10-Q 1 kim20210930_10q.htm FORM 10-Q kim20210930_10q.htm
0000879101 KIMCO REALTY CORP false --12-31 Q3 2021 2,886,259 2,717,114 1.00 1.00 7,054,000 7,054,000 19,580 19,580 19,580 19,580 489,500 489,500 0.01 0.01 750,000,000 750,000,000 616,413,920 616,413,920 432,518,743 432,518,743 9 19,348 19,348 56,465 0 7,538 482 11,283 August 2, 2021 July 28, 2021 0 53.7 21.9 29.8 0.05 0.05 1 6 2 2 8 73,081 0.9 0.3 0.3 0 Includes non-recourse liabilities of consolidated VIEs at September 30, 2021 and December 31, 2020 of $122,475 and $62,076, respectively. See Footnote 13 of the Notes to Condensed Consolidated Financial Statements. The amounts represent adjustments associated with potentially uncollectible revenues and disputed amounts primarily due to the COVID-19 pandemic. The joint ventures assumed an aggregate $191.5 million of secured debt (including a fair market value adjustment of $0.8 million) in connection with the Merger. The Company determined that the valuation of its Senior Unsecured Notes were classified within Level 2 of the fair value hierarchy and its unsecured revolving credit facility was classified within Level 3 of the fair value hierarchy. The estimated fair value amounts classified as Level 2, as of September 30, 2021 and December 31, 2020, were $7.4 billion and $5.5 billion, respectively. During October 2021, the Company purchased its partner’s 70% remaining interest in a joint venture which is comprised of six property interests, for a gross purchase price of $425.8 million, which the Company now owns 100%. Subsequently in October 2021, the Company entered into a new 50/50 joint venture with a third party in which it contributed the six properties for a gross sales price of $425.8 million and will remain as manager. Includes minimum base rents, expense reimbursements, ancillary income and straight-line rent adjustments. 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 will amortize 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. Includes extension options The pro forma earnings for the three and nine months ended September 30, 2021 were adjusted to exclude $47.0 million and $50.2 million of merger costs, respectively, while the pro forma earnings for the nine months ended September 30, 2020 were adjusted to include $50.2 million of merger costs incurred. Includes minimum base rents, expense reimbursements, percentage rent, lease termination fee income and ancillary income. Gross leasable area ("GLA") In connection with the Merger, the Company acquired ownership in 9 unconsolidated joint ventures, which have a provisional fair market value of $586.2 million at the time of Merger. These joint ventures represent 30 property interests and 2.8 million square feet of GLA, as of September 30, 2021. Acquired in connection with the Merger Amounts include additional consideration of $39.1 million relating to reimbursements paid by Kimco to WRI at the closing of the Merger. The Company manages certain of these joint venture investments and, where applicable, earns property management fees, construction management fees, property acquisition and disposition fees, leasing management fees and asset management fees. The effect of the assumed conversion of certain convertible units had an anti-dilutive effect upon the calculation of Net income/(loss) 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 and 1.2 million stock options that were not dilutive as of September 30, 2021 and 2020, respectively, and 2.5 million shares of restricted stock that were not dilutive for the three months ended September 30, 2020. See Footnotes 1 and 3 of the Company's Condensed Consolidated Financial Statements for further details. During January 2021, KIM RDC, LLC ("KIM RDC"), a wholly owned subsidiary of the Company, and KP Lancewood LLC ("KPR Member") entered into a joint venture agreement wherein KIM RDC has a 100% controlling interest and KPR Member is entitled to a profit participation. The joint venture acquired two operating properties for a gross fair value of $104.0 million (see Footnote 4 of the Company's Condensed Consolidated Financial Statements). This joint venture was accounted for as a consolidated VIE (see Footnote 13 of the Company's Condensed Consolidated Financial Statements). During June 2021, the two joint venture properties were sold for a combined sales price of $108.0 million of which the KPR Member received a distribution of $2.1 million. Relates to interest expense on finance lease liabilities, which were acquired in connection with the Merger. Representing 125 property interests and 25.3 million square feet of GLA, as of September 30, 2021, and 97 property interests and 21.2 million square feet of GLA, as of December 31, 2020. The Company determined that its valuation of its mortgages loan were classified within Level 3 of the fair value hierarchy. Includes restricted assets of consolidated variable interest entities ("VIEs") at September 30, 2021 and December 31, 2020 of $230,847 and $102,482, respectively. See Footnote 13 of the Notes to Condensed Consolidated Financial Statements. 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Table of Contents



 

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 September 30, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                    to                  

 

Commission File Number:   1-10899

 

Kimco Realty Corporation

(Exact name of registrant as specified in its charter)

Maryland

 

13-2744380

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

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

Symbol(s)

Name of each exchange on

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, the registrant had 616,428,058 shares of common stock outstanding.

 



 

 
 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

 

 

Condensed Consolidated Financial Statements of Kimco Realty Corporation and Subsidiaries (Unaudited) -

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

3

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020

4

   

Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2021 and 2020

5

   

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020

7

   
Notes to Condensed Consolidated Financial Statements. 8
   

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

22
   

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

35
   

Item 4.  Controls and Procedures.

36
   

PART II - OTHER INFORMATION

   

Item 1.  Legal Proceedings.

37
   

Item 1A.  Risk Factors.

37
   

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

39
   

Item 3.  Defaults Upon Senior Securities.

40
   

Item 4.  Mine Safety Disclosures.

40
   

Item 5.  Other Information.

40
   

Item 6.  Exhibits.

40
   

Signatures

41

 

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share information)

 

  

September 30, 2021

  

December 31, 2020

 

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 under development

  5,672   5,672 

Investments in and advances to real estate joint ventures

  1,178,511   590,694 

Other investments

  130,470   117,140 

Cash and cash equivalents

  483,471   293,188 

Marketable securities

  1,249,125   706,954 

Accounts and notes receivable, net

  235,082   219,248 

Operating lease right-of-use assets, net

  149,203   102,369 

Other assets

  380,675   233,192 

Total assets (1)

 $18,590,521  $11,614,498 
         

Liabilities:

        

Notes payable, net

 $7,034,047  $5,044,208 

Mortgages payable, net

  482,634   311,272 

Dividends payable

  5,366   5,366 

Operating lease liabilities

  125,015   96,619 

Other liabilities

  772,251   470,995 

Total liabilities (2)

  8,419,313   5,928,460 

Redeemable noncontrolling interests

  15,784   15,784 
         

Commitments and Contingencies

          
         

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 

Paid-in capital

  9,579,517   5,766,511 

Retained earnings/(cumulative distributions in excess of net income)

  328,609   (162,812)

Total stockholders' equity

  9,914,310   5,608,044 

Noncontrolling interests

  241,114   62,210 

Total equity

  10,155,424   5,670,254 

Total liabilities and equity

 $18,590,521  $11,614,498 

 

(1)

Includes restricted assets of consolidated variable interest entities (“VIEs”) at September 30, 2021 and December 31, 2020 of $230,847 and $102,482, respectively.  See Footnote 13 of the Notes to Condensed Consolidated Financial Statements.

(2)

Includes non-recourse liabilities of consolidated VIEs at September 30, 2021 and December 31, 2020 of $122,475 and $62,076, respectively.  See Footnote 13 of the Notes to Condensed Consolidated Financial Statements.

 

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

 
                                 

Revenues

                               

Revenues from rental properties, net

  $ 364,694     $ 256,607     $ 929,297     $ 778,572  

Management and other fee income

    3,913       3,185       10,634       9,880  

Total revenues

    368,607       259,792       939,931       788,452  
                                 

Operating expenses

                               

Rent

    (3,678 )     (2,767 )     (9,706 )     (8,429 )

Real estate taxes

    (50,594 )     (40,403 )     (129,124 )     (118,733 )

Operating and maintenance

    (52,063 )     (42,844 )     (145,480 )     (124,192 )

General and administrative

    (25,904 )     (28,795 )     (75,136 )     (72,316 )

Impairment charges

    (850 )     (397 )     (954 )     (3,509 )

Merger charges

    (46,998 )     -       (50,191 )     -  

Depreciation and amortization

    (114,238 )     (71,704 )     (261,687 )     (214,660 )

Total operating expenses

    (294,325 )     (186,910 )     (672,278 )     (541,839 )
                                 

Gain on sale of properties

    1,975       -       30,841       5,697  
                                 

Operating income

    76,257       72,882       298,494       252,310  
                                 

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

    -       -       -       190,832  

Interest expense

    (52,126 )     (46,942 )     (146,654 )     (141,017 )

Early extinguishment of debt charges

    -       (7,538 )     -       (7,538 )

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 )

Equity in income of joint ventures, net

    20,025       11,233       54,095       35,039  

Equity in income of other investments, net

    1,539       11,155       10,365       26,895  
                                 

Net income/(loss)

    509,204       (37,429 )     767,747       801,078  
                                 

Net income attributable to noncontrolling interests

    (1,465 )     (965 )     (5,369 )     (1,479 )
                                 

Net income/(loss) attributable to the Company

    507,739       (38,394 )     762,378       799,599  
                                 

Preferred dividends

    (6,354 )     (6,354 )     (19,062 )     (19,062 )
                                 

Net income/(loss) available to the Company's common shareholders

  $ 501,385     $ (44,748 )   $ 743,316     $ 780,537  
                                 

Per common share:

                               

Net income/(loss) available to the Company's common shareholders:

                         

-Basic

  $ 0.91     $ (0.10 )   $ 1.57     $ 1.80  

-Diluted

  $ 0.91     $ (0.10 )   $ 1.56     $ 1.80  
                                 

Weighted average shares:

                               

-Basic

    546,842       429,994       469,885       429,899  

-Diluted

    548,766       429,994       474,452       431,602  

 

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 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 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)  -   -   -   -   -   (38,394)  965   (37,429)

Redeemable noncontrolling interests income

  -   -   -   -   -   -   -   (240)  (240)

Dividends declared to common and preferred shares

  (49,605)  -   -   -   -   -   (49,605)  -   (49,605)

Distributions to noncontrolling interests

  -   -   -   -   -   -   -   (119)  (119)

Surrender of restricted common stock

  -   -   -   (2)  -   (4)  (4)  -   (4)

Amortization of equity awards

  -   -   -   -   -   6,450   6,450   -   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 

Net income

  507,739   -   -   -   -   -   507,739   1,465   509,204 

Redeemable noncontrolling interests income

  -   -   -   -   -   -   -   (353)  (353)

Dividends declared to common and preferred shares

  (110,865)  -   -   -   -   -   (110,865)  -   (110,865)

Distributions to noncontrolling interests

  -   -   -   -   -   -   -   (887)  (887)

Issuance of common stock, net of issuance costs

  -   -   -   3,516   35   76,893   76,928   -   76,928 

Issuance of common stock for merger (1)

  -   -   -   179,920   1,799   3,736,936   3,738,735   -   3,738,735 

Surrender of common stock for taxes

  -   -   -   (567)  (5)  (11,575)  (11,580)  -   (11,580)

Exercise of common stock options

  -   -   -   28   -   534   534   -   534 

Amortization of equity awards

  -   -   -   -   -   5,550   5,550   -   5,550 

Noncontrolling interests assumed from the merger (1)

  -   -   -   -   -   -   -   179,037   179,037 

Redemption/conversion of noncontrolling interests

  -   -   -   -   -   -   -   (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 

 

(1)

See Footnotes 1 and 3 of the Notes to Condensed Consolidated Financial Statements for further details.

 

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

    -       -       -       -       -       -       -       109       109  

Net income

    799,599       -       -       -       -       -       799,599       1,479       801,078  

Redeemable noncontrolling interests income

    -       -       -       -       -       -       -       (845 )     (845 )

Dividends declared to common and preferred shares

    (183,411 )     -       -       -       -       -       (183,411 )     -       (183,411 )

Distributions to noncontrolling interests

    -       -       -       -       -       -       -       (1,018 )     (1,018 )

Issuance of common stock

    -       -       -       921       9       (9 )     -       -       -  

Surrender of restricted common stock

    -       -       -       (297 )     (3 )     (5,326 )     (5,329 )     -       (5,329 )

Exercise of common stock options

    -       -       -       63       1       980       981       -       981  

Amortization of equity awards

    -       -       -       -       -       17,574       17,574       -       17,574  

Acquisition of noncontrolling interests

    -       -       -       -       -       (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       -       -       -       -       -       762,378       5,369       767,747  

Redeemable noncontrolling interests income

    -       -       -       -       -       -       -       (529 )     (529 )

Dividends declared to common and preferred shares

    (270,957 )     -       -       -       -       -       (270,957 )     -       (270,957 )

Distributions to noncontrolling interests

    -       -       -       -       -       -       -       (1,879 )     (1,879 )

Issuance of common stock, net of issuance costs

    -       -       -       4,958       49       76,879       76,928       -       76,928  

Issuance of common stock for merger (1)

    -       -       -       179,920       1,799       3,736,936       3,738,735       -       3,738,735  

Surrender of common stock for taxes

    -       -       -       (1,115 )     (10 )     (20,816 )     (20,826 )     -       (20,826 )

Exercise of common stock options

    -       -       -       132       1       2,503       2,504       -       2,504  

Amortization of equity awards

    -       -       -       -       -       17,504       17,504       -       17,504  

Noncontrolling interests assumed from the merger (1)

    -       -       -       -       -       -       -       179,037       179,037  

Redemption/conversion of noncontrolling interests

    -       -       -       -       -       -       -       (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  

 

(1)

See Footnotes 1 and 3 of the Notes to Condensed Consolidated Financial Statements for further details.

 

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,

 
  

2021

  

2020

 
         

Cash flow from operating activities:

        

Net income

 $767,747  $801,078 

Adjustments to reconcile net income to net cash provided by operating activities:

        

Depreciation and amortization

  261,687   214,660 

Impairment charges

  954   3,509 

Early extinguishment of debt charges

  -   7,538 

Equity award expense

  17,971   18,203 

Gain on sale of properties

  (30,841)  (5,697)

Gain on marketable securities, net

  (542,510)  (444,646)

Gain on sale of cost method investment

  -   (190,832)

Equity in income of joint ventures, net

  (54,095)  (35,039)

Equity in income of other real estate investments, net

  (10,365)  (26,895)

Distributions from joint ventures and other investments

  54,188   135,791 

Change in accounts and notes receivable, net

  (3,644)  (21,175)

Change in accounts payable and accrued expenses

  (55,569)  42,064 

Change in other operating assets and liabilities, net

  11,747   (32,617)

Net cash flow provided by operating activities

  417,270   465,942 
         

Cash flow from investing activities:

        

Acquisition of operating real estate

  (102,682)  (7,073)

Improvements to operating real estate

  (112,792)  (164,366)

Improvements to real estate under development

  -   (22,358)

Acquisition of Weingarten Realty Investors, net of cash acquired of $56,465

  (263,973)  - 

Proceeds from sale of marketable securities

  339   931 

Proceeds from sale of cost method investment

  -   227,325 

Investments in and advances to real estate joint ventures

  (7,546)  (14,640)

Reimbursements of investments in and advances to real estate joint ventures

  9,113   4,400 

Investments in and advances to other investments

  (59,504)  (5,418)

Reimbursements of investments in and advances to other investments

  48,420   297 

Investment in other financing receivable

  (26,897)  - 

Collection of mortgage loans receivable

  3,742   114 

Proceeds from sale of properties

  154,017   21,718 

Proceeds from insurance casualty claims

  -   2,450 

Net cash flow (used for)/provided by investing activities

  (357,763)  43,380 
         

Cash flow from financing activities:

        

Principal payments on debt, excluding normal amortization of rental property debt

  (136,222)  (158,556)

Principal payments on rental property debt

  (7,481)  (8,036)

Proceeds from issuance of unsecured term loan

  -   590,000 

Proceeds from issuance of unsecured notes

  500,000   900,000 

Repayments of unsecured revolving credit facility, net

  -   (200,000)

Repayments of unsecured term loan

  -   (590,000)

Repayments of unsecured notes

  -   (484,905)

Financing origination costs

  (7,017)  (17,851)

Payment of early extinguishment of debt charges

  -   (7,538)

Contributions from noncontrolling interests

  -   109 

Redemption/distribution of noncontrolling interests

  (7,558)  (22,483)

Dividends paid

  (270,956)  (304,320)

Proceeds from issuance of stock, net

  79,433   981 

Shares repurchased for employee tax withholding on equity awards

  (20,787)  (5,313)

Change in tenants' security deposits

  1,364   (380)

Net cash flow used for financing activities

  130,776   (308,292)
         

Net change in cash, cash equivalents and restricted cash

  190,283   201,030 

Cash, cash equivalents and restricted cash, beginning of the period

  293,188   123,947 

Cash, cash equivalents and restricted cash, end of the period

 $483,471  $324,977 
         

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 

 

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 a publicly traded owner and operator of open-air, grocery-anchored shopping centers and 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, 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 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”) paid on August 2, 2021 to shareholders of record on July 28, 2021The 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 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.

 

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, 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. Any of these events could materially adversely impact the Company’s business, financial condition, results of operations or stock price. 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. 

 

8

 

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 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 September 30, 2021 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 5 of the Company’s Condensed Consolidated Financial Statements).

 

9

 

New Accounting Pronouncements

 

The following table represents an Accounting Standards Update (“ASU”) to the FASB’s ASCs that, as of  September 30, 2021, 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 2021-05, July 2021, Lessors – Certain Leases with Variable Lease Payments (Topic 842)

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.

Effective for annual periods beginning after December 15, 2021 and interim periods therein.

We are currently evaluating the impact of the adoption of ASU 2021-05 on our consolidated financial statements, but do not believe the adoption of this standard will have a material impact on our condensed consolidated financial statements.

 

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 2020-01, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force)

The amendments clarify the interaction between the accounting for equity securities, equity method investments, and certain derivative instruments. This ASU, among other things, clarifies that an entity should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323 for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

January 1, 2021

The adoption of this ASU did not have a material impact on the Company’s financial position and/or results of operations.

 

 

3. Weingarten Merger

 

Overview

 

On August 3, 2021, 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 total purchase price of the Merger was $4.1 billion, which consists primarily of shares of the Company’s common stock issued 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:

 

Weingarten common shares outstanding as of August 3, 2021

  127,784,006 

Exchange ratio

  1.408 

Kimco common stock issued

  179,919,880 

 

10

 

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:

 

  

Weighted Average
Amortization Period (in Years)

 

Land

  n/a 

Building

  50.0 

Building improvements

  45.0 

Tenant improvements

  4.0 

Fixtures and leasehold improvements

  7.0 

In-place leases

  2.5 

Above-market leases

  5.2 

Below-market leases

  16.9 

Operating right-of-use intangible assets

  24.2 
Fair market value of debt adjustment  3.8 

 

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.

 

11

 

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 

 

(1) The pro forma earnings for the three and nine months ended September 30, 2021 were adjusted to exclude $47.0 million and $50.2 million of merger costs, respectively, while the pro forma earnings for the nine months ended September 30, 2020 were adjusted to include $50.2 million of merger costs incurred.

 

 

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 two 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 Dispositions disclosure 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
Amortization Period (in Years)

 

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     

 

12

 

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,

 
  

2021

  

2020

 

Aggregate sales price

 $156.6  $22.6 

Gain on sale of properties (1)

 $30.8  $5.7 

Number of properties sold

  5   3 

Number of parcels sold

  9   1 

 

(1)

Before noncontrolling interests of $3.0 million and taxes of $2.2 million, after utilization of net operating loss carryforwards, for the nine months ended September 30, 2021.

 

 

5. 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 table below presents joint venture investments for which the Company held an ownership interest at September 30, 2021 and December 31, 2020 (dollars in millions):

 

  

Ownership

  

The Companys Investment

 

Joint Venture

 

Interest

  

September 30, 2021

  

December 31, 2020

 

Prudential Investment Program (1)

  15.0%  $170.5  $175.1 

Kimco Income Opportunity Portfolio (“KIR”) (1)

  48.6%   183.3   177.4 

Canada Pension Plan Investment Board (“CPP”) (1)

  55.0%   162.4   159.7 

Other Institutional Joint Ventures (1) (2)

 

 

Various   264.7   - 

Other Joint Venture Programs (1) (2) (3)

 

 

Various   397.6