (201.4 | ) | $ | (711.8 | ) |
Three months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cash and cash equivalents, beginning of the period | $ | 123,947 | $ | 143,581 | ||||
Net cash flow provided by operating activities | 155,249 | 155,258 | ||||||
Net cash flow used for investing activities | (66,553 | ) | (15,542 | ) | ||||
Net cash flow provided by/(used for) financing activities | 239,153 | (139,624 | ) | |||||
Net change in cash and cash equivalents | 327,849 | 92 | ||||||
Cash and cash equivalents, end of the period | $ | 451,796 | $ | 143,673 |
Operating Activities
The Company anticipates that cash on hand, net cash flow provided by operating activities, borrowings under its Credit Facility and Term Loan and the issuance of equity and public debt, as well as other debt and equity alternatives, will provide the necessary capital required by the Company. Cash flowsThe Company will continue to evaluate its capital requirements for both its short-term and long-term liquidity needs, all of which are highly uncertain and cannot be predicted, could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in Part II, Item 1A. Risk Factors. See further discussion relating to the effects of the COVID-19 pandemic in the “COVID-19 Pandemic”, “Investing Activities” and “Financing Activities” sections within this Item 2.
Net cash flow provided by operating activities for the ninethree months ended September 30, 2017, were $493.8March 31, 2020, was $155.2 million, as compared to $444.5$155.3 million for the comparable period in 2016. This increase2019. The decrease of $49.3$0.1 million is primarily attributable to:
● | the disposition of operating properties in 2020 and 2019; partially offset by |
● | an increase in distributions from the Company’s joint venture programs; |
● | new leasing, expansion and re-tenanting of core portfolio properties; |
● | changes in operating assets and liabilities due to timing of receipts and payments; and |
● | the acquisition of an operating property during 2020. |
Due to (i) an increasethe current economic uncertainty resulting from the COVID-19 pandemic, the Company has been working with its tenants to potentially grant rent deferrals on a tenant-by-tenant basis relating to April rents. The deferrals are anticipated to be paid within a period of one year or less.
In addition, during April 2020, the Company began piloting a Tenant Assistance Program to assist small business tenants in identifying and applying for federal and state aid to help support their businesses during the COVID-19 pandemic. The Company is working in partnership with law firms to provide assistance with the application process at the Company’s expense. Legal professionals will assist tenants in identifying suitable loan programs, identifying potential lending institutions, and preparing and submitting applications.
Investing Activities
Net cash flow due to new leasing, expansion, re-tenanting of core portfolio properties and a decrease in interest expense, (ii) changes in operating assets and liabilities due to timing of receipts and payments and (iii) a change in Canadian withholding tax receivables related to the sale of various Canadian investments during 2016, partially offset by (iv) a decrease in operational distributions from the Company’s joint venture programs, due to the sale of certain joint ventures during 2017 and 2016.
Investing Activities
Cash flows used for investing activities was $66.6 million for the ninethree months ended September 30, 2017, were $278.3 million,March 31, 2020, as compared to cash flows provided by investing activities of $248.2$15.5 million for the comparable period in 2016. This change of $526.5 million resulted primarily from (i) a decrease in return of investment and distributions from liquidation of real estate joint ventures of $325.8 million, primarily due to the liquidation of certain Canadian joint ventures in 2016, (ii) a decrease in proceeds from the sale of operating properties and development properties of $190.4 million, (iii) an increase in improvements to real estate under development of $79.7 million, (iv) a decrease of $53.1 million in reimbursements of investments in and advances to real estate joint ventures and (v) an increase in improvements to operating real estate of $34.5 million, partially offset by (vi) a decrease in acquisition of operating real estate and other related net assets of $70.7 million, (vii) a decrease in acquisition of real estate under development of $41.6 million, (viii) an increase in reimbursements of investments and advances to other real estate investments of $29.0 million and (ix) a decrease in investments in and advances to real estate joint ventures of $23.3 million.2019.
Investing activities during 2020 primarily consisted of:
Cash inflows:
● | $13.3 million in proceeds from the sale of a consolidated operating property; and |
● | $2.5 million in proceeds from insurance casualty claims. |
Cash outflows:
● | $71.6 million for improvements to operating real estate primarily related to the Company’s active redevelopment pipeline and improvements to real estate under development; |
● | $7.1 million for the acquisition of operating real estate; and |
● | $5.8 million for investments in and advances to real estate joint ventures, primarily related to a redevelopment project within the Company’s joint venture portfolio, and investments in other real estate investments, primarily related to repayment of a mortgage within the Company’s Preferred Equity Program. |
Investing activities during 2019 primarily consisted of:
Cash inflows:
● | $72.1 million in proceeds from the sale of five consolidated operating properties and two out-parcels. |
Cash outflows:
● | $77.6 million for improvements to operating real estate primarily related to the Company’s active redevelopment pipeline and improvements to real estate under development; and |
● | $12.4 million for investments in and advances to real estate joint ventures, primarily related to a redevelopment project within the Company’s joint venture portfolio, and investments in other real estate investments, primarily related to repayment of a mortgage within the Company’s Preferred Equity Program. |
Acquisitions
Acquisition of Operating Real Estate and Other Related Net Assets-–
During the nine three months ended September 30, 2017March 31, 2020 and 2016,2019, the Company expended $110.8$7.1 million and $181.5$0 million (after use of Internal Revenue Code Section 1031 proceeds of $31.0 million in 2019), respectively, towards the acquisition of an operating real estate properties. The Company continuesproperty adjacent to transform itsan existing operating portfolio through its capital recycling program by acquiring what the Company believes are high quality U.S. retail properties and disposing of lesser quality assets.real estate property. The Company anticipates acquiringspending approximately $140.0up to $75.0 million to $165.0 milliontowards the acquisition of operating properties duringfor the remainder of 2017.2020. The Company intends to fund these acquisitions with net cash flow provided by operating activities, proceeds from property dispositions cash flow from operating activities, assumption of mortgage debt, if applicable, and availability under the Company’s revolving line of credit.Company's Credit Facility and Term Loan.
Improvements to Operating Real Estate-Estate–
During the nine three months ended September 30, 2017March 31, 2020 and 2016,2019, the Company expended $136.5$55.0 million and $102.1$51.3 million, respectively, towards improvements to operating real estate. These amounts consist of the following (in thousands):
Nine Months Ended September 30, | Three months Ended March 31, | |||||||||||||||
2017 | 2016 | 2020 | 2019 | |||||||||||||
Redevelopment and renovations | $ | 116,577 | $ | 58,984 | $ | 43,871 | $ | 36,357 | ||||||||
Tenant improvements and tenant allowances | 12,324 | 37,237 | 11,102 | 11,937 | ||||||||||||
Other | 7,633 | 5,863 | - | 3,051 | ||||||||||||
Total (1) | $ | 136,534 | $ | 102,084 | ||||||||||||
Total improvements (1) | $ | 54,973 | $ | 51,345 |
(1) | During the |
During the nine months ended September 30, 2017 and 2016, the Company capitalized personnel costs of $10.0 million and $9.8 million, respectively, relating to deferred leasing costs.
The Company has an ongoing program to redevelop and re-tenant its properties to maintain or enhance its competitive position in the marketplace. The Company is actively pursuing redevelopment opportunities within its operating portfolio which it believes will increase the overall value by bringing in new tenants and improving the assets’assets’ value. The Company has identified three categories of redevelopment, (i) large scale redevelopment, which involves demolishing and building new square footage, (ii) value creation redevelopment, which includes the subdivision of large anchor spaces into multiple tenant layouts, and (iii) creation of out-parcels and pads which are located in the front of the shopping center properties.
Due to the recent COVID-19 pandemic mentioned above, the Company is re-evaluating its current redevelopment and re-tenanting projects and will only move forward with the projects it feels are necessary. The Company anticipates its capital commitment toward these redevelopment projects and re-tenanting efforts duringfor the remainder of 20172020 will be approximately $75.0$80.0 million to $100.0$130.0 million. The funding of these capital requirements will be provided by proceeds from property dispositions, net cash flow fromprovided by operating activities and availability under the Company’s revolving line of credit.Credit Facility.
Real Estate Under Development-–
The Company is engaged in select real estate development projects, which are expected to be held as long-term investments. As of September 30, 2017,March 31, 2020, the Company had in progress a total of fiveone active real estate development projectsproject in progress. During the three months ended March 31, 2020 and two additional projects held for future2019, the Company expended $16.6 million and $26.3 million, respectively, towards improvements to real estate under development. The Company capitalized (i) interest of $2.0 million and $1.9 million, (ii) real estate taxes, insurance and legal costs of $0.4 million and $0.3 million and (iii) payroll of $0.5 million and $0.5 million during the three months ended March 31, 2020 and 2019, respectively, in connection with its real estate development project. The Company anticipates the total remaining costs to complete these projectsthis active project to be approximately $225.0$25.0 million to $275.0$50.0 million. The Company anticipates its capital commitment toward thesethis development projects duringproject for the remainder of 20172020 will be approximately $75.0$20.0 million to $100.0$40.0 million. The funding of these capital requirements will be provided by proceeds from property dispositions, net cash flow fromprovided by operating activities, construction financing, where applicable, and availability under the Company’s revolving line of credit.Credit Facility.
Financing Activities
Cash flows Net cash flow provided by financing activities was $239.2 million for the three months ended March 31, 2020, as compared to net cash flow used for financing activities for the nine months ended September 30, 2017, were $201.4 million, as compared to $711.8of $139.6 million for the comparable period in 2016. This change2019.
Financing activities during 2020 primarily consisted of:
Cash inflows:
● | $475.0 million in proceeds from borrowings under the Company’s unsecured revolving Credit Facility, net. |
Cash outflows:
● | $127.3 million of dividends paid; |
● | $78.4 million for principal payments on debt (primarily related to the repayment of debt on an encumbered property and the payoff of a construction loan), including normal amortization on rental property debt; |
● | $20.9 million for the redemption/distribution of noncontrolling interests, primarily related to the redemption of certain partnership interests by consolidated subsidiaries; and |
● | $5.1 million for financing origination costs, primarily related to the new unsecured revolving credit facility. |
Financing activities during 2019 primarily from (i) an increase in proceeds from issuance of unsecured notes of $600.0 million, (ii) a decrease in repayments under unsecured term loan/notes of $400.9 million, (iii) an increase in proceeds from mortgage loan financings of $206.0 million and (iv) a decrease in payment of early extinguishment of debt charges of $43.2 million, partially offset by (v) a decrease in proceeds from unsecured revolving Credit Facility, net of $226.5 million, (vi) an increase in redemption of preferred stock of $225.0 million, (vii) an increase in conversion/distribution of noncontrolling interests of $92.2 million, (viii) a decrease in proceeds from issuance of stock, net of $88.1 million, (ix) an increase in principal payments on debt of $73.1 million and (x) an increase in dividends paid of $27.1 million.consisted of:
Cash inflows:
● | $3.3 million in proceeds from construction loan financing at one development project. |
Cash outflows:
● | $132.5 million of dividends paid; and |
● | $6.4 million for principal payments on debt (primarily related to the repayment of debt on an encumbered property), including normal amortization on rental property debt. |
The Company continually evaluates its debt maturities, and, based on management’smanagement’s current assessment, believes it has viable financing and refinancing alternatives that will not materially adversely impact its expected financial results. The Company continues to pursue borrowing opportunities with large commercial U.S. and global banks, select life insurance companies and certain regional and local banks. TheDue to the recent COVID-19 pandemic mentioned above, the Company has noticed a continuing trend that, although pricing remains dependent on specific deal terms, generally spreads for non-recourse mortgage and construction loan financing stabilized,have been widening, and the unsecured debt markets are functioning well andavailable with elevated credit spreads are at manageable levels.spreads.
Debt maturities for the remainder of 20172020 consist of $12.4of: $83.6 million of consolidated debt, which relates$111.6 million of unconsolidated joint venture debt and $61.9 million of debt included in the Company’s Preferred Equity Program, assuming the utilization of extension options where available. The 2020 consolidated debt maturities are anticipated to a non-recourse mortgage that is currently in default for whichbe repaid with operating cash flows, borrowings from the Company is working with the special servicer on a resolution.
Company’s Credit Facility and debt refinancing where applicable. The Company intends to maintain strong debt service coverage and fixed charge coverage ratios as part of its commitment to maintain its investment-grade senior, unsecured debt ratings. The Company may, from time-to-time, seek to obtain funds through additional common and preferred equity offerings, unsecured debt financings, mortgages and/or mortgage/construction loan financingsfinancing and other capital alternatives.
Since the completion of the Company’sCompany’s IPO in 1991, the Company has utilized the public debt and equity markets as its principal source of capital for its expansion needs. Since the IPO, the Company has completed additional offerings of its public unsecured debt and equity, raising in the aggregate over $13.6$14.5 billion. Proceeds from public capital market activities have been used for the purposes of, among other things, repaying indebtedness, acquiring interests in open-air, grocery-anchored shopping centers and mixed-use assets, funding real estate under development projects, expanding and improving properties in the portfolio and other investments.
During February 2015,2018, the Company filed a shelf registration statement on Form S-3, which is effective for a term of three years, for the future unlimited offerings, from time-to-time, of debt securities, preferred stock, depositary shares, common stock and common stock warrants. The Company, pursuant to this shelf registration statement may, from time-to-time, offer for sale its senior unsecured debt for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisitions, development and redevelopment costs and (ii) managing the Company’sCompany’s debt maturities.
PreferredCommon Stock- –
During August 2017, the Company issued 9,000,000 Depositary Shares (the "Series L Depositary Shares"), each representing a one-thousandth fractional interest in a share of the Company's 5.125% Series L Cumulative Redeemable Preferred Stock, $1.00 par value per share. Dividends on the Series L Depositary Shares are cumulative and payable quarterly in arrears at the rate of 5.125% per annum based on the $25.00 per share initial offering price, or $1.28125 per annum. The Series L Depositary Shares are redeemable, in whole or part, for cash on or after August 16, 2022, at the option of the Company, at a redemption price of $25.00 per depositary share, plus any accrued and unpaid dividends thereon. The Series L Depositary Shares are not convertible or exchangeable for any other property or securities of the Company. The net proceeds received from this offering of $217.6 million were used for general corporate purposes, including the reduction of borrowings outstanding under the Company’s revolving credit facility and the redemption of shares of the Company’s preferred stock.
On August 7, 2017, the Company called for the partial redemption of 9,000,000 of its outstanding depositary shares of the Company’s 6.00% Series I Cumulative Redeemable Preferred Stock, $1.00 par value per share (the "Series L Preferred Stock"), representing 56.25% of the issued and outstanding Series I Preferred Stock. The aggregate redemption amount of $225.0 million plus accumulated and unpaid dividends of $1.9 million, was paid on September 6, 2017. Upon partial redemption, the Company recorded a charge of $7.0 million resulting from the difference between the redemption amount and the carrying amount of the Series I Preferred Stock on the Company’s Condensed Consolidated Balance Sheets in accordance with the FASB’s guidance on Distinguishing Liabilities from Equity. This $7.0 million charge was subtracted from net income/(loss) attributable to the Company to arrive at net income/(loss) available to the Company's common shareholders and used in the calculation of earnings per share for the nine months ended September 30, 2017.
At the Market Continuous Offering Program (“ATM program”) –
During February 2015,2019, the Company established an ATMat the market continuous offering program which is effective for a term of three years, (the “ATM program"), pursuant to which the Company may offer and sell from time to time shares of its common stock, par value $0.01 per share, with an aggregate gross sales price of up to $500.0 million through a consortium of banks acting as sales agents. Sales of the shares of common stock may be made, as needed, from time to time in “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, including by means of ordinary brokers’ transactions on the NYSENew York Stock Exchange or otherwise (i) at market prices prevailing at the time of sale, (ii) at prices related to prevailing market prices or (iii) as otherwise agreed to with the applicable sales agent. The Company did not offer for sale any shares of common stock under the ATM program during the ninethree months ended September 30, 2017.March 31, 2020.
During February 2020, the Company extended its share repurchase program for a term of two years, which will expire in February 2022, pursuant to which the Company may repurchase shares of its common stock, par value $0.01 per share, with an aggregate gross purchase price of up to $300.0 million. The Company did not repurchase any shares under the share repurchase program during the three months ended March 31, 2020. As of September 30, 2017,March 31, 2020, the Company had $211.9$224.9 million available under this ATMshare repurchase program.
Medium Term Notes (“MTN”) and Senior Notes –
The Company’sCompany’s supplemental indenturesindenture governing its MTN and senior notes contains the following covenants, all of which the Company is compliant with:
Covenant | Must Be | As of
| ||
Consolidated Indebtedness to Total Assets | <65% |
| ||
Consolidated Secured Indebtedness to Total Assets | <40% |
| ||
Consolidated Income Available for Debt Service to Maximum Annual Service Charge | >1.50x |
| ||
Unencumbered Total Asset Value to Consolidated Unsecured Indebtedness | >1.50x |
|
For a full description of the various indenture covenants, refer to the Indenture dated September 1, 1993; the First Supplemental Indenture dated August 4, 1994; the Second Supplemental Indenture dated April 7, 1995; the Third Supplemental Indenture dated June 2, 2006; the Fourth Supplemental Indenture dated April 26, 2007; the Fifth Supplemental Indenture dated as of September 24, 2009; the Sixth Supplemental Indenture dated as of May 23, 2013; and the Seventh Supplemental Indenture dated as of April 24, 2014, each as filed with the SEC. See the Exhibits Index to our Annual Report on Form 10-K for the year ended December 31, 20162019 for specific filing information.
During March 2017, the Company issued $400.0 million of Senior Unsecured Notes at an interest rate of 3.80% payable semi-annually in arrears which are scheduled to mature in April 2027. The Company used the net proceeds from the issuance of $395.5 million, after the underwriting discount and related offering costs, for general corporate purposes including to pre-fund near-term debt maturities and to reduce borrowings under the Company’s revolving Credit Facility.
During August 2017, the Company issued $500.0 million of Senior Unsecured Notes at an interest rate of 3.30% payable semi-annually in arrears which are scheduled to mature in February 2025. In addition, the Company issued $350.0 million of Senior Unsecured Notes at an interest rate of 4.45% payable semi-annually in arrears which are scheduled to mature in September 2047. The Company used the aggregate net proceeds from these issuances of $840.0 million, after the underwriting discounts and related offering costs, for general corporate purposes including to pre-fund near-term debt maturities and to reduce borrowings under the Company’s revolving Credit Facility.
On August 1, 2017, the Company made a tender offer to purchase any and all of its $300.0 million 4.30% MTN notes outstanding. As a result, the Company accepted the tender of $211.0 million of its $300.0 million outstanding MTN notes on August 10, 2017. In connection with this tender offer, the Company recorded a tender premium of $1.8 million resulting from the partial repayment of this note. Subsequently, in October 2017, the Company announced its intention to redeem the remaining $89.0 million outstanding on November 1, 2017.
Credit Facility -–
In February 2017,2020, the Company closed on a $2.25new $2.0 billion unsecured revolving Credit Facility with a group of banks, which replaced the Company’s existing $2.25 billion unsecured revolving credit facility. The Credit Facility is scheduled to expire in March 2021,2024, with two additional six monthsix-month options to extend the maturity date, at the Company’s discretion, to March 2022. This2025. The Credit Facility, which accrues interest at a rate of LIBOR plus 87.577.5 basis points (2.10%(1.76% as of September 30, 2017)March 31, 2020), can be increased to $2.75 billion through an accordion feature. The Credit Facility replacedPursuant to the Company’s $1.75 billion unsecured revolving credit facility that was scheduled to mature in March 2018. In addition,terms of the Credit Facility, includes a $500.0 million sub-limit which provides the companyCompany, among other things, is subject to covenants requiring the opportunity to borrow in alternative currencies including Canadian Dollars, British Pounds Sterling, Japanese Yen or Euros.maintenance of (i) maximum indebtedness ratios and (ii) minimum interest and fixed charge coverage ratios. As of September 30, 2017,March 31, 2020, the Credit Facility had aan outstanding balance of $25.0$675.0 million outstanding and $0.5$0.3 million appropriated for letters of credit.
Pursuant to the terms of the Credit Facility, the Company, among other things, is subject covenants requiring theto maintenance of (i) maximum leverage ratios on both unsecured and secured debt and (ii) minimum interest and fixed coverage ratios.various covenants. The Company is currently in compliance with these covenants. The financial covenants for the Credit Facility are as follows:
Covenant | Must Be | As of | ||
Total Indebtedness to Gross Asset Value (“GAV”) | <60% |
| ||
Total Priority Indebtedness to GAV | <35% |
| ||
Unencumbered Asset Net Operating Income to Total Unsecured Interest Expense | >1.75x |
| ||
Fixed Charge Total Adjusted EBITDA to Total Debt Service | >1.50x |
|
For a full description of the Credit Facility’sFacility’s covenants, refer to the Amended and Restated Credit Agreement dated as of February 1, 2017,27, 2020, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 30, 2017.February 28, 2020.
Term Loan–
TheOn April 1, 2020, the Company hadentered into a $650.0new $375.0 million unsecured term loan (“Term Loan’) pursuant to a credit agreement, with a group of banks, which is scheduled to expire in April 2021, with a one-year extension option to extend the maturity date, at the Company’s discretion, to April 2022. The Term Loan, accrues interest at a rate of LIBOR plus 140 basis points or, at the Company’s option, a spread of 40 basis points to the base rate defined in the Term Loan, each of which fluctuates in accordance with changes in the Company’s senior debt ratings. The Term Loan can be increased by an additional $750.0 million through an accordion feature. Pursuant to the terms of the Term Loan, the Company is subject to covenants that are substantially the same as those in the Credit Facility. During April 2020, borrowings under the Term Loan were increased to $590.0 million through the accordion feature.
Mortgages and Construction Loan Payable –
In August 2018, the Company closed on a construction loan commitment of $67.0 million relating to one development property. This loan commitment was scheduled to mature in January 2017,August 2020, with three one-year extensionsix additional six-month options atto extend the Company’s discretion. The Term Loan accruedmaturity date to August 2023, and bore interest at a rate of LIBOR plus 95180 basis points. During November 2016,the three months ended March 31, 2020, this construction loan was fully repaid.
During the three months ended March 31, 2020, the Company repaid $400.0$8.8 million of borrowings under the Company’s Term Loan and in January 2017, the Company repaid the remaining $250.0 million balance and terminated the agreement.
Mortgages Payable –
During the nine months ended September 30, 2017, the Company (i) consolidated $212.2 million of individual non-recourse mortgage debt (including a fair market value adjustment of $6.2 million) relating to a joint venture operating property which the Company now controls, (ii) paid off $684.6 million of maturing mortgage debt (including fair market value adjustmentsadjustment of $5.7$0.1 million) that encumbered 25an operating properties and (iii) obtained a $206.0 million non-recourse mortgage relating to one operating property.
In addition to the public equity and debt markets as capital sources, the Company may, from time-to-time, obtain mortgage financing on selected properties and construction loansloan financing to partially fund the capital needs of its real estate development projects. As of September 30, 2017,March 31, 2020, the Company had over 380320 unencumbered property interests in its portfolio.
COVID-19 –
In light of the ongoing spread of the COVID-19 pandemic and the uncertainty related to its unfolding economic impact, the Company is focused on its liquidity position including: (i) its availability under the new $2.0 billion ($2.75 billion with the accordion feature) unsecured revolving credit facility, (ii) its new $375.0 million Term Loan entered into on April 1, 2020 and was subsequently increased to $590.0 million through the accordion feature, (iii) $451.8 million of cash and cash equivalents on hand at March 31, 2020, and (iv) as mentioned above, over 320 unencumbered property interests.
The Company is continuing to monitor the impact of COVID-19 on the Company’s business, tenants and industry as a whole. The magnitude and duration of the COVID-19 pandemic and its impact on the Company’s operations and liquidity is uncertain as of the filing date of this Quarterly Report on Form 10-Q as this pandemic continues to evolve globally. However, if the COVID-19 pandemic continues on its current trajectory, such impacts could grow and become material and could materially disrupt the Company’s business operations and materially adversely affect the Company’s liquidity.
Dividends –
In connection with its intention to continue to qualify as a REIT for federal income tax purposes, the Company expects to continue paying regular dividends to its stockholders. These dividends will be paid from operating cash flows. The Company’sCompany’s Board of Directors will continue to evaluate the Company’s dividend policy on a quarterly basis as the Board of Directors monitors sources of capital and evaluates the impact of the economy and capital markets availability on operating fundamentals. Since cash used to pay dividends reduces amounts available for capital investment, the Company generally intends to maintain a conservative dividend payout ratio reservingthat reserves such amounts as it considers necessary for the expansion and renovation of shopping centers in its portfolio, debt reduction, the acquisition of interests in new properties and other investments as suitable opportunities arise and such other factors as the Board of Directors considers appropriate. Cash dividends paid for common and preferred issuances of stock for the ninethree months ended September 30, 2017March 31, 2020 and 20162019 were $381.2$127.3 million and $354.1$132.5 million, respectively.
Although the Company receives substantially all of its rental payments on a monthly basis, it generally intends to continue payinghas paid dividends quarterly. Amounts accumulated in advance of each quarterly distribution will be invested by the Company in short-term money market or other suitable instruments. On July 25, 2017,January 28, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.27$0.28 per common share payable to shareholders of record on October 4, 2017,April 2, 2020, which was paid on October 16, 2017. Additionally, on October 24, 2017,April 15, 2020. As a result of the COVID-19 pandemic and the future economic uncertainties, out of an abundance of caution, the Company’s Board of Directors declared an increased quarterly cashhas temporarily suspended the dividend on its common shares. The Company’s Board of $0.28 perDirectors will continue to monitor the Company’s financial performance and economic outlook on a monthly basis and, at a later date, intends to reinstate the common share, an annualized increasedividend during 2020 of 3.7%, payableat least the amount equal to shareholders of record on January 2, 2018, which is scheduled to be paid on January 16, 2018.the Company's REIT taxable income distribution requirements.
The Company’s Board of Directors also declared quarterly dividends with respect to the Company’s various seriesclasses of cumulative redeemable preferred shares (Series I, Series J, Series K(Classes L and Series L)M). All dividends on preferred shares were paid on April 15, 2020, to shareholders of record on April 1, 2020. Additionally, the Company’s Board of Directors declared quarterly dividends with respect to the Company’s classes of cumulative redeemable preferred shares (Classes L and M). All dividends on the preferred shares are scheduled to be paid on January 16, 2018,July 15, 2020, to shareholders of record on January 2, 2018.July 1, 2020.
Hurricane Impact -
The impact of Hurricanes Harvey, which hit Texas on August 25, 2017, and Irma, which hit Florida on September 10, 2017, resulted in minimal damage to the Company’s properties located in Texas and Florida.
With respect to Hurricane Maria, which hit the island of Puerto Rico on September 20, 2017, the Company is currently assessing damages at its seven operating properties located throughout Puerto Rico, aggregating 2.2 million square feet of GLA. Two of these operating properties, located in the southern region of the island were less impacted and most tenants have resumed operations, while the remaining five operating properties in the northern region sustained varying amounts of damage. Initial repairs are in progress, however, a final assessment and recovery plan will require additional time. The Company maintains a comprehensive property insurance policy on these properties with total coverage of up to $62.0 million, as well as business interruption insurance with coverage up to $39.3 million in the aggregate, subject to a collective deductible of $1.2 million. The Company anticipates that all damages and any loss of operations sustained will be covered under these existing policies. As further detailed information becomes available, the Company expects to recognize a charge, which it believes will not have a material effect on the Company’s financial position and/or results of operations. This charge will result from the write-down of the undepreciated portion of the property that has been permanently damaged, which would be less than the replacement costs and offset by insurance proceeds received by the Company.
Other -
The Company is subject to taxes on its activities in Canada, Puerto Rico and Mexico. In general, under local country law applicable to the structures the Company has in place and applicable treaties, the repatriation of cash to the Company from its subsidiaries and joint ventures in Canada, Puerto Rico and Mexico generally is not subject to withholding tax. The Company is subject to and also includes in its tax provision non-U.S. income taxes on certain investments located in jurisdictions outside the U.S. These investments are held by the Company at the REIT level and not in the Company’s taxable REIT subsidiary. Accordingly, the Company does not expect a U.S. income tax impact associated with the repatriation of undistributed earnings from the Company’s foreign subsidiaries.
Funds FromFrom Operations
Funds From Operations (“FFO”) is a supplemental non-GAAP financial measure utilized to evaluate the operating performance of real estate companies. The National Association of Real Estate Investment Trusts (“NAREIT”)NAREIT defines FFO as net income/(loss) available to the Company’s common shareholders computed in accordance with generally accepted accounting principles in the United States (“GAAP”), excluding (i) depreciation and amortization related to real estate, (ii) gains or losses from sales of operatingcertain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and changeinvestments in control of interests, plus (ii) depreciation and amortization of operating properties and (iii)entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and in substance real estate equity investments and (iv)(v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis. The Company also made an election to exclude from its calculation of FFO (i) gains and losses on the sale of assets and impairments of assets incidental to its main business and (ii) mark-to-market changes in the value of its equity securities. As such, the Company does not include gains/impairments on land parcels, gains/losses (realized or unrealized) from marketable securities or gains/impairments on preferred equity participations in NAREIT defined FFO. As a result of this election, the Company will no longer disclose FFO available to the Company’s common shareholders as adjusted (“FFO as adjusted”) as an additional supplemental measure. The incidental adjustments noted above which were previously excluded from NAREIT FFO and used to determine FFO as adjusted are now included in NAREIT FFO and therefore the Company believes FFO as adjusted is no longer necessary.
The Company presents FFO available to the Company’s common shareholders as it considers it an important supplemental measure of our operating performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO available to the Company’s common shareholders when reporting results. Comparison of our presentation of FFO available to the Company’s common shareholders to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.
FFO is a supplemental non-GAAP financial measure of real estate The Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Net income/(loss) available to the Company’s common shareholders Gain on disposition of operating property Gain on disposition of joint venture operating properties and change in control of interests Depreciation and amortization - real estate related Depreciation and amortization - real estate joint ventures Impairment of operating properties Provision/(benefit) for income taxes (2) Noncontrolling interests (2) FFO available to the Company’s common shareholders Transactional (income)/expense: Profit participation from other real estate investments Gain from land sales Acquisition and demolition costs Impairment of other investments Early extinguishment of debt charges Gain on liquidation of a foreign entity Preferred stock redemption charge Provision for income taxes (3) Noncontrolling interests (3) Other, net Total transactional (income)/expense, net FFO available to the Company’s common shareholders as adjusted Weighted average shares outstanding for FFO calculations: Basic Units Dilutive effect of equity awards Diluted FFO per common share – basic FFO per common share – diluted FFO as adjusted per common share – basic FFO as adjusted per common share – diluted Three Months Ended March 31, 2020 2019 Net income available to the Company’s common shareholders Gain on sale of properties Gain on sale of joint venture properties Depreciation and amortization – real estate related Depreciation and amortization – real estate joint ventures Impairment charges of depreciable real estate properties Profit participation from other real estate investments, net Loss/(gain) on marketable securities Provision for income taxes (1) Noncontrolling interests (1) FFO available to the Company’s common shareholders Weighted average shares outstanding for FFO calculations: Basic Units Dilutive effect of equity awards Diluted (2) FFO per common share – basic FFO per common share – diluted (2) (1) Related to gains, impairments, and depreciation on properties, where applicable. (2) Reflects the potential impact if certain units were converted to common stock at the beginning of the period, which would have a dilutive effect on FFO available to the Company’s common shareholders. FFO available to the Company’s common shareholders would be increased by Same Property Net Operating Same property NOI is calculated using revenues from rental properties (excluding straight-line rent adjustments, lease termination fees, TIFs and amortization of above/below market rents) less charges for bad debt, operating and maintenance expense, real estate taxes and rent expense plus the Company’s proportionate share of Same property NOI from unconsolidated real estate joint ventures, calculated on the same basis. The Company’s method of calculating Same property NOI available to the Company’s common shareholders may differ from methods used by other REITs and, accordingly, may not be comparable to such other REITs. The following is a reconciliation of Net income available to the Company’s common shareholders to Same property NOI (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31, 2017 2016 2017 2016 2020 2019 Net income/(loss) available to the Company’s common shareholders Net income available to the Company’s common shareholders Adjustments: Management and other fee income General and administrative Impairment charges Depreciation and amortization Gain on sale of properties Interest and other expense, net (Benefit)/provision for income taxes, net Gain on change in control of interests Provision for income taxes, net Equity in income of other real estate investments, net Gain on sale of operating properties, net of tax Net income attributable to noncontrolling interests Preferred stock redemption charge Preferred stock dividends Preferred dividends Non same property net operating income Non-operational expense/(income) from joint ventures, net Non-operational expense from joint ventures, net Same property NOI Leasing Activity During the Tenant Lease Expirations At March 31, 2020, the Company has a total of 5,418 leases in the U.S. consolidated operating portfolio. The following table sets forth the aggregate lease expirations for each of the next ten years, assuming no renewal options are exercised. For purposes of the table, the Total Annual Base Rent Expiring represents annualized rental revenue, excluding the impact of straight-line rent, for each lease that expires during the respective year. Amounts in thousands, except for number of lease Year Ending December 31, Number of Leases Expiring Square Feet Expiring Total Annual Base Rent Expiring % of Gross Annual Rent Number of Leases Expiring Square Feet Expiring Total Annual Base Rent Expiring % of Gross Annual Rent % % 2017 % 2018 % 2019 % 2020 % % 2021 % % 2022 % % 2023 % % 2024 % % 2025 % % 2026 % % 2027 % % 2028 % 2029 % 2030 % (1) Leases currently under The 2017 2018 2019 2020 2021 Thereafter Total Fair Value 2020 2021 2022 2023 2024 Thereafter Total Fair Value Secured Debt Fixed Rate Average Interest Rate % % % % % % % Variable Rate Average Interest Rate % % % % % % % % % Unsecured Debt Fixed Rate Average Interest Rate % % % % % % % % % % % Variable Rate Floating Rate Average Interest Rate % % % % Based on the Foreign Investment (in millions) Country Local Currency U.S. Dollars Mexican real estate investments Canadian real estate investments 19.1 Item 4. Controls and The There have not been any changes in the OTHER INFORMATION Item 1. Legal The following information supplements and amends our discussion set forth under Part I, Item 3 "Legal Proceedings" in our Annual Report on Form 10-K for the fiscal year ended December 31, The Company is not presently involved in any litigation nor, to its knowledge, is any litigation threatened against the Company or its subsidiaries that, in management's opinion, would result in any material adverse effect on the Company's ownership, management or operation of its properties taken as a whole, or which is not covered by the Company's liability insurance. The Company’s business, financial condition, results of operations or stock price has and may continue to be adversely impacted by the COVID-19 pandemic and such impact could be material. In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization. The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide, and has caused significant volatility in U.S. and international debt and equity markets. There is significant uncertainty around the extent and duration of business disruptions related to COVID-19, as well as its impact on the U.S. economy. Our business and the businesses of our tenants have been adversely affected by the COVID-19 pandemic and actions taken to contain or prevent its spread. A substantial number of tenants have temporarily closed their businesses, have shortened their operating hours or are offering reduced services. As a result, the Company has observed a substantial increase in the number of tenants that have made late or partial rent payments, requested a deferral of rent payments, or defaulted on rent payments, and it is likely that more of our tenants will be similarly impacted in the future. Impacts of COVID-19 could also result in the complete or partial closure of one or more of our tenants’ manufacturing facilities or distribution centers, temporary or long-term disruption in our tenants’ supply chains from local and international suppliers, and/or delays in the delivery of our tenants’ inventory. Even after governmental restrictions are lifted, our tenants may continue to be impacted by economic conditions resulting from COVID-19 or public perception of the risk of COVID-19, which could adversely affect foot traffic to our tenants’ businesses and our tenants’ ability to adequately staff their businesses. Such events could severely disrupt their operations and have a material adverse effect on our business, financial condition and results of operations. A downturn in our tenants’ businesses that significantly weakens their financial condition could cause them to delay lease commencements or decline to extend or renew leases upon expiration and could lead to additional failures to make rental payments when due, store closures or bankruptcies, and we may be unable to collect past due balances under relevant leases. We have begun to receive requests for rent relief from some of our tenants. We are assessing these requests on a case-by-case basis and have agreed and may continue to agree to certain relief. It is likely there will be additional requests for relief in the future. In addition, like many other companies, due to government mandates, we have instructed our employees to work from home, which, especially if this persists for a prolonged period of time, may have an adverse impact on our employees, operations and systems. The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations, financial condition and stock price will depend on numerous evolving factors that are highly uncertain and which we may not be able to predict, including the duration and scope of the pandemic, governmental, business and individual actions that have been and continue to be taken in response to the pandemic, the impact on economic activity from the pandemic and actions taken in response, the impact on our employees any other operational disruptions or difficulties we may face, the effect on our tenants and their businesses, the ability of tenants to pay their contracted rents and any additional closures of our tenants’ businesses. These effects, individually or in the aggregate, will adversely impact our tenant’s ability to pay their contracted rent. Any of these events could materially adversely impact our business, financial condition, results of operations or stock price. Financial disruption or a prolonged economic downturn could materially and adversely affect the Company’s business. Worldwide financial markets have recently experienced periods of extraordinary disruption and volatility, which has been exacerbated by the COVID-19 pandemic, resulting in heightened credit risk, reduced valuation of investments and decreased economic activity. Moreover, many companies have experienced reduced liquidity and uncertainty as to their ability to raise capital during such periods of market disruption and volatility. In the event that these conditions recur or result in a prolonged economic downturn, our results of operations, financial position or liquidity could be materially and adversely affected. These market conditions may affect the Company's ability to access debt and equity capital markets. In addition, as a result of recent financial events, we may face increased regulation. Many of the other risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 identify risks that result from, or are exacerbated by, financial economic downturn. These include risks related to our real estate assets, the competitive environment and regulatory developments. Item 2. Unregistered Sales of Equity Securities and Use of Issuer Purchases of Equity Securities During the During February 2020, the Company extended its share repurchase program for a term of two years, which will expire in February 2022, pursuant to which the Company may repurchase shares of its common stock, par value $0.01 per share, with an aggregate gross purchase price of up to $300.0 million. The Company The Company also presents FFO available to the Company’s common shareholders as adjusted as an additional supplemental measure as it believes it is more reflectivecompanies’companies’ operating performances, which does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative for net income or cash flows from operations as a measure of liquidity. Our method of calculating FFO available to the Company’s common shareholders and FFO available to the Company’s common shareholders as adjusted may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.Company’sCompany’s reconciliation of net income available to the Company’s common shareholders to FFO available to the Company’s common shareholders and FFO available tois reflected in the Company’s common shareholders as adjusted for the three and nine months ended September 30, 2017 and 2016, is as followstable below (in thousands, except per share data):. $ 101,957 $ (55,100 ) $ 298,996 $ 265,912 (40,533 ) (9,773 ) (61,394 ) (81,874 ) - (9,852 ) (72,185 ) (202,939 ) 87,262 94,814 272,232 257,839 9,562 10,719 29,413 35,621 8,651 16,857 32,294 77,803 - 29,005 (39 ) 40,797 (1,613 ) (264 ) (3,895 ) (427 ) 165,286 76,406 495,422 392,732 - (3 ) (34,573 ) (10,053 ) - (1,086 ) (1,060 ) (2,352 ) 633 2,347 1,097 3,890 1,635 - 11,343 1,058 1,753 45,674 1,753 45,674 (14,822 ) - (14,822 ) - 7,014 - 7,014 - - 36,524 8 38,176 - 285 11,338 285 (160 ) 461 324 (424 ) (3,947 ) 84,202 (17,578 ) 76,254 $ 161,339 $ 160,608 $ 477,844 $ 468,986 423,688 420,073 423,574 416,829 973 - 854 821 513 1,442 556 1,405 425,174 (1) 421,515 (1) 424,984 (1) 419,055 (1) $ 0.39 $ 0.18 $ 1.17 $ 0.94 $ 0.39 (1) $ 0.18 (1) $ 1.17 (1) $ 0.94 (1) $ 0.38 $ 0.38 $ 1.13 $ 1.13 $ 0.38 (1) $ 0.38 (1) $ 1.13 (1) $ 1.12 (1) $ 83,746 $ 101,635 (3,847 ) (23,595 ) (18 ) (4,690 ) 68,707 71,260 10,564 10,161 3,441 6,408 (6,283 ) (1,030 ) 4,667 (1,503 ) 1 - (505 ) (248 ) $ 160,473 $ 158,398 429,735 419,464 638 927 717 1,182 431,090 421,573 $ 0.37 $ 0.38 $ 0.37 $ 0.38 $268$160 and $261 for the three months ended September 30, 2017,March 31, 2020 and $688 and $621 for the nine months ended September 30, 2017 and 2016,2019, respectively. The effect of other certain convertible units would have an anti-dilutive effect upon the calculation of Net income available to the Company’s common shareholders per share. Accordingly, the impact of such conversion has not been included in the determination of diluted earnings per share calculations.(2)Related to gains, impairment and depreciation on operating properties, where applicable.(3)Related to transactional (income)/expense, where applicable.Income(Income(“SameSame property NOI”)SameSame property NOI is a supplemental non-GAAP financial measure of real estate companies’ operating performance and should not be considered an alternative to net income in accordance with GAAP or cash flows from operations as a measure of liquidity. The Company considers Same property NOI as an important operating performance measure because it is frequently used by securities analysts and investors to measure only the net operating income of properties that have been owned by the Company for the entire current and prior year reporting periods including those properties under redevelopment.periods. It excludes properties under redevelopment, development and pending stabilization; properties are deemed stabilized at the earlier of (i) reaching 90% leased or (ii) one year following a project’s inclusion in operating real estate. Same property NOI assists in eliminating disparities in net income due to the development, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent performance measure for the comparison of the Company's properties. $ 101,957 $ (55,100 ) $ 298,996 $ 265,912 $ 83,746 $ 101,635 (3,926 ) (5,790 ) (12,456 ) (14,274 ) (3,740 ) (4,376 ) 28,588 27,983 86,395 89,840 21,017 25,831 2,944 10,073 34,280 68,126 2,974 4,175 88,443 96,827 275,787 264,436 69,397 71,561 (3,847 ) (23,595 ) 47,910 87,868 137,770 191,980 49,482 41,773 (697 ) 61,426 (2,224 ) 73,292 - (6,584 ) (71,160 ) (53,096 ) 43 630 (19,909 ) (3,774 ) (61,952 ) (22,532 ) (10,958 ) (6,224 ) (40,533 ) (9,771 ) (62,102 ) (75,935 ) 1,186 1,997 13,926 4,875 289 509 7,014 - 7,014 - 12,059 11,555 35,169 34,665 6,354 14,534 (13,166 ) (12,834 ) (45,577 ) (74,466 ) (18,193 ) (28,757 ) 24,580 25,531 63,611 (67,037 ) 19,016 14,793 $ 236,450 $ 229,407 $ 697,477 $ 685,786 $ 215,580 $ 212,489 SameSame property NOI increased by $7.0$3.1 million or 3.1%1.5% for the three months ended September 30, 2017,March 31, 2020, as compared to the corresponding period in 2016.2019. This increase is primarily the result of (i) an increase in revenues from rental properties of $3.2$6.4 million primarily related to lease-up and rent commencements in the portfolio, partially offset by (ii) an increase in other property incomeoperating expenses of $3.3 million and (iii) a decrease of $0.5 million of credit losses.million.Same property NOI increased by $11.7 million or 1.7% for the nine months ended September 30, 2017, as compared to the corresponding period in 2016. This increase is primarily the result of (i) an increase of $8.2 million related to lease-up and rent commencements in the portfolio, (ii) a decrease of $2.8 million of credit losses and (iii) an increase in other property income of $0.7 million. nine three months ended September 30, 2017,March 31, 2020, the Company executed 918224 leases totaling 7.1over 1.9 million square feet in the Company’s consolidated operating portfolio comprised of 33046 new leases and 588178 renewals and options. The leasing costs associated with these new leases are estimated to aggregate $58.0$13.9 million or $28.74$44.38 per square foot. These costs include $45.1$11.5 million of tenant improvements and $12.9$2.4 million of external leasing commissions. The average rent per square foot on new leases was $18.53$19.70 and on renewals and options was $15.70.$16.91.data and percentages:data: (1) 161 604 $ 12,972 1.5 169 488 $ 11,161 1.4 131 525 $ 10,830 1.3 740 3,914 $ 67,353 7.8 896 6,561 $ 99,195 11.5 880 6,174 $ 97,607 11.3 355 1,646 $ 30,684 3.7 807 6,643 $ 98,950 11.4 759 5,499 $ 87,791 10.7 821 6,993 $ 106,062 12.3 827 5,943 $ 103,750 12.7 424 5,459 $ 76,807 8.9 719 5,783 $ 98,796 12.1 251 2,996 $ 48,414 5.6 671 5,238 $ 94,827 11.6 227 2,120 $ 35,463 4.1 497 4,514 $ 76,368 9.3 235 3,853 $ 51,910 6.0 269 4,050 $ 57,768 7.1 244 3,579 $ 54,942 6.4 249 3,226 $ 49,630 6.1 314 3,241 $ 61,421 7.5 254 2,639 $ 45,857 5.6 171 1,624 $ 29,474 3.6 month to monthmonth-to-month lease or in process of renewal.renewal.ItemItem 3. Quantitative and Qualitative Disclosures About Market RiskRisk.Company’sCompany’s primary market risk exposures areexposure is interest rate riskrisk. The Company periodically evaluates its exposure to short-term interest rates and foreign currency exchangewill, from time-to-time, enter into interest rate risk.protection agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating-rate debt. The Company has not, and does not plan to, enter into any derivative financial instruments for trading or speculative purposes. The following table presents the Company’s aggregate fixed rate and variable rate debt obligations outstanding, including fair market value adjustments and unamortized deferred financing costs, as of September 30, 2017,March 31, 2020, with corresponding weighted-averageweighted average interest rates sorted by maturity date. The table does not include extension options where available. Amounts areavailable (amounts in millions.millions). $ 12.4 $ 73.7 $ 2.4 $ 101.0 $ 157.4 $ 403.9 $ 750.8 $ 752.8 $ 83.6 $ 143.7 $ 150.8 $ 12.0 $ 9.9 $ 4.9 $ 404.9 $ 405.6 9.41 4.99 5.29 5.35 5.39 4.29 4.81 $ - $ - $ 100.0 $ - $ - $ - $ 100.0 $ 99.4 - - 2.60 - - - 2.60 5.29 5.39 4.06 3.23 6.73 7.08 4.86 $ - $ 89.0 $ 299.4 $ - $ 497.4 $ 3,796.4 $ 4,682.2 $ 4,658.6 $ - $ 484.1 $ 497.3 $ 348.4 $ 397.3 $ 2,908.4 $ 4,635.5 $ 4,416.5 - 4.30 6.88 - 3.20 3.52 3.72 - 3.20 3.40 3.13 2.70 3.73 3.50 $ - $ - $ - $ - $ 18.2 $ - $ 18.2 $ 18.2 $ - $ - $ - $ - $ 668.2 $ - $ 668.2 $ 625.4 - - - - 2.10 - 2.10 - - - - 1.76 - 1.76 Company’sCompany’s variable-rate debt balances, interest expense would have increased by $0.9$1.7 million for the ninethree months ended September 30, 2017March 31, 2020, if short-term interest rates were 1%1.0% higher.The following table presents the Company’s foreign investments in their respective local currencies and the U.S. dollar equivalents: 53.5 $ 4.8 $ 15.4 The Company has not, and does not plan to, enter into any derivative financial instruments for trading or speculative purposes.Currency fluctuations between local currency and the U.S. dollar, for investments for which the Company has determined that the local currency is the functional currency, for the period in which the Company held its investment result in a cumulative translation adjustment (“CTA”). This CTA is recorded as a component of Accumulated other comprehensive income (“AOCI”) on the Company’s Condensed Consolidated Balance Sheets. The CTA amounts are subject to future changes resulting from ongoing fluctuations in the respective foreign currency exchange rates. Changes in exchange rates are impacted by many factors that cannot be forecasted with reliable accuracy. During the nine months ended September 30, 2017, the Company substantially liquidated its investments in Canada and as such, recognized a net cumulative foreign currency translation gain of $10.0 million. As of a result of the substantial liquidation of the Company’s foreign investments, any future currency changes, which could have a favorable or unfavorable impact, will be recognized as earnings in Other income/(expense), net in the Company’s Condensed Consolidated Statements of Operations.ProceduresProcedures.Company’sCompany’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.Company’sCompany’s internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.ProceedingsProceedings.2016.2019.On January 28, 2013, the Company received a subpoena from the Enforcement Division of the SEC in connection with an investigation, In the Matter of Wal-Mart Stores, Inc. (FW-3678), that the SEC Staff is currently conducting with respect to possible violations of the Foreign Corrupt Practices Act. The Company has cooperated, and will continue to cooperate, with the SEC and the U.S. Department of Justice (“DOJ”), which is conducting a parallel investigation. At this point, we are unable to predict the duration, scope or result of the SEC or DOJ investigations.ThereExcept as set forth below, as of the date of this report, there are no material changes fromto our risk factors as previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016. 2019. ProceedsProceeds. - ninethree months ended September 30, 2017,March 31, 2020, the Company repurchased 229,436270,708 shares for an aggregate purchase price of $5.1 million (weighted average price of $19.02 per share) in connection with common shares surrendered or deemed surrendered to the Company to satisfy statutory minimum tax withholding obligations in connection with the vesting of restricted stock awards under the Company’s equity-based compensation plans.expended approximately $5.6did not repurchase any shares under the share repurchase program during the three months ended March 31, 2020. As of March 31, 2020, the Company had $224.9 million toavailable under this share repurchase these shares.
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) | ||||||||||||
January 1, 2017 – January 31, 2017 | 12,364 | $ | 25.34 | - | $ | - | ||||||||||
February 1, 2017 - February 28, 2017 | 186,397 | $ | 25.04 | - | - | |||||||||||
March 1, 2017 – March 31, 2017 | 452 | $ | 23.38 | - | - | |||||||||||
April 1, 2017 – April 30, 2017 | - | $ | - | - | - | |||||||||||
May 1, 2017 – May 31, 2017 | 15,625 | $ | 18.90 | - | - | |||||||||||
June 1, 2017 – June 30, 2017 | 1,544 | $ | 17.56 | - | - | |||||||||||
July 1, 2017 – July 31, 2017 | 1,824 | $ | 19.51 | - | - | |||||||||||
August 1, 2017 – August 31, 2017 | 10,314 | $ | 20.32 | - | - | |||||||||||
September 1, 2017 – September 30, 2017 | 916 | $ | 19.62 | - | - | |||||||||||
Total | 229,436 | $ | 24.31 | - | $ | - |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) | ||||||||||||
January 1, 2020 – January 31, 2020 | 30,631 | $ | 20.63 | - | $ | 224.9 | ||||||||||
February 1, 2020 – February 29, 2020 | 238,412 | 18.82 | - | 224.9 | ||||||||||||
March 1, 2020 – March 31, 2020 | 1,665 | 17.76 | - | 224.9 | ||||||||||||
Total | 270,708 | $ | 19.02 | - |
Item 3. Defaults Upon Senior SecuritiesSecurities.
None.None.
Item 4. Mine Safety DisclosuresDisclosures.
NotNot applicable.
None.
None.
Exhibits –
4.1 Agreement to File Instruments
Kimco Realty Corporation (the “Registrant”) hereby agrees to file with the Securities and Exchange Commission, upon request of the Commission, all instruments defining the rights of holders of long-term debt of the Registrant and its consolidated subsidiaries, and for any of its unconsolidated subsidiaries for which financial statements are required to be filed, and for which the total amount of securities authorized thereunder does not exceed 10 percent of the total assets of the Registrant and its subsidiaries on a consolidated basis.
| ||
|
| |
31.1 | ||
31.2 | ||
32.1 | ||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
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 thereunto duly authorized.
|
|
| KIMCO REALTY CORPORATION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| /s/ Conor C. Flynn |
(Date) |
|
| Conor C. Flynn |
|
|
| Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
| /s/ Glenn G. Cohen |
(Date) | Glenn G. Cohen | ||
|
|
| |
Chief Financial Officer |
36