UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20212022
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 CorporationKIMCO 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.) |
500 North Broadway, Suite 201, Jericho, NY 11753
(Address of principal executive offices) (Zip Code)
(516) 869-9000
(Registrant’s telephone number, including area code)
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, every Interactive Data File required to be submitted 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 such 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 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 27, 2021,July 20, 2022, the registrant had 616,428,058618,481,988 shares of common stock outstanding.
PART I - FINANCIAL INFORMATION
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share information)
September 30, 2021 | December 31, 2020 | June 30, 2022 | December 31, 2021 | |||||||||||||
Assets: | ||||||||||||||||
Real estate, net of accumulated depreciation and amortization of $2,886,259 and $2,717,114, respectively | $ | 14,778,312 | $ | 9,346,041 | ||||||||||||
Real estate, net of accumulated depreciation and amortization of $3,238,079 and $3,010,699, respectively | $ | 14,837,685 | $ | 15,035,900 | ||||||||||||
Real estate under development | 5,672 | 5,672 | 5,672 | 5,672 | ||||||||||||
Investments in and advances to real estate joint ventures | 1,178,511 | �� | 590,694 | 1,083,509 | 1,006,899 | |||||||||||
Other investments | 130,470 | 117,140 | 101,680 | 122,015 | ||||||||||||
Cash and cash equivalents | 483,471 | 293,188 | 296,798 | 334,663 | ||||||||||||
Marketable securities | 1,249,125 | 706,954 | 1,073,706 | 1,211,739 | ||||||||||||
Accounts and notes receivable, net | 235,082 | 219,248 | 260,140 | 254,677 | ||||||||||||
Operating lease right-of-use assets, net | 149,203 | 102,369 | 144,092 | 147,458 | ||||||||||||
Other assets | 380,675 | 233,192 | 394,287 | 340,176 | ||||||||||||
Total assets (1) | $ | 18,590,521 | $ | 11,614,498 | $ | 18,197,569 | $ | 18,459,199 | ||||||||
Liabilities: | ||||||||||||||||
Notes payable, net | $ | 7,034,047 | $ | 5,044,208 | $ | 7,056,644 | $ | 7,027,050 | ||||||||
Mortgages payable, net | 482,634 | 311,272 | 346,461 | 448,652 | ||||||||||||
Dividends payable | 5,366 | 5,366 | 5,326 | 5,366 | ||||||||||||
Operating lease liabilities | 125,015 | 96,619 | 121,434 | 123,779 | ||||||||||||
Other liabilities | 772,251 | 470,995 | 682,697 | 730,690 | ||||||||||||
Total liabilities (2) | 8,419,313 | 5,928,460 | 8,212,562 | 8,335,537 | ||||||||||||
Redeemable noncontrolling interests | 15,784 | 15,784 | 13,270 | 13,480 | ||||||||||||
Commitments and Contingencies | ||||||||||||||||
Commitments and Contingencies (Footnote 17) | ||||||||||||||||
Stockholders' equity: | ||||||||||||||||
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 616,413,920 and 432,518,743 shares, respectively | 6,164 | 4,325 | ||||||||||||||
Preferred stock, $1.00 par value, authorized 7,054,000 shares; Issued and outstanding (in series) 19,435 and 19,580 shares, respectively; Aggregate liquidation preference $485,868 and $489,500, respectively | 19 | 20 | ||||||||||||||
Common stock, $.01 par value, authorized 750,000,000 shares; Issued and outstanding 618,483,648 and 616,658,593 shares, respectively | 6,185 | 6,167 | ||||||||||||||
Paid-in capital | 9,579,517 | 5,766,511 | 9,605,163 | 9,591,871 | ||||||||||||
Retained earnings/(cumulative distributions in excess of net income) | 328,609 | (162,812 | ) | |||||||||||||
Retained earnings | 163,210 | 299,115 | ||||||||||||||
Accumulated other comprehensive income | 6,476 | 2,216 | ||||||||||||||
Total stockholders' equity | 9,914,310 | 5,608,044 | 9,781,053 | 9,899,389 | ||||||||||||
Noncontrolling interests | 241,114 | 62,210 | 190,684 | 210,793 | ||||||||||||
Total equity | 10,155,424 | 5,670,254 | 9,971,737 | 10,110,182 | ||||||||||||
Total liabilities and equity | $ | 18,590,521 | $ | 11,614,498 | $ | 18,197,569 | $ | 18,459,199 |
(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 OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||
Revenues from rental properties, net | $ | 364,694 | $ | 256,607 | $ | 929,297 | $ | 778,572 | $ | 423,273 | $ | 285,732 | $ | 845,927 | $ | 564,603 | ||||||||||||||||
Management and other fee income | 3,913 | 3,185 | 10,634 | 9,880 | 3,925 | 3,284 | 8,520 | 6,721 | ||||||||||||||||||||||||
Total revenues | 368,607 | 259,792 | 939,931 | 788,452 | 427,198 | 289,016 | 854,447 | 571,324 | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
Rent | (3,678 | ) | (2,767 | ) | (9,706 | ) | (8,429 | ) | (4,070 | ) | (2,993 | ) | (8,151 | ) | (6,028 | ) | ||||||||||||||||
Real estate taxes | (50,594 | ) | (40,403 | ) | (129,124 | ) | (118,733 | ) | (56,075 | ) | (39,594 | ) | (110,389 | ) | (78,530 | ) | ||||||||||||||||
Operating and maintenance | (52,063 | ) | (42,844 | ) | (145,480 | ) | (124,192 | ) | (69,784 | ) | (46,897 | ) | (139,009 | ) | (93,417 | ) | ||||||||||||||||
General and administrative | (25,904 | ) | (28,795 | ) | (75,136 | ) | (72,316 | ) | (27,981 | ) | (24,754 | ) | (57,929 | ) | (49,232 | ) | ||||||||||||||||
Impairment charges | (850 | ) | (397 | ) | (954 | ) | (3,509 | ) | (14,419 | ) | (104 | ) | (14,691 | ) | (104 | ) | ||||||||||||||||
Merger charges | (46,998 | ) | 0 | (50,191 | ) | 0 | 0 | (3,193 | ) | 0 | (3,193 | ) | ||||||||||||||||||||
Depreciation and amortization | (114,238 | ) | (71,704 | ) | (261,687 | ) | (214,660 | ) | (124,611 | ) | (72,573 | ) | (254,905 | ) | (147,449 | ) | ||||||||||||||||
Total operating expenses | (294,325 | ) | (186,910 | ) | (672,278 | ) | (541,839 | ) | (296,940 | ) | (190,108 | ) | (585,074 | ) | (377,953 | ) | ||||||||||||||||
Gain on sale of properties | 1,975 | 0 | 30,841 | 5,697 | 2,944 | 18,861 | 7,137 | 28,866 | ||||||||||||||||||||||||
Operating income | 76,257 | 72,882 | 298,494 | 252,310 | 133,202 | 117,769 | 276,510 | 222,237 | ||||||||||||||||||||||||
Other income/(expense) | ||||||||||||||||||||||||||||||||
Other income/(expense), net | 6,696 | (900 | ) | 11,834 | 393 | |||||||||||||||||||||||||||
Gain/(loss) on marketable securities, net | 457,127 | (76,931 | ) | 542,510 | 444,646 | |||||||||||||||||||||||||||
Gain on sale of cost method investment | 0 | 0 | 0 | 190,832 | ||||||||||||||||||||||||||||
Other income, net | 6,642 | 1,782 | 12,625 | 5,139 | ||||||||||||||||||||||||||||
(Loss)/gain on marketable securities, net | (261,467 | ) | 24,297 | (139,703 | ) | 85,382 | ||||||||||||||||||||||||||
Interest expense | (52,126 | ) | (46,942 | ) | (146,654 | ) | (141,017 | ) | (56,466 | ) | (46,812 | ) | (113,485 | ) | (94,528 | ) | ||||||||||||||||
Early extinguishment of debt charges | 0 | (7,538 | ) | 0 | (7,538 | ) | (57 | ) | 0 | (7,230 | ) | 0 | ||||||||||||||||||||
Income/(loss) before income taxes, net, equity in income of joint ventures, net, and equity in income from other investments, net | 487,954 | (59,429 | ) | 706,184 | 739,626 | |||||||||||||||||||||||||||
Provision for income taxes, net | (314 | ) | (388 | ) | (2,897 | ) | (482 | ) | ||||||||||||||||||||||||
(Loss)/income before income taxes, net, equity in income of joint ventures, net, and equity in income from other investments, net | (178,146 | ) | 97,036 | 28,717 | 218,230 | |||||||||||||||||||||||||||
(Provision)/benefit for income taxes, net | (96 | ) | (1,275 | ) | 57 | (2,583 | ) | |||||||||||||||||||||||||
Equity in income of joint ventures, net | 20,025 | 11,233 | 54,095 | 35,039 | 44,130 | 16,318 | 67,700 | 34,070 | ||||||||||||||||||||||||
Equity in income of other investments, net | 1,539 | 11,155 | 10,365 | 26,895 | 3,385 | 5,039 | 8,758 | 8,826 | ||||||||||||||||||||||||
Net income/(loss) | 509,204 | (37,429 | ) | 767,747 | 801,078 | |||||||||||||||||||||||||||
Net (loss)/income | (130,727 | ) | 117,118 | 105,232 | 258,543 | |||||||||||||||||||||||||||
Net income attributable to noncontrolling interests | (1,465 | ) | (965 | ) | (5,369 | ) | (1,479 | ) | ||||||||||||||||||||||||
Net loss/(income) attributable to noncontrolling interests | 11,226 | (421 | ) | 12,569 | (3,904 | ) | ||||||||||||||||||||||||||
Net income/(loss) attributable to the Company | 507,739 | (38,394 | ) | 762,378 | 799,599 | |||||||||||||||||||||||||||
Net (loss)/income attributable to the Company | (119,501 | ) | 116,697 | 117,801 | 254,639 | |||||||||||||||||||||||||||
Preferred dividends | (6,354 | ) | (6,354 | ) | (19,062 | ) | (19,062 | ) | ||||||||||||||||||||||||
Preferred dividends, net | (6,250 | ) | (6,354 | ) | (12,604 | ) | (12,708 | ) | ||||||||||||||||||||||||
Net income/(loss) available to the Company's common shareholders | $ | 501,385 | $ | (44,748 | ) | $ | 743,316 | $ | 780,537 | |||||||||||||||||||||||
Net (loss)/income available to the Company's common shareholders | $ | (125,751 | ) | $ | 110,343 | $ | 105,197 | $ | 241,931 | |||||||||||||||||||||||
Per common share: | ||||||||||||||||||||||||||||||||
Net income/(loss) available to the Company's common shareholders: | ||||||||||||||||||||||||||||||||
Net (loss)/income available to the Company's common shareholders: | ||||||||||||||||||||||||||||||||
-Basic | $ | 0.91 | $ | (0.10 | ) | $ | 1.57 | $ | 1.80 | $ | (0.21 | ) | $ | 0.25 | $ | 0.17 | $ | 0.56 | ||||||||||||||
-Diluted | $ | 0.91 | $ | (0.10 | ) | $ | 1.56 | $ | 1.80 | $ | (0.21 | ) | $ | 0.25 | $ | 0.17 | $ | 0.56 | ||||||||||||||
Weighted average shares: | ||||||||||||||||||||||||||||||||
-Basic | 546,842 | 429,994 | 469,885 | 429,899 | 615,642 | 431,011 | 615,207 | 430,769 | ||||||||||||||||||||||||
-Diluted | 548,766 | 429,994 | 474,452 | 431,602 | 615,642 | 432,489 | 616,943 | 432,430 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net (loss)/income | $ | (130,727 | ) | $ | 117,118 | $ | 105,232 | $ | 258,543 | |||||||
Other comprehensive income: | ||||||||||||||||
Change in unrealized gains related to defined benefit plan | 4,260 | 0 | 4,260 | 0 | ||||||||||||
Other comprehensive income | 4,260 | 0 | 4,260 | 0 | ||||||||||||
Comprehensive (loss)/income | (126,467 | ) | 117,118 | 109,492 | 258,543 | |||||||||||
Comprehensive loss/(income) attributable to noncontrolling interests | 11,226 | (421 | ) | 12,569 | (3,904 | ) | ||||||||||
Comprehensive (loss)/income attributable to the Company | $ | (115,241 | ) | $ | 116,697 | $ | 122,061 | $ | 254,639 |
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 Three Months Ended SeptemberJune 30, 20212022 and 20202021
(Unaudited)
(in thousands)
Retained Earnings/ | Retained Earnings/ | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Cumulative | Total | (Cumulative | Other | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions in Excess | Preferred Stock | Common Stock | Paid-in | Stockholders' | Noncontrolling | Total | Distributions in Excess | Comprehensive | Preferred Stock | Common Stock | Paid-in | Stockholders' | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
of Net Income) | Issued | Amount | Issued | Amount | Capital | Equity | Interests | Equity | of Net Income) | Income | Issued | Amount | Issued | Amount | Capital | Equity | Interests | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at July 1, 2020 | $ | (200,492 | ) | 20 | $ | 20 | 432,504 | $ | 4,325 | $ | 5,752,658 | $ | 5,556,511 | $ | 61,863 | $ | 5,618,374 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net (loss)/income | (38,394 | ) | - | 0 | - | 0 | 0 | (38,394 | ) | 965 | (37,429 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable noncontrolling interests income | 0 | - | 0 | - | 0 | 0 | 0 | (240 | ) | (240 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared to common and preferred shares | (49,605 | ) | - | 0 | - | 0 | 0 | (49,605 | ) | 0 | (49,605 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | 0 | - | 0 | - | 0 | 0 | 0 | (119 | ) | (119 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Surrender of restricted common stock | 0 | 0 | 0 | (2 | ) | 0 | (4 | ) | (4 | ) | 0 | (4 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of equity awards | 0 | - | 0 | - | 0 | 6,450 | 6,450 | 0 | 6,450 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | $ | (288,491 | ) | $ | 20 | $ | 20 | $ | 432,502 | $ | 4,325 | $ | 5,759,104 | $ | 5,474,958 | $ | 62,469 | $ | 5,537,427 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at July 1, 2021 | $ | (68,265 | ) | 20 | $ | 20 | 433,517 | $ | 4,335 | $ | 5,771,179 | $ | 5,707,269 | $ | 64,946 | $ | 5,772,215 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at April 1, 2021 | $ | (104,909 | ) | $ | 0 | 20 | $ | 20 | 433,448 | $ | 4,334 | $ | 5,763,868 | $ | 5,663,313 | $ | 65,154 | $ | 5,728,467 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 507,739 | - | 0 | - | 0 | 0 | 507,739 | 1,465 | 509,204 | 116,697 | 0 | - | 0 | - | 0 | 0 | 116,697 | 421 | 117,118 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable noncontrolling interests income | 0 | - | 0 | - | 0 | 0 | 0 | (353 | ) | (353 | ) | 0 | 0 | - | 0 | - | 0 | 0 | 0 | (7 | ) | (7 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared to common and preferred shares | (110,865 | ) | - | 0 | - | 0 | 0 | (110,865 | ) | 0 | (110,865 | ) | (80,053 | ) | 0 | - | 0 | - | 0 | 0 | (80,053 | ) | 0 | (80,053 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | 0 | - | 0 | - | 0 | 0 | 0 | (887 | ) | (887 | ) | 0 | 0 | - | 0 | - | 0 | 0 | 0 | (622 | ) | (622 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock, net of issuance costs | 0 | 0 | 0 | 3,516 | 35 | 76,893 | 76,928 | 0 | 76,928 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for merger (1) | 0 | 0 | 0 | 179,920 | 1,799 | 3,736,936 | 3,738,735 | 0 | 3,738,735 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Surrender of common stock for taxes | 0 | 0 | 0 | (567 | ) | (5 | ) | (11,575 | ) | (11,580 | ) | 0 | (11,580 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Surrender of common stock | 0 | 0 | 0 | 0 | (27 | ) | 0 | (154 | ) | (154 | ) | 0 | (154 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock options | 0 | 0 | 0 | 28 | 0 | 534 | 534 | 0 | 534 | 0 | 0 | 0 | 0 | 96 | 1 | 1,809 | 1,810 | 0 | 1,810 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of equity awards | 0 | - | 0 | - | 0 | 5,550 | 5,550 | 0 | 5,550 | 0 | 0 | - | 0 | - | 0 | 5,656 | 5,656 | 0 | 5,656 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interests assumed from the merger (1) | 0 | - | 0 | - | 0 | 0 | 0 | 179,037 | 179,037 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | $ | (68,265 | ) | $ | 0 | 20 | $ | 20 | 433,517 | $ | 4,335 | $ | 5,771,179 | �� | $ | 5,707,269 | $ | 64,946 | $ | 5,772,215 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at April 1, 2022 | $ | 412,659 | $ | 2,216 | 20 | $ | 20 | 618,002 | $ | 6,180 | $ | 9,589,955 | $ | 10,011,030 | $ | 204,132 | $ | 10,215,162 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (119,501 | ) | 0 | - | 0 | - | 0 | 0 | (119,501 | ) | (11,226 | ) | (130,727 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains related to defined benefit plan | 0 | 4,260 | - | 0 | - | 0 | 0 | 4,260 | 0 | 4,260 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable noncontrolling interests income | 0 | 0 | - | 0 | - | 0 | 0 | 0 | (201 | ) | (201 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared to common and preferred shares | (130,012 | ) | 0 | - | 0 | - | 0 | 0 | (130,012 | ) | 0 | (130,012 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of preferred stock | 64 | 0 | (1 | ) | (1 | ) | 0 | 0 | (3,505 | ) | (3,442 | ) | 0 | (3,442 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | 0 | 0 | - | 0 | - | 0 | 0 | 0 | (1,718 | ) | (1,718 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | 0 | 0 | 0 | 0 | 450 | 5 | 11,276 | 11,281 | 0 | 11,281 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock options | 0 | 0 | 0 | 0 | 46 | 0 | 989 | 989 | 0 | 989 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Surrender of common stock | 0 | 0 | 0 | 0 | (15 | ) | 0 | (101 | ) | (101 | ) | 0 | (101 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of equity awards | 0 | 0 | - | 0 | - | 0 | 6,472 | 6,472 | 0 | 6,472 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redemption/conversion of noncontrolling interests | 0 | - | 0 | - | 0 | 0 | 0 | (3,094 | ) | (3,094 | ) | 0 | 0 | 0 | 0 | 0 | 0 | 77 | 77 | (303 | ) | (226 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | 328,609 | 20 | $ | 20 | 616,414 | $ | 6,164 | $ | 9,579,517 | $ | 9,914,310 | $ | 241,114 | $ | 10,155,424 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | 163,210 | $ | 6,476 | 19 | $ | 19 | 618,483 | $ | 6,185 | $ | 9,605,163 | $ | 9,781,053 | $ | 190,684 | $ | 9,971,737 |
|
|
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, 2021 and 2020
(Unaudited)
(in thousands)
Retained Earnings/ | ||||||||||||||||||||||||||||||||||||
(Cumulative | Total | |||||||||||||||||||||||||||||||||||
Distributions in Excess | Preferred Stock | Common Stock | Paid-in | Stockholders' | Noncontrolling | Total | ||||||||||||||||||||||||||||||
of Net Income) | Issued | Amount | Issued | Amount | Capital | Equity | Interests | Equity | ||||||||||||||||||||||||||||
Balance at January 1, 2020 | $ | (904,679 | ) | 20 | $ | 20 | 431,815 | $ | 4,318 | $ | 5,765,233 | $ | 4,864,892 | $ | 64,015 | $ | 4,928,907 | |||||||||||||||||||
Contributions from noncontrolling interests | 0 | - | 0 | - | 0 | 0 | 0 | 109 | 109 | |||||||||||||||||||||||||||
Net income | 799,599 | - | 0 | - | 0 | 0 | 799,599 | 1,479 | 801,078 | |||||||||||||||||||||||||||
Redeemable noncontrolling interests income | 0 | - | 0 | - | 0 | 0 | 0 | (845 | ) | (845 | ) | |||||||||||||||||||||||||
Dividends declared to common and preferred shares | (183,411 | ) | - | 0 | - | 0 | 0 | (183,411 | ) | 0 | (183,411 | ) | ||||||||||||||||||||||||
Distributions to noncontrolling interests | 0 | - | 0 | - | 0 | 0 | 0 | (1,018 | ) | (1,018 | ) | |||||||||||||||||||||||||
Issuance of common stock | 0 | 0 | 0 | 921 | 9 | (9 | ) | 0 | 0 | 0 | ||||||||||||||||||||||||||
Surrender of restricted common stock | 0 | 0 | 0 | (297 | ) | (3 | ) | (5,326 | ) | (5,329 | ) | 0 | (5,329 | ) | ||||||||||||||||||||||
Exercise of common stock options | 0 | 0 | 0 | 63 | 1 | 980 | 981 | 0 | 981 | |||||||||||||||||||||||||||
Amortization of equity awards | 0 | - | 0 | - | 0 | 17,574 | 17,574 | 0 | 17,574 | |||||||||||||||||||||||||||
Acquisition of noncontrolling interests | 0 | - | 0 | - | 0 | (19,348 | ) | (19,348 | ) | (1,271 | ) | (20,619 | ) | |||||||||||||||||||||||
Balance at September 30, 2020 | $ | (288,491 | ) | 20 | $ | 20 | 432,502 | $ | 4,325 | $ | 5,759,104 | $ | 5,474,958 | $ | 62,469 | $ | 5,537,427 | |||||||||||||||||||
Balance at January 1, 2021 | $ | (162,812 | ) | 20 | $ | 20 | 432,519 | $ | 4,325 | $ | 5,766,511 | $ | 5,608,044 | $ | 62,210 | $ | 5,670,254 | |||||||||||||||||||
Net income | 762,378 | - | 0 | - | 0 | 0 | 762,378 | 5,369 | 767,747 | |||||||||||||||||||||||||||
Redeemable noncontrolling interests income | 0 | - | 0 | - | 0 | 0 | 0 | (529 | ) | (529 | ) | |||||||||||||||||||||||||
Dividends declared to common and preferred shares | (270,957 | ) | - | 0 | - | 0 | 0 | (270,957 | ) | 0 | (270,957 | ) | ||||||||||||||||||||||||
Distributions to noncontrolling interests | 0 | - | 0 | - | 0 | 0 | 0 | (1,879 | ) | (1,879 | ) | |||||||||||||||||||||||||
Issuance of common stock, net of issuance costs | 0 | 0 | 0 | 4,958 | 49 | 76,879 | 76,928 | 0 | 76,928 | |||||||||||||||||||||||||||
Issuance of common stock for merger (1) | 0 | 0 | 0 | 179,920 | 1,799 | 3,736,936 | 3,738,735 | 0 | 3,738,735 | |||||||||||||||||||||||||||
Surrender of common stock for taxes | 0 | 0 | 0 | (1,115 | ) | (10 | ) | (20,816 | ) | (20,826 | ) | 0 | (20,826 | ) | ||||||||||||||||||||||
Exercise of common stock options | 0 | 0 | 0 | 132 | 1 | 2,503 | 2,504 | 0 | 2,504 | |||||||||||||||||||||||||||
Amortization of equity awards | 0 | - | 0 | - | 0 | 17,504 | 17,504 | 0 | 17,504 | |||||||||||||||||||||||||||
Noncontrolling interests assumed from the merger (1) | 0 | - | 0 | - | 0 | 0 | 0 | 179,037 | 179,037 | |||||||||||||||||||||||||||
Redemption/conversion of noncontrolling interests | 0 | - | 0 | - | 0 | 0 | 0 | (3,094 | ) | (3,094 | ) | |||||||||||||||||||||||||
Balance at September 30, 2021 | $ | 328,609 | 20 | $ | 20 | 616,414 | $ | 6,164 | $ | 9,579,517 | $ | 9,914,310 | $ | 241,114 | $ | 10,155,424 |
|
|
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 Six Months Ended June 30, 2022 and 2021
(Unaudited)
(in thousands)
Retained Earnings/ | Accumulated | |||||||||||||||||||||||||||||||||||||||
(Cumulative | Other | Total | ||||||||||||||||||||||||||||||||||||||
Distributions 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 at January 1, 2021 | $ | (162,812 | ) | $ | 0 | 20 | $ | 20 | 432,519 | $ | 4,325 | $ | 5,766,511 | $ | 5,608,044 | $ | 62,210 | $ | 5,670,254 | |||||||||||||||||||||
Net income | 254,639 | 0 | - | 0 | - | 0 | 0 | 254,639 | 3,904 | 258,543 | ||||||||||||||||||||||||||||||
Redeemable noncontrolling interests income | 0 | 0 | - | 0 | - | 0 | 0 | 0 | (176 | ) | (176 | ) | ||||||||||||||||||||||||||||
Dividends declared to common and preferred shares | (160,092 | ) | 0 | - | 0 | - | 0 | 0 | (160,092 | ) | 0 | (160,092 | ) | |||||||||||||||||||||||||||
Distributions to noncontrolling interests | 0 | 0 | - | 0 | - | 0 | 0 | 0 | (992 | ) | (992 | ) | ||||||||||||||||||||||||||||
Issuance of common stock | 0 | 0 | 0 | 0 | 1,442 | 14 | (14 | ) | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Surrender of common stock | 0 | 0 | 0 | 0 | (548 | ) | (5 | ) | (9,241 | ) | (9,246 | ) | 0 | (9,246 | ) | |||||||||||||||||||||||||
Exercise of common stock options | 0 | 0 | 0 | 0 | 104 | 1 | 1,969 | 1,970 | 0 | 1,970 | ||||||||||||||||||||||||||||||
Amortization of equity awards | 0 | 0 | - | 0 | - | 0 | 11,954 | 11,954 | 0 | 11,954 | ||||||||||||||||||||||||||||||
Balance at June 30, 2021 | $ | (68,265 | ) | $ | 0 | 20 | $ | 20 | 433,517 | $ | 4,335 | $ | 5,771,179 | $ | 5,707,269 | $ | 64,946 | $ | 5,772,215 | |||||||||||||||||||||
Balance at January 1, 2022 | $ | 299,115 | $ | 2,216 | 20 | $ | 20 | 616,659 | $ | 6,167 | $ | 9,591,871 | $ | 9,899,389 | $ | 210,793 | $ | 10,110,182 | ||||||||||||||||||||||
Contributions from noncontrolling interests | 0 | 0 | - | 0 | - | 0 | 0 | 0 | 891 | 891 | ||||||||||||||||||||||||||||||
Net income/(loss) | 117,801 | 0 | - | 0 | - | 0 | 0 | 117,801 | (12,569 | ) | 105,232 | |||||||||||||||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains related to defined benefit plan | 0 | 4,260 | - | 0 | - | 0 | 0 | 4,260 | 0 | 4,260 | ||||||||||||||||||||||||||||||
Redeemable noncontrolling interests income | 0 | 0 | - | 0 | - | 0 | 0 | 0 | (534 | ) | (534 | ) | ||||||||||||||||||||||||||||
Dividends declared to common and preferred shares | (253,770 | ) | 0 | - | 0 | - | 0 | 0 | (253,770 | ) | 0 | (253,770 | ) | |||||||||||||||||||||||||||
Repurchase of preferred stock | 64 | 0 | (1 | ) | (1 | ) | 0 | 0 | (3,505 | ) | (3,442 | ) | 0 | (3,442 | ) | |||||||||||||||||||||||||
Distributions to noncontrolling interests | 0 | 0 | - | 0 | - | 0 | 0 | 0 | (6,058 | ) | (6,058 | ) | ||||||||||||||||||||||||||||
Issuance of common stock | 0 | 0 | 0 | 0 | 2,162 | 22 | 11,259 | 11,281 | 0 | 11,281 | ||||||||||||||||||||||||||||||
Surrender of common stock | 0 | 0 | 0 | 0 | (585 | ) | (6 | ) | (13,539 | ) | (13,545 | ) | 0 | (13,545 | ) | |||||||||||||||||||||||||
Exercise of common stock options | 0 | 0 | 0 | 0 | 174 | 1 | 3,556 | 3,557 | 0 | 3,557 | ||||||||||||||||||||||||||||||
Amortization of equity awards | 0 | 0 | - | 0 | - | 0 | 13,909 | 13,909 | 0 | 13,909 | ||||||||||||||||||||||||||||||
Redemption/conversion of noncontrolling interests | 0 | 0 | 0 | 0 | 73 | 1 | 1,612 | 1,613 | (1,839 | ) | (226 | ) | ||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | 163,210 | $ | 6,476 | 19 | $ | 19 | 618,483 | $ | 6,185 | $ | 9,605,163 | $ | 9,781,053 | $ | 190,684 | $ | 9,971,737 |
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, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Cash flow from operating activities: | ||||||||||||||||
Net income | $ | 767,747 | $ | 801,078 | $ | 105,232 | $ | 258,543 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 261,687 | 214,660 | 254,905 | 147,449 | ||||||||||||
Impairment charges | 954 | 3,509 | 14,691 | 104 | ||||||||||||
Early extinguishment of debt charges | 0 | 7,538 | 7,230 | 0 | ||||||||||||
Equity award expense | 17,971 | 18,203 | 13,994 | 12,271 | ||||||||||||
Gain on sale of properties | (30,841 | ) | (5,697 | ) | (7,137 | ) | (28,866 | ) | ||||||||
Gain on marketable securities, net | (542,510 | ) | (444,646 | ) | ||||||||||||
Gain on sale of cost method investment | 0 | (190,832 | ) | |||||||||||||
Loss/(gain) on marketable securities, net | 139,703 | (85,382 | ) | |||||||||||||
Equity in income of joint ventures, net | (54,095 | ) | (35,039 | ) | (67,700 | ) | (34,070 | ) | ||||||||
Equity in income of other real estate investments, net | (10,365 | ) | (26,895 | ) | (8,758 | ) | (8,826 | ) | ||||||||
Distributions from joint ventures and other investments | 54,188 | 135,791 | 45,775 | 37,080 | ||||||||||||
Change in accounts and notes receivable, net | (3,644 | ) | (21,175 | ) | (1,204 | ) | 19,127 | |||||||||
Change in accounts payable and accrued expenses | (55,569 | ) | 42,064 | (12,636 | ) | 5,587 | ||||||||||
Change in other operating assets and liabilities, net | 11,747 | (32,617 | ) | (41,762 | ) | (29,346 | ) | |||||||||
Net cash flow provided by operating activities | 417,270 | 465,942 | 442,333 | 293,671 | ||||||||||||
Cash flow from investing activities: | ||||||||||||||||
Acquisition of operating real estate | (102,682 | ) | (7,073 | ) | (29,282 | ) | (84,312 | ) | ||||||||
Improvements to operating real estate | (112,792 | ) | (164,366 | ) | (78,958 | ) | (66,342 | ) | ||||||||
Improvements to real estate under development | 0 | (22,358 | ) | |||||||||||||
Acquisition of Weingarten Realty Investors, net of cash acquired of $56,465 | (263,973 | ) | 0 | |||||||||||||
Investment in marketable securities | (1,870 | ) | 0 | |||||||||||||
Proceeds from sale of marketable securities | 339 | 931 | 201 | 201 | ||||||||||||
Proceeds from sale of cost method investment | 0 | 227,325 | ||||||||||||||
Investment in cost method investment | (3,000 | ) | 0 | |||||||||||||
Investments in and advances to real estate joint ventures | (7,546 | ) | (14,640 | ) | (72,947 | ) | (5,698 | ) | ||||||||
Reimbursements of investments in and advances to real estate joint ventures | 9,113 | 4,400 | 22,865 | 3,368 | ||||||||||||
Investments in and advances to other investments | (59,504 | ) | (5,418 | ) | (9,473 | ) | (55,713 | ) | ||||||||
Reimbursements of investments in and advances to other investments | 48,420 | 297 | 29,104 | 32,780 | ||||||||||||
Investment in other financing receivable | (26,897 | ) | 0 | (53,063 | ) | (397 | ) | |||||||||
Collection of mortgage loans receivable | 3,742 | 114 | 63 | 93 | ||||||||||||
Proceeds from sale of properties | 154,017 | 21,718 | 41,224 | 130,138 | ||||||||||||
Proceeds from insurance casualty claims | 0 | 2,450 | ||||||||||||||
Net cash flow (used for)/provided by investing activities | (357,763 | ) | 43,380 | |||||||||||||
Net cash flow used for investing activities | (155,136 | ) | (45,882 | ) | ||||||||||||
Cash flow from financing activities: | ||||||||||||||||
Principal payments on debt, excluding normal amortization of rental property debt | (136,222 | ) | (158,556 | ) | (115,166 | ) | (136,222 | ) | ||||||||
Principal payments on rental property debt | (7,481 | ) | (8,036 | ) | (4,827 | ) | (5,011 | ) | ||||||||
Proceeds from issuance of unsecured term loan | 0 | 590,000 | ||||||||||||||
Proceeds from mortgage loan financings | 19,000 | 0 | ||||||||||||||
Proceeds from issuance of unsecured notes | 500,000 | 900,000 | 600,000 | 0 | ||||||||||||
Repayments of unsecured revolving credit facility, net | 0 | (200,000 | ) | |||||||||||||
Repayments of unsecured term loan | 0 | (590,000 | ) | |||||||||||||
Repayments of unsecured notes | 0 | (484,905 | ) | (547,063 | ) | 0 | ||||||||||
Financing origination costs | (7,017 | ) | (17,851 | ) | (10,281 | ) | 0 | |||||||||
Payment of early extinguishment of debt charges | 0 | (7,538 | ) | (6,527 | ) | 0 | ||||||||||
Contributions from noncontrolling interests | 0 | 109 | 891 | 0 | ||||||||||||
Redemption/distribution of noncontrolling interests | (7,558 | ) | (22,483 | ) | (7,029 | ) | (3,225 | ) | ||||||||
Dividends paid | (270,956 | ) | (304,320 | ) | (253,809 | ) | (160,092 | ) | ||||||||
Proceeds from issuance of stock, net | 79,433 | 981 | 14,838 | 1,970 | ||||||||||||
Repurchase of preferred stock | (3,441 | ) | 0 | |||||||||||||
Shares repurchased for employee tax withholding on equity awards | (20,787 | ) | (5,313 | ) | (13,521 | ) | (9,225 | ) | ||||||||
Change in tenants' security deposits | 1,364 | (380 | ) | 1,873 | 890 | |||||||||||
Net cash flow used for financing activities | 130,776 | (308,292 | ) | (325,062 | ) | (310,915 | ) | |||||||||
Net change in cash, cash equivalents and restricted cash | 190,283 | 201,030 | (37,865 | ) | (63,126 | ) | ||||||||||
Cash, cash equivalents and restricted cash, beginning of the period | 293,188 | 123,947 | 334,663 | 293,188 | ||||||||||||
Cash, cash equivalents and restricted cash, end of the period | $ | 483,471 | $ | 324,977 | $ | 296,798 | $ | 230,062 | ||||||||
Interest paid during the period including payment of early extinguishment of debt charges of $0 and $7,538 (net of capitalized interest of $482 and $11,283, respectively) | $ | 122,297 | $ | 128,591 | ||||||||||||
Interest paid during the period including payment of early extinguishment of debt charges of $6,527 and $0, respectively (net of capitalized interest of $277 and $417, respectively) | $ | 132,912 | $ | 96,097 |
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. Business and Organization
Kimco Realty Corporation, a Maryland corporation, is aNorth America’s largest publicly traded owner and operator of open-air, grocery-anchored shopping centers, andincluding mixed-use assets. The terms “Kimco,” the “Company,” “we,” “our” and “us” each refers to Kimco Realty Corporation and our subsidiaries, 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, including mixed-use assets which are anchored generally by grocery stores, off-price retailers, home improvement centers, discounters and/or service-oriented tenants. Additionally, the Company provides complementary services that capitalize on the Company’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.
Weingarten Merger
On August 3, 2021, Weingarten Realty Investors (“Weingarten”) merged with and into the Company, with the Company continuing as the surviving public company (the “Merger”), pursuant to the definitive merger agreement (the “Merger Agreement”) between the Company and Weingarten, entered into on April 15, 2021. Under the terms of the Merger Agreement, each Weingarten common share was entitled to 1.408 newly issued shares of the Company’s common stock plus $2.89$2.20 in cash, subject to certain adjustments specified in the Merger Agreement.
On July 15, 2021, Weingarten’s BoardThe following highlights the Company’s significant activity upon completion of Trust Managers declared a special cash distribution of $0.69 perthe $4.1 billion strategic Merger with Weingarten common share (the “Special Distribution”) paid on August 2,3, 2021:
● | Acquired 149 properties, including 30 held through joint venture programs. |
● | Assumed senior unsecured notes of $1.5 billion (including $95.6 million in fair market value adjustments) and mortgage debt of $317.7 million (including $11.0 million in fair market value adjustments) encumbering 16 operating properties. |
● | Issued 179.9 million shares of common stock valued at $3.8 billion and paid cash consideration of $0.3 billion. |
See the Company's audited Annual Report on Form 10-K for the year ended December 31, 2021 (to shareholders of record onthe July 28, 2021. “10The Special Distribution was paid in connection with-K”) for further disclosure regarding the Merger and to satisfy REIT taxable income distribution requirements. Under the terms of the Merger Agreement, Weingarten’s payment of the Special Distribution adjusted the cash consideration paid by the Company at the closing of the Merger from $2.89 per Weingarten common share to $2.20 per Weingarten common share and had no impact on the payment of the common share consideration of 1.408 newly issued shares of Company common stock for each Weingarten common share owned immediately prior to the effective time of the Merger. During the nine months ended September 30, 2021, the Company incurred merger related expenses of $50.2 million associated with the Merger. These charges are primarily comprised of severance, professional fees and legal fees. See Footnote 3 of the Company’s Condensed Consolidated Financial Statements for further details.transaction.
COVID-19 Pandemic
The coronavirus disease 2019 (“COVID-19”) pandemic continues to impact the retail real estate industry for both landlords and tenants. 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 continue to depend on future developments, which are uncertain at this time. The Company’s business, operations and financial results will depend on numerous evolving factors, 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 distribution and effectiveness of vaccines, impacts on economic activity from the pandemic and actions taken in response, the effects of the pandemic on the Company’s tenants and their businesses and the ability of tenants to make their rental payments, additional closures of tenants’ businesses and impacts of opening and reclosing of communities in response to the increase in positive COVID-19 cases.payments. Any of these events could materially adversely impact the Company’s business, financial condition, results of operations or stock price. The development and distribution of COVID-19 vaccines has assisted in allowing many restrictions to be lifted, providing a path to recovery. However, the economy continues to face several issues including the lack of qualified employees, inflation risk, supply chain issues and new COVID-19 variants, which could impact the Company and its tenants. 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 Company will continue to monitor for any material or adverse effects resulting from the COVID-19 pandemic. If the Company has determined that any of its assets are impaired, the Company would be required to take impairment charges, and such amounts could be material.
The development and distribution of COVID-19 vaccines has assisted in allowing many restrictions to be lifted, providing a path to recovery. The U.S. economy continues to build upon the reopening trend as businesses reopen to full capacity and stimulus is flowing through to the consumer. The overall economy continues to recover but several issues including the lack of qualified employees, inflation risk, supply chain bottlenecks and COVID-19 variants have impacted the pace of the recovery.
Although the Company continues to see an increase in collections of rental payments, the effects COVID-19 have had on its tenants are still heavily considered when evaluating the collectability of the tenant’s total accounts receivable balance, including the corresponding straight-line rent receivable. Management’s estimate of the collectability of accrued rents and accounts receivable is based on the best information available to management at the time of evaluation.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying Condensed Consolidated Financial Statements include the accounts of the Company. The Company’s subsidiaries include subsidiaries which are wholly owned or which the Company has a controlling interest, including where the Company has been determined to be a primary beneficiary of a variable interest entity (“VIE”) in accordance with the Consolidation Guidanceconsolidation 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-K, for the year ended December 31, 2020 (the “10-K”), as certain disclosures in this Quarterly Report on Form 10-Q for the quarterly period ended SeptemberJune 30, 20212022 that would duplicate those included in the 10-K are not included in these Condensed Consolidated Financial Statements.
Restricted Cash
Restricted deposits are held or restricted for a specific use. The Company had restricted cash totaling $9.2 million and $0.2 million at September 30, 2021 and December 31, 2020, respectively, which is included in Cash and cash equivalents on the Company’s Condensed Consolidated Balance Sheets. This includes cash equivalents of $6.5 million that is held as collateral for letters of credit aggregating to $6.5 million at September 30, 2021.
Other Assets
In connection with the Merger, the Company acquired tax increment revenue bonds issued by an agency in connection with the development of a project in Sheridan, Colorado which mature on December 15, 2039. These Sheridan Redevelopment Agency issued Series B bonds have been classified as held to maturity and were recorded at estimated fair value upon the date of the Merger. The fair value estimates of the Company’s held to maturity tax increment revenue bonds, are based on discounted cash flow analysis, which are based on the expected future sales tax revenues of the project. This analysis reflects the contractual terms of the bonds, including the period to maturity, and uses observable market-based inputs, such as market discount rates and unobservable market-based inputs, such as future growth and inflation rates. Interest on these bonds is recorded at an effective interest rate while cash payments are received at the contractual interest rate.
The held to maturity bonds are evaluated for credit losses based on discounted estimated future cash flows. Any future receipts in excess of the amortized basis will be recognized as revenue when received. The credit risk associated with the amortized value of these bonds is low as the bonds are earmarked for repayments from sales and property taxes associated with a government entity. At September 30, 2021, no credit allowance has been recorded.
Commitments and Contingencies
In connection with the Merger, the Company now provides a guaranty for the payment of any debt service shortfalls on the Sheridan Redevelopment Agency issued Series A bonds which are tax increment revenue bonds issued in connection with a development project in Sheridan, Colorado. These tax increment revenue bonds have a balance of $53.7 million outstanding at September 30, 2021. The bonds are to be repaid with incremental sales and property taxes and a public improvement fee ("PIF") to be assessed on current and future retail sales and, to the extent necessary, any amounts we may have to provide under a guaranty. The revenue generated from incremental sales, property taxes and PIF have satisfied the debt service requirements to date. The incremental taxes and PIF are to remain intact until the earlier of the payment of the bond liability in full or 2040.
Subsequent Events
The Company has evaluated subsequent events and transactions for potential recognition or disclosure in its Condensed Consolidated Financial Statements (see Footnote 510 of the Company’s Condensed Consolidated Financial Statements).
New Accounting Pronouncements
The following table represents an Accounting Standards Update (“ASU”) to the FASB’s ASCs that, as of SeptemberJune 30, 2021,2022, 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 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions | This ASU clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and provides new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. | January 1, 2024; Early adoption permitted | The Company is still assessing the impact on the Company’s financial position and/or results of operations. |
ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers | The amendments in this update require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination rather than at fair value on the acquisition date required by Topic 805. | January 1, 2023; Early adoption permitted | The adoption of this ASU is not expected to have a material impact on the Company’s financial position and/or results of operations. |
The following ASU to the FASB’s ASC has been adopted by the Company as of the date listed:
ASU | Description | Adoption Date | Effect on the financial statements or other significant matters |
ASU 2021-05, | This ASU amends the lessor lease classification in ASC 842 for leases that include variable lease payments that are not based on an index or rate. Under the amended guidance, lessors will classify a lease with variable payments that do not depend on an index or rate as an operating lease if the lease would have been classified as a sales-type lease or a direct financing lease under the previous ASU 842 classification criteria and sales-type or direct financing lease classification would result in a Day 1 loss. |
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The following ASU to the FASB’s ASC has been adopted by the Company as of the date listed:
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3. Weingarten MergerReal Estate
OverviewAcquisitions
OnDuring the August 3, 2021,six months ended June 30, 2022, the Company completed the Merger with Weingarten, under which Weingarten merged with and into the Company, with the Company continuing as the surviving public company. The totalacquired 4 parcels for an aggregate purchase price of the Merger was $4.1 billion, which consists primarily of shares of the Company’s common stock issued$23.2 million, in exchange for Weingarten common shares, plus $281.1 million of cash consideration. The total purchase price was calculated based on the closing price of the Company’s common stock on August 3, 2021, which was $20.78 per share. At the effective time of the Merger, each Weingarten common share, issued and outstanding immediately prior to the effective time of the Merger (other than any shares owned directly by the Company or Weingarten and in each case not held on behalf of third parties) was converted into 1.408 shares of newly issued shares of the Company’s common stock. The number of Weingarten common shares outstanding as of August 3, 2021 converted to shares of the Company’s common stock was determined as follows:separate transactions.
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The following table presents the purchase price and the total value of stock consideration paid by Kimco at the close of the Merger (in thousands except share price of Kimco common stock):
Price of Kimco Common Stock | Equity Consideration Given (Kimco Shares to be Issued) | Calculated Value of Weingarten Consideration | Cash Consideration * | Total Value of Consideration | ||||||||||||||||
As of August 3, 2021 | $ | 20.78 | 179,920 | $ | 3,738,735 | $ | 320,424 | $ | 4,059,159 |
* Amounts include additional consideration of $39.1 million relating to reimbursements paid by the Company to Weingarten at the closing of the Merger for transaction costs incurred by Weingarten.
As a result of the Merger, Kimco acquired 149 properties, including 30 held through joint venture programs. The consolidated net assets and results of operations of Weingarten are included in the consolidated financial statements from the closing date, August 3, 2021.
Provisional Purchase Price Allocation
In accordance with ASC 805-10, Business Combinations, the Company accounted for the Merger as a business combination using the acquisition method of accounting. Based on the value of the common shares issued and cash consideration paid, the total fair value of the assets acquired and liabilities assumed in the Merger was $4.1 billion. The following table summarizes the provisional purchase price allocation based on the Company's initial valuation, including estimates and assumptions of the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed (in thousands):
Provisional Allocation as of September 30, 2021 | ||||
Land | $ | 1,166,922 | ||
Building and improvements | 4,041,244 | |||
In-place leases | 374,281 | |||
Above-market leases | 42,260 | |||
Real estate assets | 5,624,707 | |||
Investments in and advances to real estate joint ventures | 586,248 | |||
Cash, accounts receivable and other assets | 242,399 | |||
Total assets acquired | 6,453,354 | |||
Notes payable | (1,497,632 | ) | ||
Mortgages payable | (317,671 | ) | ||
Accounts payable and other liabilities | (279,414 | ) | ||
Below-market leases | (120,441 | ) | ||
Noncontrolling interests | (179,037 | ) | ||
Total liabilities assumed | (2,394,195 | ) | ||
Total purchase price | $ | 4,059,159 |
The provisional fair market value of the acquired properties is based upon a valuation prepared by the Company with assistance of a third-party valuation specialist. The Company and valuation specialist are still in the process of reviewing the inputs used by the third-party specialist to ensure reasonableness and that the procedures are performed in accordance with management's policy. Therefore, the final acquisition accounting adjustments, including the purchase price and its allocation, are not yet complete as of this filing. Once the purchase price and allocation are complete, an adjustment to the provisional purchase price or allocation may occur. Additionally, any excess purchase price, which could differ materially, may result in the recognition of goodwill, the amount of which may be significant.
The following table details the provisional weighted average amortization periods, in years, of the purchase price provisionally allocated to real estate and related intangible assets and liabilities acquired arising from the Merger:
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Revenues from rental properties, net and Net income/(loss) available to the Company’s common shareholders in the Company’s Condensed Consolidated Statements of Operations includes revenues of $73.5 million and net income of $9.9 million (excluding $50.2 million of merger related charges), respectively, resulting from the Merger during the nine months ended September 30, 2021.
Pro forma Information
The pro forma financial information set forth below is based upon the Company’s historical Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020, adjusted to give effect to these properties acquired as of January 1, 2020. The pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of income would have been, nor does it purport to represent the results of income for future periods. (Amounts presented in millions, except per share figures).
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||
Revenues from rental properties, net | $ | 401.4 | $ | 366.8 | $ | 1,186.4 | $ | 1,109.1 | ||||||
Net income/(loss) (1) | $ | 561.4 | $ | (21.9) | $ | 854.3 | $ | 797.6 | ||||||
Net income/(loss) available to the Company’s common shareholders | $ | 553.4 | $ | (29.8) | $ | 828.3 | $ | 775.1 | ||||||
Net income/(loss) available to the Company’s common shareholders per common share: | ||||||||||||||
Basic (1) | $ | 0.91 | $ | (0.05) | $ | 1.35 | $ | 1.27 | ||||||
Diluted (1) | $ | 0.90 | $ | (0.05) | $ | 1.34 | $ | 1.27 |
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4.Real Estate
Acquisitions
During the nine months ended September 30, 2021, the Company acquired the following operating properties, through direct asset purchases (in thousands):
Purchase Price | ||||||||||||||||||
Property Name | Location | Month Acquired | Cash | Other Consideration** | Total | GLA* | ||||||||||||
Distribution Center #1 | Lancaster, CA | Jan-21 | $ | 58,723 | $ | 11,277 | $ | 70,000 | 927 | |||||||||
Distribution Center #2 | Woodland, CA | Jan-21 | 27,589 | 6,411 | 34,000 | 508 | ||||||||||||
$ | 86,312 | $ | 17,688 | $ | 104,000 | 1,435 |
* Gross leasable area ("GLA")
** Consists of the fair value of the assets acquired which exceeded the purchase price upon closing. The transaction was a sale-leaseback with the seller which resulted in the recognition of a prepayment of rent of $17.7 million in accordance with ASC 842,Leases at closing. The prepayment of rent was amortized over the initial term of the lease through Revenues from rental properties, net on the Company's Condensed Consolidated Statements of Operations. See Footnote 12 of the Company’s Condensed Consolidated Financial Statements for additional discussion regarding fair value allocation of partnership interest for noncontrolling interests.
The 2 distribution centers were purchased through a TRS of the Company during January 2021, and they were subsequently sold in June 2021 and are included in the Dispositionsdisclosure below. Included in the Company's Condensed Consolidated Statements of Operations is $3.2 million in total revenues from the date of acquisition through the date of disposition for these two operating properties.
The purchase price for these acquisitions was allocated to real estate and related intangible assets and liabilities acquired, as applicable, in accordance with our accounting policies for asset acquisitions. The purchase price allocation for properties acquired during the nine months ended September 30, 2021, is as follows (in thousands):
Allocation as of September 30, 2021 | Weighted Average | |||||||
Land | $ | 19,527 | n/a | |||||
Building | 87,691 | 50.0 | ||||||
Building improvements | 6,251 | 45.0 | ||||||
Tenant improvements | 711 | 20.0 | ||||||
In-place leases | 11,120 | 20.0 | ||||||
Below-market leases | (21,300 | ) | 60.0 | |||||
Net assets acquired | $ | 104,000 |
Dispositions
The table below summarizes the Company’s disposition activity relating to consolidated operating properties and parcels (dollars in millions):
Nine Months Ended September 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Aggregate sales price | $ | 156.6 | $ | 22.6 | $ | 43.3 | $ | 132.2 | ||||||||
Gain on sale of properties (1) | $ | 30.8 | $ | 5.7 | $ | 7.1 | $ | 28.9 | ||||||||
Number of properties sold | 5 | 3 | 1 | 3 | ||||||||||||
Number of parcels sold | 9 | 1 | 8 | 7 |
(1) | Before noncontrolling interests of |
5.4. Investments in and Advances to Real Estate Joint Ventures
The Company has 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 Company manages certain of these joint venture investments and, where applicable, earns acquisition fees, leasing commissions, property management fees, asset management fees and construction management fees. The table below presents unconsolidated joint venture investments for which the Company held an ownership interest at SeptemberJune 30, 20212022 and December 31, 20202021 (dollars in millions):
Ownership | The Company’s Investment | Noncontrolling | The Company’s Investment | ||||||||||||||||||||
Joint Venture | Interest | September 30, 2021 | December 31, 2020 | As of June 30, 2022 | June 30, 2022 | December 31, 2021 | |||||||||||||||||
Prudential Investment Program | 15.0% | $ | 170.5 | $ | 175.1 | 15.0% | $ | 153.4 | $ | 163.0 | |||||||||||||
Kimco Income Opportunity Portfolio (“KIR”) (1) | 48.6% | 183.3 | 177.4 | 52.1% | 271.9 | 186.0 | |||||||||||||||||
Canada Pension Plan Investment Board (“CPP”) | 55.0% | 162.4 | 159.7 | 55.0% | 178.7 | 165.1 | |||||||||||||||||
Other Institutional Joint Ventures (1) (2) |
| Various | 264.7 | 0 | |||||||||||||||||||
Other Joint Venture Programs (1) (2) (3) |
| Various | 397.6 | 78.5 | |||||||||||||||||||
Other Institutional Joint Ventures | Various | 268.4 | 281.8 | ||||||||||||||||||||
Other Joint Venture Programs | Various | 211.1 | 211.0 | ||||||||||||||||||||
Total* | $ | 1,178.5 | $ | 590.7 | $ | 1,083.5 | $ | 1,006.9 |
* Representing 125114 property interests and 25.323.1 million square feet of GLA, as of SeptemberJune 30, 2021,2022, and 97120 property interests and 21.224.7 million square feet of GLA, as of December 31, 2020.2021.
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The table below presents the Company’s share of net income/(loss)income for the above investments which is included in Equity in income of joint ventures, net on the Company’s Condensed Consolidated Statements of Operations for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in millions):
Three Months Ended | Nine Months Ended, | |||||||||||||||||||||||||||||||
September 30, | September 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
Joint Venture | 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
Prudential Investment Program | $ | 1.9 | $ | 2.3 | $ | 7.2 | $ | 6.8 | ||||||||||||||||||||||||
Prudential Investment Program (1) | $ | 2.3 | $ | 2.6 | $ | 4.7 | $ | 5.3 | ||||||||||||||||||||||||
KIR | 9.4 | 8.2 | 27.2 | 22.9 | 32.0 | 9.1 | 45.5 | 17.8 | ||||||||||||||||||||||||
CPP | 2.6 | 0.9 | 6.7 | 3.6 | 2.6 | 2.0 | 5.7 | 4.1 | ||||||||||||||||||||||||
Other Institutional Joint Ventures | 0.9 | 0 | 0.9 | 0 | 4.1 | 0 | 5.6 | 0 | ||||||||||||||||||||||||
Other Joint Venture Programs | 5.2 | (0.2 | ) | 12.1 | 1.7 | 3.1 | 2.6 | 6.2 | 6.9 | |||||||||||||||||||||||
Total | $ | 20.0 | $ | 11.2 | $ | 54.1 | $ | 35.0 | $ | 44.1 | $ | 16.3 | $ | 67.7 | $ | 34.1 |
(1) | During the six months ended June 30, 2022, the Prudential Investment Program recognized an impairment charge on a property of $15.1 million, of which the Company’s share was $2.3 million. |
During the ninesix months ended SeptemberJune 30, 2022, certain of the Company’s real estate joint ventures disposed of 6 properties and a land parcel, in separate transactions, for an aggregate sales price of $268.6 million. These transactions resulted in an aggregate net gain to the Company of $29.8 million for the six months ended June 30, 2022.
During the six months ended June 30, 2021, certain of the Company’s real estate joint ventures disposed of 2 properties, in separate transactions, for an aggregate sales price of $53.7 million. These transactions resulted in an aggregate net gain to the Company of $4.2 million for the ninesix months ended SeptemberJune 30, 2021.
The table below presents debt balances within the Company’s unconsolidated joint venture investments for which the Company held noncontrolling ownership interests at SeptemberJune 30, 20212022 and December 31, 20202021 (dollars in millions):
As of September 30, 2021 | As of December 31, 2020 | As of June 30, 2022 | As of December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||
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)* | 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 | $ | 491.8 | 1.95 | % | 46.5 | $ | 495.8 | 2.05 | % | 37.2 | $ | 381.8 | 3.35 | % | 39.1 | $ | 426.9 | 2.02 | % | 45.6 | ||||||||||||||||||||||||||||
KIR | 508.4 | 3.11 | % | 24.9 | 536.9 | 3.87 | % | 25.3 | 425.6 | 2.88 | % | 38.8 | 492.6 | 2.55 | % | 27.9 | ||||||||||||||||||||||||||||||||
CPP | 84.5 | 1.83 | % | 58.1 | 84.9 | 3.25 | % | 30.0 | 83.6 | 3.54 | % | 49.1 | 84.2 | 1.85 | % | 55.0 | ||||||||||||||||||||||||||||||||
Other Institutional Joint Ventures | 169.5 | 1.63 | % | 6.0 | 0 | 0 | - | 233.2 | 3.34 | % | 53.8 | 232.9 | 1.65 | % | 59.7 | |||||||||||||||||||||||||||||||||
Other Joint Venture Programs | 402.9 | 3.58 | % | 86.0 | 423.4 | 3.41 | % | 86.7 | 400.4 | 3.80 | % | 77.2 | 402.1 | 3.58 | % | 83.0 | ||||||||||||||||||||||||||||||||
Total | $ | 1,657.1 | $ | 1,541.0 | $ | 1,524.6 | $ | 1,638.7 |
* Includes extension options
The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will assess its joint venture portfolio for any impairment indicators. If the Company has determined that any of its assets are impaired, the Company would be required to take impairment charges, and such amounts could be material.
6.5. Other Investments
The Company has provided capital to owners and developers of real estate properties and loans 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 SeptemberJune 30, 2021,2022, the Company’s net investment under the Preferred Equity Program was $108.3$69.9 million relating to 49 properties, including 38 net leased16 properties. During the ninesix months ended SeptemberJune 30, 2022 and 2021,the Company recognized net income of $8.5$8.1 million and $7.7 million from its preferred equity investments, including net transactional losses of $1.2 million. During the nine months ended September 30, 2020, the Company recognized income of $26.8 million from its preferred equity investments, including net profit participation of $15.9 million.respectively. These amounts are included in Equity in income of other investments, net on the Company’s Condensed Consolidated Statements of Operations.
During September 2021, the Company entered into an equity investment commitment of up to $25 million with Fifth Wall’s Climate Technology Fund, of which $2.3 million has been funded as of September 30, 2021. During October 2021, Mary Hogan Preusse, a member of the Company’s Board of Directors, joined Fifth Wall as a Senior Advisor.
7.6. Marketable Securities
The amortized cost and unrealized gains, net of marketable securities as of SeptemberJune 30, 20212022 and December 31, 2020,2021, are as follows (in thousands):
As of September 30, 2021 | As of December 31, 2020 | As of June 30, 2022 | As of December 31, 2021 | |||||||||||||
Marketable securities: | ||||||||||||||||
Amortized cost | $ | 114,194 | $ | 114,531 | $ | 115,862 | $ | 114,159 | ||||||||
Unrealized gains, net | 1,134,931 | 592,423 | 957,844 | 1,097,580 | ||||||||||||
Total fair value | $ | 1,249,125 | $ | 706,954 | $ | 1,073,706 | $ | 1,211,739 |
During the three months ended SeptemberJune 30, 20212022 and 2020,2021, there werethe Company recognized net unrealized losses on marketable securities of $261.5 million and net unrealized gains on marketable securities of $457.1$24.3 million, respectively. During the six months ended June 30, 2022 and2021, the Company recognized net unrealized losses on marketable securities of $76.9$139.7 million respectively. During the nine months ended September 30, 2021 and2020, the net unrealized gains on marketable securities were $542.5 million and $444.6of $85.4 million, respectively. These net unrealized gains and losses are included in Gain/(loss)(Loss)/gain on marketable securities, net on the Company’s Condensed Consolidated Statements of Operations. See Footnote 14 of the Company’s Condensed Consolidated Financial Statements for fair value disclosure.
8.7. Accounts and Notes Receivable
The components of accounts and notes receivable, net of potentially uncollectible amounts as of SeptemberJune 30, 20212022 and December 31, 2020,2021, are as follows (in thousands):
As of September 30, 2021 | As of December 31, 2020 | As of June 30, 2022 | As of December 31, 2021 | |||||||||||||
Billed tenant receivables | $ | 11,651 | $ | 25,428 | $ | 21,595 | $ | 20,970 | ||||||||
Unbilled common area maintenance, insurance and tax reimbursements | 55,142 | 35,982 | 38,033 | 55,283 | ||||||||||||
Deferred rent receivables | 8,569 | 17,328 | 3,383 | 5,029 | ||||||||||||
Other receivables | 10,585 | 4,880 | 22,175 | 15,725 | ||||||||||||
Straight-line rent receivables | 149,135 | 135,630 | 174,954 | 157,670 | ||||||||||||
Total accounts and notes receivable, net | $ | 235,082 | $ | 219,248 | $ | 260,140 | $ | 254,677 |
9.8. Leases
Lessor Leases
The Company’s primary source of revenues is derived from lease agreements, which includes rental income and expense reimbursement. The Company’s lease income is comprised 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’s lease income, which is included in Revenues from rental properties, net on the Company’s Condensed Consolidated Statements of Operations, as either fixed or variable lease income based on the criteria specified in ASC 842, for the ninethree and six months ended SeptemberJune 30, 20212022 and 2020,2021, is as follows (in thousands):
Nine Months Ended September 30, | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Lease income: | ||||||||||||||||||||||||
Fixed lease income (1) | $ | 720,174 | $ | 659,913 | $ | 336,370 | $ | 223,259 | $ | 668,368 | $ | 436,263 | ||||||||||||
Variable lease income (2) | 181,980 | 173,216 | 81,514 | 55,683 | 164,961 | 115,995 | ||||||||||||||||||
Above-market and below-market leases amortization, net | 11,915 | 17,500 | 2,683 | 3,231 | 6,980 | 8,933 | ||||||||||||||||||
Adjustments for potentially uncollectible revenues and disputed amounts (3) | 15,228 | (72,057 | ) | 2,706 | 3,559 | 5,618 | 3,412 | |||||||||||||||||
Total lease income | $ | 929,297 | $ | 778,572 | $ | 423,273 | $ | 285,732 | $ | 845,927 | $ | 564,603 |
(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. |
(3) | The amounts represent adjustments associated with potentially uncollectible revenues and disputed amounts primarily due to the COVID-19 pandemic. |
Lessee Leases
The Company currently leases real estate space under non-cancelable operating lease agreements for ground leases and administrative office leases. The Company’s operating leases have remaining lease terms ranging from less than one year to 64.364 years, some of which include options to extend the terms for up to an additional 75 years. The Company does not typically 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 unless the Company is reasonably certain it will exercise these renewal options.
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.
In connection with the Merger, the Company obtained $32.6 million of operating right-of-use assets in exchange for new operating lease liabilities related to six properties under operating lease agreements for ground leases. In addition, the Company acquired two properties under finance leasing arrangements that consists of variable lease payments with a bargain purchase option. As a result, the Company obtained finance right-of-use assets of $23.8 million (which are included in Other assets on the Company’s Condensed Consolidated Balance Sheets) in exchange for new finance lease liabilities (which are included in Other liabilities on the Company’s Condensed Consolidated Balance Sheets).
The weighted-average remaining non-cancelable lease term and weighted-average discount rates for the Company’s operating and finance leases as of SeptemberJune 30, 20212022 were as follows:
Operating Leases | Finance Leases | Operating Leases | Finance Leases | |||||||||||||
Weighted-average remaining lease term (in years) | 25.7 | 2.3 | 25.5 | 1.5 | ||||||||||||
Weighted-average discount rate | 6.62 | % | 4.44 | % | 6.63 | % | 4.44 | % |
The components of the Company’s lease expense, which are included in interest expense, rent expense and general and administrative expense on the Company’s Condensed Consolidated Statements of Operations for the ninethree and six months ended SeptemberJune 30, 20212022 and 2020,2021, were as follows (in thousands):
Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Lease cost: | ||||||||
Finance lease cost (1) | $ | 263 | $ | 0 | ||||
Operating lease cost | 8,562 | 7,782 | ||||||
Variable lease cost | 2,520 | 2,104 | ||||||
Total lease cost | $ | 11,345 | $ | 9,886 |
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Lease cost: | ||||||||||||||||
Finance lease cost | $ | 250 | $ | 0 | $ | 576 | $ | 0 | ||||||||
Operating lease cost | 3,268 | 2,795 | 6,251 | 5,624 | ||||||||||||
Variable lease cost | 1,188 | 649 | 2,596 | 1,332 | ||||||||||||
Total lease cost | $ | 4,706 | $ | 3,444 | $ | 9,423 | $ | 6,956 |
10.9. Other Assets
Assets Held-For-Sale
At SeptemberJune 30, 2021,2022, the Company had a property and land parcel classified as held-for-sale at a net carrying amount of $21.0$2.9 million (including accumulated depreciation and amortization of $0.2$1.1 million).
Mortgages and Other Financing Receivables
During the ninesix months ended SeptemberJune 30, 2021,2022, the Company issued/acquiredprovided as a lender the following mortgage loans and other financing receivables (dollars in millions):
Date Issued/Acquired | Face Amount | Interest Rate | Maturity Date | |||
Sep-21 | $ | 21.5 | 12.50% | Sep-27 | ||
Aug-21* | $ | 10.0 | 5.00% | Jan-22 | ||
Aug-21* | $ | 3.4 | 7.00% | Oct-53 | ||
Jul-21 | $ | 5.0 | 8.00% | Jun-22 | ||
Mar-21 | $ | 0.4 | 7.00% | Mar-31 |
* Acquired in connection with the Merger
In addition, during the nine months ended September 30, 2021, the Company received $3.6 million in full payment of a mortgage loan receivable which accrued interest at a rate of 4.00% and was scheduled to mature in November 2021.
Date Issued | Face Amount | Interest Rate | Maturity Date | |||||||
Jun-22 | $ | 16.5 | 9.00 | % | June-25 | |||||
Jun-22 | $ | 19.6 | 10.00 | % | June-29 | |||||
May-22 | $ | 14.0 | 8.00 | % | May-29 | |||||
Jan-22 | $ | 3.0 | 8.00 | % | July-22 |
11.10. Notes and Mortgages Payable
Notes Payable
In February 2020, theThe Company obtainedhas a $2.0 billion unsecured revolving credit facility (the “Credit Facility”) with a group of banks. The Credit Facilitybanks which 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 is a green credit facility tied to sustainability metric targets, as described in the agreement. The Company achieved such targets, which effectively reduced the rate on the Credit Facility by one basis point. The Credit Facility, which accrues interest at a rate of LIBOR plus 76.5 basis points (0.85%(2.55% as of SeptemberJune 30, 2021)2022), 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 SeptemberJune 30, 2021,2022, the Credit Facility had 0 outstanding balance, appropriations for letters of credit of $1.9$1.2 million and the Company was in compliance with its covenants.
In connection with the Merger, During July 2022, the Company assumed senior unsecured notes aggregating $1.5 billion (including fair market value adjustmentamended the Credit Facility to (i) replace LIBOR borrowings with Secured Overnight Financing Rate (“SOFR”) borrowings, (ii) supplement the sustainability grid with an additional 1 basis point reduction of $95.6 million),applicable margin if certain criteria as defined in the Credit Facility are met, (iii) add a leverage metric test which, have scheduled maturity dates ranging from October 2022 if met, reduces the applicable margin by 5 basis points and (iv) obtain pre-approval of a possible organizational conversion to August 2028 and accrue interest at rates ranging from 3.25% to 6.88% per annum. The senior unsecured notes assumed during the Merger have covenants that are similar to the Company’s existing debt covenants for its senior unsecured notes.an UPREIT structure.
In September 2021,February 2022, the Company issued $500.0$600.0 million inof senior unsecured notes, which are scheduled to mature in December 2031April 2032 and accrue interest at a rate of 2.25%3.20% per annum. Proceeds from this issuance were used for general corporate purposes, including the repayment of certain senior unsecured notes.
During the six months ended June 30, 2022, the Company repaid or partially repaid the following notes (dollars in millions):
Type | Date Paid | Amount Repaid | Interest Rate | Maturity Date | ||||||||
Senior unsecured notes (1) | Mar-22 | $ | 500.0 | 3.400 | % | Nov-22 | ||||||
Senior unsecured notes (2) | May-22 & Jun-22 | $ | 36.1 | 3.125 | % | Jun-23 | ||||||
Senior unsecured notes (3) | Jun-22 | $ | 11.0 | 3.375 | % | Oct-22 |
(1) | The Company incurred a prepayment charge of $6.5 million and $0.7 million in write-off of deferred financing costs resulting from the early repayment. |
(2) | Represents partial repayments. As of June 30, 2022, these notes had an outstanding principal of $313.9 million. |
(3) | Represents partial repayments. As of June 30, 2022, these notes had an outstanding principal of $288.4 million. |
Mortgages Payable
During the ninesix months ended SeptemberJune 30, 2021,2022, the Company (i) obtained a $19.0 million mortgage relating to a consolidated joint venture operating property and (ii) repaid $137.2$115.3 million of mortgage debt (including fair market value adjustment of $1.0$0.2 million) that encumbered 16six operating properties.
In connection with the Merger, the Company assumed mortgage debt aggregating $317.7 million (including fair market value adjustment of $11.0 million) that encumber 16 operating properties, which have scheduled maturity dates ranging from April 2022 to August 2038 and accrue interest at rates ranging from 3.50% to 6.95% per annum.
12.11. Noncontrolling Interests
Noncontrolling interests represent the portion of equity that the Company does not own in those entities it consolidates as a result of having a controlling interest or determininghaving determined 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 Operations.
In connection withDuring the Merger, six months ended June 30, 2022, the Company acquired tworecognized impairment charges of $14.0 million relating to 5 properties held in a consolidated joint ventures structured as DownREIT partnerships. These ventures allow the outside limited partners to redeem their interest in the partnership, and the Company has the option to redeem the interest in cash or sharesventure, before partners’ $13.0 million noncontrolling interests share of the Company's common stock. As of September 30, 2021, the aggregate redemption value of these noncontrolling interests was approximately $41.7 million. In addition, the Company acquired ownership interests in eight consolidated joint ventures in connection with the Merger, which have noncontrolling interests of $134.3 million.impairment.
The following table presents the change in the redemption value of the Redeemable noncontrolling interests for the ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Balance at January 1, | $ | 15,784 | $ | 17,943 | ||||
Fair value allocation to partnership interest (1) | 2,068 | 0 | ||||||
Income | 529 | 845 | ||||||
Distributions (1) | (2,597 | ) | (845 | ) | ||||
Balance at September 30, | $ | 15,784 | $ | 17,943 |
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Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Balance at January 1, | $ | 13,480 | $ | 15,784 | ||||
Fair value allocation to partnership interest | 0 | 2,068 | ||||||
Net income | 534 | 176 | ||||||
Distributions | (535 | ) | (2,244 | ) | ||||
Redemption/conversion of noncontrolling interests | (209 | ) | 0 | |||||
Balance at June 30, | $ | 13,270 | $ | 15,784 |
13.12. Variable Interest Entities (“VIE”)
Included within the Company’s consolidated operating properties at SeptemberJune 30, 20212022 and December 31, 20202021 are 3433 and 2234 consolidated entities, respectively, that are VIEs for which the Company is the primary beneficiary. In August 2021, the Company acquired 11 of these VIEs in conjunction with the Merger. 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 because the unrelated investors do not have substantive 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 SeptemberJune 30, 2022, total assets of these VIEs were $1.6 billion and total liabilities were $148.1 million. At December 31, 2021, total assets of these VIEs were $1.4$1.6 billion and total liabilities were $122.5 million. At December 31, 2020, total assets of these VIEs were $1.0 billion and total liabilities were $62.1$153.9 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 the entity may experience.
All liabilities of these consolidated VIEs are non-recourse to the Company (“VIE Liabilities”). The assets of the unencumbered VIEs are not restricted for use to settle only the obligations of these VIEs. The remaining VIE assets are encumbered by third-party non-recourse mortgage debt. The assets associated with these encumbered VIEs (“Restricted Assets”) are collateral under the respective mortgages 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 as follows (dollars in millions):
As of September 30, 2021 | As of December 31, 2020 | |||||||
Number of unencumbered VIEs | 30 | 19 | ||||||
Number of encumbered VIEs | 4 | 3 | ||||||
Total number of consolidated VIEs | 34 | 22 | ||||||
Restricted Assets: | ||||||||
Real estate, net | $ | 225.1 | $ | 97.7 | ||||
Cash and cash equivalents | 1.8 | 1.8 | ||||||
Accounts and notes receivable, net | 2.0 | 1.9 | ||||||
Other assets | 1.9 | 1.1 | ||||||
Total Restricted Assets | $ | 230.8 | $ | 102.5 | ||||
VIE Liabilities: | ||||||||
Mortgages payable, net | $ | 79.7 | $ | 36.5 | ||||
Operating lease liabilities | 6.7 | 5.5 | ||||||
Other liabilities | 36.1 | 20.1 | ||||||
Total VIE Liabilities | $ | 122.5 | $ | 62.1 |
As of June 30, 2022 | As of December 31, 2021 | |||||||
Number of unencumbered VIEs | 30 | 30 | ||||||
Number of encumbered VIEs | 3 | 4 | ||||||
Total number of consolidated VIEs | 33 | 34 | ||||||
Restricted Assets: | ||||||||
Real estate, net | $ | 193.2 | $ | 222.9 | ||||
Cash and cash equivalents | 5.2 | 2.0 | ||||||
Accounts and notes receivable, net | 1.5 | 2.0 | ||||||
Other assets | 1.7 | 1.0 | ||||||
Total Restricted Assets | $ | 201.6 | $ | 227.9 | ||||
VIE Liabilities: | ||||||||
Mortgages payable, net | $ | 74.5 | $ | 78.9 | ||||
Accounts payable and accrued expenses | 12.3 | 11.8 | ||||||
Operating lease liabilities | 6.6 | 6.7 | ||||||
Other liabilities | 54.7 | 56.5 | ||||||
Total VIE Liabilities | $ | 148.1 | $ | 153.9 |
14.13. 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’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 estimated fair value differs from the carrying value (in thousands):
September 30, 2021 | December 31, 2020 | June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||||
Notes payable, net (1) | $ | 7,034,047 | $ | 7,418,103 | $ | 5,044,208 | $ | 5,486,953 | $ | 7,056,644 | $ | 6,420,439 | $ | 7,027,050 | $ | 7,330,723 | ||||||||||||||||
Mortgages payable, net (2) | $ | 482,634 | $ | 484,699 | $ | 311,272 | $ | 312,933 | $ | 346,461 | $ | 319,813 | $ | 448,652 | $ | 449,758 |
(1) | The Company determined that the valuation of its |
(2) | The Company determined that its valuation of its mortgages |
The Company has certain financial instruments that must be measured under the FASB’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 table below presents the Company’s financial assets measured at fair value on a recurring basis at SeptemberJune 30, 20212022 and December 31, 2020,2021, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):
Balance at September 30, 2021 | Level 1 | Level 2 | Level 3 | |||||||||||||
Marketable equity securities | $ | 1,249,125 | $ | 1,249,125 | $ | 0 | $ | 0 |
Balance at June 30, 2022 | Level 1 | Level 2 | Level 3 | |||||||||||||
Marketable equity securities | $ | 1,073,706 | $ | 1,073,706 | $ | 0 | $ | 0 |
Balance at December 31, 2020 | Level 1 | Level 2 | Level 3 | |||||||||||||
Marketable equity securities | $ | 706,954 | $ | 706,954 | $ | 0 | $ | 0 |
Balance at December 31, 2021 | Level 1 | Level 2 | Level 3 | |||||||||||||
Marketable equity securities | $ | 1,211,739 | $ | 1,211,739 | $ | 0 | $ | 0 |
The table below presents the Company’s assets measured at fair value on a non-recurring basis at SeptemberJune 30, 20212022 and December 31, 20202021 (in thousands):
Balance at September 30, 2021 | Level 1 | Level 2 | Level 3 | |||||||||||||
Other investments | $ | 9,834 | $ | 0 | $ | 0 | $ | 9,834 |
Balance at June 30, 2022 | Level 1 | Level 2 | Level 3 | |||||||||||||
Real estate | $ | 110,503 | $ | 0 | $ | 0 | $ | 110,503 |
Balance at December 31, 2021 | Level 1 | Level 2 | Level 3 | |||||||||||||
Other investments | $ | 9,834 | $ | 0 | $ | 0 | $ | 9,834 |
Balance at December 31, 2020 | Level 1 | Level 2 | Level 3 | |||||||||||||
Real estate | $ | 24,899 | $ | 0 | $ | 0 | $ | 24,899 | ||||||||
Other investments | $ | 5,464 | $ | 0 | $ | 0 | $ | 5,464 |
During the six months ended June 30, 2022, the Company recognized impairment charges related to adjustments to property carrying values of $14.7 million, before noncontrolling interests of $13.0 million. The Company’s estimated fair values of these assets were primarily based upon estimated sales prices from signed contracts or letters of intent from third-party offers, which were less than the carrying value of the assets. The Company does not have access to the unobservable inputs used to determine the estimated fair values of third-party offers. Based on these inputs, the Company determined that its valuation of these investments was classified within Level 3 of the fair value hierarchy.
15.14. Incentive Plans
In May 2020, the Company’s stockholders approved the 2020 Equity Participation Plan (the “2020 Plan”), which is a successor to the Restated Kimco Realty Corporation 2010 Equity Participation Plan (together with the 2020 Plan, the “Plans”) that expired in March 2020. The 2020 Plan provides for a maximum of 10,000,000 shares of the Company’s common stock to be reserved for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, stock payments and deferred stock awards. At SeptemberJune 30, 2021,2022, the Company had 8.56.9 million shares of common stock available for issuance under the 2020 Plan.
The Company accounts for equity awards in accordance with FASB’s Compensation – Stock Compensation guidance, which requires that all share-based payments to employees, including grants of employee stock options, restricted stock and performance shares, be recognized in the Condensed Consolidated Statements of Operations over the service period based on their fair values. Fair value of performance awards is determined using the Monte Carlo method which is 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 expenses associated with its equity awards of $18.0$14.0 million and $18.2$12.3 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. As of SeptemberJune 30, 2021,2022, the Company had $41.9$56.2 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 averageweighted-average period of approximately 2.83.1 years.
Defined Benefit Plan
As part of the Merger, the Company assumed sponsorship of Weingarten's noncontributory qualified cash balance retirement plan (“the Benefit Plan”). At the date of the Merger, the Benefit Plan was frozen and as a result no new benefits will be offered to employees who were not already part of the Benefit Plan on the Merger date. The Benefit Plan is expected to be terminated by December 31, 2021. The Benefit Plan maintains a separate account for each participant. Annual additions to each participant’s account included an interest credit of 4.5% as the service credit was suspended upon the freeze. The participant data used in determining the liabilities and costs for the Benefit Plan was collected as of January 1,2021.
Upon the Merger, the Benefit Plan’s projected benefit obligation and plan assets were fair valued as of the Merger date. The projected benefit obligation, fair value of the plan assets and the Benefit Plan’s funded status at the Merger date were (in thousands):
Projected benefit obligation | $ | (73,081) | ||
Fair value of plan assets | 74,025 | |||
Funded status (included in Other assets) | $ | 944 |
The weighted-average assumptions used to determine the benefit obligation are shown below:
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The Benefit Plan’s investment policy is to address the long-term needs of the Benefit Plan and consider the risk tolerances of participants, to select appropriate investments to be offered by the Benefit Plan and to establish procedures for monitoring and evaluating the performance of the investments of the Benefit Plan. The Benefit Plan’s overall objectives for selecting and monitoring investment options are (i) to promote and optimize retirement wealth accumulation, (ii) to provide a full range of asset classes and investment options that are intended to help diversify the portfolio to maximize return within reasonable and prudent levels of risk, (iii) to control costs of administering the Benefit Plan and (iv) to manage the investments held by the Benefit Plan.
The selection of investment options is determined using criteria based on the following characteristics: fund history, relative performance, investment style, portfolio structure, manager tenure, minimum assets, expenses and operation considerations. Investment options selected for use in the Benefit Plan are reviewed at least on a semi-annual basis to evaluate material changes from the selection criteria. Asset allocation is used to determine how the investment portfolio should be split between stocks, bonds and cash. The asset allocation decision is influenced by investment time horizon; risk tolerance; and investment return objectives. The primary factor in establishing asset allocation is demographics of the Benefit Plan. A broad market diversification model is used in considering all these factors, and the percentage allocation to each investment category may also vary depending upon market conditions. Re-balancing of the allocation of the Benefit Plan’s assets occurs semi-annually.
The fair value of plan assets was determined based on publicly quoted market prices for identical assets as of the date of the Merger, which are all classified as Level 1 observable inputs. The fair value and allocation of the plan assets were as follows (in thousands):
Fair Value | Asset Allocation | |||||||
Cash and short-term investments | $ | 44,563 | 60 | % | ||||
Large company funds | 11,946 | 16 | % | |||||
Fixed income funds | 7,467 | 10 | % | |||||
International funds | 3,247 | 5 | % | |||||
Growth funds | 2,364 | 3 | % | |||||
Small company funds | 2,225 | 3 | % | |||||
Mid company funds | 2,213 | 3 | % | |||||
Total | $ | 74,025 | 100 | % |
The components of net periodic benefit income include an expected return on plan assets of $0.9 million and an interest cost of $0.3 million for the three and nine months ended September 30, 2021, which are included in Other income/(expense), net in the Company’s Condensed Consolidated Statements of Operations.
NaN contributions are anticipated to be made to the Benefit Plan during the remainder of 2021.
16.Earnings Per Share
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 September 30, | Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Computation of Basic and Diluted Earnings Per Share: | ||||||||||||||||
Net income/(loss) available to the Company's common shareholders | $ | 501,385 | $ | (44,748 | ) | $ | 743,316 | $ | 780,537 | |||||||
Earnings attributable to participating securities | (4,078 | ) | (251 | ) | (5,749 | ) | (5,259 | ) | ||||||||
Net income/(loss) available to the Company’s common shareholders for basic earnings per share | 497,307 | (44,999 | ) | 737,567 | 775,278 | |||||||||||
Distributions on convertible units | 42 | 0 | 3,009 | 119 | ||||||||||||
Net income/(loss) available to the Company’s common shareholders for diluted earnings per share | $ | 497,349 | $ | (44,999 | ) | $ | 740,576 | $ | 775,397 | |||||||
Weighted average common shares outstanding – basic | 546,842 | 429,994 | 469,885 | 429,899 | ||||||||||||
Effect of dilutive securities (1): | ||||||||||||||||
Equity awards | 1,718 | 0 | 1,837 | 1,496 | ||||||||||||
Assumed conversion of convertible units | 206 | 0 | 2,730 | 207 | ||||||||||||
Weighted average common shares outstanding – diluted | 548,766 | 429,994 | 474,452 | 431,602 | ||||||||||||
Net income/(loss) available to the Company's common shareholders: | ||||||||||||||||
Basic earnings per share | $ | 0.91 | $ | (0.10 | ) | $ | 1.57 | $ | 1.80 | |||||||
Diluted earnings per share | $ | 0.91 | $ | (0.10 | ) | $ | 1.56 | $ | 1.80 |
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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.
17.15. Stockholders’ Equity
Preferred Stock
The Company’s Board of Director’s authorized the repurchase of up to 900,000 depositary shares of Class L preferred stock and 1,058,000 depositary shares of Class M preferred stock representing up to 1,958 shares of the Company’s preferred stock, par value $1.00 per share, through December 31, 2022. During the six months ended June 30, 2022, the Company repurchased the following preferred stock:
Class of Preferred Stock | Depositary Shares Repurchased | Purchase Price (in millions) | ||||||
Class L | 54,508 | $ | 1.3 | |||||
Class M | 90,760 | $ | 2.1 |
The Company’s outstanding Preferred Stock is detailed below:
As of September 30, 2021 and December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||
As of June 30, 2022 | As of June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||
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 | Shares | Shares | Liquidation (in thousands) | Dividend | Annual Depositary | Par | Optional | ||||||||||||||||||||||||||||||||||||
Class L | 10,350 | 9,000 | $ | 225,000 | 5.125 | % | $ | 1.28125 | $ | 1.00 | 8/16/2022 | 10,350 | 8,946 | $ | 223,637 | 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 | 10,580 | 10,489 | 262,231 | 5.250 | % | $ | 1.31250 | $ | 1.00 | 12/20/2022 | ||||||||||||||||||||||||||||||
19,580 | $ | 489,500 | 19,435 | $ | 485,868 |
As of December 31, 2021 | |||||||||||||||||||||||||
Class of | Shares | Shares | Liquidation (in thousands) | Dividend Rate | Annual Depositary | Par Value | Optional | ||||||||||||||||||
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, theThe Company extended itshas a common share repurchase program, for a term of two years, which willis scheduled to expire in February 2022, pursuant to which29,2024. Under this program, 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 common share repurchase program during the ninesix months ended SeptemberJune 30, 2021.2022. As of SeptemberJune 30, 2021,2022, the Company had $224.9 million available under this common share repurchase program.
During August 2021, the Company established an at-the-market continuous offering program (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 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. In addition, the Company may from time to time enter into separate forward sale agreements with one or more banks. During the 2021,six months ended June 30, 2022, the Company issued 3,515,500450,000 shares and received net proceeds after commissions of $76.9$11.3 million. As of SeptemberJune 30, 2021,2022, the Company had $422.4$411.0 million available under this ATM program.
In connection with the Merger, each Weingarten common share, issued and outstanding immediately prior to the effective time
Dividends Declared
The following table provides a summary of the dividends declared per share:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Common Shares | $ | 0.17000 | $ | 0.10000 | $ | 0.51000 | $ | 0.38000 | ||||||||
Class L Depositary Shares | $ | 0.32031 | $ | 0.32031 | $ | 0.96093 | $ | 0.96093 | ||||||||
Class M Depositary Shares | $ | 0.32813 | $ | 0.32813 | $ | 0.98439 | $ | 0.98439 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Common Shares | $ | 0.20000 | $ | 0.17000 | $ | 0.39000 | $ | 0.34000 | ||||||||
Class L Depositary Shares | $ | 0.32031 | $ | 0.32031 | $ | 0.64062 | $ | 0.64062 | ||||||||
Class M Depositary Shares | $ | 0.32813 | $ | 0.32813 | $ | 0.65626 | $ | 0.65626 |
18.16. Supplemental Schedule of Non-Cash Investing / Financing Activities
The following schedule summarizes the non-cash investing and financing activities of the Company for the ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Surrender of common stock | $ | 20,826 | $ | 5,329 | ||||
Declaration of dividends paid in succeeding period | $ | 5,366 | $ | 5,366 | ||||
Capital expenditures accrual | $ | 35,451 | $ | 41,373 | ||||
Lease liabilities arising from obtaining operating right-of-use assets | $ | 553 | $ | 0 | ||||
Allocation of fair value to noncontrolling interests | $ | 2,068 | $ | 0 | ||||
Purchase price fair value adjustment to prepaid rent | $ | 15,620 | $ | 0 | ||||
Weingarten Merger: | ||||||||
Real estate assets | $ | 5,624,707 | $ | 0 | ||||
Investments in and advances to real estate joint ventures | $ | 586,248 | $ | 0 | ||||
Notes payable | $ | (1,497,632 | ) | $ | 0 | |||
Mortgages payable | $ | (317,671 | ) | $ | 0 | |||
Below-market leases | $ | (120,441 | ) | $ | 0 | |||
Noncontrolling interests | $ | (179,037 | ) | $ | 0 | |||
Other assets and liabilities, net | $ | (149,813 | ) | $ | 0 | |||
Lease liabilities arising from obtaining operating right-of-use assets | $ | 32,569 | $ | 0 | ||||
Lease liabilities arising from obtaining financing right-of-use assets | $ | 23,778 | $ | 0 | ||||
Common stock issued in exchange for Weingarten shares | $ | (3,738,735 | ) | $ | 0 |
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Surrender of common stock | $ | 13,545 | $ | 9,246 | ||||
Declaration of dividends paid in succeeding period | $ | 5,326 | $ | 5,366 | ||||
Capital expenditures accrual | $ | 23,225 | $ | 37,269 | ||||
Lease liabilities arising from obtaining operating right-of-use assets | $ | 0 | $ | 553 | ||||
Allocation of fair value to noncontrolling interests | $ | 0 | $ | 2,068 | ||||
Decrease in redeemable noncontrolling interests from redemption of units for common stock | $ | 1,613 | $ | 0 | ||||
Purchase price fair value adjustment to prepaid rent | $ | 0 | $ | 15,620 |
The following table provides a reconciliation of cash, cash equivalents and restricted cash recorded on the Company’s Condensed Consolidated Balance Sheets to the Company’s Condensed Consolidated Statements of Cash Flows (in thousands):
As of September 30, 2021 | As of December 31, 2020 | As of June 30, 2022 | As of December 31, 2021 | |||||||||||||
Cash and cash equivalents | $ | 474,260 | $ | 292,953 | $ | 293,863 | $ | 325,631 | ||||||||
Restricted cash | 9,211 | 235 | 2,935 | 9,032 | ||||||||||||
Total cash, cash equivalents and restricted cash | $ | 483,471 | $ | 293,188 | $ | 296,798 | $ | 334,663 |
17.Commitments and Contingencies
Letters of Credit
The Company has issued letters of credit in connection with the completion and repayment guarantees primarily on certain of the Company’s redevelopment projects and guaranty of payment related to the Company’s insurance program. At June 30, 2022, these letters of credit aggregated $42.6 million.
Funding Commitments
The Company has an investment with a funding commitment of $25.0 million, of which $10.1 million has been funded as of June 30, 2022.
Other
In connection with the construction of its development and redevelopment projects and related infrastructure, certain public agencies require posting of performance and surety bonds to guarantee that the Company’s obligations are satisfied. These bonds expire upon the completion of the improvements and infrastructure. As of June 30, 2022, there were $27.7 million in performance and surety bonds outstanding.
In connection with the Merger, the Company now provides a guaranty for the payment of any debt service shortfalls on the Sheridan Redevelopment Agency issued Series A bonds which are tax increment revenue bonds issued in connection with a development project in Sheridan, Colorado. These tax increment revenue bonds have a balance of $49.7 million outstanding at June 30, 2022. The bonds are to be repaid with incremental sales and property taxes and a public improvement fee ("PIF") to be assessed on current and future retail sales and, to the extent necessary, any amounts we may have to provide under a guaranty. The revenue generated from incremental sales, property taxes and PIF have satisfied the debt service requirements to date. The incremental taxes and PIF are to remain intact until the earlier of the payment of the bond liability in full or 2040.
The Company is subject to various other legal proceedings and claims that arise in the ordinary course of business. Management believes that the final outcome of such matters will not have a material adverse effect on the financial position, results of operations or liquidity of the Company taken as a whole as of June 30, 2022.
18.Defined Benefit Plan
As part of the Merger, the Company assumed sponsorship of Weingarten’s noncontributory qualified cash balance retirement plan (“the Benefit Plan”). At the date of the Merger, the Benefit Plan was frozen and as a result no new benefits will be offered to employees who were not already part of the Benefit Plan on the Merger date. The Benefit Plan was terminated as of December 31, 2021. In connection with the termination, the Benefit Plan maintains a separate account for each participant. Annual additions to each participant’s account includes an interest credit of 4.5% as the service credit was suspended upon the freeze. The participant data used in determining the liabilities and costs for the Benefit Plan was determined as of June 30,2022.
The following table summarizes the measurement changes in the Benefit Plan’s projected benefit obligation, plan assets and funded status, as well as the components of net periodic benefit costs, including key assumptions, from January 1, 2022 through June 30, 2022 (in thousands):
2022 | ||||
Change in Projected Benefit Obligation: | ||||
Benefit obligation at January 1 | $ | 36,995 | ||
Interest cost | 435 | |||
Actuarial gain | (6,028 | ) | ||
Benefit payments | (1,093 | ) | ||
Benefit obligation at June 30 | $ | 30,309 | ||
Change in Plan Assets: | ||||
Fair value of plan assets at January 1 | $ | 43,653 | ||
Actual return on plan assets | (1,343 | ) | ||
Benefit payments | (1,093 | ) | ||
Fair value of plan assets at June 30 | $ | 41,217 | ||
Funded status at June 30 (included in Other assets) | $ | 10,908 | ||
Accumulated benefit obligation | $ | 30,309 | ||
Net gain recognized in other comprehensive income | $ | 6,476 |
The weighted-average assumptions used to determine the benefit obligation as of June 30, 2022 are as follows:
Discount rate | 4.23 | % | ||
Interest credit rate for cash balance plan | 4.50 | % |
The selection of the discount rate is made after comparison to yields based on cash investments. The long-term rate of return is a composite rate for the Benefit Plan. It is derived as the sum of the percentages invested in each principal asset class included in the portfolio multiplied by their respective expected rates of return. The Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the Benefit Plan portfolio. This analysis resulted in the selection of 1.00% as the long-term rate of return assumption for the six months ended June 30, 2022.
NaN contributions have been made and none are anticipated to be made to the Benefit Plan during 2022.
19.Accumulated Other Comprehensive Income (“AOCI”)
The following table displays the change in the components of AOCI for the six months ended June 30, 2022:
Unrealized Gains | ||||
Balance as of January 1, 2022 | $ | 2,216 | ||
Other comprehensive income before reclassifications | 4,260 | |||
Amounts reclassified from AOCI | 0 | |||
Net current-period other comprehensive income | 4,260 | |||
Balance as of June 30, 2022 | $ | 6,476 |
20.Earnings Per Share
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 June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Computation of Basic and Diluted Earnings Per Share: | ||||||||||||||||
Net (loss)/income available to the Company's common shareholders | $ | (125,751 | ) | $ | 110,343 | $ | 105,197 | $ | 241,931 | |||||||
Earnings attributable to participating securities | (533 | ) | (672 | ) | (1,000 | ) | (1,475 | ) | ||||||||
Net (loss)/income available to the Company’s common shareholders for basic earnings per share | (126,284 | ) | 109,671 | 104,197 | 240,456 | |||||||||||
Distributions on convertible units | 0 | 9 | 0 | 18 | ||||||||||||
Net (loss)/income available to the Company’s common shareholders for diluted earnings per share | $ | (126,284 | ) | $ | 109,680 | $ | 104,197 | $ | 240,474 | |||||||
Weighted average common shares outstanding – basic | 615,642 | 431,011 | 615,207 | 430,769 | ||||||||||||
Effect of dilutive securities (1): | ||||||||||||||||
Equity awards | 0 | 1,356 | 1,689 | 1,528 | ||||||||||||
Assumed conversion of convertible units | 0 | 122 | 47 | 133 | ||||||||||||
Weighted average common shares outstanding – diluted | 615,642 | 432,489 | 616,943 | 432,430 | ||||||||||||
Net (loss)/income available to the Company's common shareholders: | ||||||||||||||||
Basic earnings per share | $ | (0.21 | ) | $ | 0.25 | $ | 0.17 | $ | 0.56 | |||||||
Diluted earnings per share | $ | (0.21 | ) | $ | 0.25 | $ | 0.17 | $ | 0.56 |
(1) | The effect of the assumed conversion of certain convertible units had an anti-dilutive effect upon the calculation of Net (loss)/income available to the Company’s common shareholders per share. Accordingly, the impact of such conversions has not been included in the determination of diluted earnings per share calculations. Additionally, there were 0.5 million stock options that were not dilutive as of June 30, 2021. |
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.
Item 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 Kimco 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,” “commit,” “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, in some cases, are 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)reduction in the Company’s abilityincome in the event of multiple lease terminations by tenants or a failure of multiple tenants to raise capital by selling its assets, (v) changesoccupy their premises 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 management’s ability to estimate the impact thereof, (vii) pandemics or other health crises, such as coronavirus disease 2019 (“COVID-19”), (viii)a shopping center, (iv) the availability of suitable acquisition, disposition, development and redevelopment opportunities, and risks related to acquisitions not performing in accordance with our expectations, (ix)(v) the Company’s failureability to realize the expected benefits of the Merger (as defined below), (x) significant transactionraise capital by selling its assets, (vi) increases in operating costs and/or unknown or inestimable liabilities relateddue to the Merger, (xi) the risk of shareholder litigation in connection with the Merger, including any resulting expense, (xii)inflation and supply chain issues, (vii) risks related to future opportunities and plans for the combined company, including the uncertainty of expected future financial performance and results of the combined company following the Merger, (xiii)merger between Kimco and Weingarten Realty Investors (the “Merger”), (viii) the possibility that, if the Company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial analysts or investors, the market price of the Company’s common stock could decline, (xiv)(ix) changes in governmental laws and regulations, including but not limited to changes in data privacy, environmental (including climate change), safety and health laws, and management’s ability to estimate the impact of such changes, (x) valuation and risks related to the Company’s joint venture and preferred equity investments, (xv)(xi) valuation of marketable securities and other investments, including the shares of Albertsons Companies, Inc. common stock held by the Company, (xii) impairment charges, (xiii) pandemics or other health crises, such as coronavirus disease 2019 (“COVID-19”), (xiv) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms to the Company, (xv) the level and volatility of interest rates and management’s ability to estimate the impact thereof, (xvi) increases in operating costs, (xvii) changes in the dividend policy for the Company’s common and preferred stock and the Company’s ability to pay dividends at current levels, (xviii) the reduction in the Company’s income in the event of multiple lease terminations by tenants or a failure of multiple tenants to occupy their premises in a shopping center, (xix) impairment charges, (xx)(xvii) unanticipated changes in the Company’s intention or ability to prepay certain debt prior to maturity and/or hold certain securities until maturity, and (xxi)(xviii) the other risks and uncertainties identified under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year-ended December 31, 2020, as supplemented by the risks and uncertainties identified under Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q.2021. 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 in the Company’s Quarterly Reports on Form 10-Q and 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 Overview
Kimco Realty Corporation, a Maryland corporation, is North America’s largest publicly traded owner and operator of open-air, grocery-anchored shopping centers, andincluding mixed-use assets in the U.S.assets. The terms “Kimco,” the “Company,” “we,” “our” and “us” each refers 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 SeptemberJune 30, 2021,2022, the Company had interests in 545533 U.S. shopping center properties, aggregating 93.791.7 million square feet of gross leasable area (“GLA”), located in 29 states. In addition, the Company had 5827 other property interests, primarily through the Company’s preferred equity investments and other investments, totaling 6.36.1 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 Company’s primary business objective is to be the premier owner and operator of open-air, grocery-anchored shopping centers, andincluding mixed-use assets, in the U.S. The Company believes it can achieve this objective by:
● | increasing the value of its existing portfolio of properties and generating higher levels of portfolio growth; |
● | increasing cash flows for reinvestment and/or for distribution to |
● | improving debt metrics and upgraded unsecured debt ratings |
● | continuing growth in desirable demographic areas with successful |
● | increasing |
The Company further concentrated its business objectives to three main areas:
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Weingarten Merger
On August 3, 2021, Weingarten Realty Investors (“Weingarten”) merged with and into the Company, with the Company continuing as the surviving public company, (the “Merger”), pursuant to the definitive merger agreement (the “Merger Agreement”) between the Company and Weingarten which was entered into on April 15, 2021. The Merger brought together two industry-leading retail real estate platforms with highly complementary portfolios and created the preeminent open-air shopping center and mixed-use real estate owner in the country.U.S. As a result of the Merger, the Company acquired 149 properties, including 30 held through joint venture programs. The increased scale in targeted growth markets, coupled with a broader pipeline of redevelopment opportunities, has positioned the combined company to create significant value for its shareholders. Under the terms of the Merger Agreement, each Weingarten common share was entitled to 1.408 newly issued shares of the Company’s common stock plus $2.89 in cash, subject to certain adjustments specified in the Merger Agreement.
On July 15, 2021, Weingarten’s Board of Trust Managers declared a special cash distribution of $0.69 per Weingarten common share (the “Special Distribution”) payable on August 2, 2021 to shareholders of record on July 28, 2021. The Special Distribution was paid in connection with the Merger and to satisfy REIT taxable income distribution requirements. Under the terms of the Merger Agreement, Weingarten’s payment of the Special Distribution adjusted the cash consideration paid by the Company at the closing of the Merger from $2.89 per Weingarten common share to $2.20 per Weingarten common share and had no impact on the payment of the share consideration of 1.408 newly issued shares of Company common stock for each Weingarten common share owned immediately prior to the effective time of the Merger. In connection with the Merger the Company issued 179.9 million shares of common stock.
COVID-19 Pandemic
The COVID-19 pandemic has resulted in a widespread health crisis that adversely affected businesses, economies and financial markets worldwide. The COVID-19 pandemic significantly impacted the retail sector in which the Company operates. The majority of the Company’s tenants and their operations have been, and may continue to be impacted. Through the duration of the pandemic, a substantial number of tenants had to temporarily or permanently close their business, shortened their operating hours or offer reduced services for some period of time.
The development and distribution of COVID-19 vaccines has assisted in allowing many restrictions to be lifted, providing a path to recovery. The U.S.However, the economy continues to build upon the reopening trend as businesses reopen to full capacity and stimulus is flowing through to the consumer. The overall economy continues to recover butface several issues including the lack of qualified employees, inflation risk, supply chain bottlenecksissues and new COVID-19 variants, have impactedwhich could impact the pace of the recovery.
The extent to which the COVID-19 pandemic impacts the Company’s financial condition, results of operationsCompany and cash flows, in the near term, will continue to depend on future developments, which continue to be uncertain, including new information that may emerge concerning the severity of COVID-19, variants, the distribution and effectiveness as well as the willingness to take the vaccines, 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.its tenants.
The Company continues to monitor the impact of COVID-19, and responses thereto, on the Company’s business, tenantsits tenants’ industries and industry as a whole.general economic, financial and social conditions. The magnitude and duration of the COVID-19 pandemic and its impact on the Company’s operations and liquidity remains uncertain as the pandemic continues to evolve globally and within the United States. 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 Company will continue to monitor for any material or adverse effects resulting from the COVID-19 pandemic. If the Company determines that any of its assets are impaired as a result of the COVID-19 pandemic, the Company would be required to take impairment charges, and such amounts could be material. The Company did not incur any impairment charges during the six months ended June 30, 2022 relating to COVID-19.
Although the Company continues to see an increase in collections of rental payments, the effects COVID-19 have had on its tenants are still heavily considered when evaluating the adequacy of the collectability of the tenant’s total accounts receivable balance, including the corresponding straight-line rent receivable. As of September 30, 2021, the Company’s consolidated accounts receivable balance was 43% potentially uncollectible, including receivables from tenants that are being accounted for on a cash basis, and 13% of the Company’s straight-line rent receivables were potentially uncollectible, also inclusive of tenants that are being accounted for on a cash basis. These reserves are primarily attributable to the impact from the COVID-19 pandemic. Management’s estimate of the collectability of accrued rents and accounts receivable is based on the best information available to management at the time of evaluation. The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will continue to assess the collectability of its tenant accounts receivables. As such, the Company may determine that further adjustments to its accounts receivable may be required in the future, and such amounts may be material.
Cybersecurity
The Company’s Audit Committee receives quarterly briefings from the Company’s Chief Information Officer detailing any existing or emerging threats to the Company as well as the status of projects to strengthen the Company’s security systems and improve cyber readiness.
In addition, the Company has a Cyber Risk Committee (“Cyber Committee”) which reviews and reports on technology-based security issues. The Cyber Committee is comprised of Senior Management from all business units within the Company and meets quarterly to review the controls and procedures in place to identify potential cyber security risks throughout the Company. The Cyber Committee also develops strategies to mitigate risks and other potential breaches which could damage or harm the Company, its employees, data and systems.
The Company utilizes advanced endpoint protection, firewalls, intrusion detection and prevention, threat intelligence, security event logging and correlation, and 3rd party penetration testing, security monitoring and alerting to safeguard employees, data and systems. The Company has cybersecurity coverage incorporated in its insurance policies. The Company has not experienced any information security breaches over the last three years.
The Company requires all its employees to complete annual employee security awareness training and also conducts internal phishing exercises regularly to assess the effectiveness of the training and to identify where additional training is necessary.
Climate Change
The Company recognizes that climate change is one of the most significant stakeholder issues of our times, threatening the viability of economic and environmental systems globally. The scientific community has studied climate change and a consensus exists that warming is occurring outside the boundaries of historical planetary trends due in significant part to human activity. As a real estate portfolio owner, the Company monitors physical and transition risks as well as opportunities posed to its business by climate change. The Company’s Board of Directors (the “Board”) sets the Company’s overall Environmental, Social and Governance (“ESG”) program objectives and oversees enterprise risk management. The Nominating and Corporate Governance Committee of the Board is responsible for ESG program oversight and performance evaluation.
Climate risks and opportunities are evaluated at both the corporate and individual asset level. The following table summarizes relevant climate risks identified as a part of the Company’s ongoing risk assessment process.
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The Company’s approach in mitigating these risks include but are not limited to (i) carrying additional insurance coverage relating to flooding and windstorms, (ii) maintaining a geographically diversified portfolio which assists in limiting exposure to event driven risks and (iii) creating a form “green lease” for its tenants which incorporates varied criteria that align landlord and tenant sustainability priorities as well as establishing green construction criteria.
Results of Operations
Comparison of the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021
Results from operations for the three and nine months ended September 30, 2021 reflect the results of the Company’s Merger with Weingarten on August 3, 2021. Accordingly, our results of operations will reflect the combined operations for the entire period for future quarters, unlike the results of operations for the three and nine months ended September 30, 2021, which only reflects the combined operations for two months. Therefore, our historical financial statements may not be indicative of future operating results.
The following table presents the comparative results from the Company’s Condensed Consolidated Statements of Operations for the three and ninesix months ended SeptemberJune 30, 2021,2022, as compared to the corresponding periods in 20202021 (in thousands, except per share data):
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | Change | 2021 | 2020 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||
Revenues from rental properties, net | $ | 364,694 | $ | 256,607 | $ | 108,087 | $ | 929,297 | $ | 778,572 | $ | 150,725 | $ | 423,273 | $ | 285,732 | $ | 137,541 | $ | 845,927 | $ | 564,603 | $ | 281,324 | ||||||||||||||||||||||||
Management and other fee income | 3,913 | 3,185 | 728 | 10,634 | 9,880 | 754 | 3,925 | 3,284 | 641 | 8,520 | 6,721 | 1,799 | ||||||||||||||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||||||||||||||||||
Rent (1) | (3,678 | ) | (2,767 | ) | (911 | ) | (9,706 | ) | (8,429 | ) | (1,277 | ) | (4,070 | ) | (2,993 | ) | (1,077 | ) | (8,151 | ) | (6,028 | ) | (2,123 | ) | ||||||||||||||||||||||||
Real estate taxes | (50,594 | ) | (40,403 | ) | (10,191 | ) | (129,124 | ) | (118,733 | ) | (10,391 | ) | (56,075 | ) | (39,594 | ) | (16,481 | ) | (110,389 | ) | (78,530 | ) | (31,859 | ) | ||||||||||||||||||||||||
Operating and maintenance (2) | (52,063 | ) | (42,844 | ) | (9,219 | ) | (145,480 | ) | (124,192 | ) | (21,288 | ) | (69,784 | ) | (46,897 | ) | (22,887 | ) | (139,009 | ) | (93,417 | ) | (45,592 | ) | ||||||||||||||||||||||||
General and administrative (3) | (25,904 | ) | (28,795 | ) | 2,891 | (75,136 | ) | (72,316 | ) | (2,820 | ) | (27,981 | ) | (24,754 | ) | (3,227 | ) | (57,929 | ) | (49,232 | ) | (8,697 | ) | |||||||||||||||||||||||||
Impairment charges | (850 | ) | (397 | ) | (453 | ) | (954 | ) | (3,509 | ) | 2,555 | (14,419 | ) | (104 | ) | (14,315 | ) | (14,691 | ) | (104 | ) | (14,587 | ) | |||||||||||||||||||||||||
Merger charges | (46,998 | ) | - | (46,998 | ) | (50,191 | ) | - | (50,191 | ) | - | (3,193 | ) | 3,193 | - | (3,193 | ) | 3,193 | ||||||||||||||||||||||||||||||
Depreciation and amortization | (114,238 | ) | (71,704 | ) | (42,534 | ) | (261,687 | ) | (214,660 | ) | (47,027 | ) | (124,611 | ) | (72,573 | ) | (52,038 | ) | (254,905 | ) | (147,449 | ) | (107,456 | ) | ||||||||||||||||||||||||
Gain on sale of properties | 1,975 | - | 1,975 | 30,841 | 5,697 | 25,144 | 2,944 | 18,861 | (15,917 | ) | 7,137 | 28,866 | (21,729 | ) | ||||||||||||||||||||||||||||||||||
Other income/(expense) | ||||||||||||||||||||||||||||||||||||||||||||||||
Other income/(expense), net | 6,696 | (900 | ) | 7,596 | 11,834 | 393 | 11,441 | |||||||||||||||||||||||||||||||||||||||||
Gain/(loss) on marketable securities, net | 457,127 | (76,931 | ) | 534,058 | 542,510 | 444,646 | 97,864 | |||||||||||||||||||||||||||||||||||||||||
Gain on sale of cost method investment | - | - | - | - | 190,832 | (190,832 | ) | |||||||||||||||||||||||||||||||||||||||||
Other income, net | 6,642 | 1,782 | 4,860 | 12,625 | 5,139 | 7,486 | ||||||||||||||||||||||||||||||||||||||||||
(Loss)/gain on marketable securities, net | (261,467 | ) | 24,297 | (285,764 | ) | (139,703 | ) | 85,382 | (225,085 | ) | ||||||||||||||||||||||||||||||||||||||
Interest expense | (52,126 | ) | (46,942 | ) | (5,184 | ) | (146,654 | ) | (141,017 | ) | (5,637 | ) | (56,466 | ) | (46,812 | ) | (9,654 | ) | (113,485 | ) | (94,528 | ) | (18,957 | ) | ||||||||||||||||||||||||
Early extinguishment of debt charges | - | (7,538 | ) | 7,538 | - | (7,538 | ) | 7,538 | (57 | ) | - | (57 | ) | (7,230 | ) | - | (7,230 | ) | ||||||||||||||||||||||||||||||
Provision for income taxes, net | (314 | ) | (388 | ) | 74 | (2,897 | ) | (482 | ) | (2,415 | ) | |||||||||||||||||||||||||||||||||||||
(Provision)/benefit for income taxes, net | (96 | ) | (1,275 | ) | 1,179 | 57 | (2,583 | ) | 2,640 | |||||||||||||||||||||||||||||||||||||||
Equity in income of joint ventures, net | 20,025 | 11,233 | 8,792 | 54,095 | 35,039 | 19,056 | 44,130 | 16,318 | 27,812 | 67,700 | 34,070 | 33,630 | ||||||||||||||||||||||||||||||||||||
Equity in income of other investments, net | 1,539 | 11,155 | (9,616 | ) | 10,365 | 26,895 | (16,530 | ) | 3,385 | 5,039 | (1,654 | ) | 8,758 | 8,826 | (68 | ) | ||||||||||||||||||||||||||||||||
Net income attributable to noncontrolling interests | (1,465 | ) | (965 | ) | (500 | ) | (5,369 | ) | (1,479 | ) | (3,890 | ) | ||||||||||||||||||||||||||||||||||||
Preferred dividends | (6,354 | ) | (6,354 | ) | - | (19,062 | ) | (19,062 | ) | (0 | ) | |||||||||||||||||||||||||||||||||||||
Net income/(loss) available to the Company's common shareholders | $ | 501,385 | $ | (44,748 | ) | $ | 546,133 | $ | 743,316 | $ | 780,537 | $ | (37,221 | ) | ||||||||||||||||||||||||||||||||||
Net income/(loss) available to the Company's common shareholders: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss/(income) attributable to noncontrolling interests | 11,226 | (421 | ) | 11,647 | 12,569 | (3,904 | ) | 16,473 | ||||||||||||||||||||||||||||||||||||||||
Preferred dividends, net | (6,250 | ) | (6,354 | ) | 104 | (12,604 | ) | (12,708 | ) | 104 | ||||||||||||||||||||||||||||||||||||||
Net (loss)/ income available to the Company's common shareholders | $ | (125,751 | ) | $ | 110,343 | $ | (236,094 | ) | $ | 105,197 | $ | 241,931 | $ | (136,734 | ) | |||||||||||||||||||||||||||||||||
Net (loss)/income available to the Company's common shareholders: | Net (loss)/income available to the Company's common shareholders: | |||||||||||||||||||||||||||||||||||||||||||||||
Diluted per common share | $ | 0.91 | $ | (0.10 | ) | $ | 1.01 | $ | 1.56 | $ | 1.80 | $ | (0.24 | ) | $ | (0.21 | ) | $ | 0.25 | $ | (0.46 | ) | $ | 0.17 | $ | 0.56 | $ | (0.39 | ) |
(1) | Rent expense primarily relates to ground lease payments for which the Company is the lessee. |
(2) | Operating and maintenance expense consists of property related costs including repairs and maintenance costs, roof repair, landscaping, parking lot repair, snow removal, utilities, property insurance costs, security and various other property related expenses. |
(3) | General and administrative expense includes employee-related expenses (including salaries, bonuses, equity awards, benefits, severance costs and payroll taxes), professional fees, office rent, travel and entertainment costs and other company-specific expenses. |
Net loss available to the Company’s common shareholders was $125.8 million for the three months ended June 30, 2022, as compared to net income available to the Company’s common shareholders of $110.3 million for the comparable period in 2021. On a diluted per common share basis, net loss available to the Company’s common shareholders for the three months ended June 30, 2022 was $(0.21), as compared to net income available to the Company’s common shareholder of $0.25 for the comparable period in 2021.
Net income available to the Company’s common shareholders was $501.4$105.2 million for the threesix months ended SeptemberJune 30, 2021,2022, as compared to net loss available to the Company’s common shareholders of $44.7$241.9 million for the comparable period in 2020.2021. On a diluted per common share basis, net income available to the Company’s common shareholders for the threesix months ended SeptemberJune 30, 20212022 was $0.91,$0.17 as compared to net loss available to the Company’s common shareholders of $0.10$0.56 for the comparable period in 2020.
Net income available to the Company’s common shareholders was $743.3 million for the nine months ended September 30, 2021, as compared to $780.5 million for the comparable period in 2020. On a diluted per common share basis, net income available to the Company’s common shareholders for the nine months ended September 30, 2021 was $1.56, as compared to $1.80 for the comparable period in 2020.2021.
The following describes the changes of certain line items included on the Company’s Condensed Consolidated Statements of Operations that the Company believes changed significantly and affected Net (loss)/income available to the Company's common shareholders during the three and ninesix months ended SeptemberJune 30, 2021,2022, as compared to the corresponding periodsperiod in 2020:2021:
Revenues from rental properties, net –
The increase in Revenues from rental properties, net of $108.1$137.5 million for the three months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period in 2020,2021, is primarily from (i) an increase in revenues of $71.5$133.4 million due to properties acquired throughduring 2022 and 2021, including the impact of the Merger, (ii) a net decreaseincrease in credit lossesrevenues from tenants of $26.0$8.5 million primarily due to increased collections,an increase in leasing activity and net growth in the current portfolio and (iii) an increase in net straight-line rental income of $14.5$4.7 million primarily due to an increase in leasing activity at recently completed development and redevelopment projectsa decrease in reserves, partially offset by (iv) a net increase of $5.3 million due to changes in credit losses from tenants, (v) a decrease in revenues of $2.0 million due to dispositions during 2022 and (iv) an increase2021 and (vi) a decrease in lease termination fee income of $2.0 million, partially offset by (v) a net decrease in revenues from tenants of $5.9 million, primarily due to tenant vacancies for the three months ended September 30, 2021, as compared to the corresponding period in 2020.$1.8 million.
The increase in Revenues from rental properties, net of $150.7$281.3 million for the ninesix months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period in 2020,2021, is primarily from (i) an increase in revenues of $74.1$266.5 million due to properties acquired primarily resulting fromduring 2022 and 2021, including the impact of the Merger, (ii) a net decreaseincrease in credit lossesrevenues from tenants of $71.1$18.7 million primarily due to increased collections,an increase in leasing activity and net growth in the current portfolio and (iii) an increase in net straight-line rental income of $22.1$9.6 million primarily due to an increase in leasing activity at recently completed development and redevelopment projects, anda decrease in reserves, partially offset by (iv) an increasea decrease in lease termination fee income of $9.5$6.8 million, partially offset by(v) a decrease in revenues of $4.0 million due to dispositions during 2022 and 2021 and (vi) a net decrease in revenues from tenantsincrease of $26.1$2.7 million primarily due to tenant vacancies for the nine months ended September 30, 2021, as compared to the corresponding periodchanges in 2020.credit losses from tenants.
Real estate taxes –
The increase in Real estate taxes of $10.2$16.5 million and $10.4$31.9 million for the three and ninesix months ended SeptemberJune 30, 2021, respectively,2022, as compared to the corresponding periods in 2020,2021, respectively, is primarily due to an increase in properties acquired throughduring 2022 and 2021, including the impact of the Merger.
Operating and maintenance –
The increase in Operating and maintenance expense of $9.2$22.9 million and $45.6 million for the three and six months ended June 30, 2022, as compared to the corresponding periods in 2021, respectively, is primarily due to properties acquired during 2022 and 2021, including the impact of the Merger.
General and administrative –
The increase in General and administrative expense of $3.2 million for the three months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period in 2020,2021, is primarily due to (i) an increase in operating expensesprofessional and legal fees of $7.5$1.9 million due to properties acquired through the Merger and (ii) an increase in overall spending on properties primarily due toemployee-related expenses of $1.5 million resulting from additional employees hired in connection with the reopening of markets throughout the country.Merger.
The increase in OperatingGeneral and maintenanceadministrative expense of $21.3$8.7 million for the ninesix months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period in 2020,2021, is primarily due to (i) an increase in operatingemployee-related expenses of $7.5$6.4 million due to properties acquired throughresulting from additional employees hired in connection with the Merger, (ii) an increase in snow removal costsprofessional and legal fees of $5.3$2.7 million and (iii) an increase in overall spending on propertiestravel and entertainment costs of $0.8 million, partially offset by (iv) a decrease of $1.4 million primarily due to the reopeningfluctuations in value of markets throughout the country.various directors’ deferred stock.
Impairment charges –
During the ninesix months ended SeptemberJune 30, 2020,2022 and 2021, the Company recognized impairment charges related to adjustments to property carrying values of $3.5$14.7 million and $0.1 million, respectively, for which the Company’s estimated fair values were primarily based upon signed contracts or letters of intent from third-partythird party offers. 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. Certain of the calculations to determine fair values utilized unobservable inputs and, as such, were classified as Level 3 of the FASB’s fair value hierarchy.
Merger charges–
During the ninethree and six months ended SeptemberJune 30, 2021, the Company incurred costs of $50.2$3.2 million associated with the Merger. These charges are primarily comprised of severance costs and professional and legal fees.
Depreciation and amortization –
The increase in Depreciation and amortization of $42.5$52.0 million for the three months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period in 2020,2021, is primarily due to (i) an increase of $42.1$55.0 million resulting from property acquisitions in connection withproperties acquired during 2022 and 2021, including the impact of the Merger, during 2021 and (ii) an increase of $2.1$1.2 million due to depreciation commencing on certain development and redevelopment projects that were placed into service during 20212022 and 2020,2021, partially offset by (iii) a decrease of $1.7$4.2 million due to write-offs of depreciable assets primarily due to tenant vacates during 2020 and 2021.property dispositions.
The increase in Depreciation and amortization of $47.0$107.5 million for the ninesix months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period in 2020,2021, is primarily due to (i) an increase of $43.2$113.8 million primarily resulting from property acquisitions in connection withproperties acquired during 2022 and 2021, including the impact of the Merger, during 2021 and (ii) an increase of $7.6$1.4 million due to depreciation commencing on certain development and redevelopment projects that were placed into service during 20212022 and 2020,2021, partially offset by (iii) a decrease of $3.8$7.7 million due to write-offs of depreciable assets primarily due to tenant vacates during 2020 and 2021.property dispositions.
Gain on sale of properties –
During the ninesix months ended SeptemberJune 30, 2021,2022, the Company disposed of fivean operating propertiesproperty and nineeight land parcels, in separate transactions, for an aggregate sales price of $156.6$43.3 million, which resulted in aggregate gains of $30.8$7.1 million. During the ninesix months ended SeptemberJune 30, 2020,2021, the Company disposed of three operating properties and aseven land parcel,parcels, in separate transactions, for an aggregate sales price of $22.6$132.2 million, which resulted in aggregate gains of $5.7$28.9 million.
Other income/(expense),income, net –
The increase in Other income/(expense),income, net of $7.6$4.9 million for the three months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period in 2020,2021, is primarily due to (i) an increase$2.3 million in dividend income of $4.0 million primarily from the shares of Albertsons Companies, Inc. (“ACI”) common stock held bylower costs associated with potential transactions for which the Company is no longer pursuing, (ii) ana net increase in mortgage and other financing income of $1.4 million primarily due to new loans issuedloan financing provided by the Company during 20202022 and 2021, and (iii) an increase in dividend income of $0.6$0.8 million related to net periodic benefit incomeprimarily from the Company’s defined benefit plan assumed duringshares of Albertsons Companies, Inc. “ACI” common stock held by the Merger for the three months ended September 30, 2021.Company.
The increase in Other income/(expense),income, net of $11.4$7.5 million for the ninesix months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period in 2020,2021, is primarily due to (i) an increase$3.1 million in dividend income of $12.0 million primarily from the shares of ACI common stock held by the Company, (ii) an increase in mortgage and other financing income of $2.8 million primarily due to new loans issued during 2020 and 2021 and (iii) an increase of $0.6 million related to net periodic benefit income from the Company’s defined benefit plan assumed during the Merger for the nine months ended September 30, 2021, partially offset by (iv) an increase of $2.9 million inlower costs associated with potential transactions for which the Company is no longer pursuing, (ii) a net increase in mortgage and (v) a decreaseother financing income of $1.8$2.6 million relatedprimarily due to insurance proceeds receivednew loans issued during 2022 and 2021 and (iii) an increase in dividend income of $1.6 million primarily from the nine months ended September 30, 2021 as compared toshares of ACI common stock held by the corresponding period in 2020.Company.
Gain/(loss)(Loss)/gain on marketable securities, net –
The increasechange in Gain/(loss)(Loss)/gain on marketable securities, net of $534.1$285.8 million and $97.9$225.1 million for the three and ninesix months ended SeptemberJune 30, 2021, respectively,2022, as compared to the corresponding periods in 2020,2021, respectively, is primarily the result of mark-to-market fluctuations of the shares of ACI common stock held by the Company, which were obtained during ACI’s initial public offering (“IPO”) in June 2020. This offering resulted in the Company changing the classification of its ACI investment from a cost method investment to a marketable security.
Gain on sale of cost method investment –
In June 2020, the Company recognized an aggregate gain of $190.8 million related to (i) a $131.6 million gain resulting from ACI’s partial repurchase of its common stock from existing shareholders in conjunction with its issuance of convertible preferred stock and (ii) a gain of $59.2 million in connection with the partial sale of the shares of ACI common stock held by the Company during ACI’s IPO.Company.
Interest expense –
The increase in Interest expense of $5.2$9.7 million and $5.6$19.0 million for the three and ninesix months ended SeptemberJune 30, 2021, respectively,2022, as compared to the corresponding periods in 2020,2021, respectively, is primarily due to(i) increased levels of borrowings andresulting from the assumptions of unsecured notes and mortgages in connection with the Merger.Merger and public debt offerings, partially offset by (ii) the repayment of unsecured notes and mortgages during 2022 and 2021.
Early extinguishment of debt charges –
During the threesix months ended SeptemberJune 30, 2020,2022, the Company redeemed $484.9repaid its $500.0 million of its 3.20%3.40% senior unsecured notes, outstanding, in separate transactions, which were scheduled to mature in May 2021.November 2022. As a result, the Company incurred a prepayment charge of $7.5$6.5 million forand $0.7 million from the threewrite-off of deferred financing costs during the six months ended SeptemberJune 30, 2020.2022.
Equity in income of joint ventures, net –
The increase in Equity in income of joint ventures, net of $8.8$27.8 million for the three months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period in 2020,2021, is primarily due to (i) net gains of $27.2 million resulting from the sale of properties within various joint venture investments during 2022, and (ii) an increase in equity in income of $2.5 million from ownership interests acquired in unconsolidated joint ventures in connection with the Merger, partially offset by (iii) impairment charges of $2.3 million recognized during 2022.
The increase in Equity in income of joint ventures, net of $33.6 million for the six months ended June 30, 2022, as compared to the corresponding period in 2021, is primarily due to (i) an increase in net gains of $24.9 million resulting from the sale of properties within various joint venture investments during 2022, as compared to the corresponding period in 2021, (ii) an increase in equity in income of $8.2$5.6 million within various joint venture investments during 2021,2022, as compared to the corresponding period in 2020,2021, primarily resulting from a decrease in credit losses due to collections from tenants, including straight-line rental income (ii) an increase in equity in income of $1.4 million resulting from ownership interests acquired in unconsolidated joint ventures in connection with the Merger, partially offset by (iii) an increase in impairment charges of $0.8 million recognized during the three months ended September 30, 2021, as compared to the corresponding period in 2020.
The increase in Equity in income of joint ventures, net of $19.1 million for the nine months ended September 30, 2021, as compared to the corresponding period in 2020, is primarily due to (i) an increase in equity in income of $13.8 million within various joint venture investments during 2021, as compared to the corresponding period in 2020, primarily resulting from a decrease in credit losses due to collections from tenants, including straight-line rental income, (ii) an increase in net gains of $5.3 million resulting from the sale of properties within various joint venture investments during the nine months ending September 30, 2021, as compared to the corresponding period in 2020, and (iii) an increase in equity in income of $1.4$4.8 million resulting from ownership interests acquired in unconsolidated joint ventures in connection with the Merger, partially offset by (iv) an increase in impairment charges of $1.4$1.7 million recognized during the nine months ended September 30, 2021,2022, as compared to the corresponding period in 2020.2021.
Equity in income of other investments, netNet loss/(income) attributable to noncontrolling interests –
The decreasechange in Equity in incomeNet loss/(income) attributable to noncontrolling interests of other investments, net of $9.6$11.6 million and $16.5 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, as compared to the corresponding periods in 2020, is primarily due to a decrease in profit participation from the sale of properties within the Company’s Preferred Equity Program during 2021, as compared to the corresponding periods in 2020.
Net income attributable to noncontrolling interests –
The increase in Net income attributable to noncontrolling interests of $3.9 million for the nine months ended September 30, 2021, as compared to the corresponding period in 2020, is primarily due to (i) an increase in net gain on sale ofimpairment charges relating to properties within consolidated joint ventures recognized during the nine months ended September 30, 2021, as compared to the corresponding period in 2020 and2022, partially offset by (ii) an increase in net income attributable to noncontrolling interests recognizedprimarily related to consolidated joint ventures acquired in connection with the Merger.
Tenant Concentration
The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties and a large tenant base. As of SeptemberJune 30, 2021,2022, the Company had interests in 545533 U.S. shopping center properties, aggregating 93.791.7 million square feet of gross leasable area (“GLA”), located in 2729 states. At SeptemberJune 30, 2021,2022, the Company’s five largest tenants were TJX Companies, The Home Depot, Ross Stores, Albertsons and Amazon/Whole Foods, and Ross Stores, which represented 3.7%, 2.2%, 2.0%1.9%, 1.9% and 1.9%, 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.
Liquidity and Capital Resources
The Company’s capital resources include accessing the public debt and equity capital markets, unsecured term loans, mortgages and construction loan financing, and immediate access to the Company’s unsecured revolving credit facility (the “Credit Facility”) with bank commitments of $2.0 billion which can be increased to $2.75 billion through an accordion feature. In addition, the Company holds 39.8 million shares of ACI, which are subject to certain contractual lock-up provisions.
The Company’s cash flow activitiesprovisions that are summarized as follows (in thousands):
Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Cash, cash equivalents and restricted cash, beginning of the period | $ | 293,188 | $ | 123,947 | ||||
Net cash flow provided by operating activities | 417,270 | 465,942 | ||||||
Net cash flow (used for)/provided by investing activities | (357,763 | ) | 43,380 | |||||
Net cash flow provided by/(used for) financing activities | 130,776 | (308,292 | ) | |||||
Net increase in cash, cash equivalents and restricted cash | 190,283 | 201,030 | ||||||
Cash, cash equivalents and restricted cash, end of the period | $ | 483,471 | $ | 324,977 |
Operating Activitiesscheduled to expire on September 10, 2022.
The Company anticipates that cash on hand, net cash flow provided by operating activities, borrowings under its Credit Facility and the issuance of equity, and public debt, as well as other debt and equity alternatives, and the sale of marketable equity securities, will provide the necessary capital required by the Company. The 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, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic.pandemic, the current inflation and other risks detailed in Part I, Item 1A. Risk Factors of our 10-K.
The Company’s cash flow activities are summarized as follows (in thousands):
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash, cash equivalents and restricted cash, beginning of the period | $ | 334,663 | $ | 293,188 | ||||
Net cash flow provided by operating activities | 442,333 | 293,671 | ||||||
Net cash flow used for investing activities | (155,136 | ) | (45,882 | ) | ||||
Net cash flow used for financing activities | (325,062 | ) | (310,915 | ) | ||||
Net change in cash, cash equivalents and restricted cash | (37,865 | ) | (63,126 | ) | ||||
Cash, cash equivalents and restricted cash, end of the period | $ | 296,798 | $ | 230,062 |
Operating Activities
Net cash flow provided by operating activities for the ninesix months ended SeptemberJune 30, 20212022 was $417.3$442.3 million, as compared to $465.9$293.7 million for the comparable period in 2020.2021. The decreaseincrease of $48.6$148.6 million is primarily attributable to:
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● | new leasing, expansion and re-tenanting of core portfolio properties; and |
● | an increase in distributions from the Company’s joint ventures programs, partially offset by |
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Investing Activities
Net cash flow used for investing activities was $357.8$155.1 million for the ninesix months ended SeptemberJune 30, 2021,2022, as compared to net cash flow provided by investing activities of $43.4$45.9 million for the comparable period in 2020.2021.
Investing activities during the ninesix months ended SeptemberJune 30, 20212022 primarily consisted of:
Cash inflows:
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Cash outflows:
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● | $29.3 million for the acquisition of four parcels; and |
● | $3.0 million for investment in cost method investment. |
Investing activities during the six months ended June 30, 2021 primarily consisted of:
Cash inflows:
● | $130.1 million in proceeds from the sale of three consolidated properties and seven parcels; |
● | $32.8 million in reimbursements of investments in and advances to other investments; and |
● | $3.4 million in reimbursements of investments in and advances to real estate joint ventures. |
Cash outflows:
● | $84.3 million for the acquisition of two consolidated operating properties; |
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● | $61.4 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 the Company’s investment in a new preferred equity investment located in San Antonio, |
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Investing activities during the nine months ended September 30, 2020 primarily consisted of:
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Acquisition of Operating Real Estate –
During the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the Company expended $366.7$29.3 million and $7.1$84.3 million, respectively, towards the acquisition of operating real estate properties, including the Merger in 2021.properties. The Company anticipates spending approximately $25.0$150.0 million to $75.0$250.0 million towards the acquisition of operating properties for the remainder of 2021.2022. The funding ofCompany intends to fund these capital requirements will be provided byacquisitions with cash on hand, cash flow from operating activities, proceeds from property dispositions net cash flow provided by operating activities,and/or availability under the Company’sits Credit Facility and the issuance of equity and public debt.Facility.
Improvements to Operating Real Estate –
During the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the Company expended $112.8$79.0 million and $164.4$66.3 million, respectively, towards improvements to operating real estate. These amounts consist of the following (in thousands):
Nine Months Ended September 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Redevelopment and renovations | $ | 71,786 | $ | 135,694 | $ | 42,784 | $ | 40,209 | ||||||||
Tenant improvements and tenant allowances | 41,006 | 28,672 | 36,174 | 26,133 | ||||||||||||
Total improvements (1) | $ | 112,792 | $ | 164,366 | $ | 78,958 | $ | 66,342 |
(1) | During the |
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’ 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 located in the front of the shopping center properties.
The Company anticipates its capital commitment toward these redevelopment projects and re-tenanting efforts for the remainder of 20212022 will be approximately $25.0$90.0 million to $50.0$120.0 million. The funding of these capital requirements will be provided by cash on hand, proceeds from property dispositions, net cash flow provided by operating activities andand/or availability under the Company’s Credit Facility.
Financing Activities
Net cash flow provided by financing activities was $130.8 million for the nine months ended September 30, 2021, as compared to net cash flow used for financing activities of $308.3was $325.1 million for the six months ended June 30, 2022, as compared to $310.9 million for the comparable period in 2020.2021.
Financing activities during the ninesix months ended SeptemberJune 30, 20212022 primarily consisted of:
Cash inflows:
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● | $19.0 million in proceeds from mortgage loan financing; and |
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Cash outflows:
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● | $253.8 million of dividends paid; |
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● | $7.0 million in |
Financing activities during the nine months ended September 30, 2020 primarily consisted of:
Cash inflows:
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Financing activities during the six months ended June 30, 2021 primarily consisted of:
Cash outflows:
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The Company continually evaluates its debt maturities, and, based on management’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.
Debt maturities for the remainder of 20212022 consist of: $9.1$290.9 million of consolidated debt included in the Company’s Preferred Equity Program,and $100.4 million of unconsolidated joint venture debt, assuming the utilization of extension options where available. These 2021The 2022 consolidated debt maturities are anticipated to be repaid with cash on hand, operating cash flows, borrowings from the Credit Facility and public debt offerings, as deemed appropriate. The 2022 debt maturities on properties in the Company’s unconsolidated joint ventures are anticipated to be repaid through operating cash flows, debt refinancing, unsecured credit facilities, proceeds from property sales of operating properties of the respective entities and partner capital contributions, as deemed appropriate.
The Company intends to maintain strong debt service coverage and fixed charge coverage ratios as part of its commitment to maintain or improve its unsecured debt ratings. The Company may, from time to time, seek to obtain funds through additional common and preferred equity offerings, unsecured debt financings and/or mortgage/construction loan financings and other capital alternatives.
Since the completion of the Company’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 $16.2$16.8 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-anchoredgrocery anchored shopping centers and mixed-use assets, funding real estate under development projects, expanding and improving properties in the portfolio and other investments.
During August 2021, 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 securities for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisitions and development and redevelopment costs and (ii) managing the Company’s debt maturities.
CommonPreferred Stock –
During February 2020,The Company’s Board of Director’s authorized the Company extended its share repurchase program for a term of two years, which will expire in February 2022, pursuantup to which the Company may repurchase900,000 depositary shares of its commonClass L preferred stock and 1,058,000 depositary shares of Class M preferred stock representing up to 1,958 shares the Company’s preferred stock, par value $0.01$1.00 per share, with an aggregate gross purchase price of up to $300.0 million. The Company did not repurchase any shares underthrough December 31, 2022. During the share repurchase program during the ninesix months ended SeptemberJune 30, 2021. As of September 30, 2021,2022, the Company had $224.9 million available under this share repurchase program.repurchased the following preferred stock:
Class of Preferred Stock | Depositary Shares Repurchased | Purchase Price (in millions) | ||
Class L | 54,508 | $ | 1.3 | |
Class M | 90,760 | $ | 2.1 |
Common Stock –
During August 2021, the Company established an at-the-market continuous offering program (the “ATM program”) pursuant to which the Company may offer and sell from time to timetime-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. In addition, the Company may from time to time enter into separate forward sale agreements with one or more banks. During 2021,the six months ended June 30, 2022, the Company issued 3,515,500450,000 shares and received net proceeds after commissions of $76.9$11.3 million. As of SeptemberJune 30, 2021,2022, the Company had $422.4$411.0 million available under this ATM program.
In connection with the Merger, each WeingartenThe Company has a common share issued and outstanding immediately priorrepurchase program, which is scheduled to expire on February 29, 2024. Under this program, the effective time of the Merger, was converted into 1.408Company may repurchase shares of newly issued shares of Kimcoits common stock, resulting in approximately 179.9par 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 common share repurchase program during the six months ended June 30, 2022. As of June 30, 2022, the Company had $224.9 million available under this common shares issued to effect the Merger.share repurchase program.
Senior Notes –
In February 2022, the Company issued $600.0 million of senior unsecured notes, which are scheduled to mature in April 2032 and accrue interest at a rate of 3.20% per annum. Proceeds from this issuance were used for general corporate purposes, including the repayment of certain senior unsecured notes.
During the six months ended June 30, 2022, the Company repaid or partially repaid the following notes (dollars in millions):
Type | Date Paid | Amount Repaid | Interest Rate | Maturity Date | ||||||||
Senior unsecured notes (1) | Mar-22 | $ | 500.0 | 3.400 | % | Nov-22 | ||||||
Senior unsecured notes (2) | May-22 & Jun-22 | $ | 36.1 | 3.125 | % | Jun-23 | ||||||
Senior unsecured notes (3) | Jun-22 | $ | 11.0 | 3.375 | % | Oct-22 |
(1) | The Company incurred a prepayment charge of $6.5 million and $0.7 million in write-off of deferred financing costs resulting from the early repayment. |
(2) | Represents partial repayments. As of June 30, 2022, these notes had an outstanding balance of $313.9 million. |
(3) | Represents partial repayments. As of June 30, 2022, these notes had an outstanding balance of $288.4 million. |
The Company’s indenture governing its senior notes contains the following covenants, all of which the Company is compliant with:
Covenant | Must Be | As of | ||||
Consolidated Indebtedness to Total Assets | <60% | |||||
Consolidated Secured Indebtedness to Total Assets | <40% | 2% | ||||
Consolidated Income Available for Debt Service to Maximum Annual Service Charge | >1.50x | 4.5x | ||||
Unencumbered Total Asset Value to Consolidated Unsecured Indebtedness | >1.50x | 2.4x |
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, 2020 for specific filing information.
In connection with the Merger, the Company assumed senior unsecured notes of $1.5 billion (including fair market value adjustment of $95.6 million), which have scheduled maturity dates ranging from October 2022 to August 2028 and accrue interest at rates ranging from 3.25% to 6.88% per annum. The senior unsecured notes assumed during the Merger have covenants that are similar to the Company’s existing debt covenants for its senior unsecured notes. Please refer to the form Indenture dated May 1, 1995 filed withincluded in Weingarten’s Registration Statement on Form S-3, to the Registration Statement,filed with the Securities and Exchange Commission on May 1,February 10, 1995, the First Supplemental Indenture, dated as of August 2, 2006 filed with Weingarten’s Current Report on Form 8-K dated August 2, 2006, and the Second Supplemental Indenture, dated as of October 9, 2012 filed with Weingarten’s Current Report on Form 8-K dated October 9, 2012.
In September See the Exhibits Index to our Annual Report on Form 10-K for the year ended December 31, 2021 the Company issued $500.0 million of senior unsecured notes, which are scheduled to mature in December 2031 and accrue interest at a rate of 2.25% per annum.for specific filing information.
Credit Facility –
In February 2020, the Company obtained a $2.0 billion Credit Facility with a group of banks. 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 is a green credit facility tied to sustainability metric targets, as described in the agreement. The Company achieved such targets, which effectively reduced the rate on the Credit Facility by one basis point. The Credit Facility, which accrues interest at a rate of LIBOR plus 76.5 basis points (0.85%(2.55% as of SeptemberJune 30, 2021)2022), 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 SeptemberJune 30, 2021,2022, the Credit Facility had no outstanding balance and appropriations for letters of credit of $1.9$1.2 million.
During July 2022, the Company amended the Credit Facility to (i) replace LIBOR borrowings with Secured Overnight Financing Rate (“SOFR”) borrowings, (ii) supplement the sustainability grid with an additional one basis point reduction of applicable margin if certain criteria as defined in the Credit Facility are met, (iii) add a leverage metric test which, if met, reduces the applicable margin by five basis points and (iv) obtain pre-approval of a possible organizational conversion to an UPREIT structure.
Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to maintenance of 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% | 38% | ||||
Total Priority Indebtedness to GAV | <35% | 1% | ||||
Unencumbered Asset Net Operating Income to Total Unsecured Interest Expense | >1.75x | 4.6x | ||||
Fixed Charge Total Adjusted EBITDA to Total Debt Service | >1.50x | 4.2x |
For a full description of the Credit Facility’s covenants, refer to theAmendment No. 2 dated July 12, 2022 to Amended and Restated Credit Agreement, dated as of February 27, 2020, filed asherewith Exhibit 10.1 to the Company’s Currentthis Quarterly Report on Form 8-K10-Q dated February 28, 2020.July 29, 2022.
Mortgages Payable –
During the ninesix months ended SeptemberJune 30, 2021,2022, the Company (i) obtained a $19.0 million mortgage relating to a consolidated joint venture operating property and (ii) repaid $137.2$115.3 million of mortgage debt (including fair market value adjustment of $1.0$0.2 million) that encumbered 16six operating properties.
In connection with the Merger, the Company assumed mortgage debt of $317.7 million (including fair market value adjustment of $11.0 million) that encumber 16 operating properties, which have scheduled maturity dates ranging from April 2022 to August 2038 and accrue interest at rates ranging from 3.50% to 6.95% per annum.
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 loan financing to partially fund the capital needs of its real estate developmentre-development and re-tenanting projects. As of SeptemberJune 30, 2021,2022, the Company had over 480 unencumbered property interests in its portfolio.
CommitmentsOther –
In connection with the construction of its development and Contingencies –redevelopment projects and related infrastructure, certain public agencies require posting of performance and surety bonds to guarantee that the Company’s obligations are satisfied. These bonds expire upon the completion of the improvements and infrastructure. As of June 30, 2022, there were $27.7 million in performance and surety bonds outstanding.
In connection with the Merger, the Company now provides a guaranty for the payment of any debt service shortfalls on the Sheridan Redevelopment Agency issued Series A bonds which are tax increment revenue bonds issued in connection with a development project in Sheridan, Colorado. These tax increment revenue bonds have a balance of $53.7$49.7 million outstanding at SeptemberJune 30, 2021.2022. The bonds are to be repaid with incremental sales and property taxes and a public improvement fee ("PIF") to be assessed on current and future retail sales and, to the extent necessary, any amounts we may have to provide under a guaranty. The revenue generated from incremental sales, property taxes and PIF have satisfied the debt service requirements to date. The incremental taxes and PIF are to remain intact until the earlier of the payment of the bond liability in full or 2040.
COVID-19 –
As the COVID-19 pandemic continues to evolve, uncertainty remains regarding the long-term economic impact it will have. As a result, the Company has focused on creating a strong liquidity position, including, but not limited to, maintaining availability under its Credit Facility, cash and cash equivalents on hand and having access to unencumbered property interests.
The Company continues 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 isremains uncertain as of the filing date of this Quarterly Report on Form 10-Q as this pandemic continues to evolve globally and within the United States. However, if the COVID-19 pandemic continues, such impacts could grow, become material and 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 U.S. 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’s Board of Directors will continue to evaluate the Company’s dividend policy on a quarterly basis as they monitor sources of capital and evaluate 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 dividend payout ratio that 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 ninesix months ended SeptemberJune 30, 2022 and 2021 and 2020 were $271.0$253.8 million and $304.3$160.1 million, respectively.
Although the Company receives substantially all of its rental payments on a monthly basis, it generally intends to continue paying 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. The Company’s Board of Directors will continue to monitor the impact the COVID-19 pandemic has on the Company's financial performance and economic outlook. The Company’s objective is to establish a dividend level that maintains compliance with the Company’s REIT taxable income distribution requirements. On August 13, 2021,April 26, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.17 per common share payable to shareholders of record on September 9, 2021, which was paid on September 23, 2021. Also, on July 27, 2021, the Company’s Board of Directors also declared quarterly dividends with respect to the Company’s classes of cumulative redeemable preferred shares (Classes L and M), which were paid on OctoberJuly 15, 2021,2022 to shareholders of record on OctoberJuly 1, 2021.2022. In addition, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per common share, which was paid on June 23, 2022 to shareholders of record on June 9, 2022.
On OctoberJuly 26, 2021,2022, 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), which are scheduled to be paid on JanuaryOctober 17, 2022, to shareholders of record on JanuaryOctober 3, 2022. Additionally, on OctoberJuly 26, 2021,2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.17$0.22 per common share, representing a 10.0% increase from the prior quarterly dividend of $0.20, payable on DecemberSeptember 23, 20212022 to shareholders of record on DecemberSeptember 9, 2021.2022.
Funds From Operations
Funds From Operations (“FFO”) is a supplemental non-GAAP financial measure utilized to evaluate the operating performance of real estate companies. 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 certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis. The Company also made an election, per the NAREIT Funds From Operations White Paper-2018 Restatement, 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, allowance for credit losses on mortgage receivables 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 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 may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
The Company’s reconciliation of net income/Net (loss)/income available to the Company’s common shareholders to FFO available to the Company’s common shareholders is reflected in the table below (in thousands, except per share data).
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net income/(loss) available to the Company’s common shareholders | $ | 501,385 | $ | (44,748 | ) | $ | 743,316 | $ | 780,537 | |||||||
Gain on sale of properties | (1,975 | ) | - | (30,841 | ) | (5,697 | ) | |||||||||
Gain on sale of joint venture properties | - | - | (5,283 | ) | (18 | ) | ||||||||||
Depreciation and amortization - real estate related | 113,404 | 71,015 | 259,298 | 212,018 | ||||||||||||
Depreciation and amortization - real estate joint ventures | 15,365 | 9,932 | 35,605 | 30,673 | ||||||||||||
Impairment charges of depreciable real estate properties | 2,041 | 775 | 3,213 | 4,354 | ||||||||||||
Gain on sale of cost method investment | - | - | - | (190,832 | ) | |||||||||||
Profit participation from other investments, net | 2,380 | (8,406 | ) | 1,229 | (15,875 | ) | ||||||||||
(Gain)/loss on marketable securities, net | (457,127 | ) | 76,931 | (542,510 | ) | (444,646 | ) | |||||||||
Provision for income taxes (1) | 35 | 1,500 | 2,177 | 1,501 | ||||||||||||
Noncontrolling interests (1) | (1,805 | ) | (310 | ) | 551 | (1,373 | ) | |||||||||
FFO available to the Company’s common shareholders (3) | $ | 173,703 | $ | 106,689 | $ | 466,755 | $ | 370,642 | ||||||||
Weighted average shares outstanding for FFO calculations: | ||||||||||||||||
Basic | 546,842 | 429,994 | 469,885 | 429,899 | ||||||||||||
Units | 2,626 | 658 | 2,642 | 639 | ||||||||||||
Dilutive effect of equity awards | 1,718 | 1,192 | 1,837 | 1,496 | ||||||||||||
Diluted (2) | 551,186 | 431,844 | 474,364 | 432,034 | ||||||||||||
FFO per common share – basic (3) | $ | 0.32 | $ | 0.25 | $ | 0.99 | $ | 0.86 | ||||||||
FFO per common share – diluted (2) (3) | $ | 0.32 | $ | 0.25 | $ | 0.99 | $ | 0.86 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net (loss)/income available to the Company’s common shareholders | $ | (125,751 | ) | $ | 110,343 | $ | 105,197 | $ | 241,931 | |||||||
Gain on sale of properties | (2,944 | ) | (18,861 | ) | (7,137 | ) | (28,866 | ) | ||||||||
Gain on sale of joint venture properties | (27,198 | ) | - | (30,184 | ) | (5,283 | ) | |||||||||
Depreciation and amortization - real estate related | 123,672 | 71,781 | 253,133 | 145,894 | ||||||||||||
Depreciation and amortization - real estate joint ventures | 16,616 | 10,234 | 33,501 | 20,241 | ||||||||||||
Impairment charges (including real estate joint ventures) | 17,233 | 104 | 17,933 | 1,172 | ||||||||||||
Profit participation from other investments, net | (1,988 | ) | (1,346 | ) | (5,651 | ) | (1,151 | ) | ||||||||
Loss/(gain) on marketable securities, net | 261,467 | (24,297 | ) | 139,703 | (85,382 | ) | ||||||||||
Provision/(benefit) for income taxes, net (1) | 3 | 1,096 | (8 | ) | 2,142 | |||||||||||
Noncontrolling interests (1) | (14,729 | ) | (271 | ) | (19,459 | ) | 2,355 | |||||||||
FFO available to the Company’s common shareholders (3) | $ | 246,381 | $ | 148,783 | $ | 487,028 | $ | 293,053 | ||||||||
Weighted average shares outstanding for FFO calculations: | ||||||||||||||||
Basic | 615,642 | 431,011 | 615,207 | 430,769 | ||||||||||||
Units | 2,473 | 642 | 2,509 | 653 | ||||||||||||
Dilutive effect of equity awards | 1,419 | 1,356 | 1,689 | 1,528 | ||||||||||||
Diluted (2) | 619,534 | 433,009 | 619,405 | 432,950 | ||||||||||||
FFO per common share – basic | $ | 0.40 | $ | 0.35 | $ | 0.79 | $ | 0.68 | ||||||||
FFO per common share – diluted (2) | $ | 0.40 | $ | 0.34 | $ | 0.79 | $ | 0.68 |
(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 |
(3) | Includes Early extinguishment of debt charges of $7.2 million recognized during the six months ended June 30, 2022. Includes Merger charges of |
Same Property Net Operating Income (“(“Same property NOI”NOI”)
Same 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. 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.
For the three and six months ended June 30, 2022, and 2021, the Company included Same property NOI from the Weingarten properties acquired through the Merger, as the Company owned these properties for the full three and six months ended June 30, 2022. The amount of the adjustment relating to Weingarten Same property NOI for the three and six months ended June 30, 2021, included in the table below, represents the Same property NOI from Weingarten properties prior to the Merger, which is not included in the Company's Net (loss)/income available to the Company’s common shareholders for the corresponding period.
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/Net (loss)/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 June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
Net income/(loss) available to the Company’s common shareholders | $ | 501,385 | $ | (44,748 | ) | $ | 743,316 | $ | 780,537 | |||||||||||||||||||||||
Net (loss)/income available to the Company’s common shareholders | $ | (125,751 | ) | $ | 110,343 | $ | 105,197 | $ | 241,931 | |||||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||
Management and other fee income | (3,913 | ) | (3,185 | ) | (10,634 | ) | (9,880 | ) | (3,925 | ) | (3,284 | ) | (8,520 | ) | (6,721 | ) | ||||||||||||||||
General and administrative | 25,904 | 28,795 | 75,136 | 72,316 | 27,981 | 24,754 | 57,929 | 49,232 | ||||||||||||||||||||||||
Impairment charges | 850 | 397 | 954 | 3,509 | 14,419 | 104 | 14,691 | 104 | ||||||||||||||||||||||||
Merger charges | 46,998 | - | 50,191 | - | - | 3,193 | - | 3,193 | ||||||||||||||||||||||||
Depreciation and amortization | 114,238 | 71,704 | 261,687 | 214,660 | 124,611 | 72,573 | 254,905 | 147,449 | ||||||||||||||||||||||||
Gain on sale of properties | (1,975 | ) | - | (30,841 | ) | (5,697 | ) | (2,944 | ) | (18,861 | ) | (7,137 | ) | (28,866 | ) | |||||||||||||||||
Interest and other expense, net | 45,430 | 55,380 | 134,820 | 148,162 | 49,881 | 45,030 | 108,090 | 89,389 | ||||||||||||||||||||||||
(Gain)/loss on marketable securities, net | (457,127 | ) | 76,931 | (542,510 | ) | (444,646 | ) | |||||||||||||||||||||||||
Gain on sale of cost method investment | - | - | - | (190,832 | ) | |||||||||||||||||||||||||||
Provision for income taxes, net | 314 | 388 | 2,897 | 482 | ||||||||||||||||||||||||||||
Loss/(gain) on marketable securities, net | 261,467 | (24,297 | ) | 139,703 | (85,382 | ) | ||||||||||||||||||||||||||
Provision/(benefit) for income taxes, net | 96 | 1,275 | (57 | ) | 2,583 | |||||||||||||||||||||||||||
Equity in income of other investments, net | (1,539 | ) | (11,155 | ) | (10,365 | ) | (26,895 | ) | (3,385 | ) | (5,039 | ) | (8,758 | ) | (8,826 | ) | ||||||||||||||||
Net income attributable to noncontrolling interests | 1,465 | 965 | 5,369 | 1,479 | ||||||||||||||||||||||||||||
Preferred dividends | 6,354 | 6,354 | 19,062 | 19,062 | ||||||||||||||||||||||||||||
Net (loss)/income attributable to noncontrolling interests | (11,226 | ) | 421 | (12,569 | ) | 3,904 | ||||||||||||||||||||||||||
Preferred dividends, net | 6,250 | 6,354 | 12,604 | 12,708 | ||||||||||||||||||||||||||||
Weingarten same property NOI (1) | - | 93,855 | - | 185,639 | ||||||||||||||||||||||||||||
Non same property net operating income | (76,304 | ) | (1,464 | ) | (104,893 | ) | (17,659 | ) | (17,295 | ) | (14,159 | ) | (35,122 | ) | (31,578 | ) | ||||||||||||||||
Non-operational expense from joint ventures, net | 18,658 | 16,494 | 45,227 | 52,272 | (2,858 | ) | 14,606 | 16,826 | 26,568 | |||||||||||||||||||||||
Same property NOI | $ | 220,738 | $ | 196,856 | $ | 639,416 | $ | 596,870 | $ | 317,321 | $ | 306,868 | $ | 637,782 | $ | 601,327 |
(1) | Amounts for the |
Same property NOI increased by $23.9 million or 12.1% for the three months ended September 30, 2021, as compared to the corresponding period in 2020. This increase is primarily the result of (i) a decrease in credit losses of $28.7 million due to increased collections, partially offset by (ii) a decrease in revenues from rental properties of $3.7 million primarily related to tenant rent abatements and lower occupancy levels as a result of the COVID-19 pandemic and (iii) an increase in non-recoverable operating expenses of $1.1 million.
Same property NOI increased by $42.5$10.5 million or 7.1%3.4% for the ninethree months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period in 2020.2021. This increase is primarily the result of (i) a decreasean increase in credit lossesnet operating income of $76.2 million due to increased collections, partially offset by (ii) a decrease in revenues from rental properties of $31.1$20.1 million primarily related to an increase in rental revenue driven by strong leasing activity and a decrease in tenant rent abatements and lower occupancy levelsvacancies as a result of the COVID-19 pandemic, and (iii)partially offset by (ii) a change in credit loss from tenants of $9.6 million.
Same property NOI increased by $36.5 million or 6.1% for the six months ended June 30, 2022, as compared to the corresponding period in 2021. This increase is primarily the result of (i) an increase in non-recoverablenet operating income of $42.8 million primarily related to an increase in rental revenue driven by strong leasing activity and a decrease in tenant rent abatements and vacancies as a result of the COVID-19 pandemic, partially offset by (ii) a change in credit loss from tenants of $6.3 million.
Effects of Inflation
Many of the Company's long-term leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive payment of additional rent calculated as a percentage of tenants' gross sales above pre-determined thresholds, which generally increase as prices rise, and/or as a result of escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses often include increases based upon changes in the consumer price index or similar inflation indices. In addition, many of the Company's leases are for terms of less than 10 years, which permits the Company to seek to increase rents to market rates upon renewal. To assist in partially mitigating the Company's exposure to increases in costs and operating expenses, including common area maintenance costs, real estate taxes and insurance, resulting from inflation the Company’s leases include provisions that either (i) require the tenant to pay an allocable share of $2.6 million.these operating expenses or (ii) contain fixed contractual amounts, which include escalation clauses, to reimburse these operating expenses.
Leasing Activity
During the ninesix months ended SeptemberJune 30, 2021,2022, the Company executed 817927 leases totaling over 5.76.4 million square feet in the Company’s consolidated operating portfolio comprised of 305275 new leases and 512652 renewals and options. The leasing costs associated with these new leases are estimated to aggregate $68.1$59.8 million or $39.67$42.95 per square foot. These costs include $53.1$47.5 million of tenant improvements and $15.0$12.3 million of external leasing commissions. The average rent per square foot for (i) new leases was $21.12$21.67 and (ii) renewals and options was $16.04.$17.12.
Tenant Lease Expirations
At SeptemberJune 30, 2021,2022, the Company has a total of 8,1618,252 leases in its 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 data:
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 | % of Gross Annual Rent | |||||||||||||||||||||||||
(1) | 229 | 498 | $ | 12,555 | 1.1 | % | 204 | 623 | $ | 13,733 | 1.1 | % | |||||||||||||||||||||
2021 | 185 | 587 | $ | 14,710 | 1.3 | % | |||||||||||||||||||||||||||
2022 | 1,162 | 5,772 | $ | 114,198 | 9.8 | % | 337 | 1,146 | $ | 27,428 | 2.3 | % | |||||||||||||||||||||
2023 | 1,207 | 8,003 | $ | 141,954 | 12.1 | % | 1,184 | 6,966 | $ | 131,110 | 10.8 | % | |||||||||||||||||||||
2024 | 1,151 | 7,892 | $ | 145,990 | 12.5 | % | 1,201 | 7,826 | $ | 148,738 | 12.3 | % | |||||||||||||||||||||
2025 | 1,005 | 7,526 | $ | 138,386 | 11.8 | % | 1,117 | 8,098 | $ | 149,269 | 12.3 | % | |||||||||||||||||||||
2026 | 958 | 9,154 | $ | 143,893 | 12.3 | % | 1,045 | 9,481 | $ | 155,052 | 12.8 | % | |||||||||||||||||||||
2027 | 520 | 6,463 | $ | 100,033 | 8.5 | % | 984 | 9,361 | $ | 156,408 | 12.9 | % | |||||||||||||||||||||
2028 | 422 | 4,716 | $ | 84,982 | 7.3 | % | 523 | 5,809 | $ | 102,154 | 8.4 | % | |||||||||||||||||||||
2029 | 359 | 3,351 | $ | 61,509 | 5.3 | % | 399 | 3,630 | $ | 66,816 | 5.5 | % | |||||||||||||||||||||
2030 | 307 | 2,536 | $ | 55,054 | 4.7 | % | 303 | 2,457 | $ | 54,913 | 4.5 | % | |||||||||||||||||||||
2031 | 320 | 2,263 | $ | 51,113 | 4.4 | % | 333 | 2,484 | $ | 54,643 | 4.5 | % | |||||||||||||||||||||
2032 | 343 | 2,507 | $ | 49,437 | 4.1 | % |
(1) | Leases currently under month-to-month lease or in process of renewal. |
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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The Company’s primary market risk exposure is interest rate risk. The Company periodically evaluates its exposure to short-term interest rates and will, from time-to-time, enter into interest rate protection agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating-rate debt. The Company has not entered, 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 SeptemberJune 30, 2021,2022, with corresponding weighted averageweighted-average interest rates sorted by maturity date. The Company had no variable rate debt outstanding at September 30, 2021. The table does not include extension options where available (amounts in millions).
2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total | Fair Value | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||
Secured Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Rate | $ | - | $ | 146.4 | $ | 56.1 | $ | 6.7 | $ | 55.9 | $ | 217.5 | $ | 482.6 | $ | 484.7 | $ | - | $ | 55.1 | $ | 4.9 | $ | 53.9 | $ | - | $ | 213.9 | $ | 327.8 | $ | 301.6 | ||||||||||||||||||||||||||||||||
Average Interest Rate | - | 4.11 | % | 3.95 | % | 6.74 | % | 3.50 | % | 4.29 | % | 4.14 | % | - | 3.95 | % | 6.75 | % | 3.50 | % | - | 4.28 | % | 4.13 | % | |||||||||||||||||||||||||||||||||||||||
Variable Rate | $ | - | $ | - | $ | - | $ | 18.7 | $ | - | $ | - | $ | 18.7 | $ | 18.2 | ||||||||||||||||||||||||||||||||||||||||||||||||
Average Interest Rate | - | - | - | 2.35 | % | - | - | 2.35 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unsecured Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Rate | $ | - | $ | 806.8 | $ | 661.6 | $ | 663.8 | $ | 759.0 | $ | 4,142.8 | $ | 7,034.0 | $ | 7,418.1 | $ | 290.9 | $ | 619.9 | $ | 658.1 | $ | 755.4 | $ | 787.0 | $ | 3,945.3 | $ | 7,056.6 | $ | 6,420.4 | ||||||||||||||||||||||||||||||||
Average Interest Rate | - | 3.39 | % | 3.30 | % | 3.37 | % | 3.48 | % | 3.32 | % | 3.35 | % | 3.38 | % | 3.31 | % | 3.37 | % | 3.48 | % | 3.06 | % | 3.35 | % | 3.33 | % |
Based on the Company’s variable-rate debt balances, interest expense would have increased by $0.1 million for the six months ended June 30, 2022 if short-term interest rates were 1.0% higher.
Item 4. Controls and Procedures.
The Company’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.
On August 3, 2021, the Company completed the Merger and accordingly the Company’s management is in the process of integrating Weingarten’s operations into its internal control over financial reporting, as necessary, to accommodate modifications to its business processes related to the Merger transaction. None of these integration activities are expected to have a material impact on our system of internal control over financial reporting.
Other than as noted above, thereThere have not been any changes in the Company’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.
OTHER INFORMATION
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, 2020.2021.
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.
Except as set forth below, as of the date of this report, thereThere are no material changes to 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, 2020.
Risks Relating to the Company after Completion of the Merger
We have incurred substantial expenses related to the Merger and may continue to incur additional expenses.
We have incurred substantial expenses in connection with the Merger and may continue to incur additional expenses relating to integrating the business, operations, networks, systems, technologies, policies and procedures of the Company and Weingarten. There are a large number of processes that must be integrated in the Merger, including leasing, billing, management information, purchasing, accounting and finance, sales, payroll and benefits, fixed asset, lease administration and regulatory compliance. While we and Weingarten have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond our control that could affect the total amount or the timing of integration expenses.
Our stockholders have been diluted by the Merger and the trading price of shares of the combined company may be affected by factors different from those affecting the price of shares of our common stock before the Merger.
The Merger has diluted the ownership position of our stockholders. Upon completion of the Merger, our legacy stockholders own approximately 71% of the issued and outstanding shares of our common stock, and legacy Weingarten stockholders own approximately 29% of the issued and outstanding shares of our common stock. Consequently, our stockholders have less influence over our management and policies after the effective time of the Merger than they currently exercise over our management and policies. The results of our operations and the trading price of our common stock after the Merger may also be affected by factors different from those currently affecting our results of operations and the trading prices of our common stock. For example, some of our and Weingarten’s existing institutional investors may elect to decrease their ownership in the combined company. Accordingly, the historical trading prices and financial results of the Company and Weingarten may not be indicative of these matters for the combined company after the Merger.
Following the Merger, we may be unable to integrate the business of Weingarten successfully or realize the anticipated synergies and related benefits of the Merger or do so within the anticipated time frame.
The Merger involves the combination of two companies which currently operate as independent public companies. We will be required to devote significant management attention and resources to integrating the business practices and operations of Weingarten. Potential difficulties we may encounter in the integration process include the following:
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For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of our management, the disruption of our ongoing business or inconsistencies in our services, standards, controls, procedures and policies, any of which could adversely affect the ability of the Company to maintain relationships with tenants, vendors and employees or to achieve the anticipated benefits of the Merger, or could otherwise adversely affect our business and financial results.
Following the Merger, we have a substantial amount of indebtedness and may need to incur more in the future.
We have substantial indebtedness and, in connection with the Merger, incurred additional indebtedness. The incurrence of new indebtedness could have adverse consequences on our business following the Merger, such as:
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The impact of any of these potential adverse consequences could have a material adverse effect on our results of operations, financial condition, and liquidity.
Counterparties to certain agreements with the Company or Weingarten may exercise their contractual rights under such agreements in connection with the Merger.
We and Weingarten are each party to certain agreements that give the counterparty certain rights following a “change in control,” including in some cases the right to terminate such agreements. Under some such agreements, for example certain debt obligations, the Merger may constitute a change in control and therefore the counterparty may exercise certain rights under the agreement upon the closing of the Merger. Any such counterparty may request modifications of its respective agreements as a condition to granting a waiver or consent under its agreement. There is no assurance that such counterparties will not exercise their rights under the agreements, including termination rights where available, that the exercise of any such rights will not result in a material adverse effect or that any modifications of such agreements will not result in a material adverse effect to the combined company subsequent to the Merger.
We face risks relating to cybersecurity attacks and security incidents which could cause loss of confidential information, disrupt operations and materially affect our business and financial results.
We, like all businesses, are subject to cyberattacks and security incidents, which threaten the confidentiality, integrity, and availability of our systems and information resources. Those attacks and incidents may be due to intentional or unintentional acts by employees, contractors or third-parties, who seek to gain unauthorized access to our or our service providers’ systems to disrupt operations, corrupt data, or steal confidential information. through malware, computer viruses, ransomware, social engineering (e.g., phishing attachments to e-mails) or other vectors.
The risk of a cybersecurity attack, data breach or disruption, including by computer hackers, foreign governments and cyber terrorists, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations and, in some cases, may be critical to the operations of certain of our tenants. While we maintain some of our own critical information technology systems, we also depend on third-parties to provide important software, technologies, tools and a broad array of services and functions, such as payroll, human resources, electronic communications and certain finance functions, among others. In addition, in the ordinary course of our business, we collect, process, transmit and store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information.
Although we, and our service providers, have various measures in place to maintain and manage the security and integrity of IT networks, related systems and information assets, there can be no assurance that these efforts will be effective or that attempted attacks, breaches or disruptions will not be successful or damaging. Our measures to prevent, detect and mitigate these threats, such as password protection, firewalls, backup servers, threat monitoring, log aggregation, vulnerability scanning, data encryption, periodic penetration testing and multifactor authentication, may not be successful in preventing a security incident or data breach or limiting the effects of such a breach. Furthermore, the security measures employed by third-party service providers may prove to be ineffective at preventing breaches of their systems. This is particularly so because attack methodologies change frequently or are not recognized until launched, and we also may be unable to investigate or remediate incidents because attackers are increasingly using techniques and tools designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.
As a result of the COVID-19 pandemic, employees working remotely has amplified certain risks to our business. The number of points of potential cyberattack, such as laptops and mobile devices have increased and any failure to effectively manage these risks, including to timely identify and appropriately respond to any cyberattacks or other disruption to our technology infrastructure, may adversely affect our business. Cyber criminals are targeting their attacks on individual employees, utilizing interest in pandemic related information to increase business email compromise scams designed to trick victims into transferring sensitive data or funds, or steal credentials that compromise information systems which extend to multiple platforms throughout the Company.
The primary risks that could directly result from the occurrence of a cyberattack or security incident include operational interruption, damage to our relationship with our tenants, and private data exposure. We could be required to expend significant capital and other resources to address an attack or incident, which may not be covered or fully covered by our insurance and which may involve payments for investigations, forensic analyses, legal advice, public relations advice, system repair or replacement, or other services, in addition to any remedies or relief that may result from legal proceedings. Our financial results may be negatively impacted by such attacks and incidents or any resulting negative media attention.
A cyberattack or security incident could:
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Moreover, cyber incidents perpetrated against our tenants, including unauthorized access to customers’ credit card data and other confidential information, could diminish consumer confidence and consumer spending and negatively impact our business.
2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
The Company’s Board of Director’s authorized the repurchase of up to 900,000 depositary shares of Class L preferred stock and 1,058,000 depositary shares of Class M preferred stock representing up to an aggregate of 1,958 shares of the Company’s preferred stock, par value $1.00 per share, through December 31, 2022.
During the ninethree months ended SeptemberJune 30, 2021,2022, the Company repurchased 1,082,483 shares for an aggregate purchase price of $20.8 million (weighted average price of $19.20 per share) in connection with common shares surrendered or deemed surrendered to the Company to satisfy statutory minimum tax withholding obligations in connection with equity-based compensation plans.following Class L depositary shares:
Period | Total Number | Average | Total Number of Shares Purchased Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) | ||||||||||||||
April 1, 2022 | – | April 30, 2022 | - | $ | - | - | $ | n/a | ||||||||||
May 1, 2022 | – | May 31, 2022 | 49,336 | 23.75 | - | $ | n/a | |||||||||||
June 1, 2022 | – | June 30, 2022 | 5,172 | 23.82 | - | $ | n/a | |||||||||||
| Total | 54,508 | $ | 23.76 | - |
During February 2020,the three months ended June 30, 2022, the Company extended itsrepurchased the following Class M depositary shares:
Period | Total Number | Average | Total Number of Shares Purchased Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) | ||||||||||||||
April 1, 2022 | – | April 30, 2022 | - | $ | - | - | $ | n/a | ||||||||||
May 1, 2022 | – | May 31, 2022 | 78,661 | 23.59 | - | $ | n/a | |||||||||||
June 1, 2022 | – | June 30, 2022 | 12,099 | 23.81 | - | $ | n/a | |||||||||||
| Total | 90,760 | $ | 23.61 | - |
The Company has a common share repurchase program, for a term of two years, which willis scheduled to expire inon February 2022, pursuant to which29, 2024. Under this program, 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 common share repurchase program during the ninesix months ended SeptemberJune 30, 2021.2022. As of SeptemberJune 30, 2021,2022, the Company had $224.9 million available under this common share repurchase program.
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, 2021 – January 31, 2021 | 75,847 | $ | 15.16 | - | $ | 224.9 | ||||||||||
February 1, 2021 – February 28, 2021 | 441,944 | 17.89 | - | 224.9 | ||||||||||||
March 1, 2021 – March 31, 2021 | 1,336 | 19.13 | - | 224.9 | ||||||||||||
April 1, 2021 – April 30, 2021 | 3,434 | 19.43 | - | 224.9 | ||||||||||||
May 1, 2021 – May 31, 2021 | 3,565 | 21.45 | - | 224.9 | ||||||||||||
June 1, 2021 – June 30, 2021 | - | - | - | 224.9 | ||||||||||||
July 1, 2021 – July 31, 2021 | - | - | - | 224.9 | ||||||||||||
August 1, 2021 – August 31, 2021 | 556,357 | 20.78 | - | 224.9 | ||||||||||||
September 1, 2021 – September 30, 2021 | - | - | - | 224.9 | ||||||||||||
Total | 1,082,483 | $ | 19.20 | - |
During the six months ended June 30, 2022, the Company repurchased 559,887 shares of the Company’s common stock for an aggregate purchase price of $13.5 million (weighted average price of $24.15 per share) in connection with common shares surrendered or deemed surrendered to the Company to satisfy statutory minimum tax withholding obligations in connection with equity-based compensation plans.
Period | Total Number | Average | Total Number of Shares Purchased Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) | ||||||||||||||
January 1, 2022 | – | January 31, 2022 | 3,157 | $ | 24.68 | - | $ | 224.9 | ||||||||||
February 1, 2022 | – | February 28, 2022 | 552,640 | 24.16 | - | $ | 224.9 | |||||||||||
March 1, 2022 | – | March 31, 2022 | - | - | - | $ | 224.9 | |||||||||||
April 1, 2022 | – | April 30, 2022 | - | - | - | $ | 224.9 | |||||||||||
May 1, 2022 | – | May 31, 2022 | 2,520 | 23.26 | - | $ | 224.9 | |||||||||||
June 1, 2022 | – | June 30, 2022 | 1,570 | 21.90 | - | $ | 224.9 | |||||||||||
Total | 559,887 | $ | 24.15 | - |
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
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.
* Furnished herewith.
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.
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