KIMCO REALTY CORPORATION The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this Form 10-K. Historical results and percentage relationships set forth in the Consolidated Statements of Income contained in the Consolidated Financial Statements, including trends, should not be taken as indicative of future operations. Critical Accounting Policies The Consolidated Financial Statements of the Company include the accounts of the Company, its wholly owned subsidiaries and all entities in which the Company has a controlling interest, including where the Company has been determined to be a primary beneficiary of a variable interest entity in accordance with the consolidation guidance of the FASB Accounting Standards Codification. The Company applies these provisions to each of its joint venture investments to determine whether the cost, equity or consolidation method of accounting is appropriate. The Company evaluates performance on a property specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single reportable segment for disclosure purposes in accordance with accounting principles generally accepted inthe United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Consolidated Financial Statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported amounts of assets and liabilities. These estimates are based on, but not limited to, historical results, industry standards and current economic conditions, giving due consideration to materiality. The most significant assumptions and estimates relate to revenue recognition and the recoverability of trade accounts receivable, depreciable lives, valuation of real estate and intangible assets and liabilities, valuation of joint venture investments and other investments, and realizability of deferred tax assets and uncertain tax positions. Application of these assumptions requires the exercise of judgment as to future uncertainties, and, as a result, actual results could materially differ from these estimates. The Company is required to make subjective assessments as to whether there are impairments in the value of its real estate properties, investments in joint ventures and other investments. The Company's reported net earnings are directly affected by management's estimate of impairments.
Revenue Recognition and Recoverability of Trade Accounts Receivable
Revenues from rental properties, net are comprised of minimum base rent,
percentage rent, lease termination fee income, amortization of above-market and
below-market rent adjustments and straight-line rent adjustments. Upon the
adoption of ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"), the Company elected
the lessor practical expedient to combine the lease and non-lease components,
determined the lease component was the predominant component and as a result,
accounted for the combined components under Topic 842. Non-lease components
include reimbursements paid to the Company from tenants for common area
maintenance costs and other operating expenses. The combined components are
included in Revenues from rental properties, net on the Company's Consolidated
Statements of Income.
Base rental revenues from rental properties are recognized on a straight-line
basis over the terms of the related leases. Certain of these leases also provide
for percentage rents based upon the level of sales achieved by the lessee.
These percentage rents are recognized once the required sales level is
achieved. Rental income may also include payments received in connection with
lease termination agreements. Lease termination fee income is recognized when
the lessee provides consideration in order to terminate an existing lease
agreement and has vacated the leased space. If the lessee continues to occupy
the leased space for a period of time after the lease termination is agreed
upon, the termination fee is accounted for as a lease modification based on the
modified lease term. Upon acquisition of real estate operating properties, the
Company estimates the fair value of identified intangible assets and liabilities
(including above-market and below-market leases, where applicable). The
capitalized above-market or below-market intangible asset or liability is
amortized to rental income over the estimated remaining term of the respective
leases, which includes the expected renewal option period for below-market
leases.
Also included in Revenues from rental properties, net are ancillary income and
tax increment financing ("TIF") income. Ancillary income is derived through
various agreements relating to parking lots, clothing bins, temporary storage,
vending machines, ATMs, trash bins and trash collections, seasonal leases, etc.
The majority of the revenue derived from these sources is through lease
agreements/arrangements and is recognized in accordance with the lease terms
described in the lease. The Company has TIF agreements with certain
municipalities and receives payments in accordance with the agreements. TIF
reimbursement income is recognized on a cash-basis when received.
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Table of Contents Trade accounts receivable The Company reviews its trade accounts receivable, including its straight-line rent receivable, related to base rents, straight-line rent, expense reimbursements and other revenues for collectability. When evaluating the probability of the collection of the lessee's total accounts receivable, including the corresponding straight-line rent receivable balance on a lease-by-lease basis, the Company considered the effects COVID-19 has had on its tenants, including the corresponding straight-line rent receivable. The Company's analysis of its accounts receivable included (i) customer credit worthiness, (ii) assessment of risk associated with the tenant, and (iii) current economic trends. In addition, tenants in bankruptcy are analyzed and considerations are made in connection with the expected recovery of pre-petition and post-petition bankruptcy claims. EffectiveJanuary 1, 2019 , in accordance with the adoption of Topic 842, the Company includes provision for doubtful accounts in Revenues from rental properties, net. If a lessee's accounts receivable balance is considered uncollectible, the Company will write-off the receivable balances associated with the lease and will only recognize lease income on a cash basis. In addition to the lease-specific collectability assessment performed under Topic 842, the analysis also recognizes a general reserve, as a reduction to Revenues from rental properties, for its portfolio of operating lease receivables which are not expected to be fully collectible based on the Company's historical and current collection experience and the potential for settlement of arrears. Although the Company estimates uncollectible receivables and provides for them through charges against revenues from rental properties, actual results may differ from those estimates. If the Company subsequently determines that it is probable it will collect the remaining lessee's lease payments under the lease term, the Company will then reinstate the straight-line balance and the lease income will then be limited to the lesser of (i) the straight-line rental income or (ii) the lease payments that have been collected from the lessee. Real Estate Depreciable Lives
The Company's investments in real estate properties are stated at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations and replacements, which improve and extend the life of the asset, are capitalized.
The Company capitalizes acquisition costs related to real estate operating properties, which qualify as asset acquisitions. Also, upon acquisition of real estate operating properties, the Company estimates the fair value of acquired tangible assets (consisting of land, building, building improvements and tenant improvements) and identified intangible assets and liabilities (consisting of above and below-market leases, in-place leases, and tenant relationships, where applicable), assumed debt and redeemable units issued at the date of acquisition, based on evaluation of information and estimates available at that date. Fair value is determined based on a market approach, which contemplates the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets, as follows:
Buildings and building improvements (in years) 5 to
50
Fixtures, leasehold and tenant improvements (including certain Terms of identified intangible assets)
leases or
useful
lives,
whichever
is
shorter
The Company is required to make subjective assessments as to the useful lives of
its properties for purposes of determining the amount of depreciation to reflect
on an annual basis with respect to those properties. These assessments have a
direct impact on the Company's net earnings.
Valuation of Real Estate, and Intangible Assets and Liabilities
On a continuous basis, management assesses whether there are any indicators,
including property operating performance, changes in anticipated holding period,
general market conditions and delays of development, that the value of the real
estate properties (including any related amortizable intangible assets or
liabilities) may be impaired. A property value is considered impaired only if
management's estimate of current and projected operating cash flows, net of
anticipated construction and leasing costs (undiscounted and unleveraged), of
the property over its anticipated hold period is less than the net carrying
value of the property. Such cash flow projections consider factors such as
expected future costs of materials and labor, operating income, trends and
prospects, as well as the effects of demand, competition and other factors. To
the extent impairment has occurred, the carrying value of the property would be
adjusted to reflect the estimated fair value of the property. The Company's
estimated fair values are primarily based upon estimated sales prices from
signed contracts or letters of intent from third-parties, discounted cash flow
models or third-party appraisals. Estimated fair values that are based on
discounted cash flow models include all estimated cash inflows and outflows over
a specified holding period. Capitalization rates and discount rates utilized in
these models are based upon unobservable rates that the Company believes to be
within a reasonable range of current market rates.
When a real estate asset is identified by management as held-for-sale, the
Company ceases depreciation of the asset and estimates the sales price of such
asset net of selling costs. If, in management's opinion, the net sales price of
the asset is less than the net book value of such asset, an adjustment to the
carrying value would be recorded to reflect the estimated fair value of the
property.
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Table of Contents
Valuation of Joint Venture Investments and Other Investments
The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting as the Company exercises significant influence, but does not control, these entities. These investments are recorded initially at cost and are subsequently adjusted for cash contributions and distributions. Earnings for each investment are recognized in accordance with each respective investment agreement and, where applicable, are based upon an allocation of the investment's net assets at book value as if the investment was hypothetically liquidated at the end of each reporting period. The Company's joint ventures and other real estate investments primarily consist of co-investments with institutional and other joint venture partners in open-air shopping center properties, consistent with its core business. These joint ventures typically obtain non-recourse third-party financing on their property investments, thus contractually limiting the Company's exposure to losses to the amount of its equity investment, and, due to the lender's exposure to losses, a lender typically will require a minimum level of equity in order to mitigate its risk. From time to time the joint ventures will obtain unsecured debt, which may be guaranteed by the joint venture. The Company's exposure to losses associated with its unconsolidated joint ventures is primarily limited to its carrying value in these investments. On a continuous basis, management assesses whether there are any indicators, including property operating performance and general market conditions, that the value of the Company's investments in unconsolidated joint ventures may be impaired. An investment's value is impaired only if management's estimate of the fair value of the investment is less than the carrying value of the investment and such difference is deemed to be other-than-temporary. To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the investment over the estimated fair value of the investment. Estimated fair values which are based on discounted cash flow models include all estimated cash inflows and outflows over a specified holding period, capitalization rates and discount rates utilized in these models are based upon unobservable rates that the Company believes to be within a reasonable range of current market rates.
Realizability of Deferred Tax Assets and Uncertain Tax Positions
The Company is subject toU.S. federal, state and local income taxes on the income from its activities relating to its TRSs and subject to local taxes on certain non-U.S. investments. The Company accounts for income taxes using the asset and liability method, which requires that deferred tax assets and liabilities be recognized based on future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted. A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the evidence available, it is more likely than not (i.e., a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. The valuation allowance, which requires significant judgement from management, should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. The Company's reported net earnings are directly affected by management's judgement in determining a valuation allowance. The Company recognizes and measures benefits for uncertain tax positions, which requires significant judgment from management. Although the Company believes it has adequately reserved for any uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in the Company's income tax expense in the period in which a change is made, which could have a material impact on operating results (see Footnote 22 of the Notes to Consolidated Financial Statements included in this Form 10-K). Executive Overview
26
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Table of Contents COVID-19 Pandemic The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide, and has caused significant volatility inU.S. and international debt and equity markets. The COVID-19 pandemic has significantly impacted the retail sector in which the Company operates and, if the effects of the pandemic are prolonged, it could continue to have a significant adverse impact on the underlying industries of many of the Company's tenants. The majority of the Company's tenants and their operations have been impacted, and may continue to be impacted, affecting their ability to pay rent. Through the duration of the pandemic a substantial number of tenants have had to temporarily or permanently close their business, shortened their operating hours or offer reduced services for some period of time. As a result of the current economic uncertainty and the impact to many of the Company's tenants, the Company has taken important steps to offer its support, including:
? The Company has worked, and continues to work, with these tenants to grant
rent deferrals or rent waivers on a lease by lease basis.
? The Company established a
tenants in identifying and applying for federal and state aid to help support
their businesses during the COVID-19 pandemic. In partnership with advisory
firms the Company provides assistance with the application process at the
Company's expense. These firms assist tenants in identifying suitable loan
programs, identifying potential lending institutions, and preparing and
submitting applications.
? The Company is closely monitoring recommendations and mandates of federal,
state and local governments, and health authorities.
? At the onset of the COVID-19 pandemic in the
increased the frequency and intensity of its janitorial services to help
prevent the spread of the virus. Areas such as public bathrooms, interior
concourses and hallways, vestibules and shared doors, and elevators and
escalators are being sanitized multiple times per day.
? The Company's teams worked to provide additional assistance in the communities
where it operates, finding creative ways to use its conveniently located
shopping centers during this difficult time. The Company fast-tracked the
approval of drive-thru testing centers, blood-drive locations, and school
lunch pick-ups.
? The Company launched the Kimco Curbside Pickup™ program designating dedicated
parking spots for curbside merchandise pickup at its shopping centers for use
by all tenants and their customers.
As of December 31, 2020 , mandated or voluntary tenant closures represented 2.7%
of annual base rent for all of the Company's wholly owned locations and the
Company's share of ownership in joint ventures (collectively, the "pro-rata
annual base rent"). As a result, the Company has also had a substantial number
of tenants that have made late or partial rent payments, requested a deferral of
rent payments, forgiveness of rent payments or defaulted on rent payments, and
it is likely that more of the Company's tenants will be similarly impacted in
the future. From the onset of the COVID-19 pandemic, the Company granted
selective deferrals for approximately 9%, of its pro-rata annual base rent,
forgave rental payments aggregating $13.7 million of pro-rata rents. Collection
rates have steadily increased from 74% of its pro-rata annual base rent for
second quarter ended June 30, 2020 to 92% for the fourth quarter ended December
31, 2020 , with rates increasing each quarter. The Company continues to negotiate
for the payment of the remaining rents not yet collected as well as work with
tenants to grant rent waivers on a lease by lease basis. The deferrals generally
have a repayment period of six to 18 months. The Company has also collected 91%
of the pro-rata annual base rent for the month of January 2021 .
The Company considered the impacts COVID-19 has had on its tenants when
evaluating the adequacy of the collectability of the lessee's total accounts
receivable balance, including the corresponding straight-line rent receivable.
During the year ended December 31, 2020 , the Company's revenue was reduced by
$81.0 million associated with potentially uncollectible revenues including
revenues from tenants that are being accounted for on a cash basis, which
includes $15.2 million for straight-line rent receivables, primarily
attributable to the COVID-19 pandemic. Since the COVID-19 pandemic began, the
Company has seen an increase in the number of tenants filing for bankruptcy,
some of which emerged from bankruptcy prior to December 31, 2020 . As of December
31, 2020 , there were 38 leases or 0.7% of pro-rata annual base rent, within the
Company's portfolio associated with tenants in bankruptcy. The Company continues
to evaluate the impact these bankruptcy filings have or will have on
collections, vacancies and future rental income. 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.
The impact of COVID-19 on the Company's future results could be significant and
will largely depend on future developments, which are highly uncertain and
cannot be predicted, including new information that may emerge concerning the
severity of COVID-19, the success of governmental, business and individual
actions that have been and continue to be taken in response to COVID-19, the
impact of COVID-19 on economic activity, the effect of COVID-19 on the Company's
tenants and their businesses, the ability of tenants to make their rental
payments and any additional closures of tenants' businesses.
The Company 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
remains uncertain as this pandemic continues to evolve globally and within the
United States . Management cannot, at this point, estimate ultimate losses
related to the COVID-19 pandemic. The Company will continue to monitor the
economic, financial, and social conditions resulting from the COVID-19 pandemic
and will assess its asset portfolio for any impairment indicators. If the
Company determines that any of its assets are impaired, the Company would be
required to take impairment charges, and such amounts could be material. See
Footnote 6 to the Notes to the Company's Consolidated Financial Statements for
additional discussion regarding impairment charges.
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Table of Contents
The following highlights the Company's significant transactions, events and
results that occurred during the year ended
Financial and Portfolio Information:
? Net income available to the Company's common shareholders was
or
to
2019.
? Funds from operations ("FFO") was
for the year ended
per diluted share, for the corresponding period in 2019 (see additional
disclosure on FFO beginning on page 40).
? Same property net operating income ("Same property NOI") was
for the year ended
corresponding period in 2019 (see additional disclosure on Same property NOI
beginning on page 41).
? Increased collections of pro-rata base rent from 74% in the second quarter
ended
Executed 761 new leases, renewals and options totaling approximately 5.4
million square feet in the consolidated operating portfolio.
? The Company's consolidated operating portfolio occupancy at
was 93.9% as compared to 96.2% at December 31, 2019 .
Acquisition Disposition and Other Activity (see Footnotes 3, 5 and 9 of the Notes to Consolidated Financial Statements included in this Form 10-K):
? Acquired a land parcel located in
center, for a purchase price of $7.1 million .
? Disposed of three operating properties and four parcels, in separate
transactions, for an aggregate sales price of
transactions resulted in aggregate gains of
? Monetized
a gain of
Development Activity (see Footnote 4 of the Notes to Consolidated Financial Statements included in this Form 10-K):
? Placed in service Dania Pointe Phase II, a Signature SeriesTM development
project located in Dania Beach , FL.
Capital Activity (for additional details see Liquidity and Capital Resources below):
? Obtained a new
interest at a rate of LIBOR plus 76.5 basis points.
? Issued $400.0 million of 1.90% notes maturing March 2028 .
? Issued
(the "Green Bond").
? Redeemed all its 3.20% senior unsecured notes due 2021 totaling $484.9
million, the Company incurred aggregate prepayment charges of
? Entered into a term loan with total borrowing capacity of
was terminated and fully repaid in
? Repaid
properties.
? As ofDecember 31, 2020 , had$2.3 billion in immediate liquidity, including$293.2 million in cash. 28
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As a result of the above debt activity, the Company's consolidated debt maturity profile, including extension options, is as follows:
[[Image Removed: tbl4.jpg]]
? As of
weighted average maturity profile was 10.9 years related to the Company's
consolidated debt.
The Company faces external factors which may influence its future results from
operations. The convenience and availability of e-commerce has continued to
impact the retail sector, which could affect our ability to increase or maintain
rental rates and our ability to renew expiring leases and/or lease available
space. To mitigate the effect of e-commerce on its business, the Company's
strategy has been to attract local area customers to its properties by providing
a diverse and robust tenant base across a variety of retailers, including
grocery stores, off-price retailers, discounters or service-oriented tenants,
which offer buy online and pick up in store, off-price merchandise and
day-to-day necessities rather than high-priced luxury items.
Over the past several years, the Company has transformed its portfolio, focusing
on major metropolitan-area U.S. markets, predominantly on the East and West
coasts and in the Sunbelt region, which are supported by strong demographics,
significant projected population growth, and where the Company perceives
significant barriers to entry. Given this significant transformation
successfully executed over the last several years, the Company now owns a
predominantly grocery-anchored portfolio clustered in the nation's top markets
which positioned the Company to overcome many of the challenges brought upon by
COVID-19. The Company believes that this transformed portfolio will enable it to
maintain higher occupancy levels, rental rates and rental growth. In addition,
the Company, on a selective basis, has developed or redeveloped projects which
include residential and mixed-use components.
As part of the Company's investment strategy, each property is evaluated for its
highest and best use, which may include residential and mixed-use components. In
addition, the Company may consider other opportunistic investments related to
retailer controlled real estate, such as, repositioning underperforming retail
locations, retail real estate financing and bankruptcy transaction support. The
Company may continue to dispose of certain properties. If the estimated fair
value for any of these assets is less than their net carrying values, the
Company would be required to take impairment charges and such amounts could be
material. For a further discussion of these and other factors that could impact
our future results, performance or transactions, see Item 1A. "Risk Factors."
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Table of Contents Results of Operations
Comparison of the years ended
The following table presents the comparative results from the Company's
Consolidated Statements of Income for the year ended
Year Ended December 31,
2020 2019 $ Change
Revenues
Revenues from rental properties, net $ 1,044,888 $ 1,142,334 $ (97,446 )
Management and other fee income 13,005 16,550 (3,545 )
Operating expenses
Rent (1) (11,270 ) (11,311 ) 41
Real estate taxes (157,661 ) (153,659 ) (4,002 )
Operating and maintenance (2) (174,038 ) (171,981 ) (2,057 )
General and administrative (3) (93,217 ) (96,942 ) 3,725
Impairment charges (6,624 ) (48,743 )
42,119
Depreciation and amortization (288,955 ) (277,879 ) (11,076 ) Gain on sale of properties/change in control of interests 6,484 79,218 (72,734 ) Other income/(expense) Other income, net 4,119 10,985 (6,866 ) Gain on marketable securities, net 594,753 829
593,924
Gain on sale of cost method investment 190,832 -
190,832
Interest expense (186,904 ) (177,395 ) (9,509 ) Early extinguishment of debt charges (7,538 ) - (7,538 ) (Provision)/benefit for income taxes, net (978 ) 3,317 (4,295 ) Equity in income of joint ventures, net 47,353 72,162 (24,809 ) Equity in income of other real estate investments, net 28,628 26,076
2,552
Net income attributable to noncontrolling interests (2,044 ) (2,956 ) 912 Preferred stock redemption charges - (18,528 )
18,528
Preferred dividends (25,416 ) (52,089 )
26,673
Net income available to the Company's common shareholders$ 975,417 $ 339,988 $ 635,429 Net income available to the Company's common shareholders: Diluted per share$ 2.25 $ 0.80 $ 1.45
(1) Rent expense relates to ground lease payments for which the Company is the
lessee.
(2) Operating and maintenance expense consists of property related costsincluding 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 expense and other
company-specific expenses.
Net income available to the Company's common shareholders was $975.4 million for
the year ended December 31, 2020 , as compared to $340.0 million for the
comparable period in 2019. On a diluted per share basis, net income available to
the Company's common shareholders for the year ended December 31, 2020 , was
$2.25 as compared to $0.80 for the comparable period in 2019. For additional
disclosure, see Footnote 24 of the Notes to Consolidated Financial Statements
included in this Form 10-K.
The following describes the changes of certain line items included on the
Company's Consolidated Statements of Income, that the Company believes changed
significantly and affected Net income available to the Company's common
shareholders during the year ended
Revenue from rental properties, net -
The decrease in Revenues from rental properties, net of$97.4 million is primarily from (i) an increase of$80.0 million in adjustments associated with potentially uncollectible revenues, including revenues from tenants that are being accounted for on a cash basis and straight-line rent receivables, primarily due to the COVID-19 pandemic, for the year endedDecember 31, 2020 , as compared to the corresponding period in 2019 and (ii) a decrease in revenues of$30.6 million due to properties sold during 2020 and 2019, partially offset by (iii) the completion of certain redevelopment and development projects included in the Company's Signature Series™, acquisitions, tenant buyouts and net growth in the current portfolio, which provided incremental revenues for the year endedDecember 31, 2020 of$13.2 million , as compared to the corresponding period in 2019.
Management and other fee income -
The decrease in Management and other fee income of$3.5 million is primarily due to lower cash receipts for the year endedDecember 31, 2020 , as compared to the corresponding period in 2019, related to (i) the deferral of rent payments, rent relief provided, late or partial rent payments or defaulted rent payments as a result of the COVID-19 pandemic and (ii) the sale of properties and change of ownership interest within various joint venture investments during the year endedDecember 31, 2020 , as compared to the corresponding period in 2019. 30
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Table of Contents Real estate taxes - The increase in Real estate taxes of$4.0 million is primarily due to (i) an increase of$8.4 million related to the completion of certain redevelopment and development projects and an overall increase in assessed values in the current portfolio during the year endedDecember 31, 2020 , as compared to the corresponding period in 2019, partially offset by (ii) a decrease of$4.4 million due to properties sold during 2020 and 2019. General and administrative - The decrease in General and administrative expense of$3.7 million is primarily due to (i) a reduction in travel and entertainment and convention costs of$2.9 million due to fewer business related trips as a result of the COVID-19 pandemic, (ii) a decrease in employee-related expenses of$2.3 million , (iii) a reduction in office rent expense of$1.4 million , due to the relocation of the Company's headquarters to Company-owned office space, (iv) a decrease of$0.9 million primarily due to the fluctuations in value of various directors' deferred stock, (v) a decrease in professional fees of$0.9 million and (vi) a decrease in information technology costs of$0.7 million for the year endedDecember 31, 2020 , as compared to the corresponding period in 2019, partially offset by (vii) an increase in severance charges related to employee retirement and terminations of$5.5 million during the year endedDecember 31, 2020 , as compared to the corresponding period in 2019. Impairment charges - During the years endedDecember 31, 2020 and 2019, the Company recognized impairment charges related to adjustments to property carrying values of$6.6 million and$48.7 million , respectively, for which the Company's estimated fair values were primarily based upon (i) signed contracts or letters of intent from third-party offers or (ii) discounted cash flow models. These adjustments to property carrying values were recognized in connection with the Company's efforts to market certain properties and management's assessment as to the likelihood and timing of such potential transactions. Certain of the calculations to determine fair value utilized unobservable inputs and, as such, were classified as Level 3 of the fair value hierarchy. For additional disclosure, see Footnotes 6 and 16 of the Notes to Consolidated Financial Statements included in this Form 10-K.
Depreciation and amortization -
The increase in Depreciation and amortization of$11.1 million is primarily due to (i) an increase of$17.3 million in write-offs of depreciable assets primarily due to tenant vacates during the year endedDecember 31, 2020 , as compared to the corresponding period in 2019 and (ii) an increase of$6.0 million primarily related to the completion of certain development and redevelopment projects being placed into service during 2020 and 2019, partially offset by (iii) a decrease of$6.2 million resulting from property dispositions in 2020 and 2019 and (iv) a decrease of$6.0 million related to fully depreciated assets during the year endedDecember 31, 2020 , as compared to the corresponding period in 2019.
Gain on sale of properties/change in control of interests -
During 2020, the Company disposed of three operating properties and four parcels, in separate transactions, for an aggregate sales price of$31.8 million , for which certain of the transactions resulted in aggregate gains of$6.5 million . During 2019, the Company disposed of 20 operating properties and nine parcels, in separate transactions, for an aggregate sales price of$344.7 million , for which certain of the transactions resulted in aggregate gains of$79.2 million . Other income, net - The decrease in Other income, net of$6.9 million is primarily due to (i) a net decrease in settlement proceeds of$2.8 million related to property condemnations during the year endedDecember 31, 2020 , as compared to the corresponding period in 2019, (ii) a gain on forgiveness of debt of$2.8 million related to property disposed through a deed in lieu transaction during 2019, (iii) a decrease of$1.6 million related to the recognition of income from the Company'sPuerto Rico properties, resulting from the receipt of casualty insurance claims in excess of the value of the assets written-off during the year endedDecember 31, 2020 , as compared to the corresponding period in 2019, (iv) an increase in environmental remediation costs of$1.3 million for the year endedDecember 31, 2020 , as compared to the corresponding period in 2019, and (v) a decrease in mortgage financing income of$0.8 million , partially offset by (vi) a net increase in interest, dividends and other income of$2.9 million , primarily related to dividends received on the Company's ACI shares during the year endedDecember 31, 2020 , as compared to the corresponding period in 2019. 31
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Gain on marketable securities, net -
The increase in Gain on marketable securities, net of$593.9 million is primarily the result of the mark-to-market fluctuations of the Company's ACI investment, which launched its IPO inJune 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 -
InJune 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 Company's investment in ACI through ACI's IPO. Interest expense -
The increase in Interest expense of
Early extinguishment of debt charges -
During the year endedDecember 31, 2020 , the Company fully redeemed$484.9 million of its outstanding 3.20% senior unsecured notes, which were scheduled to mature inMay 2021 . As a result, the Company incurred a prepayment charge of$7.5 million for the year endedDecember 31, 2020 .
(Provision)/benefit for income taxes, net -
The change in (Provision)/benefit for income taxes, net of
Equity in income of joint ventures, net -
The decrease in Equity in income of joint ventures, net of$24.8 million is primarily due to (i) the recognition of net gains of$16.0 million resulting from the sale of properties within various joint venture investments during 2019 and (ii) lower equity in income of$13.6 million within various joint venture investments during the year endedDecember 31, 2020 , as compared to the corresponding period in 2019, primarily resulting from the sale of properties within various joint venture investments during 2019 and an increase in adjustments of trade account receivable and straight-line receivable balances associated with the leases accounted for on a cash basis due to the impact from the COVID-19 pandemic during 2020, partially offset by (iii) a decrease in impairment charges of$4.8 million recognized during the year endedDecember 31, 2020 , as compared to the corresponding period in 2019.
Preferred stock redemption charges -
During 2019, the Company redeemed all its outstanding Class I Preferred Stock, Class J Preferred Stock and Class K Preferred Stock and, as a result, the Company recorded a redemption charge of$18.5 million . This charge was subtracted from net income attributable to the Company to arrive at net income available to the Company's common shareholders and used in the calculation of earnings per share for the year endedDecember 31, 2019 . Preferred dividends - The decrease in Preferred dividends of$26.7 million is primarily due to the redemption of all the Company's outstanding Class I Preferred Stock, Class J Preferred Stock and Class K Preferred Stock during 2019 as discussed above.
Comparison of the years ended
Information pertaining to fiscal year 2018 was included in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 under Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," which was filed with theSEC onFebruary 25, 2020 .
Liquidity and Capital Resources
The Company's capital resources include accessing the public debt and equity capital markets, mortgage and construction loan financing, and immediate access to an 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. 32
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The Company's cash flow activities are summarized as follows (in thousands):
Year Ended December 31,
2020 2019
Cash and cash equivalents, beginning of year $ 123,947 $ 143,581
Net cash flow provided by operating activities 589,913 583,628
Net cash flow used for investing activities (33,273 ) (120,421 )
Net cash flow used for financing activities (387,399 ) (482,841 )
Net change in cash and cash equivalents 169,241 (19,634 )
Cash and cash equivalents, end of year $ 293,188 $ 123,947
Operating Activities
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, 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,
which could be affected by various risks and uncertainties, including, but not
limited to, the effects of the COVID-19 pandemic and other risks detailed in
Part I, Item 1A. Risk Factors. See further discussion relating to the effects of
the COVID-19 pandemic in the "COVID-19 Pandemic" and "Financing Activities"
sections within this Item 7.
Cash flows provided by operating activities for the year ended
? an increase in distributions from the Company's joint venture programs;
? changes in accounts payable, accrued expenses, operating assets and
liabilities, net due to timing of receipts and payments;
? new leasing, expansion and re-tenanting of core portfolio properties; and
? the acquisition of an operating property during 2020; partially offset by
? an increase in tenants on cash basis, tenant vacates and rent relief provided
as a result of the COVID-19 pandemic; and
? the disposition of operating properties in 2020 and 2019.
Due to the current economic uncertainty resulting from the COVID-19 pandemic,
the Company has worked, and continues to work, with its tenants to grant rent
deferrals or rent waivers on a lease by lease basis. The deferrals are generally
anticipated to be paid within six to 18 months.
Investing Activities
Cash flows used for investing activities were
Investing activities during 2020 consisted primarily of:
Cash inflows:
?
method investment prior to its IPO and the sale of 4.7 million shares of ACI
common stock during its IPO;
?
parcels;
?
joint ventures and reimbursements of investments in and advances to other real
estate investments, primarily related to the sale of properties within the
joint venture portfolio and the Company's Preferred Equity Program; and
? $2.5 million in proceeds from insurance casualty claims.
Cash outflows:
?
the Company's active redevelopment pipeline and improvements to real estate
under development;
?
primarily related to a redevelopment project and the repayment of a mortgage
within the Company's joint venture portfolio, and investments in other real
estate investments, primarily related to an investment in a new preferred
equity investment and the repayment of mortgages within the Company's
Preferred Equity Program;
? $25.0 million for investment in other financing receivable; and
? $12.6 million for the acquisition of operating real estate.
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Investing activities during 2019 consisted primarily of:
Cash inflows:
?$324.3 million in proceeds from the sale of 20 consolidated operating properties and nine parcels;
?
joint ventures and reimbursements of investments in and advances to other real
estate investments, primarily related to the sale of properties within the
joint venture portfolio and the Company's Preferred Equity Program;
? $10.4 million in collection of mortgage loans receivable;
? $4.0 million in proceeds from insurance casualty claims; and
? $2.0 million in proceeds from sale of marketable securities.
Cash outflows:
?
the Company's active redevelopment pipeline and improvements to real estate
under development; and
?
primarily related to a redevelopment project within the Company's joint
venture portfolio, and investments in other real estate investments, primarily
related to repayment of a mortgage within the Company's Preferred Equity
Program.
Acquisitions of
During the years endedDecember 31, 2020 and 2019, the Company expended$12.6 million and$2.0 million , respectively, (net of Internal Revenue Code 26 U.S.C. §1031 proceeds) towards the acquisition of operating real estate properties. The Company anticipates spending approximately$75.0 million to$100.0 million towards the acquisition of operating properties during 2021. The Company intends to fund these acquisitions with cash flow from operating activities, proceeds from property dispositions and availability under its Credit Facility.
Improvements to
During the years endedDecember 31, 2020 and 2019, the Company expended$221.3 million and$324.8 million , respectively, towards improvements to operating real estate. These amounts consist of the following (in thousands): Year Ended December 31, 2020 2019 Redevelopment and renovations$ 175,661 $ 265,954
Tenant improvements and tenant allowances 45,617 58,867 Total (1)
$ 221,278 $ 324,821
(1) During the year ended
payroll of
interest of
the Company's improvements to operating real estate.
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, including square footage for mixed-use, (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 2021 will be approximately $75.0 million
to $150.0 million . The funding of these capital requirements will be provided by
proceeds from property dispositions, net cash flow provided by operating
activities and availability under the Company's Credit Facility.
Financing Activities
Cash flows used for financing activities were
Financing activities during 2020 primarily consisted of the following:
Cash inflows:
?
$400.0 million of the Company's unsecured 1.90% Notes due 2028; and ?$590.0 million in proceeds from issuance of the Term Loan. 34
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Table of Contents Cash outflows:
?
?
notes due 2021;
? $379.9 million of dividends paid;
? $200.0 million in repayments under the Credit Facility, net;
?
on four encumbered properties), including normal amortization of rental
property debt;
?
primarily related to the redemption of certain partnership interests by
consolidated subsidiaries;
?
Facility, Term Loan, Green Bond and senior unsecured notes;
? $7.5 million in payment of early extinguishment of debt charges; and
? $5.6 million in other financing related costs.
Financing activities during 2019 primarily consisted of the following:
Cash inflows:
?
?
the Company's at-the-market continuous offering program (the "ATM program");
?$100.0 million in proceeds from the Company's Credit Facility, net; and
?
project.
Cash outflows:
?
K Preferred Stock;
? $531.6 million of dividends paid;
?
on two encumbered properties), including normal amortization on rental
property debt;
?
primarily related to the redemption of certain partnership interests by
consolidated subsidiaries; and
?
of senior unsecured notes.
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 2021 consist of: $139.4 million of consolidated debt; $138.0
million of unconsolidated joint venture debt and $19.9 million of debt included
in the Company's Preferred Equity Program, assuming the utilization of extension
options where available. The 2021 consolidated debt maturities are anticipated
to be repaid with operating cash flows and borrowings from the Credit
Facility. The 2021 debt maturities on properties in the Company's unconsolidated
joint ventures and Preferred Equity Program are anticipated to be repaid through
operating cash flows, debt refinancing, unsecured credit facilities, proceeds
from sales 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 obtain an upgrade on
its investment-grade senior, unsecured debt ratings. The Company may, from time
to time, seek to obtain funds through additional common and preferred equity
offerings, unsecured debt financings 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 $15.6
billion . Proceeds from public capital market activities have been used for the
purposes of, among other things, repaying indebtedness, acquiring interests in
open-air shopping centers, funding real estate under development projects,
expanding and improving properties in the portfolio and other investments.
During February 2018 , the Company filed a shelf registration statement on Form
S-3, which is effective for a term of three years, for 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, or a new shelf registration statement filed to
replace the existing shelf registration statement, from time to time, offer for
sale its senior unsecured debt for any general corporate purposes, including (i)
funding specific liquidity requirements in its business, including property
acquisitions, development and redevelopment costs and (ii) managing the
Company's debt maturities.
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DuringMay 2020 , the Company filed a registration statement on Form S-8 for its 2020 Equity Participation Plan (the "2020 Plan"), which was approved by the Company's stockholders and is a successor to theRestated Kimco Realty Corporation 2010 Equity Participation Plan that expired inMarch 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. AtDecember 31, 2020 , the Company had 9.98 million shares of common stock available for issuance under the 2020 Plan. (See Footnote 21 of the Notes to Consolidated Financial Statements included in this Form 10-K). Preferred Stock - The following Preferred Stock classes were redeemed during the year endedDecember 31, 2019 : Class of Depositary Redemption Redemption Redemption Preferred Redemption Dividend Shares Price per Amount Charges (1) Stock Date Rate Redeemed Depositary Share (in millions) (in millions) Class I 9/14/2019 6.00 % 7,000,000 $ 25 $ 175.0 $ 5.5 Class K 9/14/2019 5.625 % 7,000,000 $ 25 $ 175.0 $ 5.9 Class J 12/31/2019 5.50 % 9,000,000 $ 25 $ 225.0 $ 7.1
(1) Redemption charges resulting from the difference between the redemption
amount and the carrying amount of the respective preferred stock class on the
Company's Consolidated Balance Sheets are accounted for in accordance with
the FASB's guidance on Distinguishing Liabilities from Equity. These charges
were subtracted from net income attributable to the Company to arrive at net
income available to the Company's common shareholders and used in the
calculation of earnings per share.
ATM Program
During September 2019 , the Company established an 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. During 2019, the Company issued 9,514,544
shares and received proceeds of $200.1 million , net of commissions and fees of
$1.8 million . The Company did not offer for sale any shares of common stock
under the ATM program during 2020. As of December 31, 2020 , the Company had
$298.1 million available under this ATM program.
Share Repurchase Program -
During February 2020 , the Company extended its share repurchase program, for a
term of two years, which is scheduled to expire February 29, 2022 . 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 share repurchase program during
the year ended December 31, 2020 . As of December 31, 2020 , the Company had
$224.9 million available under this common share repurchase program.
Senior Notes -
During the year ended
Date Issued Maturity Date Amount Issued Interest Rate
Aug-2020 Mar-2028 $ 400.0 1.90% Jul-2020 (1) Oct-2030 $ 500.0 2.70%
(1) In
proceeds from this offering are allocated to finance or refinance, in whole
or in part, recently completed, existing or future Eligible Green Projects,
in alignment with the four core components of the Green Bond Principles,
2018 as administered by the
Eligible Green Projects include projects with disbursements made in the
three years preceding the issue date of the notes. The Company intends to
spend the remaining net proceeds from the offering during the life of the
notes.
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During the year ended
Date Paid Maturity Date Amount Repaid Interest Rate Jul-2020 & Aug-2020 (1) May-2021 $ 484.9
3.20%
(1) The Company incurred a prepayment charge of
in Early extinguishment of debt charges on the Company's Consolidated
Statements of Income.
The Company's supplemental indenture governing its senior notes contains the following covenants, all of which the Company is compliant with:
As of
December 31,
Covenant Must Be 2020
Consolidated Indebtedness to Total Assets <65% 39%
Consolidated Secured Indebtedness to Total Assets <40%
2%
Consolidated Income Available for Debt Service to Maximum Annual Service Charge >1.50x
7.9x
Unencumbered Total Asset Value to Consolidated Unsecured Indebtedness >1.50x 2.6x For a full description of the various indenture covenants refer to the Indenture datedSeptember 1, 1993 ; the First Supplemental Indenture datedAugust 4, 1994 ; the Second Supplemental Indenture datedApril 7, 1995 ; the Third Supplemental Indenture datedJune 2, 2006 ; the Fourth Supplemental Indenture datedApril 26, 2007 ; the Fifth Supplemental Indenture dated as ofSeptember 24, 2009 ; the Sixth Supplemental Indenture dated as ofMay 23, 2013 ; and the Seventh Supplemental Indenture dated as ofApril 24, 2014 , each as filed with theSEC . See the Exhibits Index for specific filing information. Credit Facility - InFebruary 2020 , the Company obtained a new$2.0 billion Credit Facility with a group of banks, which replaced the Company's existing$2.25 billion unsecured revolving credit facility. The Credit Facility is scheduled to expire inMarch 2024 , with two additional six-month options to extend the maturity date, at the Company's discretion, toMarch 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 (0.91% as ofDecember 31, 2020 ), can be increased to$2.75 billion through an accordion feature. Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to covenants requiring the maintenance of (i) maximum indebtedness ratios and (ii) minimum interest and fixed charge coverage ratios. As ofDecember 31, 2020 , the Credit Facility had no outstanding balance and$0.3 million appropriated for letters of credit and the Company was in compliance with its covenants. Pursuant to the terms of the Credit Facility, the Company 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: As of December 31, Covenant Must Be 2020 Total Indebtedness to Gross Asset Value ("GAV") <60%
45%
Total Priority Indebtedness to GAV <35%
0%
Unencumbered Asset Net Operating Income to Total Unsecured Interest Expense >1.75x
3.6x
Fixed Charge Total Adjusted EBITDA to Total Debt Service >1.50x 3.3x For a full description of the Credit Facility's covenants refer to the Amended and Restated Credit Agreement dated as ofFebruary 27, 2020 , filed as Exhibit 10.1 to the Company's Current Report on Form 8-K datedFebruary 28, 2020 . Term Loan - OnApril 1, 2020 , the Company entered into the Term Loan with total outstanding borrowings of$590.0 million pursuant to a credit agreement with a group of banks. The Term Loan was scheduled to mature inApril 2021 , with a one-year extension option to extend the maturity date, at the Company's discretion, toApril 2022 . The Term Loan accrued interest at a rate of LIBOR plus 140 basis points or, at the Company's option, a spread of 40 basis points to the base rate defined in the Term Loan, that in each case fluctuated in accordance with changes in the Company's senior debt ratings. The Term Loan could be increased by an additional$750.0 million through an accordion feature. Pursuant to the terms of the Term Loan, the Company was subject to covenants that were substantially the same as those in the Credit Facility. DuringJuly 2020 , the Term Loan was fully repaid and the facility was terminated.
Mortgages and Construction Loan Payable -
During 2020, the Company repaid
InAugust 2018 , the Company closed on a construction loan commitment of$67.0 million relating to one development property. This loan commitment was scheduled to mature inAugust 2020 , with six additional six-month options to extend the maturity date toAugust 2023 and bore interest at a rate of LIBOR plus 180 basis points. This construction loan was fully repaid inJanuary 2020 . 37
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Table of Contents 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 loans to partially fund the capital needs of its real estate under development projects. As ofDecember 31, 2020 , the Company had over 325 unencumbered property interests in its portfolio. COVID-19 - As the COVID-19 pandemic continues to evolve, an uncertainty remains in relation to the long-term economic impact it will have. As a result, the Company has focused on creating a strong liquidity position by: (i) maintaining availability under its$2.0 billion ($2.75 billion with the accordion feature) Credit Facility; (ii) issuing a$500.0 million Green Bond, (iii) issuing$400.0 million of 1.90% unsecured senior notes due 2028; (iv) paying down and terminating its Term Loan; (v) repaying$484.9 million of senior unsecured notes due 2021 which extended the Company's weighted average debt maturity profile to 10.9 years, (vi) holding$293.2 million of cash and cash equivalents on hand atDecember 31, 2020 ; and (vii) having access to over 325 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 remains uncertain as this pandemic continues to evolve globally and withinthe United States . The continued impact of COVID-19 could materially disrupt the Company's business operations and materially adversely affect the Company's liquidity. Management cannot, at this point, fully estimate ultimate losses related to the COVID-19 pandemic. Dividends - In connection with its intention to continue to qualify as a REIT forU.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 the Board of Directors monitors sources of capital and evaluates the impact of the economy and capital markets availability on operating fundamentals. Since cash used to pay dividends reduces amounts available for capital investment, the Company generally intends to maintain a dividend payout ratio which 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 were$379.9 million ,$531.6 million and$529.8 million in 2020, 2019 and 2018 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 which maintains compliance with the Company's REIT taxable income distribution requirements. OnFebruary 22, 2021 , the Company's Board of Directors declared a quarterly cash dividend of$0.17 per common share payable to shareholders of record onMarch 10, 2021 , which is scheduled to be paid onMarch 24, 2021 . The Company's Board of Directors declared a quarterly dividend with respect to the Company's classes of cumulative redeemable preferred shares (Classes L and M) which are scheduled to be paid onApril 15, 2021 , to shareholders of record onApril 1, 2021 . Other - The Company is subject to taxes on activities inPuerto Rico ,Canada , andMexico . In general, under local country law applicable to the structures the Company has in place and applicable treaties, the repatriation of cash to the Company from its subsidiaries and joint ventures inPuerto Rico ,Canada andMexico generally are not subject to withholding tax. The Company is subject to and also includes in its tax provision non-U.S. income taxes on certain investments located in jurisdictions outside theU.S. These investments are held by the Company at the REIT level and not in the Company's taxable REIT subsidiary. Accordingly, the Company does not expect aU.S. income tax impact associated with the repatriation of undistributed earnings from the Company's foreign subsidiaries. 38
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Contractual Obligations and Other Commitments
The Company has debt obligations relating to its Credit Facility, unsecured senior notes and mortgages with maturities ranging from four months to 28 years. As ofDecember 31, 2020 , the Company's total debt had a weighted average term to maturity of 10.9 years. In addition, the Company has non-cancelable operating leases pertaining to its shopping center portfolio. As ofDecember 31, 2020 , the Company had 30 consolidated shopping center properties that are subject to long-term ground leases where a third-party owns and has leased the underlying land to the Company to construct and/or operate a shopping center. The following table summarizes the Company's debt maturities (excluding extension options, unamortized debt issuance costs of$56.4 million and fair market value of debt adjustments aggregating$3.5 million ) and obligations under non-cancelable operating leases as ofDecember 31, 2020 : Payments due by period (in millions) 2021 2022 2023 2024 2025 Thereafter Total
Long-Term Debt: Principal (1)$ 144.9 $ 644.4 $ 365.1 $ 401.7 $ 500.6 $ 3,351.7 $ 5,408.4 Interest (2)$ 183.0 $ 170.4 $ 146.9 $ 133.0 $ 116.0 $ 1,466.3 $ 2,215.6 Non-cancelable operating leases (3)$ 11.2 $ 10.6 $ 10.6 $ 9.8 $ 9.3 $ 128.8 $ 180.3
(1) Maturities utilized do not reflect extension options, which range from six
months to one year.
(2) For loans which have interest at floating rates, future interest expense was
calculated using the rate as of
(3) For leases which have inflationary increases, future ground and office rent
expense was calculated using the rent based upon initial lease payment.
The Company has
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. AtDecember 31, 2020 , these letters of credit aggregated$36.2 million . In connection with the construction of its development/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 ofDecember 31, 2020 , the Company had$16.3 million in performance and surety bonds outstanding. The Company has accrued$1.5 million of non-current uncertain tax positions and related interest under the provisions of the authoritative guidance that addresses accounting for income taxes, which are included in Other liabilities on the Company's Consolidated Balance Sheets atDecember 31, 2020 . These amounts are not included in the table above because a reasonably reliable estimate regarding the timing of settlements with the relevant tax authorities, if any, cannot be made.
Off-Balance Sheet Arrangements
The Company has investments in various unconsolidated real estate joint ventures with varying structures. These joint ventures primarily operate shopping center properties. Such arrangements are generally with third-party institutional investors and individuals. The properties owned by the joint ventures are primarily financed with individual non-recourse mortgage loans, however, the Company, on a selective basis, has obtained unsecured financing for certain joint ventures. As ofDecember 31, 2020 , the Company did not guarantee any joint venture unsecured debt. Non-recourse mortgage debt is generally defined as debt whereby the lenders' sole recourse with respect to borrower defaults is limited to the value of the property collateralized by the mortgage. The lender generally does not have recourse against any other assets owned by the borrower or any of the constituent members of the borrower, except for certain specified exceptions listed in the particular loan documents (see Footnote 7 of the Notes to Consolidated Financial Statements included in this Form 10-K). The table below presents debt balances within the Company's unconsolidated joint venture investments for which the Company held noncontrolling ownership interests atDecember 31, 2020 (dollars in millions): 39
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Mortgages Weighted Weighted
Kimco and Notes Number of Average Average
Ownership Number of Payable, Net Encumbered Interest Remaining
Joint Venture Interest Properties (in millions) Properties Rate Term (months)*Prudential Investment Program (1) 15.0 % 40 $ 495.8 11 2.05 % 37.2 Kimco Income Opportunity Portfolio (2) 48.6 % 37 536.9 22 3.87 % 25.3 Canada Pension Plan Investment Board 55.0 % 4 84.9 1 3.25 % 30.0 Other Joint Venture Programs Various 16 423.4 10 3.41 % 86.7 Total$ 1,541.0
* Average remaining term includes extensions
(1) Includes an unsecured term loan of
financing costs of
2021, with a one-year extension option at the joint venture's discretion, and
bears interest at a rate equal to LIBOR plus 1.50% (1.64% at
2020).
(2) Includes unsecured revolving credit facilities, which had an aggregate
outstanding balance of
to mature in
venture's discretion, and January 2025 .
As of December 31, 2020 , these loans had scheduled maturities ranging from four
months to 10.5 years and bore interest at rates ranging from 1.34% to 5.79%.
Approximately $138.0 million of the aggregate outstanding loan balances matures
in 2021. These maturing loans are anticipated to be repaid with operating cash
flows, debt refinancing, unsecured credit facilities, proceeds from sales and
partner capital contributions, as deemed appropriate (see Footnote 7 of the
Notes to Consolidated Financial Statements included in this Form 10-K).
Other Real Estate Investments
The Company has provided capital to owners and developers of real estate
properties and loans through its Preferred Equity Program. As of December 31,
2020 , the Company's net investment under the Preferred Equity program was $98.2
million relating to 113 properties, including 103 net leased properties, which
are accounted for as direct financing leases. As of December 31, 2020 , these
preferred equity investment properties had non-recourse mortgage loans
aggregating $141.9 million (including fair market value of debt adjustments
aggregating $4.8 million ). These loans have scheduled maturities ranging from
one month to four years and bear interest at rates ranging from 4.19% to 9.85%.
Due to the Company's preferred position in these investments, the Company's
share of each investment is subject to fluctuation and is dependent upon
property cash flows. The Company's maximum exposure to losses associated with
its preferred equity investments is limited to its invested capital.
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 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.
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Table of Contents
The Company's reconciliation of net 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 Year Ended
December 31, December 31,
2020 2019 2020 2019
Net income available to the Company's
common shareholders $ 194,880 $ 92,812 $ 975,417 $ 339,988
Gain on sale of properties/change in
control of interests (787 ) (31,836 ) (6,484 ) (79,218 )
Gain on sale of joint venture properties (30 ) (892 ) (48 ) (16,066 )
Depreciation and amortization - real
estate related 73,578 67,864 285,596 276,097
Depreciation and amortization - real
estate joint ventures 9,658 10,910 40,331 40,954
Impairment charges of depreciable real
estate properties 4,043 11,504 8,397 55,945
Gain on sale of cost method investment - - (190,832 ) -
Profit participation from other real
estate investments, net 2,210 1,288 (13,665 ) (7,300 )
(Gain)/loss on of marketable securities,
net (150,108 ) 546 (594,753 ) (829 )
(Benefit)/provision for income taxes (1) (74 ) - 1,426 -
Noncontrolling interests (1) (337 ) (303 ) (1,710 ) (1,193 )
FFO available to the Company's common
shareholders $ 133,033 $ 151,893 $ 503,675 $ 608,378
Weighted average shares outstanding for
FFO calculations:
Basic 430,103 422,467 429,950 420,370
Units 666 777 639 826
Dilutive effect of equity awards 1,364 1,336 1,475 1,365
Diluted (2) 432,133 424,580 432,064 422,561
FFO per common share - basic $ 0.31 $ 0.36 $ 1.17 $ 1.45
FFO per common share - diluted (2) $ 0.31 $ 0.36 $ 1.17 $ 1.44
(1) Related to gains, impairment 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 $92 and $199 for the
three months ended December 31, 2020 and 2019, respectively, and $309 and
$868 for the years ended December 31, 2020 and 2019, respectively. Theeffect of other certain convertible units would have an anti-dilutive effect
upon the calculation of Net income available to the Company's common
shareholders per share. Accordingly, the impact of such conversion has not
been included in the determination of diluted earnings per share
calculations.
Same Property Net Operating Income
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.
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.
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Table of Contents
The following is a reconciliation of Net income available to the Company's common shareholders to Same property NOI (in thousands):
Three Months Ended Year Ended
December 31, December 31,
2020 2019 2020 2019
Net income available to the Company's
common shareholders $ 194,880 $ 92,812 $ 975,417 $ 339,988
Adjustments:
Management and other fee income (3,125 ) (4,321 ) (13,005 ) (16,550 )
General and administrative 20,901 24,646 93,217 96,942
Impairment charges 3,115 7,508 6,624 48,743
Depreciation and amortization 74,295 68,439 288,955 277,879
Gain on sale of properties/change in
control of interests (787 ) (31,836 ) (6,484 ) (79,218 )
Interest and other expense, net 42,162 42,284 190,323 166,410
(Gain)/loss on marketable securities,
net (150,108 ) 546 (594,753 ) (829 )
Gain on sale of cost method investment - - (190,832 ) -
Provision/(benefit) for income taxes,
net 496 263 978 (3,317 )
Equity in income of other real estate
investments, net (1,733 ) (3,318 ) (28,628 ) (26,076 )
Net income attributable to
noncontrolling interests 565 624 2,044 2,956
Preferred stock redemption charges - 7,159 - 18,528
Preferred dividends 6,354 9,448 25,416 52,089
Non same property net operating income (10,929 ) (19,778 ) (33,328 ) (85,087 )
Non-operational expense from joint
ventures, net 16,237 20,463 68,510 59,992
Same property NOI $ 192,323 $ 214,939 $ 784,454 $ 852,450
Same property NOI decreased by $22.6 million , or 10.5%, for the three months
ended December 31, 2020 , as compared to the corresponding period in 2019, which
is primarily the result of a reduction of revenue associated with potentially
uncollectible revenues.
Same property NOI decreased by
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. Most of the Company's leases include escalation clauses or require the tenant to pay an allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation.
New Accounting Pronouncements
See Footnote 1 of the Notes to Consolidated Financial Statements included in this Form 10-K.
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