Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DD.C..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 endedMarch 31,, 2020 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

Symbol(s)


which registered

Common Stock, par value $.01 per share.

KIM

New York Stock Exchange

Depositary Shares, each representing one-thousandth of a share of 5.125% Class L Cumulative Redeemable, Preferred Stock, $1.00 par value per share.

KIMprL

New York Stock Exchange

Depositary Shares, each representing one-thousandth of a share of 5.250% Class M Cumulative Redeemable, Preferred Stock, $1.00 par value per share.

KIMprM

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes    No

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes    No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12-b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

Non-accelerated filer

Smaller reporting company

Emerging growth company

   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No

 

As of April 14, 2020,21, 2021, the registrant had 432,525,409433,459,202 shares of common stock outstanding.

 



 


 

 

PART I - FINANCIAL INFORMATION

 

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 March 31, 20202021 and December 31, 20192020

3

 

Condensed Consolidated Statements of Income for the Three Months Ended March 31, 20202021 and 20192020

4

 

Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 20202021 and 20192020

5

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 20202021 and 20192020

6

 

Notes to Condensed Consolidated Financial Statements.

7

  

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

19

16

  

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

30

26

  

Item 4.  Controls and Procedures.

30

26

  

PART II - OTHER INFORMATION

  

Item 1.  Legal Proceedings.

31

27

  

Item 1A.  Risk Factors.

31

27

  

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

32

31

  

Item 3.  Defaults Upon Senior Securities.

32

31

  

Item 4.  Mine Safety Disclosures.

32

31

  

Item 5.  Other Information.

32

31

  

Item 6.  Exhibits.

33

31

  

Signatures

34

32

2


 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share information)

 

 

March 31, 2020

  

December 31, 2019

  

March 31, 2021

  

December 31, 2020

 

Assets:

      

Real estate, net of accumulated depreciation and amortization of $2,552,669 and $2,500,053, respectively

 $9,179,554  $9,209,053 

Real estate, net of accumulated depreciation and amortization of $2,727,002 and $2,717,114, respectively

 $9,410,039  $9,346,041 

Real estate under development

 230,602  220,170  5,672  5,672 

Investments in and advances to real estate joint ventures

 585,591  578,118  592,791  590,694 

Other real estate investments

 178,393  194,400  117,437  117,140 

Cash and cash equivalents

 451,796  123,947  253,852  293,188 

Marketable securities

 767,989  706,954 

Accounts and notes receivable, net

 220,215  218,689  200,655  219,248 

Operating lease right-of-use assets, net

 97,790  99,125  101,433  102,369 

Other assets

  361,193   354,365   249,835   233,192 

Total assets (1)

 $11,305,134  $10,997,867  $11,699,703  $11,614,498 
  

Liabilities:

      

Notes payable, net

 $5,303,656  $4,831,759  $5,045,868  $5,044,208 

Mortgages and construction loan payable, net

 404,879  484,008 

Mortgages payable, net

 295,613  311,272 

Dividends payable

 126,473  126,274  5,366  5,366 

Operating lease liabilities

 91,546  92,711  95,833  96,619 

Other liabilities

  488,168   516,265   510,704   470,995 

Total liabilities (2)

  6,414,722   6,051,017   5,953,384   5,928,460 

Redeemable noncontrolling interests

  17,943   17,943   17,852   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 432,525,409 and 431,814,951 shares, respectively

 4,325  4,318 

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 433,448,386 and 432,518,743 shares, respectively

 4,334  4,325 

Paid-in capital

 5,747,277  5,765,233  5,763,868  5,766,511 

Cumulative distributions in excess of net income

  (942,031)  (904,679)  (104,909)  (162,812)

Total stockholders' equity

 4,809,591  4,864,892  5,663,313  5,608,044 

Noncontrolling interests

  62,878   64,015   65,154   62,210 

Total equity

  4,872,469   4,928,907   5,728,467   5,670,254 

Total liabilities and equity

 $11,305,134  $10,997,867  $11,699,703  $11,614,498 

 

(1)

Includes restricted assets of consolidated variable interest entities (“VIEs”) at March 31, 20202021 and December 31, 20192020 of $104,243$101,947 and $245,489,$102,482, respectively.  See Footnote 1011 of the Notes to Condensed Consolidated Financial Statements.

(2)

Includes non-recourse liabilities of consolidated VIEs at March 31, 20202021 and December 31, 20192020 of $65,544$96,660 and $153,436,$62,076, respectively.  See Footnote 1011 of the Notes to Condensed Consolidated Financial Statements.

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands, except per share data)

 

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2020

  

2019

  

2021

  

2020

 
  

Revenues

      

Revenues from rental properties, net

 $286,004  $290,634  $278,871  $286,004 

Management and other fee income

  3,740   4,376   3,437   3,740 

Total revenues

  289,744   295,010   282,308   289,744 
  

Operating expenses

      

Rent

 (2,835) (2,692) (3,035) (2,835)

Real estate taxes

 (39,652) (39,347) (38,936) (39,652)

Operating and maintenance

 (42,408) (40,896) (46,520) (42,408)

General and administrative

 (21,017) (25,831) (24,478) (21,017)

Impairment charges

 (2,974) (4,175) 0  (2,974)

Depreciation and amortization

  (69,397)  (71,561)  (74,876)  (69,397)

Total operating expenses

  (178,283)  (184,502)  (187,845)  (178,283)
  

Gain on sale of properties

  3,847   23,595   10,005   3,847 
  

Operating income

 115,308  134,103  104,468  115,308 
  

Other income/(expense)

      

Other (expense)/income, net

 (3,422) 2,622 

Other income, net

 3,357  1,245 

Gain/(loss) on marketable securities, net

 61,085  (4,667)

Interest expense

  (46,060)  (44,395)  (47,716)  (46,060)

Income before income taxes, net, equity in income of joint ventures, net, and equity in income from other real estate investments, net

 65,826  92,330  121,194  65,826 
  

Provision for income taxes, net

 (43) (630) (1,308) (43)

Equity in income of joint ventures, net

 13,648  18,754  17,752  13,648 

Equity in income of other real estate investments, net

 10,958  6,224  3,787  10,958 
          

Net income

 90,389  116,678  141,425  90,389 
  

Net income attributable to noncontrolling interests

 (289) (509) (3,483) (289)
          

Net income attributable to the Company

 90,100  116,169  137,942  90,100 
  

Preferred dividends

  (6,354)  (14,534)  (6,354)  (6,354)
  

Net income available to the Company's common shareholders

 $83,746  $101,635  $131,588  $83,746 
  

Per common share:

      

Net income available to the Company:

     

Net income available to the Company's common shareholders:

 

-Basic

 $0.19  $0.24  $0.30  $0.19 

-Diluted

 $0.19  $0.24  $0.30  $0.19 
  

Weighted average shares:

      

-Basic

  429,735   419,464   430,524   429,735 

-Diluted

  430,505   420,763   432,264   430,505 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three Months Ended March 31, 20202021 and 20192020

(Unaudited)

(in thousands)

 

 

Cumulative

                     

Total

         

Cumulative Distributions in Excess

 

Preferred Stock

 

Common Stock

 

Paid-in

 

Total

Stockholders'

 

Noncontrolling

 

Total

 
 

Distributions in

 

Preferred Stock

 

Common Stock

 

Paid-in

 

Stockholders'

 

Noncontrolling

 

Total

 
 

Excess of Net Income

 

Issued

 

Amount

 

Issued

 

Amount

 

Capital

 

Equity

 

Interests

 

Equity

 

Balance at January 1, 2019

 $(787,707) 43  $43  421,389  $4,214  $6,117,254  $5,333,804  $77,249  $5,411,053 

Net income

  116,169  -  -  -  -  -  116,169  509  116,678 

Redeemable noncontrolling interests income

  -  -  -  -  -  -  -  (92) (92)

Dividends declared to common and preferred shares

  (132,703) -  -  -  -  -  (132,703) -  (132,703)

Distributions to noncontrolling interests

  -  -  -  -  -  -  -  (685) (685)

Issuance of common stock

  -  -  -  783  8  (8) -  -  - 

Surrender of restricted stock

  -  -  -  (187) (2) (3,250) (3,252) -  (3,252)

Exercise of common stock options

  -  -  -  52  -  681  681  -  681 

Amortization of equity awards

  -  -  -  -  -  5,178  5,178  -  5,178 

Balance at March 31, 2019

 $(804,241) 43  $43  422,037  $4,220  $6,119,855  $5,319,877  $76,981  $5,396,858 
                     

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  $(904,679) 20  $20  431,815  $4,318  $5,765,233  $4,864,892  $64,015  $4,928,907 

Net income

  90,100  -  -  -  -  -  90,100  289  90,389  90,100  -  0  -  0  0  90,100  289  90,389 

Redeemable noncontrolling interests income

  -  -  -  -  -  -  -  (262) (262) 0  -  0  -  0  0  0  (262) (262)

Dividends declared to common and preferred shares

  (127,452) -  -  -  -  -  (127,452) -  (127,452) (127,452) -  0  -  0  0  (127,452) 0  (127,452)

Distributions to noncontrolling interests

  -  -  -  -  -  -  -  (555) (555) 0  -  0  -  0  0  0  (555) (555)

Issuance of common stock

  -  -  -  921  9  (9) -  -  -  0  0  0  921  9  (9) 0  0  0 

Surrender of restricted common stock

  -  -  -  (274) (3) (5,156) (5,159) -  (5,159) 0  0  0  (274) (3) (5,156) (5,159) 0  (5,159)

Exercise of common stock options

  -  -  -  63  1  980  981  -  981  0  0  0  63  1  980  981  0  981 

Amortization of equity awards

  -  -  -  -  -  5,729  5,729  -  5,729  0  -  0  -  0  5,729  5,729  0  5,729 

Acquisition of noncontrolling interests

  -  -  -  -  -  (19,500) (19,500) (609) (20,109)  0  -  0  -  0  (19,500) (19,500) (609) (20,109)

Balance at March 31, 2020

 $(942,031) 20  $20  432,525  $4,325  $5,747,277  $4,809,591  $62,878  $4,872,469  $(942,031) 20  $20  432,525  $4,325  $5,747,277  $4,809,591  $62,878  $4,872,469 
                   

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

 137,942  -  0  -  0  0  137,942  3,483  141,425 

Redeemable noncontrolling interests income

 0  -  0  -  0  0  0  (169) (169)

Dividends declared to common and preferred shares

 (80,039) -  0  -  0  0  (80,039) 0  (80,039)

Distributions to noncontrolling interests

 0  -  0  -  0  0  0  (370) (370)

Issuance of common stock

 0  0  0  1,442  14  (14) 0  0  0 

Surrender of restricted common stock

 0  0  0  (521) (5) (9,087) (9,092) 0  (9,092)

Exercise of common stock options

 0  0  0  8  0  160  160  0  160 

Amortization of equity awards

  0  -  0  -  0  6,298  6,298  0  6,298 

Balance at March 31, 2021

 $(104,909) 20  $20  433,448  $4,334  $5,763,868  $5,663,313  $65,154  $5,728,467 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2020

  

2019

  

2021

 

2020

 
  

Cash flow from operating activities:

      

Net income

 $90,389  $116,678  $141,425  $90,389 

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

      

Depreciation and amortization

 69,397  71,561  74,876  69,397 

Impairment charges

 2,974  4,175  0  2,974 

Equity award expense

 5,905  5,477  6,457  5,905 

Gain on sale of properties

 (3,847) (23,595) (10,005) (3,847)

(Gain)/loss on marketable securities, net

 (61,085) 4,667 

Equity in income of joint ventures, net

 (13,648) (18,754) (17,752) (13,648)

Equity in income of other real estate investments, net

 (10,958) (6,224) (3,787) (10,958)

Distributions from joint ventures and other real estate investments

 35,894  28,524  19,198  35,894 

Change in accounts and notes receivable

 (1,526) 878 

Change in accounts and notes receivable, net

 18,593  (1,526)

Change in accounts payable and accrued expenses

 5,456  2,837  15,387  5,456 

Change in other operating assets and liabilities

  (24,787)  (26,299)

Change in other operating assets and liabilities, net

  (34,936)  (29,454)

Net cash flow provided by operating activities

  155,249   155,258   148,371   155,249 
  

Cash flow from investing activities:

      

Acquisition of operating real estate

 (7,073) -  (84,312) (7,073)

Improvements to operating real estate

 (54,973) (51,345) (20,569) (54,973)

Improvements to real estate under development

 (16,578) (26,286) 0  (16,578)

Investments in marketable securities

 -  (157)

Proceeds from sale of marketable securities

 163  39  50  163 

Investments in and advances to real estate joint ventures

 (5,282) (5,638) (1,805) (5,282)

Reimbursements of investments in and advances to real estate joint ventures

 1,914  1,435  967  1,914 

Investments in and advances to other real estate investments

 (478) (6,771) (419) (478)

Reimbursements of investments in and advances to other real estate investments

 343  0 

Investment in other financing receivable

 -  (48) (397) 0 

Collection of mortgage loans receivable

 40  160  37  40 

Proceeds from sale of operating properties

 13,264  72,069 

Proceeds from sale of properties

 22,181  13,264 

Proceeds from insurance casualty claims

  2,450   1,000   0   2,450 

Net cash flow used for investing activities

  (66,553)  (15,542)  (83,924)  (66,553)
  

Cash flow from financing activities:

      

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

 (75,681) (3,224) (12,272) (75,681)

Principal payments on rental property debt

 (2,742) (3,137) (2,661) (2,742)

Proceeds from construction loan financing

 -  3,300 

Proceeds under the unsecured revolving credit facility, net

 475,000  - 

Proceeds from the unsecured revolving credit facility, net

 0  475,000 

Financing origination costs

 (5,145) (3) 0  (5,145)

Payment of early extinguishment of debt charges

 -  (771)

Redemption/distribution of noncontrolling interests

 (20,926) (773) (539) (20,926)

Dividends paid

 (127,255) (132,521) (80,039) (127,255)

Proceeds from issuance of stock, net

 981  681  160  981 

Change in other financing liabilities

  (5,079)  (3,176)

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

  239,153   (139,624)
Shares repurchased for employee tax withholding on equity awards  (9,082)  (5,149)

Change in tenants' security deposits

  650   70 

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

  (103,783)  239,153 
  

Net change in cash and cash equivalents

 327,849  92  (39,336) 327,849 

Cash and cash equivalents, beginning of the period

  123,947   143,581   293,188   123,947 

Cash and cash equivalents, end of the period

 $451,796  $143,673  $253,852  $451,796 
          

Interest paid during the period including payment of early extinguishment of debt charges of $0 and $771, respectively (net of capitalized interest of $4,364 and $3,137 respectively)

 $25,383  $27,026 

Interest paid during the period (net of capitalized interest of $296 and $4,364, respectively)

 $29,383  $25,383 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

1. Business and Organization

 

Kimco Realty Corporation, a Maryland corporation, is one of North America’s largest publicly traded owners and operators of open-air, grocery-anchored shopping centers and mixed-use properties.assets.  The terms “Kimco,” the “Company,” “we,” “our” and “us” each referrefers 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.

 

The Company’s response to the COVID-19 pandemic -Pandemic

 

In March 2020, The coronavirus disease 2019 (“COVID-19”) was recognized as a pandemic by the World Health Organization (WHO). Shortly thereafter, the President of the United States declared a national emergency throughout the United States. The COVID-19pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies, and financial markets worldwide, and has caused significant volatility in U.S. and international debt and equity markets. Thecontinues to impact of COVID-19 on the retail real estate industry for both landlords and tenants has been wide ranging, including, buttenants.  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 highly uncertain and cannot be predicted at this time. The Company’s business, operations and financial results will depend on numerous evolving factors that the Company is not limitedable to predict at this time, including the temporary closuresduration and scope of many businesses, "shelter in place" orders, social distancing guidelines and otherthe pandemic, governmental, business and individual actions that have been and continue to be, taken in response to the COVID-19 pandemic. There has also been reduced consumer spending duepandemic, the distribution and effectiveness of vaccines, the impact on economic activity from the pandemic and actions taken in response, the effect on the Company’s tenants and their businesses, the ability of tenants to job losses, government restrictionsmake their rental payments, additional closures of tenants’ businesses and the impact of opening and reclosing of communities in response to COVID-19 and other effects attributable tothe resurgence of COVID-19.

The COVID-19 pandemic, while still unfolding, has significantly impacted eachAny of these events could materially adversely impact the Company’s stakeholders. The Company is awarebusiness, financial condition, results of the critical role its shopping centers play in the communities they serve, often providing access to essential goods and services such as groceries, drug stores, and medical care. With very few exceptions, the Company’s shopping centers generally remain open to continue to provide access to these essential goods and services, and the Company has taken steps to protect the shoppers and tenants at its sites, following the guidance of the Centers for Disease Control and Prevention (CDC) and the WHO.

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, a substantial tax and spending package intended to provide additional economic stimulus to address the impact of the COVID-19 pandemic. The Company continues to monitor the impact of the COVID-19 pandemic closely, as well as any effects that may result from the CARES Act.

As of March 31, 2020, the Company has not incurred any significant disruptions to its business activities. Management cannot, at this point, estimate ultimate losses related to the COVID-19 pandemic, and accordingly no impairment charges were reflected in the Company’s Condensed Consolidated Statements of Income related to this matter.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 extent to which the COVID-19 pandemic impacts the Company’s financial condition, results of operations and cash flows, in the near term, will depend on future developments, which are highly uncertain and cannot be predicted at this time. The Company will continue to monitor for any material or adverse effects resulting from the COVID-19 pandemic. See Footnote 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.

Since the outbreak of the COVID-1619 to the Notes topandemic, the Company’s Condensed Consolidated Financial Statements for additional discussion.

7

The health and safety of the Company’s employees andtenants had or continue to have temporarily or permanently closed their families is a top priority.businesses. Others had, or continue to have, shortened their operating hours or offered reduced services. The Company has, takenand continues to have, worked with tenants to grant rent deferrals or forgiveness of rent on a tenant-by-tenant basis. The development and distribution of COVID vaccines throughout the necessary stepscountry have assisted in allowing many restrictions to protect its employeesbe lifted, providing a path to recovery.  There have been additional improvements to the real estate industry as the pandemic continues to redefine the needs of consumers across the country.  There has been an increase in demand for warehouse space to satisfy fulfilment and to empower them to work from homedistribution needs as well as certain retail spaces, which provide essential goods such as grocers and care for their family members and children whose lives have also been impacted.pharmacies.    

Beginning March 11, 2020, the Company transitioned nearly 100% of its workforce to work from home, ensuring they are safely situated during this critical social distancing period.

All business travel has been stopped until further notice.

The Company has benefited from recent investments in new technology and software over the last year, as its entire team is equipped with new laptops and cellular capability to enable them to work remotely.

Daily webinar training is being provided to ensure associates are fully supported to work from home. The Company’s human resources and information technology teams are available to all employees to address any needs or concerns they may have.

Associates will be provided paid time off to care for themselves or family members diagnosed with COVID-19.

The Company has ramped up communications at all levels and has initiated Company-wide virtual meetings such that executives are accessible, able to keep associates informed, and able to answer questions.

 

The Company will continuecontinues to evaluate individual situations as they arisesee an increase in collections of rental payments, however, the effects COVID-19 has had on its tenants is still heavily considered when evaluating the adequacy of the collectability of the lessee’s total accounts receivable balance, including the corresponding straight-line rent receivable. Management’s estimate of the collectability of accrued rents and adjust its approach as appropriate, withaccounts receivable is based on the goalbest information available to enable its employees to be as productive as possible while offering themmanagement at the flexibility they need to care for themselves and their families.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, 20192020 (the “10-K”), as certain disclosures in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020,2021 that would duplicate those included in the 10-K are not included in these Condensed Consolidated Financial Statements.

 

7

Reclassifications -

Certain amounts in the prior period have been reclassified in order to conform to the current period’s presentation.  For comparative purposes, the Company reclassified $4.7 million of loss on marketable securities, net from Other income, net to Gain/(loss) on marketable securities, net on the Company’s Condensed Consolidated Statements of Income for the three months ended March 31, 2020. On the Company’s Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020, the Company reclassified (i) $5.1 million of Cash flows used for Change in other financing liabilities to Cash flows used for Shares repurchased for employee tax withholdings on equity awards of $5.1 million and Cash flows provided by Change in tenant’s security deposits of $0.1 million and (ii) $4.7 million in Change in other operating assets and liabilities to (Gain)/loss on marketable securities, net, for comparative purposes. 

Subsequent Events -

 

The Company has evaluated subsequent events and transactions for potential recognition or disclosure in its condensed consolidated financial statements (See FootnotesCondensed Consolidated Financial Statements (see Footnote 817 and 16 to the Notes toof the Company’s Condensed Consolidated Financial Statements).

 

New Accounting Pronouncements

In April 2020, the FASB staff developed a question-and-answer document, Topic 842 and Topic 840: Accounting for Lease Concessions related to the Effects of the COVID-19 Pandemic, which focuses on the application of the lease guidance in Topic 842, Leases, and Topic 840, Leases (if Topic 842 has not yet been adopted) for lease concessions related to the effects of the COVID-19 pandemic. The FASB staff has been made aware that, given the unprecedented and global nature of the COVID-19 pandemic, it may be exceedingly challenging for entities to determine whether existing contracts provide enforceable rights and obligations for lease concessions and, if so, whether those concessions are consistent with the terms of the contract or are modifications to a contract. As such, an entity can elect not to evaluate whether certain relief provided by a lessor in response to the COVID-19 pandemic is a lease modification. An entity that makes this election can then elect to apply the modification guidance to that relief or account for the concession as if it were contemplated as part of the existing contract. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.

Some concessions will provide a deferral of payments with no substantive changes to the consideration in the original contract. A deferral affects the timing of cash receipts, but the amount of the consideration is substantially the same as that required by the original contract. The FASB staff expects that there will be multiple ways to account for those deferrals, none of which the FASB staff believes are preferable to the others. Two of those methods are:

(i)

Account for the concessions as if no changes to the lease contract were made. Under that accounting, a lessor would increase its lease receivable, and a lessee would increase its accounts payable as receivables/payments accrue. In its income statement, a lessor would continue to recognize income, and a lessee would continue to recognize expense during the deferral period.

(ii)

Account for the deferred payments as variable lease payments.

As of March 31, 2020, the Company did not provide and/or enter into lease concessions related to the COVID-19 pandemic as a lessor or lessee related to rental income/expense recognized during the three months ended March 31, 2020. The Company is currently assessing and continuing to evaluate the impact of this lease guidance for any lease concessions related to the effects of the COVID-19 pandemic on the Company’s financial position and/or results of operations subsequent to March 31, 2020.

 

The following table represents ASUsASU to the FASB’s ASC that,have been adopted by the Company as of March 31, 2020, are not yet effective for the Company and for which the Company has not elected early adoption, where permitted:date listed:

 

ASU

Description

EffectiveAdoption

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; Early adoption permitted

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

The following ASUs to the FASB’s ASC have been adopted by the Company as of the date listed:

ASU

Description

Adoption

Date

Effect on the financial

statements or other

significant matters

ASU 2020-03, Codification Improvements to Financial Instruments

This ASU improves and clarifies various financial instruments topics. The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications.

The amendment is divided into issues 1 to 7 with different effective dates.

The Company adopted issues 1-7 of this ASU, the adoption did not have a material impact on the Company’s financial position and/or results of operations.

ASU 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting

This ASU is intended to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.

This guidance is effective immediately, and the Company may elect to apply the amendments prospectively through December 31, 2022.2021

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

ASU 2018-17, Consolidation (Topic 810) – Targeted Improvements to Related Party Guidance for Variable Interest Entities

The amendment to Topic 810 clarifies the following areas:

(i)   Applying the variable interest entity (VIE) guidance to private companies under common control, and

(ii)  Considering indirect interests held through related parties under common control, for determining whether fees paid to decision makers and service providers are variable interests.

This update improves the accounting for those areas, thereby improving general purpose financial reporting. Retrospective adoption is required.

January 1, 2020; Early adoption permitted

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

ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract

The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

January 1, 2020; Early adoption permitted

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

 

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement

The amendment modifies the disclosure requirements for fair value measurements in Topic 820, based on the concepts in the FASB Concepts Statement, Conceptual Framework for Financial Reporting – Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits.

January 1, 2020; Early adoption permitted

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

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses

ASU 2019-05, Financial Instruments – Credit Losses (Topic 326), Targeted Transition Relief

ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses

The new guidance introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses.

In November 2018, the FASB issued ASU 2018-19, which includes amendments to (i) clarify receivables arising from operating leases are within the scope of the new leasing standard (Topic 842) discussed below and (ii) align the implementation date for nonpublic entities’ annual financial statements with the implementation date for their interim financial statements. Early adoption is permitted as of the original effective date.

In May 2019, the FASB issued ASU 2019-05, which amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (i) were previously recorded at amortized cost and (ii) are within the scope of ASC 326-203 if the instruments are eligible for the fair value option under ASC 825-10.4. The fair value option election does not apply to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. These amendments should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings balance in the statement of financial position as of the date that an entity adopted the amendments in ASU 2016-13. Certain disclosures are required. The effective date will be the same as the effective date in ASU 2016-13.

In November 2019, the FASB issued ASU 2019-11, which clarifies treatment of certain credit losses and disclosure requirements.

January 1, 2020; Early adoption permitted

The Company adopted this standard using the modified retrospective method.

While the Company’s mortgages and other financing receivables are impacted by this ASU, the adoption did not have a material impact to the Company’s Condensed Consolidated Financial Statements.

 

3. Real Estate

 

Acquisitions of Operating Properties -

 

During the three months ended March 31, 2020,2021, the Company acquired the following operating property,properties, through a direct asset purchasepurchases (in thousands):

 

   

Purchase Price

     

Purchase Price

     

Property Name

Location

Month Acquired

 

Cash

  

GLA*

 

Location

Month Acquired

 

Cash

  

Other Consideration**

  

Total

  

GLA*

 

North Valley Parcel

Peoria, AZ

Feb-20

 $7,073  9 

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 will be amortized over the initial term of the lease through Revenues from rental properties, net on the Company's Condensed Consolidated Statements of Income.  See Footnote 10 of the Company’s Condensed Consolidated Financial Statements for additional discussion regarding fair value allocation of partnership interest for noncontrolling interests.

Included in the Company's Condensed Consolidated Statements of Income is $1.6 million in total revenues from the date of acquisition through March 31, 2021 for operating properties acquired during the year.

 

Purchase Price Allocation -

 

The purchase price for this acquisitionthese acquisitions is allocated to real estate and related intangible assets acquired, as applicable, in accordance with our accounting policies for asset acquisitions. The purchase price allocation for the propertyproperties acquired during the three months ended March 31, 2020,2021, is as follows (in thousands): 

 

  

Allocation as of

March 31, 2020

  

Weighted-Average
Amortization Period (in Years)

 

Land

 $935  n/a 

Buildings

  4,610  50.0 

Building improvements

  221  45.0 

Tenant improvements

  382  19.4 

In-place leases

  925  19.4 

Net assets acquired

 $7,073    

Real Estate Under Development

  

Allocation as of

March 31, 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     

 

The Company is engaged in a real estate development project located in Dania Beach, FL for long-term investment. Construction is currently planned to continue on this real estate development project during the COVID-

198 pandemic. As

Dispositions -

 

The table below summarizes the Company’s disposition activity relating to consolidated operating properties and parcels (dollars in millions):

 

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2020

  

2019

  

2021

  

2020

 

Aggregate sales price

 $13.5  $74.2  $23.0  $13.5 

Gain on sale of properties(1)

 $3.8  $23.6  $10.0  $3.8 

Number of properties sold

 1  5  1  1 

Number of out-parcels sold

 -  2 

Number of parcels sold

 4  0 

 

Impairments-

(1)Before noncontrolling interests of $3.0 million and taxes of $1.0 million for the three months ended March 31, 2021.

 

During the three months ended March 31, 2020 and 2019, the Company recognized aggregate impairment charges of $3.0 million and $4.2 million, respectively, related to adjustments to property carrying values for properties which the Company has marketed for sale as part of its active capital recycling program and as such has adjusted the anticipated hold period for such properties. The Company’s estimated fair values of these properties were primarily based upon estimated sales prices from signed contracts or letters of intent from third party offers. See Footnote 11 to the Notes to the Company’s Condensed Consolidated Financial Statements for fair value disclosure.

The COVID-19 pandemic has significantly impacted the retail sector in which the Company operates and if the effects of the pandemic are prolonged, it could have a significant adverse impact to the underlying industries of many of the Company’s tenants. Management cannot, at this point, estimate ultimate losses related to the COVID-19 pandemic, and accordingly no impairment charges were reflected in the accompanying financial statements related to this matter. The Company will continue to monitor the economic, financial, and social conditions resulting from this pandemic and will assess its asset portfolio for any impairment indicators. If the Company has determined that any of its assets are impaired the Company would be required to take impairment charges and such amounts could be material.

 

4. Investments in and Advances to Real Estate Joint Ventures

 

The Company has investments in and advances to various real estate joint ventures. These joint ventures are engaged primarily in the operation of shopping centers which are either owned or held under long-term operating leases. The Company and the joint venture partners have joint approval rights for major decisions, including those regarding property operations. As such, the Company holds noncontrolling interests in these joint ventures and accounts for them under the equity method of accounting.

 

The table below presents joint venture investments for which the Company held an ownership interest at March 31, 20202021 and December 31, 20192020 (dollars in millions):

 

  

Ownership

  

The Companys Investment

 

Joint Venture

 

Interest

  

March 31, 2020

  

December 31, 2019

 

Prudential Investment Program (1)

 15.0%  $169.6  $169.5 

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

 48.6%   177.7   175.0 

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

 55.0%   156.6   151.7 

Other Joint Venture Programs

 

Various

   81.7   81.9 

Total*

    $585.6  $578.1 

* Representing 98 property interests and 21.3 million square feet of GLA, as of both March 31, 2020 and December 31, 2019.

  

Ownership

  

The Companys Investment

 

Joint Venture

 

Interest

  

March 31, 2021

  

December 31, 2020

 

Prudential Investment Program (1)

  15.0%  $175.7  $175.1 

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

  48.6%   179.0   177.4 

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

  55.0%   161.7   159.7 

Other Joint Venture Programs

 

 

Various   76.4   78.5 

Total*

     $592.8  $590.7 

 

*

Representing 95 property interests and 21.3 million square feet of GLA, as of March 31, 2021, and 97 property interests and 21.2 million square feet of GLA, as of December 31, 2020.

(1)

The Company manages 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 table below presents the Company’s share of net income for the above investments which is included in Equity in income of joint ventures, net on the Company’s Condensed Consolidated Statements of Income for the three months ended March 31, 20202021 and 20192020 (in millions):

 

 

Three Months Ended

March 31,

  

Three Months Ended

March 31,

 

Joint Venture

 

2020

  

2019

  

2021

  

2020

 

Prudential Investment Program

 $2.6  $2.9  $2.6  $2.6 

KIR

 9.8  14.5  8.7  9.8 

CPP

 1.0  1.4  2.1  1.0 

Other Joint Venture Programs

  0.2   -   4.4   0.2 

Total

 $13.6  $18.8  $17.8  $13.6 

 

9

During the three months ended March 31, 2019,2021, certain of the Company’s real estate joint ventures disposed of four operating2 properties, in separate transactions, for an aggregate sales price of $54.5$53.7 million. These transactions resulted in an aggregate net gain to the Company of $3.4$4.2 million for the three months ended March 31, 2019.2021.

 

The table below presents debt balances within the Company’s unconsolidated joint venture investments for which the Company held noncontrolling ownership interests at March 31, 20202021 and December 31, 20192020 (dollars in millions):

 

 

As of March 31, 2020

  

As of December 31, 2019

  

As of March 31, 2021

  

As of December 31, 2020

 

Joint Venture

 

Mortgages

and Notes

Payable, Net

  

Weighted

Average

Interest Rate

  

Weighted Average Remaining Term (months)*

  

Mortgages

and Notes Payable, Net

  

Weighted

Average

Interest Rate

  

Weighted Average Remaining

Term (months)*

  

Mortgages and

Notes Payable, Net

 

Weighted

Average

Interest Rate

 

Weighted

Average

Remaining

Term (months)*

 

Mortgages

and

Notes

Payable, Net

 

Weighted

Average

Interest

Rate

 

Weighted

Average

Remaining

Term (months)*

 

Prudential Investment Program

 $537.0  2.91% 43.8  $538.1  3.46

%

 46.8  $494.6  2.03% 34.2  $495.8  2.05% 37.2 

KIR

 561.4  4.15% 32.0  556.0  4.39

%

 28.4  524.3  3.27% 28.9  536.9  3.87% 25.3 

CPP

 84.9  3.25% 39.0  84.8  3.25

%

 42.0  85.0  3.25% 27.0  84.9  3.25% 30.0 

Other Joint Venture Programs

  414.4  3.62% 78.5   415.2  3.87

%

 80.9   382.7  3.59% 89.8   423.4  3.41% 86.7 

Total

 $1,597.7          $1,594.1          $1,486.6          $1,541.0         

 

* Includes extension options

The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will assess its joint venture portfolio for any impairment indicators. If the Company has determined that any of its assets are impaired, the Company would be required to take impairment charges, and such amounts could be material.

 

 

5. Other Real Estate Investments

 

The Company has provided capital to owners and developers of real estate properties and loans through its Preferred Equity Program. The Company’s maximum exposure to losses associated with its preferred equity investments is primarily limited to its net investment. As of March 31, 2020,2021, the Company’s net investment under the Preferred Equity Program was $159.6$99.4 million relating to 205111 properties, including 195101 net leased properties.  During the three months ended March 31, 2021, the Company recognized income of $3.2 million from its preferred equity investments. During the three months ended March 31, 2020, the Company recognized income of $11.1 million from its preferred equity investments, including profit participation of $6.3 million. During the three months ended March 31, 2019, the Company recognized income of $6.5 million from its preferred equity investments, including profit participation of $1.0 million. These amounts are included in Equity in income of other real estate investments, net on the Company’s Condensed Consolidated Statements of Income.

 

6. Marketable Securities

The amortized cost and unrealized gains, net of marketable securities as of March 31, 2021 and December 31, 2020, are as follows (in thousands):

  

As of March 31, 2021

  

As of December 31, 2020

 

Marketable securities:

        

Amortized cost

 $114,480  $114,531 

Unrealized gains, net

  653,509   592,423 

Total fair value

 $767,989  $706,954 

During the three months ended March 31, 2021 and 2020, there were net unrealized gains on marketable securities of $61.1 million and net unrealized losses on marketable securities of $4.7 million, respectively. These net unrealized gains and losses are included in Gain/(loss) on marketable securities, net on the Company’s Condensed Consolidated Statements of Income. See Footnote 12 of the Company’s Condensed Consolidated Financial Statements for fair value disclosure.

7.Accounts and Notes Receivable

The components of accounts and notes receivable, net of potentially uncollectible amounts as of March 31, 2021 and December 31, 2020, are as follows (in thousands):

  March 31, 2021 December 31, 2020
Billed tenant receivables $24,219 $25,428
Unbilled CAM, insurance and tax reimbursements  25,052  35,982
Deferred rent receivables  9,995  17,328
Other receivables  5,120  4,880
Straight-line rent receivables  136,269  135,630
Total accounts and notes receivable, net $200,655 $219,248

8.Leases

 

Lessor Leases

 

The Company'sCompany’s primary source of revenues areis derived from lease agreements, which includes rental income and expense reimbursement. The Company'sCompany’s lease income is comprised of minimum base rent, expense reimbursements, percentage rent, lease termination fee income, ancillary income, amortization of above-market and below-market rent adjustments and straight-line rent adjustments.

 

10

The disaggregation of the Company'sCompany’s lease income, which is included in RevenueRevenues from rental properties on the Company'sCompany’s Condensed Consolidated Statements of Income, as either fixed or variable lease income based on the criteria specified in ASC 842, for the three months ended March 31, 20202021 and 2019,2020, is as follows (in thousands):

  

Three Months Ended March 31,

 
  

2020

  

2019

 

Lease income:

        

Fixed lease income (1)

 $217,155  $214,804 
Variable lease income (2)  58,907   66,516 

Above-market and below-market leases amortization, net

  9,942   9,314 

Total lease cost

 $286,004  $290,634 

  

Three Months Ended March 31,

 
  

2021

  

2020

 

Lease income:

        

Fixed lease income (1)

 $212,393  $218,873 

Variable lease income (2)

  60,776   57,189 

Above-market and below-market leases amortization, net

  5,702   9,942 

Total lease income

 $278,871  $286,004 

 

(1)

Includes minimum base rents, expense reimbursements, ancillary income and straight-line rent adjustments.

(2)

Includes minimum base rents, expense reimbursements, percentage rent, lease termination fee income and ancillary income.

 

Lessee Leases

 

The Company currently leases real estate space under noncancelablenon-cancelable operating lease agreements for ground leases and administrative office leases. The Company’s leases have remaining lease terms ranging from less than one year to 51.964.8 years, some of which include options to extend the terms for up to an additional 75 years. The Company does not include any of its renewal options in its lease terms for calculating its lease liability as the renewal options allow the Company to maintain operational flexibility and the Company is not reasonably certain it will exercise these renewal options at this time. The weighted-averageAt March 31, 2021, the weighted average remaining non-cancelable lease term for the Company’s operating leases was 21.020.5 years at March 31, 2020. The weighted-averageand the weighted average discount rate was 6.65% at March 31, 2020. 6.54%. The Company’s operating lease liabilities are determined based on the estimated present value of the Company’s minimum lease payments under its lease agreements. The discount rate used to determine the lease liabilities is based on the estimated incremental borrowing rate on a lease by lease basis. When calculating the incremental borrowing rates, the Company utilized data from (i) its recent debt issuances, (ii) publicly available data for instruments with similar characteristics, (iii) observable mortgage rates and (iv) unlevered property yields and discount rates. The Company then applied adjustments to account for considerations related to term and security that may not be fully incorporated by the data sets.

 

The components of the Company’s lease expense, which are included in rent expense and general and administrative expense on the Company’s Condensed Consolidated Statements of Income for the three months ended March 31, 20202021 and 2019,2020, were as follows (in thousands):

 

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2020

  

2019

  

2021

  

2020

 

Lease cost:

          

Operating lease cost

 $2,598  $3,328  $2,830  $2,598 

Variable lease cost

  727   269   683   727 

Total lease cost

 $3,325  $3,597  $3,513  $3,325 

 

 

7.Other Assets

Mortgages and Other Financing Receivables -

The Company has various mortgages and other financing receivables which consist of loans acquired and loans originated by the Company. The Company reviews payment status to identify performing versus non-performing loans. As of March 31, 2020, the Company had a total of seven loans aggregating $7.8 million, all of which were identified as performing loans.

Assets Held-For-Sale -

At March 31, 2020, the Company had a property classified as held-for-sale at a net carrying amount of $1.3 million (including accumulated depreciation and amortization of $1.1 million). The Company’s determination of the fair value of the property was based upon an executed contract of sale with a third party, which is in excess of the book value of this property.

8.9. Notes Mortgages and Construction LoanMortgages Payable

 

Notes Payable

 

In February 2020, the Company closed onobtained a new $2.0 billion unsecured revolving credit facility (the “Credit Facility”) with a group of banks, which replaced the Company’s existing $2.25 billion unsecured revolving credit facility.banks. The Credit Facility is scheduled to expire in March 2024, with two additional six-month options to extend the maturity date, at the Company’s discretion, to March 2025. The Credit Facility is a green credit facility tied to sustainability metric targets, as described in the agreement. The Company achieved such targets, which effectively reduced the rate on the Credit Facility by one basis point. The Credit Facility, which accrues interest at a rate of LIBOR plus 77.576.5 basis points (1.76%(0.88% as of March 31, 2020)2021), can be increased to $2.75 billion through an accordion feature. Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to covenants requiring the maintenance of (i) maximum indebtedness ratios and (ii) minimum interest and fixed charge coverage ratios. As of March 31, 2020,2021, the Credit Facility had an0 outstanding balance, of $675.0 million and $0.3$0.3 million appropriated for letters of credit and the Company was in compliance with its covenants.

 

On April 1, 2020, the Company entered into a new $375.0 million unsecured term loan credit facility pursuant to a credit agreement (the “Term Loan”), with a group of banks, which is scheduled to expire in April 2021, with a one-year extension option to extend the maturity date, at the Company’s discretion, to April 2022. The Term Loan accrues interest at a rate of LIBOR plus 140 basis points or, at the Company’s option, a spread of 40 basis points to the base rate defined in the Term Loan, that in each case fluctuates in accordance with changes in the Company’s senior debt ratings. The Term Loan can be increased by an additional $750.0 million through an accordion feature. Pursuant to the terms of the Term Loan, the Company is subject to covenants that are substantially the same as those in the Credit Facility. During April 2020, borrowings under the Term Loan were increased to $590.0 million through the accordion feature.

Mortgages and Construction LoanMortgages Payable -

In August 2018, the Company closed on a construction loan commitment of $67.0 million relating to one development property. This loan commitment was scheduled to mature in August 2020, with six additional six-month options to extend the maturity date to August 2023, and bore interest at a rate of LIBOR plus 180 basis points. During the three months ended March 31, 2020, this construction loan was fully repaid.

 

During the three months ended March 31, 2020,2021, the Company repaid $8.8$12.3 million of mortgage debt (including fair market value adjustment of $0.1 million) that encumbered an operating property.

 

 

 

9.10. Noncontrolling Interests

 

Noncontrolling interests represent the portion of equity that the Company does not own in entities it consolidates as a result of having a controlling interest or determining that the Company was the primary beneficiary of a VIE in accordance with the provisions of the FASB’s Consolidation guidance.  The Company accounts and reports for noncontrolling interests in accordance with the Consolidation guidance and the Distinguishing Liabilities from Equity guidance issued by the FASB. The Company identifies its noncontrolling interests separately within the equity section on the Company’s Condensed Consolidated Balance Sheets. The amounts of consolidated net income attributable to the Company and to the noncontrolling interests are presented separately on the Company’s Condensed Consolidated Statements of Income.

 

During the three months ended March 31, 2020, the Company acquired its partner’s interests in a consolidated entity for a purchase price of $20.0 million. This transaction resulted in a net decrease in Noncontrolling interests of $0.5 million and a corresponding net increase in Paid-in capital of $19.5 million on the Company’s Condensed Consolidated Balance Sheets. There are no remaining partners in this consolidated entity.

Included within noncontrolling interests are units that were determined to be contingently redeemable that are classified as Redeemable noncontrolling interests and presented in the mezzanine section between Total liabilities and Stockholder’s equity on the Company’s Condensed Consolidated Balance Sheets.

 

The following table presents the change in the redemption value of the Redeemable noncontrolling interests for the three months ended March 31, 20202021 and 20192020 (in thousands): 

 

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2020

  

2019

  

2021

  

2020

 

Balance at January 1,

 $17,943  $23,682  $15,784  $17,943 

Fair value allocation to partnership interest (1)

 2,068  0 

Income

 262  92  169  262 

Distributions

  (262)  (90)  (169)  (262)

Balance at March 31,

 $17,943  $22,684  $17,852  $17,943 

(1)

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 2 operating properties for a gross fair value of $104.0 million (see Footnote 3 of the Company’s Condensed Consolidated Financial Statements). This joint venture is accounted for as a consolidated VIE (see Footnote 11 of the Company’s Condensed Consolidated Financial Statements).

 

 

10.11. Variable Interest Entities (“VIE”)

 

Included within the Company’s consolidated operating properties at both March 31, 20202021 and December 31, 2019,2020, are 23 and 22 consolidated entities, respectively, that are VIEs, for which the Company is the primary beneficiary. These entities have been established to own and operate real estate property. The Company’s involvement with these entities is through its majority ownership and management of the properties. The entities were deemed VIEs primarily because the unrelated investors do not have substantive kick-out rights to remove the general or managing partner by a vote of a simple majority or less, and they do not have substantive participating rights. The Company determined that it was the primary beneficiary of these VIEs as a result of its controlling financial interest. At March 31, 2021, total assets of these VIEs were $1.1 billion and total liabilities were $96.7 million. At December 31, 2020, total assets of these VIEs were $1.0 billion and total liabilities were $65.5 million. At December 31, 2019, total assets of these VIEs were $0.9 billion and total liabilities were $70.9$62.1 million.

 

The majority of the operations of these VIEs are funded with cash flows generated from the properties. The Company has not provided financial support to any of these VIEs that it was not previously contractually required to provide, which consists primarily of funding any capital expenditures, including tenant improvements, which are deemed necessary to continue to operate the entity and any operating cash shortfalls that the entity may experience.

Additionally, included within the Company’s real estate development projects at December 31, 2019, is one consolidated entity that was a VIE, for which the Company was the primary beneficiary. This entity had been established to develop a real estate property to hold as a long-term investment. The Company’s involvement with this entity is through its majority ownership and management of the property. This entity was deemed a VIE primarily because the equity investments at risk were not sufficient to permit the entity to finance its activities without additional financial support. The initial equity contributed to this entity was not sufficient to fully finance the real estate construction as development costs are funded by the partners throughout the construction period. The Company determined that it was the primary beneficiary of this VIE as a result of its controlling financial interest. At December 31, 2019, total assets of this real estate development VIE were $346.9 million and total liabilities were $82.5 million. During the three months ended March 31, 2020 the Company purchased the partner’s noncontrolling interest and maintains full ownership of the entity. As a result, the entity is no longer a VIE.

 

All liabilities of these consolidated VIEs are non-recourse to the Company (“VIE Liabilities”). The assets of the unencumbered VIEs are not restricted for use to settle only the obligations of these VIEs. The remaining VIE assets are encumbered by third party non-recourse mortgage debt and a construction loan.debt. The assets associated with these encumbered VIEs (“Restricted Assets”) are collateral under the respective mortgages and a construction loan and are therefore restricted and can only be used to settle the corresponding liabilities of the VIE. The table below summarizes the consolidated VIEs and the classification of the Restricted Assets and VIE Liabilities on the Company’s Condensed Consolidated Balance Sheets as follows (dollars in millions):

 

 

As of March 31, 2020

 

As of December 31, 2019

  

As of March 31, 2021

 

As of December 31, 2020

 

Number of unencumbered VIEs

  19   19  20  19 

Number of encumbered VIEs

  3   4   3   3 

Total number of consolidated VIEs

  22   23  23  22 
            

Restricted Assets:

            

Real estate, net

 $99.1  $228.9  $97.1  $97.7 

Cash and cash equivalents

  1.6   9.2  1.6  1.8 

Accounts and notes receivable, net

  2.0   3.8  1.6  1.9 

Other assets

  1.5   3.6   1.6   1.1 

Total Restricted Assets

 $104.2  $245.5  $101.9  $102.5 
            

VIE Liabilities:

            

Mortgages and construction loan payable, net

 $37.6  $104.5 

Mortgages payable, net

 $36.2  $36.5 

Operating lease liabilities

 5.5  5.5 

Other liabilities

  27.9   48.9   55.0   20.1 

Total VIE Liabilities

 $65.5  $153.4  $96.7  $62.1 

 

 

 

11.12. Fair Value Measurements

 

All financial instruments of the Company are reflected in the accompanying Condensed Consolidated Balance Sheets at amounts which, in management’s estimation, based upon an interpretation of available market information and valuation methodologies, reasonably approximate their fair values except those listed below, for which fair values are disclosed. The valuation method used to estimate fair value for fixed-rate and variable-rate debt is based on discounted cash flow analyses, with assumptions that include credit spreads, market yield curves, trading activity, loan amounts and debt maturities. The fair values for marketable securities are based on published values, securities dealers’ estimated market values or comparable market sales. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition.

 

As a basis for considering market participant assumptions in fair value measurements, the FASB’s Fair Value Measurements and Disclosures guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

 

The following are financial instruments for which the Company’s estimated fair value differs from the carrying value (in thousands):

 

 

March 31, 2020

  

December 31, 2019

  

March 31, 2021

  

December 31, 2020

 
 

Carrying Value

  

Fair Value

  

Carrying Value

  

Fair Value

  

Carrying Value

  

Fair Value

  

Carrying Value

  

Fair Value

 

Notes payable, net (1)

 $5,303,656  $5,041,889  $4,831,759  $4,983,763  $5,045,868  $5,306,905  $5,044,208  $5,486,953 

Mortgages and construction loan payable, net (2)

 $404,879  $405,562  $484,008  $486,042 

Mortgages payable, net (2)

 $295,613  $297,860  $311,272  $312,933 

 

 

(1)

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 March 31, 20202021 and December 31, 2019,2020, were $4.4$5.3 billion and $4.8$5.5 billion, respectively. The estimated fair value amounts classified as Level 3, as of March 31, 2020 and December 31, 2019, were $625.4 million and $199.9 million, respectively.

 

(2)

The Company determined that its valuation of its mortgages and construction loan were classified within Level 3 of the fair value hierarchy. 

 

The Company has certain financial instruments that must be measured under the FASB’s Fair Value Measurements and Disclosures guidance, including available for sale securities. The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.

 

The tables below present the Company’s financial assets measured at fair value on a recurring basis at March 31, 20202021 and December 31, 2019,2020, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

 

  

Balance at

March 31, 2020

  

Level 1

  

Level 2

  

Level 3

 
                 

Marketable equity securities

 $4,524  $4,524  $-  $- 
  

Balance at

March 31, 2021

  

Level 1

  

Level 2

  

Level 3

 
                 

Marketable equity securities

 $767,989  $767,989  $0  $0 

 

  

Balance at

December 31, 2019

  

Level 1

  

Level 2

  

Level 3

 
                 

Marketable equity securities

 $9,353  $9,353  $-  $- 
  

Balance at

December 31, 2020

  

Level 1

  Level 2  

Level 3

 
                 

Marketable equity securities

 $706,954  $706,954  $0  $0 

 

Assets measured at fair value on a non-recurring basis at MarchDecember 31, 2020and December 31, 2019, are as follows (in thousands):

 

  

Balance at

March 31, 2020

  

Level 1

  

Level 2

  

Level 3

 
                 

Real estate

 $5,300  $-  $-  $5,300 
  

Balance at

December 31, 2020

  

Level 1

  

Level 2

  

Level 3

 
                 

Real estate

 $24,899  $0  $0  $24,899 

Other real estate investments

 $5,464  $0  $0  $5,464 

 

  

Balance at

December 31, 2019

  

Level 1

  

Level 2

  

Level 3

 
                 

Real estate

 $39,510  $-  $-  $39,510 

Other real estate investments

 $32,974  $-  $-  $62,429 

During the

three13 months ended March 31, 2020 and 2019, the Company recognized impairment charges related to adjustments to property carrying values

The Company’s estimated fair values of these properties were primarily based upon estimated sales prices, which were less than the carrying value of the assets, from signed contracts or letters of intent from third party offers. The Company does not have access to the unobservable inputs used to determine the estimated fair values of third party offers. Based on these inputs, the Company determined that its valuation of these investments was classified within Level 3 of the fair value hierarchy. (See Footnote 3 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional discussion regarding impairment charges).

 

 

12.13. Incentive Plans

In May 2020, the Company’s stockholders approved the 2020 Equity Participation Plan (the “2020 Plan”), which is a successor to the Restated Kimco Realty Corporation 2010 Equity Participation Plan that expired in March 2020.  The 2020 Plan provides for a maximum of 10,000,000 shares of the Company’s common stock to be reserved for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, stock payments and deferred stock awards.  At March 31, 2021, the Company had 8.5 million shares of common stock available for issuance under the 2020 Plan.

 

The Company accounts for equity awards in accordance with FASB’s Compensation – Stock Compensation guidance which requires that all share-based payments to employees, including grants of employee stock options, restricted stock and performance shares, be recognized in the Condensed Consolidated Statements of Income over the service period based on their fair values. Fair value isof performance awards are determined depending on the type of award, using either the Black-Scholes option pricing formula or the Monte Carlo method for performance shares, both of which areis intended to estimate the fair value of the awards at the grant date. Fair value of restricted shares is calculated based on the price on the date of grant.

 

The Company recognized expenses associated with its equity awards of $5.9$6.5 million and $5.5$5.9 million for the three months ended March 31, 20202021 and 2019,2020, respectively.  As of March 31, 2020,2021, the Company had $52.0$53.9 million of total unrecognized compensation cost related to unvested stock compensation granted under the Plans.  That cost is expected to be recognized over a weighted average period of approximately 3.33.2 years.

 

 

13.14. Earnings Per Share

 

The following table sets forth the reconciliation of earnings and the weighted average number of shares used in the calculation of basic and diluted earnings per share (amounts presented in thousands except per share data):

 

 

Three Months Ended

  

Three Months Ended

 
 

March 31,

  

March 31,

 
 

2020

  

2019

  

2021

  

2020

 

Computation of Basic and Diluted Earnings Per Share:

            

Net income available to the Company's common shareholders

 $83,746  $101,635  $131,588  $83,746 

Earnings attributable to participating securities

  (686)  (625)  (792)  (686)

Net income available to the Company’s common shareholders for basic earnings per share

 83,060  101,010  130,796  83,060 

Distributions on convertible units

  -   25   9   0 

Net income available to the Company’s common shareholders for diluted earnings per share

 $83,060  $101,035  $130,805  $83,060 
  

Weighted average common shares outstanding – basic

 429,735  419,464  430,524  429,735 

Effect of dilutive securities (1):

      

Equity awards

 717  1,182  1,606  717 

Assumed conversion of convertible units

  53   117   134   53 

Weighted average common shares outstanding – diluted

  430,505   420,763   432,264   430,505 
  

Net income available to the Company's common shareholders:

      

Basic earnings per share

 $0.19  $0.24  $0.30  $0.19 

Diluted earnings per share

 $0.19  $0.24  $0.30  $0.19 

 

(1)

The effect of the assumed conversion of certain convertible units had an anti-dilutive effect upon the calculation of Net income available to the Company’s common shareholders per share. Accordingly, the impact of such conversions has not been included in the determination of diluted earnings per share calculations. Additionally, there were 1.20.8 million and 1.31.2 million stock options that were not dilutive as of March 31, 20202021 and 2019,2020, respectively.

 

The Company's unvested restricted share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the unvested restricted share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted share awards based on dividends declared and the unvested restricted shares' participation rights in undistributed earnings.

 

 

 

14.15. Stockholders’ Equity

 

Preferred Stock -

 

The Company’s outstanding Preferred Stock is detailed below:

 

As of March 31, 2020 and December 31, 2019

As of March 31, 2021 and December 31, 2020

As of March 31, 2021 and December 31, 2020

Class of

Preferred

Stock

 

Shares

Authorized

  

Shares

Issued and Outstanding

  

Liquidation Preference

(in thousands)

  

Dividend

Rate

  

Annual

Dividend per

Depositary

Share

  

 

Par

Value

 

Optional

Redemption

Date

 

Shares

Authorized

  

Shares

Issued and

Outstanding

  

Liquidation

Preference

(in thousands)

  

Dividend

Rate

  

Annual

Dividend per

Depositary

Share

  

Par

Value

 

Optional

Redemption

Date

Class L

 10,350  9,000  $225,000  5.125% $1.28125  $1.00 

8/16/2022

 10,350  9,000  $225,000  5.125% $1.28125  $1.00 

8/16/2022

Class M

 10,580   10,580   264,500  5.250% $1.31250  $1.00 

12/20/2022

  10,580   10,580   264,500   5.250% $1.31250  $1.00 

12/20/2022

     19,580  $489,500              19,580  $489,500           

 

Common Stock-

During February 2020, the Company extended its share repurchase program for a term of two years, which will expire in February 2022, pursuant to which the Company may repurchase shares of its common stock, par value $0.01 per share, with an aggregate gross purchase price of up to $300.0 million. The Company did not repurchase any shares under the share repurchase program during the three months ended March 31, 2020.2021. As of March 31, 2020,2021, the Company had $224.9 million available under this share repurchase program.

 

During September 2019, the Company established an at the market continuous offering program (“ATM program”), pursuant to which the Company may offer and sell from time to time shares of its common stock, par value $0.01 per share, with an aggregate gross sales price of up to $500.0 million through a consortium of banks acting as sales agents. Sales of the shares of common stock may be made, as needed, from time to time in “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, including by means of ordinary brokers’ transactions on the New York Stock Exchange or otherwise (i) at market prices prevailing at the time of sale, (ii) at prices related to prevailing market prices or (iii) as otherwise agreed to with the applicable sales agent. The Company did not offer for sale any shares of common stock under the ATM program during the three months ended March 31, 2020.

Dividends Declared -

 

The following table provides a summary of the dividends declared per share:

 

  

Three Months Ended March 31,

 
  

2020

  

2019

 

Common Shares

 $0.28000  $0.28000 

Class I Depositary Shares (1)

 $-  $0.37500 

Class J Depositary Shares (1)

 $-  $0.34375 

Class K Depositary Shares (1)

 $-  $0.35156 

Class L Depositary Shares

 $0.32031  $0.32031 

Class M Depositary Shares

 $0.32813  $0.32813 

(1)

Shares were fully redeemed during 2019

  

Three Months Ended March 31,

 
  

2021

  

2020

 

Common Shares

 $0.17000  $0.28000 

Class L Depositary Shares

 $0.32031 ��$0.32031 

Class M Depositary Shares

 $0.32813  $0.32813 

 

 

15.16. Supplemental Schedule of Non-Cash Investing / Financing Activities

 

The following schedule summarizes the non-cash investing and financing activities of the Company for the three months ended March 31, 20202021 and 20192020 (in thousands):

 

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2020

  

2019

  

2021

  

2020

 

Acquisition of real estate interests through proceeds held in escrow

 $-  $30,970 

Surrender of restricted common stock

 $5,159  $3,252  $9,092  $5,159 

Declaration of dividends paid in succeeding period

 $126,473  $130,444  $5,366  $126,473 

Capital expenditures accrual

 $47,533  $70,976  $36,062  $47,533 

Lease liabilities arising from obtaining right-of-use assets

 $553  $0 
Allocation of fair value to noncontrollling interests $2,068  $0 
Purchase price fair value adjustment to prepaid rent $15,620  $0 

17.Subsequent Events

Pending Merger with Weingarten Realty Investors

On April 15, 2021, the Company and Weingarten Realty Investors (“Weingarten”) announced that they have entered into a definitive merger agreement under which Weingarten will merge with and into the Company, with the Company continuing as the surviving public company. The parties currently expect the transaction to close during the second half of 2021, subject to customary closing conditions, including the approval of both the Company and Weingarten shareholders.  This strategic transaction was unanimously approved by the Board of Directors of the Company and the Board of Trust Managers of Weingarten.  Under the terms of the merger agreement, each Weingarten common share will be converted into 1.408 newly issued shares of the Company’s common stock plus $2.89 in cash. Based on the closing stock price for the Company on April 14, 2021, this represents a total consideration of approximately $30.32 per Weingarten share.

 

 

16.Subsequent Events

During and subsequent to the first quarter 2020, the world has been impacted by the COVID-19 pandemic. It has created significant economic uncertainty and volatility. The extent to which the COVID-19 pandemic impacts the Company’s business, operations and financial results will depend on numerous evolving factors that the Company is not be able to predict at this time, including the duration and scope of the pandemic, governmental, business and individual actions that have been and continue to be taken in response to the pandemic, the impact on economic activity from the pandemic and actions taken in response, the effect on the Company’s tenants and their businesses, the ability of tenants to make their rental payments and any additional closures of tenants’ businesses. Any of these events could materially adversely impact the Company’s business, financial condition, results of operations or stock price.

As of April 30, 2020, the Company’s shopping centers generally remain open, however, a substantial number of tenants have temporarily closed their businesses, have shortened their operating hours or are offering reduced services. The Company has also observed a substantial increase in the number of tenants that have made late or partial rent payments, requested a deferral of rent payments or defaulted on rent payments.

As a result of these requests and the current economic uncertainty, the Company has taken important steps to offer its support:

The Company has worked with these tenants to potentially grant rent deferrals on a tenant-by-tenant basis. The deferrals are anticipated to be paid within a period of one year or less.

During April 2020, the Company began piloting a Tenant Assistance Program to assist small business tenants in identifying and applying for federal and state aid to help support their businesses during the COVID-19 pandemic. The Company is working in partnership with law firms to provide assistance with the application process at the Company’s expense. Legal professionals will assist tenants in identifying suitable loan programs, identifying potential lending institutions, and preparing and submitting applications.

The Company is closely monitoring recommendations and mandates of federal, state and local governments and health authorities.

At the onset of the COVID-19 pandemic in the U.S., the Company immediately increased the frequency and intensity of its janitorial services to help prevent the spread of the virus. Areas such as public bathrooms, interior concourses and hallways, vestibules and shared doors, and elevators and escalators are being sanitized multiple times per day.

The Company’s teams are also working quickly to provide additional assistance in the communities where it operates, finding creative ways to use its conveniently located shopping centers during this difficult time. The Company is fast-tracking the approval of drive-thru testing centers, blood drive locations, and school lunch pick-ups, and several of its shopping centers are already offering these services.

The Company launched the Kimco Curbside Pickup™ program designating dedicated parking spots for curbside pickup at its centers for use by all tenants and their customers.

In addition, on April 1, 2020, the Company entered into a new $375.0 million unsecured term loan credit facility, that was subsequently increased to $590.0 million through an accordion feature. See Footnote 8 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional discussion regarding the Term Loan.

 

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

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q, together with other statements and information publicly disseminated by Kimco Realty Corporation (the “Company”) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with the safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “will,” “target,” “forecast” or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and could materially affect actual results, performances or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) general adverse economic and local real estate conditions, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business, (iii) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms to the Company, (iv) the Company’s ability to raise capital by selling its assets, (v) changes in governmental laws and regulations and management’s ability to estimate the impact of such changes, (vi) the level and volatility of interest rates and management’s ability to estimate the impact thereof, (vii) pandemics or other health crises, such as coronavirus disease 2019 (“COVID-19”), (viii) the availability of suitable acquisition, disposition, development and redevelopment opportunities, and risks related to acquisitions not performing in accordance with our expectations, (ix) risks and uncertainties associated with the Company’s and Weingarten Realty Investor’s (“Weingarten”), ability to complete the acquisition on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary shareholder approvals and satisfaction of other closing conditions to consummate the acquisition; (x) the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive transaction agreement relating to the proposed transaction, (xi) risks related to diverting the attention of the Company and Weingarten management from ongoing business operations; failure to realize the expected benefits of the acquisition, (xii) significant transaction costs and/or unknown or inestimable liabilities, (xiii) the risk of shareholder litigation in connection with the proposed transaction, including resulting expense or delay; the risk that Weingarten’s business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected, (xiv) the Company’s ability to obtain the expected financing to consummate the acquisition, (xv) risks related to future opportunities and plans for the combined company, including the uncertainty of expected future financial performance and results of the combined company following completion of the acquisition, (xvi) effects relating to the announcement of the acquisition or any further announcements or the consummation of the acquisition on the market price of the Company’s common stock or Weingarten’s common shares, (xvii) the possibility that, if the Company does not achieve the perceived benefits of the acquisition as rapidly or to the extent anticipated by financial analysts or investors, the market price of the Company’s common stock could decline, (xviii) valuation and risks related to the Company’s joint venture and preferred equity investments, (x)(xix) valuation of marketable securities and other investments, (xi)including the shares of Albertsons Companies, Inc. common stock held by the Company, (xx) increases in operating costs, (xii)(xxi) changes in the dividend policy for the Company’s common and preferred stock and the Company’s ability to pay dividends at current levels, (xiii)(xxii) the reduction in the Company’s income in the event of multiple lease terminations by tenants or a failure by multiple tenants to occupy their premises in a shopping center, (xiv)(xxiii) impairment charges, (xv)(xxiv) unanticipated changes in the Company’s intention or ability to prepay certain debt prior to maturity and/or hold certain securities until maturity and (xvi)(xxv) the risks and uncertainties identified under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year-ended December 31, 2019.2020. Accordingly, there is no assurance that the Company’s expectations will be realized.  The Company disclaims any intention or obligation to update the forward-looking statements, whether as a result of new information, future events or otherwise.  You are advised to refer to any further disclosures the Company makes or related subjects in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that the Company files with the Securities and Exchange Commission (“SEC”).

 

The following discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes thereto.  These unaudited financial statements include all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature.

 

Executive Overview

 

Kimco Realty Corporation, a Maryland corporation, is one of North America’s largest publicly traded owners and operators of open-air, grocery-anchored shopping centers and mixed-use assets.assets in the U.S. The terms “Kimco,” the “Company,” “we,” “our” and “us” each referrefers to Kimco Realty Corporation and our subsidiaries, unless the context indicates otherwise.  The Company’s mission is to create destinations for everyday living that inspire a sense of community and deliver value to our many stakeholders.

 

The Company is a self-administered real estate investment trust (“REIT”) and has owned and operated open-air shopping centers for over 60 years.  The Company has not engaged, nor does it expect to retain, any REIT advisors in connection with the operation of its properties. As of March 31, 2020,2021, the Company had interests in 401398 U.S. shopping center properties, aggregating 70.069.8 million square feet of gross leasable area (“GLA”), located in 27 states. In addition, the Company had 215122 other property interests, primarily through the Company’s preferred equity investments and other real estate investments, totaling 6.06.7 million square feet of GLA. The Company’s ownership interests in real estate consist of its consolidated portfolio and portfolios where the Company owns an economic interest, such as properties in the Company’s investment real estate management programs, where the Company partners with institutional investors and also retains management.  

 

The Company’s operating strategies areprimary business objective is to (i) ownbe the premier owner and operate its shopping center properties at their highest potential through maximizing and maintaining rental income and occupancy levels, (ii) attract local area customers to itsoperators of open-air, grocery-anchored shopping centers which offer buy online and pick up in store, off-price merchandise and day-to-day necessities rather than high-priced luxury items, and (iii) maintain a strong balance sheet.

The Company’s investment strategy is to invest capital into its high-quality assets which are tightly clustered in major metropolitan markets that provide opportunity for growth while disposing of lesser qualitymixed-use assets in less desirable locations. Through this strategy, the Company has transformed its portfolio and will continue these efforts as deemed necessary to maximize the quality and growth of its portfolio. Property acquisitions are focused in major metropolitan areas allowing tenants to generate higher foot traffic resulting in higher sales volume accompanied with a potential for a mixed-use component.U.S. The Company believes thatit can achieve this will enable it to maintain higher occupancy levels, rental rates and rental growth.objective by:

increasing the value of its existing portfolio of properties and generating higher levels of portfolio growth;

increasing cash flows for reinvestment and/or for distribution to shareholders;

continuing growth in desirable demographic areas with successful retailers; and

increasing capital appreciation.

 

 

The Company’s investment strategy also includesCompany further concentrated its business objectives to three main areas:

Sustainable Growth – Delivering consistent growth from a portfolio of well-located, essential-anchored shopping centers and mixed-use assets.

Financial Strength – Maintaining a strong balance sheet that will sustain dividend growth, with liquidity to be an opportunistic investor during periods of disruption.

Opportunistic Investment – Generating additional internal and external growth through accretive acquisitions, redevelopments and investments opportunities with retailers who have significant real estate holdings.

Pending Merger with Weingarten Realty Investors

On April 15, 2021, the Company and Weingarten Realty Investors (“Weingarten”) announced that they have entered into a definitive merger agreement (the "Merger Agreement") under which Weingarten will merge with and into the Company, with the Company continuing as the surviving public company (the “Merger”).  The Merger brings together two industry-leading retail re-tenanting, renovationreal estate platforms with highly complementary portfolios, creating the preeminent open-air shopping center and expansionmixed-use real estate owner in the country.  The increased scale in targeted growth markets, coupled with a broader pipeline of its existing centers and acquired centers, while also pursuing redevelopment opportunities, positions the combined company to increase overallcreate significant value withinfor its portfolio. The Company may selectively acquire established income-producing real estate properties and properties requiring significant re-tenanting and redevelopment, primarily in geographic regions in which the Company presently operates. Additionally, the Company may selectively acquire land parcels in its key markets for real estate development projects for long-term investment. The Company may consider investments in other real estate sectors and in geographic markets where it does not presently operate should suitable opportunities arise. The Company also continues to simplify its business by reducing the number of joint venture investments.shareholders. 

 

As partUnder the terms of the Merger Agreement, each Weingarten common share will be converted into 1.408 newly issued shares of the Company’s investment strategy each property is evaluatedcommon stock plus $2.89 in cash.  Based on the closing stock price for its highestthe Company on April 14, 2021, this represents a total consideration of approximately $30.32 per Weingarten share.  The parties currently expect the transaction to close during the second half of 2021, subject to customary closing conditions, including the approval of both the Company and best use, which may include residentialWeingarten shareholders.  This strategic transaction was unanimously approved by the Board of Directors of the Company and the Board of Trust Managers of Weingarten. 

The Merger will create a national operating portfolio of 559 open-air grocery-anchored shopping centers and mixed-use components. In addition,assets comprising approximately 100 million square feet of gross leasable area.  These properties are primarily concentrated in the Company may consider other opportunistic investments relatedtop major metropolitan markets in the United States.  The combined company is expected to retailer controlled real estate such as repositioning underperforming retail locations, retail real estate financingbenefit from increased scale and bankruptcy transaction support. The Company hasdensity in key Sun Belt markets, enhanced asset quality, tenant diversity, a capital recycling program that provides forlarger redevelopment pipeline and a deleveraged balance sheet. As a result, the disposition of certain lesser quality assets. If the estimated faircombined company should be uniquely positioned to drive further sustained growth in net operating income and asset value for any of these assets is less than their net carrying values, the Company would be required to take impairment chargescreation through continued strategic leasing and such amounts could be material.asset management.

 

COVID-19 Pandemic

 

The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide, and has caused significant volatility in U.S. and international debt and equity markets. The COVID-19 pandemic has significantly impacted the retail sector in which the Company operates, and if the effectsoperates. The majority of the pandemic are prolonged, it could have a significant adverse impact on the underlying industries of many of the Company’s tenants. Accordingly, the Company’s tenants and their operations and, thus, their ability to pay rent, have been impacted, and may continue to be impacted.  AtThrough the endduration of April 2020, all the Company’s shopping centers remain open and operational continuing to provide access to tenants providing essential goods and services. However,pandemic, a substantial number of tenants have had to temporarily closedor permanently close their business, have shortened their operating hours or are offeringoffer reduced services. Based on information currently available to us, approximately 44%services for some period of annual base rent across the portfolio comes from tenants that are subject to some form of mandatory closure or have voluntarily closed. As a result, the Company has observed a substantial increase in the number of tenants that have made late or partial rent payments, requested a deferral of rent payments, or defaulted on rent payments, and it is likely that more of our tenants will be similarly impacted in the future.  The Company received rent deferral requests approximating 35% of the Company’s pro-rata minimum base rent for the month of April, with the Company selectively granting deferrals for 14% of the minimum base rent for this period. The Company continues to negotiate for the payment of the remaining April rent not yet collected.time. 

 

The impact ofextent to which the COVID-19 onpandemic impacts the Company’s futurefinancial condition, results could be significantof operations and cash flows, in the near term, will largelycontinue to depend on future developments, which arecontinue to be highly uncertain and cannot be predicted at this time, 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 distribution and effectiveness of vaccines, the impact of COVID-19 on economic activity, the effect of COVID-19 on the Company’s tenants and their businesses, the ability of tenants to make their rental payments and any additional closures of tenants’ businesses. 

 

The Company is continuingcontinues to monitor the impact of COVID-19 on the Company’s business, tenants and industry as a whole.  The magnitude and duration of the COVID-19 pandemic and its impact on the Company’s operations and liquidity isremains uncertain as of the filing date of this Quarterly Report on Form 10-Q as this pandemic continues to evolve globally. However, ifglobally and within the COVID-19 pandemic continues its current trajectory, such impacts could grow and become material and could materially disrupt the Company’s business operations. See Part II. Item 1A. "Risk Factors" of this Quarterly Report on Form 10-Q and Footnotes 1, 2, 8 and 16 to the Notes to the Company’s Condensed Consolidated Financial Statements for further discussion of the possible impact of the COVID-19 pandemic on the Company’s business.

As of March 31, 2020, the Company has not incurred any significant disruptions to its business activities.United States. Management cannot, at this point, estimate ultimate losses related to the COVID-19 pandemic, and accordingly no impairment charges were reflected in the accompanying financial statements related to this matter.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 3 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional discussion regarding impairment charges.

 

Also, in response toSince the outbreak of the COVID-19 pandemic, the Company’s shopping centers have remained open; however, as noted above, a substantial number of tenants had, or continue to have, temporarily or permanently closed their businesses. Others had, or continue to have, shortened their operating hours or offered reduced services. The Company has, and continues to have, worked with tenants to grant rent deferrals or forgiveness of rent on a tenant-by-tenant basis. The development and distribution of COVID vaccines throughout the country have assisted in April 2020,allowing many restrictions to be lifted, providing a path to recovery. There have been additional improvements to the real estate industry as the pandemic continues to redefine the needs of consumers across the country.  There has been an increase in demand for warehouse space to satisfy fulfilment and distribution needs as well as certain retail spaces which provide essential goods such as grocers and pharmacies. 

The Company continues to see an increase in collections of rental payments, however, the effects COVID-19 has had on its tenants is still heavily considered when evaluating the adequacy of the collectability of the lessee’s total accounts receivable balance, including the corresponding straight-line rent receivable. As of March 31, 2021, the Company’s consolidated accounts receivable balance was 50% potentially uncollectible, including receivables from tenants that are being accounted for on a cash basis, and 15% of the Company’s straight-line rent receivables were potentially uncollectible, also inclusive of tenants that are being accounted for on a cash basis.  These elevated reserves are primarily attributable to the impact from the COVID-19 pandemic. Management’s estimate of the collectability of accrued rents and accounts receivable is based on the best information available to management at the time of evaluation.  The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will continue to assess the collectability of its tenant accounts receivables.  As such, the Company closed on a $375.0 million unsecured term loan credit facility (the "Term Loan")may determine that was subsequently increasedfurther adjustments to $590.0 million through an accordion feature.its accounts receivable may be required in the future, and such amounts may be material. 

 

 

Results of Operations

 

Comparison of the three months ended March 31, 2020 31, 2021 and 20192020

 

The following table presents the comparative results from the Company’s Condensed Consolidated Statements of Income for the three months ended March 31, 2020,2021, as compared to the corresponding periodsperiod in 20192020 (in thousands, except per share data):

 

 

Three Months Ended March 31,

 
 

2020

  

2019

  

Change

  

Three Months Ended March 31,

 
  

2021

  

2020

  

Change

 

Revenues

        

Revenues from rental properties, net

 $286,004  $290,634  $(4,630) $278,871  $286,004  $(7,133)

Management and other fee income

 3,740  4,376  (636) 3,437  3,740  (303)

Operating expenses

        

Rent (1)

 (2,835) (2,692) (143) (3,035) (2,835) (200)

Real estate taxes

 (39,652) (39,347) (305) (38,936) (39,652) 716 

Operating and maintenance (2)

 (42,408) (40,896) (1,512) (46,520) (42,408) (4,112)

General and administrative (3)

 (21,017) (25,831) 4,814  (24,478) (21,017) (3,461)

Impairment charges

 (2,974) (4,175) 1,201  -  (2,974) 2,974 

Depreciation and amortization

 (69,397) (71,561) 2,164  (74,876) (69,397) (5,479)

Gain on sale of properties

 3,847  23,595  (19,748) 10,005  3,847  6,158 

Other income/(expense)

        

Other (expense)/income, net

 (3,422) 2,622  (6,044)

Other income, net

 3,357  1,245  2,112 

Gain/(loss) on marketable securities, net

 61,085  (4,667) 65,752 

Interest expense

 (46,060) (44,395) (1,665) (47,716) (46,060) (1,656)

Provision for income taxes, net

 (43) (630) 587  (1,308) (43) (1,265)

Equity in income of joint ventures, net

 13,648  18,754  (5,106) 17,752  13,648  4,104 

Equity in income of other real estate investments, net

 10,958  6,224  4,734  3,787  10,958  (7,171)

Net income attributable to noncontrolling interests

 (289) (509) 220  (3,483) (289) (3,194)

Preferred dividends

  (6,354)  (14,534)  8,180   (6,354)  (6,354)  - 

Net income available to the Company's common shareholders

 $83,746  $101,635  $(17,889)

Net income available to the Company:

       

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

 $131,588  $83,746  $47,842 

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

 

Diluted per common share

 $0.19  $0.24  $(0.05) $0.30  $0.19  $0.11 

 

 

(1)

Rent expense relates to ground lease payments for which the Company is the lessee.

 

(2)

Operating and maintenance expense consists of property related costs including repairs and maintenance costs, roof repair, landscaping, parking lot repair, snow removal, utilities, property insurance costs, security and various other property related expenses.

 

(3)

General and administrative expense includes employee-related expenses (including salaries, bonuses, equity awards, benefits, severance costs and payroll taxes), professional fees, office rent, travel expenseand entertainment costs and other company-specific expenses.

 

Net income available to the Company’s common shareholders was $83.7$131.6 million for the three months ended March 31, 2020,2021, as compared to $101.6$83.7 million for the comparable period in 2019.2020. On a diluted per common share basis, net income available to the Company for the three months ended March 31, 20202021 was $0.19$0.30 as compared to $0.24$0.19 for the comparable period in 2019.2020.

 

The following describes the changes of certain line items included on the Company’s Condensed Consolidated Statements of Income, that the Company believes changed significantly and affected Net income available to the Company's common shareholders during the three months ended March 31, 2020,2021, as compared to the corresponding period in 2019:2020:

 

RevenueRevenues from rental properties, net , net

 

The decrease in Revenues from rental properties, net of $4.6$7.1 million is primarily from (i) a decrease in revenues of $13.1 million due to properties sold during 2020 and 2019, partially offset by (ii) the completion of certain redevelopment and development projects included in the Company’s Signature Series™, which provided incremental revenues for the three months ended March 31, 2021, as compared to the corresponding period in 2020, is primarily from (i) a net decrease in revenues from tenants, including straight-line rental income, primarily due to rent relief provided in association with the COVID-19 pandemic and tenant vacancies for the three months ended March 31, 2021 of $4.5$12.9 million, as compared to the corresponding period in 20192020 and (ii) a decrease in revenues of $0.6 million due to properties sold during 2021 and 2020, partially offset by (iii) acquisitions, tenant buyouts and net growthan increase in the current portfolio, which provided incremental revenueslease termination fee income for the three months ended March 31, 20202021 of $4.0$4.8 million, as compared to the corresponding period in 2019.2020 and (iv) an increase in revenues of $1.6 million due to property acquisitions during 2021.

Operating and maintenance

The increase in Operating and maintenance expense of $4.1 million for the three months ended March 31, 2021, as compared to the corresponding period in 2020, is primarily due to an increase in snow removal costs and security and property maintenance services.

 

General and administrative

 

The decreaseincrease in General and administrative expense of $4.8$3.5 million for the three months ended March 31, 2021, as compared to the corresponding period in 2020, is primarily due to (i) a reductiondecrease of $2.6$1.6 million primarilyin payroll capitalization due to less active development and redevelopment projects during the three months ended March 31, 2021, as compared to the corresponding period in 2020 and (ii) an increase of $1.9 million due to the fluctuations in value of various directors’ deferred stockstock.

Impairment charges

During the three months ended March 31, 2020, the Company recognized impairment charges related to adjustments to property carrying values of $3.0 million, for which the Company’s estimated fair values were primarily based upon signed contracts or letters of intent from third party offers. These adjustments to property carrying values were recognized in connection with the Company’s efforts to market certain properties and management’s assessment as to the likelihood and timing of such potential transactions. Certain of the calculations to determine fair values utilized unobservable inputs and, as such, were classified as Level 3 of the FASB’s fair value hierarchy.

Depreciation and amortization

The increase in Depreciation and amortization of $5.5 million for the three months ended March 31, 2021, as compared to the corresponding period in 2020, is primarily due to (i) an increase of $2.7 million due to depreciation commencing on certain development and redevelopment projects that were placed into service during 2021 and 2020, (ii) an increase of $2.2 million in write-offs of depreciable assets primarily due to tenant vacates during the three months ended March 31, 2020,2021, as compared to the corresponding period in 2019, (ii) a reduction in salary and severance expense for the three months ended March 31, 2020 of $1.8 million, as compared to the corresponding period in 2019, and (iii) a reduction in office rent expensean increase of $0.4$0.6 million as compared to the corresponding period in 2019.resulting from property acquisitions during 2021.

 

Gain on sale of properties

During the three months ended March 31, 2021, the Company disposed of an operating property and four parcels, in separate transactions, for an aggregate sales price of $23.0 million, which resulted in aggregate gains of $10.0 million. During the three months ended March 31, 2020, the Company disposed of an operating property for a sales price of $13.5 million, which resulted in a gain of $3.8 million.

 

DuringGain/(loss) on marketable securities, net

The gain on marketable securities, net of $61.1 million for the three months ended March 31, 2019,2021, as compared to the loss on marketable securities, net of $4.7 million for corresponding period in 2020, is primarily the result of the mark-to-market fluctuations of the Company’s Albertsons Companies, Inc. (“ACI”) investment, which had its initial public offering (“IPO”) in June 2020. This offering resulted in the Company disposedchanging the classification of five operating properties and two out-parcels, in separate transactions, for an aggregate sales price of $74.2 million. These transactions resulted in aggregate gains of $23.6 million.

Other (expense)/income, net –

The change in Other (expense)/income, net of $6.0 million is primarily dueits ACI investment from a cost method investment to changes in the fair value of available-for-salea marketable securities.security.

 

Equity in income of joint ventures, net

The decreaseincrease in Equity in income of joint ventures, net of $5.1$4.1 million for the three months ended March 31, 2021, as compared to the corresponding period in 2020, is primarily due to (i) the recognition ofan increase in net gains of $3.7$4.7 million resulting from the sale of properties within various joint venture investments during the three months endedending March 31, 2019 and2021, as compared to the corresponding period in 2020, partially offset by (ii) lower equity in income of $1.4$0.6 million within various joint venture investments during 2020,2021, as compared to the corresponding period in 2019,2020, primarily resulting from the sale of properties within various joint venture investments during 2019.2021 and 2020.

 

Equity in income of other real estate investments,, net

The increasedecrease in Equity in income of other real estate investments, net of $4.7$7.2 million for the three months ended March 31, 2021, as compared to the corresponding period in 2020, is primarily due to a net increasedecrease in profit participation from the sale of properties within the Company’s Preferred Equity Program during 2020,2021, as compared to the corresponding period in 2019.2020.

Net income attributable to noncontrolling interests

 

Preferred dividends

The decreaseincrease in Preferred dividendsNet income attributable to noncontrolling interests of $8.2$3.2 million for the three months ended March 31, 2021, as compared to the corresponding period in 2020, is primarily due to an increase in net gain on sale of properties during the redemption of preferred shares (Classes I, J and K) during 2019.three months ended March 31, 2021, as compared to the corresponding period in 2020.

 

Tenant Concentration

 

The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties and a large tenant base. As of March 31, 2021, the Company had interests in 398 U.S. shopping center properties, aggregating 69.8 million square feet of gross leasable area (“GLA”), located in 27 states.  At March 31, 2020,2021, the Company’s five largest tenants were TJX Companies, Home Depot, Ahold Delhaize USA, Albertsons and Ross Stores,PetSmart, which represented 3.9%4.0%, 2.5%2.6%, 2.1%, 2.0% and 1.8%2.0%, respectively, of the Company’s annualized base rental revenues, including the proportionate share of base rental revenues from properties in which the Company has less than a 100% economic interest. As discussed above, as a result of the COVID-19 pandemic, the Company has observed a substantial increase in the number of tenants that have made late or partial rent payments, requested a deferral of rent payments, or defaulted on rent payments, and it is likely that more of our tenants will be similarly impacted in the future.

 

Liquidity and Capital Resources

 

The Company’s capital resources include accessing the public debt and equity capital markets, unsecured term loan,loans, mortgages and construction loan financing, and immediate access to the Credit FacilityCompany’s unsecured revolving credit facility (the “Credit Facility”) with bank commitments of $2.0 billion which can be increased to $2.75 billion through an accordion feature. In addition, the Company holds 39.8 million shares of ACI, which are subject to certain contractual lock-up provisions.

 

The Company’s cash flow activities are summarized as follows (in thousands): 

 

  

Three months Ended March 31,

 
  

2020

  

2019

 

Cash and cash equivalents, beginning of the period

 $123,947  $143,581 

Net cash flow provided by operating activities

  155,249   155,258 

Net cash flow used for investing activities

  (66,553)  (15,542)

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

  239,153   (139,624)

Net change in cash and cash equivalents

  327,849   92 

Cash and cash equivalents, end of the period

 $451,796  $143,673 

  

Three months ended March 31,

 
  

2021

  

2020

 

Cash and cash equivalents, beginning of the period

 $293,188  $123,947 

Net cash flow provided by operating activities

  148,371   155,249 

Net cash flow used for investing activities

  (83,924)  (66,553)

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

  (103,783)  239,153 

Net change in cash and cash equivalents

  (39,336)  327,849 

Cash and cash equivalents, end of the period

 $253,852  $451,796 

 

Operating Activities

 

The Company anticipates that cash on hand, net cash flow provided by operating activities, borrowings under its Credit Facility and Term Loan and the issuance of equity and public debt, as well as other debt and equity alternatives, will provide the necessary capital required by the Company. The Company will continue to evaluate its capital requirements for both its short-term and long-term liquidity needs, all of which are highly uncertain and cannot be predicted, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in Part II, Item 1A. Risk Factors. See further discussion relating to the effects of the COVID-19 pandemic in the “COVID-19 Pandemic”, “Investing Activities” and “Financing Activities” sections within this Item 2.pandemic.

 

Net cash flow provided by operating activities for the three months ended March 31, 2020,2021 was $155.2$148.4 million, as compared to $155.3$155.2 million for the comparable period in 2019.2020. The decrease of $0.1$6.8 million is primarily attributable to:

 

a decrease in distributions from the Company’s joint ventures programs; 

rent relief provided to tenants as a result of the COVID-19 pandemic; and

the disposition of operating properties in 20202021 and 2019;2020; partially offset by

an increase in distributions from the Company’s joint venture programs;

 

new leasing, expansion and re-tenanting of core portfolio properties;

 

changes in operating assets and liabilities due to timing of receipts and payments; and

 

the acquisition of an operating propertyproperties during 2021 and 2020.

 

Due to the current economic uncertainty resulting from the COVID-19 pandemic, the Company has been working with its tenants to potentially grant rent deferrals on a tenant-by-tenant basis relating to April rents. The deferrals are anticipated to be paid within a period of one year or less.

In addition, during April 2020, the Company began piloting a Tenant Assistance Program to assist small business tenants in identifying and applying for federal and state aid to help support their businesses during the COVID-19 pandemic. The Company is working in partnership with law firms to provide assistance with the application process at the Company’s expense. Legal professionals will assist tenants in identifying suitable loan programs, identifying potential lending institutions, and preparing and submitting applications.

Investing Activities

 

Net cash flow used for investing activities was $66.6$83.9 million for the three months ended March 31, 2020,2021, as compared to $15.5net cash flow used for investing activities of $66.6 million for the comparable period in 2019.2020.

 

Investing activities during the three months ended March 31, 2021 primarily consisted of:

Cash inflows:

$22.2 million in proceeds from the sale of a consolidated operating property and four parcels..

Cash outflows:

$84.3 million for the acquisition of two consolidated operating properties; 

$20.6 million for improvements to operating real estate primarily related to the Company’s active redevelopment pipeline; and

$2.2 million for investments in and advances to real estate joint ventures, primarily related to a redevelopment project within the Company's joint venture portfolio, and investments in other real estate investments, primarily related to repayment of a mortgage within the Company's Preferred Equity Program.  

Investing activities during the three months ended March 31, 2020 primarily consisted of:

 

Cash inflows:

 

$13.3 million in proceeds from the sale of a consolidated operating property; and

 

$2.5 million in proceeds from insurance casualty claims.

 

Cash outflows:

 

$71.6 million for improvements to operating real estate primarily related to the Company’s active redevelopment pipeline and improvements to real estate under development;

 

$7.1 million for the acquisition of operating real estate; and

 

$5.8 million for investments in and advances to real estate joint ventures, primarily related to a redevelopment project within the Company’s joint venture portfolio, and investments in other real estate investments, primarily related to repayment of a mortgage within the Company’s Preferred Equity Program.

 

Investing activities during 2019 primarily consisted of:

Cash inflows:

$72.1 million in proceeds from the sale of five consolidated operating properties and two out-parcels.

Cash outflows:

$77.6 million for improvements to operating real estate primarily related to the Company’s active redevelopment pipeline and improvements to real estate under development; and

$12.4 million for investments in and advances to real estate joint ventures, primarily related to a redevelopment project within the Company’s joint venture portfolio, and investments in other real estate investments, primarily related to repayment of a mortgage within the Company’s Preferred Equity Program.

Acquisition of Operating Real Estate

During the three months ended March 31, 20202021 and 2019,2020, the Company expended $7.1$84.3 million and $0$7.1 million, (after use of Internal Revenue Code Section 1031 proceeds of $31.0 million in 2019), respectively, towards the acquisition of an operating real estate property adjacent to an existing operating real estate property.properties. The Company anticipates spending approximately up$25.0 million to $75.0$50.0 million towards the acquisition of operating properties for the remainder of 2020.2021, excluding amounts expended in connection with the Merger (see Footnote 17 to the Notes to the Company’s Condensed Consolidated Financial Statements). The Company intends to fundfunding of these acquisitions withcapital requirements will be provided by proceeds from property dispositions, net cash flow provided by operating activities proceeds from property dispositions and availability under the Company'sCompany’s Credit Facility and Term Loan.Facility.

 

Improvements to Operating Real Estate

 

During the three months ended March 31, 20202021 and 2019,2020, the Company expended $55.0$20.6 million and $51.3$55.0 million, respectively, towards improvements to operating real estate. These amounts consist of the following (in thousands):

 

 

Three months Ended March 31,

  

Three months ended March 31,

 
 

2020

  

2019

  

2021

  

2020

 

Redevelopment and renovations

 $43,871  $36,357  $12,908  $43,871 

Tenant improvements and tenant allowances

 11,102  11,937   7,661   11,102 

Other

  -   3,051 

Total improvements (1)

 $54,973  $51,345  $20,569  $54,973 

 

 

(1)

During the three months ended March 31, 20202021 and 2019,2020, the Company capitalized payroll of $2.6$1.5 million and $1.1$2.6 million, respectively, and capitalized interest of $2.4$0.3 million and $1.2$2.4 million, respectively, in connection with 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,redevelopment: (i) large scale redevelopment, which involves demolishing and building new square footage,footage; (ii) value creation redevelopment, which includes the subdivision of large anchor spaces into multiple tenant layouts,layouts; and (iii) creation of out-parcels and pads located in the front of the shopping center properties.

 

Due to the recent COVID-19 pandemic mentioned above, the Company is re-evaluating its current redevelopment and re-tenanting projects and will only move forward with the projects it feels are necessary. The Company anticipates its capital commitment toward these redevelopment projects and re-tenanting efforts for the remainder of 20202021 will be approximately $80.0$75.0 million to $130.0 million.$125.0 million, which does not include any amounts that may result from the Merger (see Footnote 17 to the Notes to the Company’s Condensed Consolidated Financial Statements). 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.

 

Real Estate Under DevelopmentFinancing Activities

 

The Company is engaged in select real estate development projects, which are expected to be held as long-term investments. As of March 31, 2020, the Company had one active real estate development project in progress. DuringNet cash flow used for financing activities was $103.8 million for the three months ended March 31, 2020 and 2019,2021, as compared to $239.2 million for the Company expended $16.6 million and $26.3 million, respectively, towards improvements to real estate under development. The Company capitalized (i) interestcomparable period in 2020.

Financing activities during the three months ended March 31, 2021 primarily consisted of:

Cash outflows:

$80.0 million of dividends paid;

$14.9 million in principal payment on debt, including normal amortization of rental property debt; and

$9.1 million in shares repurchased for employee tax withholding on equity awards.

Financing activities during the three months ended March 31, 2020 and 2019, respectively, in connection with its real estate development project. The Company anticipates the total remaining costs to complete this active project to be approximately $25.0 million to $50.0 million. The Company anticipates its capital commitment toward this development project for the remainder of 2020 will be approximately $20.0 million to $40.0 million. The funding of these capital requirements will be provided by proceeds from property dispositions, net cash flow provided by operating activities, construction financing, where applicable, and availability under the Company’s Credit Facility.

Financing Activities

Net cash flow provided by financing activities was $239.2 million for the three months ended March 31, 2020, as compared to net cash flow used for financing activities of $139.6 million for the comparable period in 2019.

Financing activities during 2020 primarily consisted of:

 ‐

Cash inflows:

 

$475.0 million in proceeds from borrowings under the Company’s unsecured revolving Credit Facility, net.

Cash outflows:

 

$127.3 million of dividends paid;

 

$78.4 million for principal payments on debt (primarily related to the repayment of debt on an encumbered property and the payoff of a construction loan), including normal amortization on rental property debt;

 

$20.9 million for the redemption/distribution of noncontrolling interests, primarily related to the redemption of certain partnership interests by consolidated subsidiaries; and

 

$5.1 million for financing origination costs, primarily related to the new unsecured revolving credit facility.

 

Financing activities during 2019 primarily consisted of:

Cash inflows:

$3.3 million in proceeds from construction loan financing at one development project.

Cash outflows:

$132.5 million of dividends paid; and

$6.4 million for principal payments on debt (primarily related to the repayment of debt on an encumbered property), including normal amortization on rental property debt.

The Company continually evaluates its debt maturities, and, based on management’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. Due to the recent COVID-19 pandemic mentioned above, the Company has noticed a continuing trend that, although pricing remains dependent on specific deal terms, generally spreads for non-recourse mortgage and construction loan financing have been widening, and the unsecured debt markets are available with elevated credit spreads.

 

Debt maturities for 2020the remainder of 2021 consist of: $83.6$125.7 million of consolidated debt, $111.6debt; $54.9 million of unconsolidated joint venture debt and $61.9$19.9 million of debt included in the Company’s Preferred Equity Program, assuming the utilization of extension options where available. The 20202021 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 Credit Facilityunconsolidated joint ventures and Preferred Equity Program are anticipated to be repaid through operating cash flows, debt refinancing, where applicable. 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 improve its investment-grade senior, unsecured debt ratings.  The Company may, from time-to-time,time to time, seek to obtain funds through additional common and preferred equity offerings, unsecured debt financings mortgages and/or mortgage/construction loan financingfinancings 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 $14.5$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, grocery-anchored shopping centers and mixed-use assets, funding real estate under development projects, expanding and improving properties in the portfolio and other investments.

 

During February 2018,2021, the Company filed a shelf registration statement on Form S-3, which is effective for a term of three years, for the future unlimited offerings, from time-to-time,time to time, of debt securities, preferred stock, depositary shares, common stock and common stock warrants. The Company, pursuant to this shelf registration statement may, from time-to-time,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.

 

Common Stock

During September 2019, the Company established an at the market continuous offering program (the “ATM program"), pursuant to which the Company may offer and sell from time to time shares of its common stock, par value $0.01 per share, with an aggregate gross sales price of up to $500.0 million through a consortium of banks acting as sales agents. Sales of the shares of common stock may be made, as needed, from time to time in “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, including by means of ordinary brokers’ transactions on the New York Stock Exchange or otherwise (i) at market prices prevailing at the time of sale, (ii) at prices related to prevailing market prices or (iii) as otherwise agreed to with the applicable sales agent. The Company did not offer for sale any shares of common stock under the ATM program during the three months ended March 31, 2020.

During February 2020, the Company extended its share repurchase program for a term of two years, which will expire in February 2022, pursuant to which the Company may repurchase shares of its common stock, par value $0.01 per share, with an aggregate gross purchase price of up to $300.0 million. The Company did not repurchase any shares under the share repurchase program during the three months ended March 31, 2020.2021. As of March 31, 2020,2021, the Company had $224.9 million available under this share repurchase program.

Senior Notes

 

The Company’s supplemental indenture governing its senior notes contains the following covenants, all of which the Company is compliant with:

 

Covenant

 

Must Be

 

As of March 31, 2021, 2020

Consolidated Indebtedness to Total Assets

 

<65%

 

43%

38%

Consolidated Secured Indebtedness to Total Assets

 

<40%

 

3%

2%

Consolidated Income Available for Debt Service to Maximum Annual Service Charge

 

>1.50x

 

4.7x8.3x

Unencumbered Total Asset Value to Consolidated Unsecured Indebtedness

 

>1.50x

 

2.3x2.6x

 

For a full description of the various indenture covenants, refer to the Indenture dated September 1, 1993; the First Supplemental Indenture dated August 4, 1994; the Second Supplemental Indenture dated April 7, 1995; the Third Supplemental Indenture dated June 2, 2006; the Fourth Supplemental Indenture dated April 26, 2007; the Fifth Supplemental Indenture dated as of September 24, 2009; the Sixth Supplemental Indenture dated as of May 23, 2013; and the Seventh Supplemental Indenture dated as of April 24, 2014, each as filed with the SEC. See the Exhibits Index to our Annual Report on Form 10-K for the year ended December 31, 20192020 for specific filing information.

 

Credit Facility

 

In February 2020, the Company closed onobtained 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.banks. The Credit Facility is scheduled to expire in March 2024, with two additional six-month options to extend the maturity date, at the Company’s discretion, to March 2025. The Credit Facility is a green credit facility tied to sustainability metric targets, as described in the agreement. The Company achieved such targets, which effectively reduced the rate on the Credit Facility by one basis point. The Credit Facility, which accrues interest at a rate of LIBOR plus 77.576.5 basis points (1.76%(0.88% as of March 31, 2020)2021), can be increased to $2.75 billion through an accordion feature. Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to covenants requiring the maintenance of (i) maximum indebtedness ratios and (ii) minimum interest and fixed charge coverage ratios. As of March 31, 2020,2021, the Credit Facility had anno outstanding balance, of $675.0 million and $0.3 million appropriated for letters of credit.credit and the Company was in compliance with its covenants.

 

Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to maintenance of various covenants. The Company is currently in compliance with these covenants. The financial covenants for the Credit Facility are as follows:

 

Covenant

 

Must Be

 

As of March 31, 202131, 2020

Total Indebtedness to Gross Asset Value (“GAV”)

 

<60%

 

43%

46%

Total Priority Indebtedness to GAV

 

<35%

 

1%

Unencumbered Asset Net Operating Income to Total Unsecured Interest Expense

 

>1.75x

 

4.2x3.6x

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 of February 27, 2020, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 28, 2020.

 

Term Loan

On April 1, 2020, the Company entered into a new $375.0 million Term Loan pursuant to a credit agreement, with a group of banks, which is scheduled to expire in April 2021, with a one-year extension option to extend the maturity date, at the Company’s discretion, to April 2022. The Term Loan, accrues interest at a rate of LIBOR plus 140 basis points or, at the Company’s option, a spread of 40 basis points to the base rate defined in the Term Loan, each of which fluctuates in accordance with changes in the Company’s senior debt ratings. The Term Loan can be increased by an additional $750.0 million through an accordion feature. Pursuant to the terms of the Term Loan, the Company is subject to covenants that are substantially the same as those in the Credit Facility. During April 2020, borrowings under the Term Loan were increased to $590.0 million through the accordion feature.

Mortgages and Construction Loan Payable

In August 2018, the Company closed on a construction loan commitment of $67.0 million relating to one development property. This loan commitment was scheduled to mature in August 2020, with six additional six-month options to extend the maturity date to August 2023, and bore interest at a rate of LIBOR plus 180 basis points. During the three months ended March 31, 2020, this construction loan was fully repaid.

 

During the three months ended March 31, 2020,2021, the Company repaid $8.8$12.3 million of mortgage debt (including fair market value adjustment of $0.1 million) that encumbered an operating property.

 

In addition to the public equity and debt markets as capital sources, the Company may, from time-to-time,time to time, obtain mortgage financing on selected properties and construction loan financing to partially fund the capital needs of its real estate development projects. As of March 31, 2020,2021, the Company had over 320330 unencumbered property interests in its portfolio.

 

COVID-19

 

In light of the ongoing spread ofAs the COVID-19 pandemic andcontinues to evolve, an uncertainty remains in relation to the uncertainty related to its unfoldinglong-term economic impact it will have. As a result, the Company ishas focused on itscreating a strong liquidity position, including: (i) itsincluding, but not limited to, maintaining availability under the new $2.0 billion ($2.75 billion with the accordion feature) unsecured revolving credit facility, (ii) its new $375.0 million Term Loan entered into on April 1, 2020 and was subsequently increased to $590.0 million through the accordion feature, (iii) $451.8 million ofCredit Facility, cash and cash equivalents on hand at March 31, 2020, and (iv) as mentioned above, over 320having access to unencumbered property interests.

 

The Company is continuingcontinues to monitor the impact of COVID-19 on the Company’s business, tenants and industry as a whole. The magnitude and duration of the COVID-19 pandemic and its impact on the Company’s operations and liquidity is uncertain as of the filing date of this Quarterly Report on Form 10-Q as this pandemic continues to evolve globally.globally and within the United States. However, if the COVID-19 pandemic continues, on its current trajectory, such impacts could grow, and become material and could materially disrupt the Company’s business operations and materially adversely affect the Company’s liquidity.

 

Dividends

The Company’s Board of Directors will continue to evaluate the Company’s dividend policy on a quarterly basis as the Board of Directors monitorsthey monitor sources of capital and evaluatesevaluate the impact of the economy and capital markets availability on operating fundamentals.  Since cash used to pay dividends reduces amounts available for capital investment, the Company generally intends to maintain a dividend payout ratio that reserves such amounts as it considers necessary for the expansion and renovation of shopping centers in its portfolio, debt reduction, the acquisition of interests in new properties and other investments as suitable opportunities arise and such other factors as the Board of Directors considers appropriate.  Cash dividends paid for common and preferred issuances of stock for the three months ended March 31, 2021 and 2020 and 2019 were $127.3$80.0 million and $132.5$127.3 million, respectively.

 

Although the Company receives substantially all of its rental payments on a monthly basis, it generally has paidintends 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. On January 28, 2020,February 22, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.28$0.17 per common share payable to shareholders of record on April 2, 2020,March 10, 2021, which was paid on March 24, 2021. On April 15, 2020. As a result of the COVID-19 pandemic and the future economic uncertainties, out of an abundance of caution,27, 2021, the Company’s Board of Directors has temporarily suspended thedeclared a quarterly cash dividend of $0.17 per common share payable to shareholders of record on its common shares. The Company’s Board of Directors will continueJune 9, 2021, which is scheduled to monitor the Company’s financial performance and economic outlookbe paid on a monthly basis and, at a later date, intends to reinstate the common dividend during 2020 of at least the amount equal to the Company's REIT taxable income distribution requirements.June 23, 2021.

 

The Company’s Board of Directors declared quarterly dividends with respect to the Company’s classes of cumulative redeemable preferred shares (Classes L and M). All dividends on preferred shares were paid on April 15, 2020,2021, to shareholders of record on April 1, 2020.2021. Additionally, the Company’s Board of Directors declared quarterly dividends with respect to the Company’s classes of cumulative redeemable preferred shares (Classes L and M). All dividends on the preferred shares are scheduled to be paid on July 15, 2020,2021, to shareholders of record on July 1, 2020.2021.

 

Funds From Operations

 

Funds From Operations (“FFO”) is a supplemental non-GAAP financial measure utilized to evaluate the operating performance of real estate companies. NAREIT defines FFO as net income/(loss) available to the Company’s common shareholders computed in accordance with generally accepted accounting principles in the United States (“GAAP”), excluding (i) depreciation and amortization related to real estate, (ii) gains or losses from sales of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis. The Company also made an election to exclude from its calculation of FFO (i) gains and losses on the sale of assets and impairments of assets incidental to its main business and (ii) mark-to-market changes in the value of its equity securities. As such, the Company does not include gains/impairments on land parcels, gains/losses (realized or unrealized) from marketable securities, allowance for credit losses on mortgage receivables or gains/impairments on preferred equity participations in NAREIT defined FFO. As a result of this election, the Company will no longer disclose FFO available to the Company’s common shareholders as adjusted (“FFO as adjusted”) as an additional supplemental measure. The incidental adjustments noted above which were previously excluded from NAREIT FFO and used to determine FFO as adjusted are now included in NAREIT FFO and therefore the Company believes FFO as adjusted is no longer necessary.

 

The Company presents FFO available to the Company’s common shareholders as it considers it an important supplemental measure of our operating performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO available to the Company’s common shareholders when reporting results. Comparison of our presentation of FFO available to the Company’s common shareholders to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.

 

FFO is a supplemental non-GAAP financial measure of real estate companies’ operating performances, which does not represent cash generated from operating activities in accordance with GAAP and therefore, should not be considered an alternative for net income or cash flows from operations as a measure of liquidity.  Our method of calculating FFO available to the Company’s common shareholders may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

 

The Company’s reconciliation of net income 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 March 31,

 
  

2020

  

2019

 

Net income available to the Company’s common shareholders

 $83,746  $101,635 

Gain on sale of properties

  (3,847)  (23,595)

Gain on sale of joint venture properties

  (18)  (4,690)

Depreciation and amortization – real estate related

  68,707   71,260 

Depreciation and amortization – real estate joint ventures

  10,564   10,161 

Impairment charges of depreciable real estate properties

  3,441   6,408 

Profit participation from other real estate investments, net

  (6,283)  (1,030)

Loss/(gain) on marketable securities

  4,667   (1,503)

Provision for income taxes (1)

  1   - 

Noncontrolling interests (1)

  (505)  (248)

FFO available to the Company’s common shareholders

 $160,473  $158,398 

Weighted average shares outstanding for FFO calculations:

        

Basic

  429,735   419,464 

Units

  638   927 

Dilutive effect of equity awards

  717   1,182 

Diluted (2)

  431,090   421,573 
         

FFO per common share – basic

 $0.37  $0.38 

FFO per common share – diluted (2)

 $0.37  $0.38 

  

Three Months Ended March 31,

 
  

2021

  

2020

 

Net income available to the Companys common shareholders

 $131,588  $83,746 

Gain on sale of properties

  (10,005)  (3,847)

Gain on sale of joint venture properties

  (5,283)  (18)

Depreciation and amortization - real estate related

  74,113   68,707 

Depreciation and amortization - real estate joint ventures

  10,007   10,564 

Impairment charges

  1,068   3,441 

Profit participation from other real estate investments, net

  195   (6,283)

(Gain)/loss on marketable securities, net

  (61,085)  4,667 

Provision for income taxes (1)

  1,046   1 

Noncontrolling interests (1)

  2,626   (505)

FFO available to the Companys common shareholders

 $144,270  $160,473 

Weighted average shares outstanding for FFO calculations:

        

Basic

  430,524   429,735 

Units

  654   638 

Dilutive effect of equity awards

  1,606   717 

Diluted (2)

  432,784   431,090 
         

FFO per common share basic

 $0.34  $0.37 

FFO per common share diluted (2)

 $0.33  $0.37 

 

 

(1)

Related to gains, impairments, and depreciation on properties, where applicable.

 

(2)

Reflects the potential impact if certain units were converted to common stock at the beginning of the period, which would have a dilutive effect on FFO available to the Company’s common shareholders. FFO available to the Company’s common shareholders would be increased by $160$97 and $261$160 for the three months ended March 31, 20202021 and 2019,2020, respectively. The effect of other certain convertible units would have an anti-dilutive effect upon the calculation of Net incomeFFO 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(Income (Same property NOI”NOI)

 

Same property NOI is a supplemental non-GAAP financial measure of real estate companies’ operating performance and should not be considered an alternative to net income in accordance with GAAP or cash flows from operations as a measure of liquidity. The Company considers Same property NOI as an important operating performance measure because it is frequently used by securities analysts and investors to measure only the net operating income of properties that have been owned by the Company for the entire current and prior year reporting periods. It excludes properties under redevelopment, development and pending stabilization; properties are deemed stabilized at the earlier of (i) reaching 90% leased or (ii) one year following a project’s inclusion in operating real estate. Same property NOI assists in eliminating disparities in net income due to the development, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent performance measure for the comparison of the Company's properties.

 

Same property NOI is calculated using revenues from rental properties (excluding straight-line rent adjustments, lease termination fees, TIFs and amortization of above/below market rents) less charges for bad debt, operating and maintenance expense, real estate taxes and rent expense plus the Company’s proportionate share of Same property NOI from unconsolidated real estate joint ventures, calculated on the same basis. The Company’s method of calculating Same property NOI available to the Company’s common shareholders may differ from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

 

The following is a reconciliation of Net income available to the Company’s common shareholders to Same property NOI (in thousands):

 

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2020

  

2019

  

2021

  

2020

 

Net income available to the Company’s common shareholders

 $83,746  $101,635 

Net income available to the Companys common shareholders

 $131,588  $83,746 

Adjustments:

      

Management and other fee income

 (3,740) (4,376) (3,437) (3,740)

General and administrative

 21,017  25,831  24,478  21,017 

Impairment charges

 2,974  4,175  -  2,974 

Depreciation and amortization

 69,397  71,561  74,876  69,397 

Gain on sale of properties

 (3,847) (23,595) (10,005) (3,847)

Interest and other expense, net

 49,482  41,773  44,359  44,815 

(Gain)/loss on marketable securities, net

 (61,085) 4,667 

Provision for income taxes, net

 43  630  1,308  43 

Equity in income of other real estate investments, net

 (10,958) (6,224) (3,787) (10,958)

Net income attributable to noncontrolling interests

 289  509  3,483  289 

Preferred dividends

 6,354  14,534  6,354  6,354 

Non same property net operating income

 (18,193) (28,757) (15,039) (16,282)

Non-operational expense from joint ventures, net

  19,016   14,793   11,963   19,014 

Same property NOI

 $215,580  $212,489 

Same property NOI

 $205,056  $217,489 

 

Same property NOI increaseddecreased by $3.1$12.4 million or 1.5%5.7% for the three months ended March 31, 2020,2021, as compared to the corresponding period in 2019.2020. This increasechange is primarily the result of (i) an increase ina reduction of revenue associated with rent waivers, potentially uncollectible revenues from rental propertiesand disputed amounts.

 

Leasing Activity

 

During the three months ended March 31, 2020,2021, the Company executed 224262 leases totaling over 1.92.3 million square feet in the Company’s consolidated operating portfolio comprised of 4696 new leases and 178166 renewals and options. The leasing costs associated with these new leases are estimated to aggregate $13.9$18.9 million or $44.38$34.22 per square foot. These costs include $11.5$13.9 million of tenant improvements and $2.4$5.0 million of external leasing commissions. The average rent per square foot onfor (i) new leases was $19.70$22.18 and on(ii) renewals and options was $16.91.$14.99.

 

Tenant Lease Expirations

 

At March 31, 2020,2021, the Company has a total of 5,4185,264 leases in the U.S.its consolidated operating portfolio. The following table sets forth the aggregate lease expirations for each of the next ten years, assuming no renewal options are exercised. For purposes of the table, the Total Annual Base Rent Expiring represents annualized rental revenue, excluding the impact of straight-line rent, for each lease that expires during the respective year. Amounts in thousands, except for number of lease data:

 

Year Ending

December 31,

 

Number of Leases

Expiring

  

Square Feet

Expiring

  

Total Annual Base

Rent Expiring

  

% of Gross

Annual Rent

  

Number of Leases

Expiring

  

Square Feet

Expiring

  

Total Annual Base

Rent Expiring

  

% of Gross

Annual Rent

 
(1) 169  488  $11,161  1.4

%

  175  504  $11,487  1.4

%

2020

 355  1,646  $30,684  3.7

%

2021

 759  5,499  $87,791  10.7

%

  413  2,196  $38,140  4.7

%

2022

 827  5,943  $103,750  12.7

%

  802  5,204  $93,466  11.5

%

2023

 719  5,783  $98,796  12.1

%

  738  5,766  $98,818  12.1

%

2024

 671  5,238  $94,827  11.6

%

  673  5,109  $94,217  11.6

%

2025

 497  4,514  $76,368  9.3

%

  625  5,255  $94,322  11.6

%

2026

 269  4,050  $57,768  7.1

%

  470  6,256  $89,401  11.0

%

2027

 249  3,226  $49,630  6.1

%

  270  3,741  $56,674  7.0

%

2028

 314  3,241  $61,421  7.5

%

  320  3,383  $61,164  7.5

%

2029

 254  2,639  $45,857  5.6

%

  251  2,679  $47,301  5.8

%

2030

 171  1,624  $29,474  3.6

%

  206  1,708  $33,119  4.1

%

2031

  160  1,215  $25,487  3.1

%

 

 

(1)

Leases currently under month-to-month lease or in process of renewal.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

The Company’s primary market risk exposure is interest rate risk. The Company periodically evaluates its exposure to short-term interest rates and will, from time-to-time, enter into interest rate protection agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating-rate debt. The Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes. The following table presents the Company’s aggregate fixed rate and variable rate debt obligations outstanding, including fair market value adjustments and unamortized deferred financing costs, as of March 31, 2020,2021, with corresponding weighted average interest rates sorted by maturity date. The Company had no variable rate debt outstanding at March 31, 2021. The table does not include extension options where available (amounts in millions).

 

  

2020

  

2021

  

2022

  

2023

  

2024

  

Thereafter

  

Total

  

Fair Value

 

Secured Debt

                                

Fixed Rate

 $83.6  $143.7  $150.8  $12.0  $9.9  $4.9  $404.9  $405.6 

Average Interest Rate

  5.29

%

  5.39

%

  4.06

%

  3.23

%

  6.73

%

  7.08

%

  4.86

%

    
                                 

Unsecured Debt

                                

Fixed Rate

 $-  $484.1  $497.3  $348.4  $397.3  $2,908.4  $4,635.5  $4,416.5 

Average Interest Rate

  -   3.20

%

  3.40

%

  3.13

%

  2.70

%

  3.73

%

  3.50

%

    
                                 

Floating Rate

 $-  $-  $-  $-  $668.2  $-  $668.2  $625.4 

Average Interest Rate

  -   -   -   -   1.76

%

  -   1.76

%

    

Based on the Company’s variable-rate debt balances, interest expense would have increased by $1.7 million for the three months ended March 31, 2020, if short-term interest rates were 1.0% higher.

  

2021

  

2022

  

2023

  

2024

  

2025

  

Thereafter

  

Total

  

Fair Value

 

Secured Debt

                                

Fixed Rate

 $125.7  $145.8  $12.0  $7.8  $-  $4.3  $295.6  $297.9 

Average Interest Rate

  5.42

%

  4.05

%

  3.23

%

  6.73

%

  -   7.08

%

  4.71

%

    
                                 

Unsecured Debt

                                

Fixed Rate

 $-  $498.3  $348.9  $398.0  $497.6  $3,303.1  $5,045.9  $5,306.9 

Average Interest Rate

  -   3.40

%

  3.13

%

  2.70

%

  3.30

%

  3.42

%

  3.33

%

    

 

Item 4.Controls and Procedures.

 

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

 

There have not been any changes in the Company’s internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

PART II

OTHER INFORMATION

 

Item 1.Legal Proceedings.

 

The following information supplements and amends our discussion set forth under Part I, Item 3 "Legal Proceedings" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.2020.

 

The Company is not presently involved in any litigation nor, to its knowledge, is any litigation threatened against the Company or its subsidiaries that, in management's opinion, would result in any material adverse effect on the Company's ownership, management or operation of its properties taken as a whole, or which is not covered by the Company's liability insurance.

 

Item 1A.Risk Factors.

 

Except as set forth below, as of the date of this report, there are no material changes to our risk factors as previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019.2020. 

 

Risks Relating to the Merger

The Company’sMerger may not be completed on the terms or timeline currently contemplated, or at all.

Although the Company and Weingarten have entered into a definitive Merger Agreement on April 15, 2021 under which Weingarten will merge with and into the Company, the completion of the Merger is subject to certain conditions, including:

(1)

approval of the Company's stockholders and Weingarten's stockholders of the Merger in separate stockholder meetings;

(2)

approval for listing on the NYSE of the common stock of the Company to be issued in connection with the Merger;

(3)

effectiveness of the registration statement for our shares being issued pursuant to the Merger and such registration statement not being the subject of any stop order or proceeding seeking a stop order;

(4)

no injunction or law prohibiting the Merger;

(5)

accuracy of each party’s representations, subject in most cases to materiality or material adverse effect qualifications;

(6)

material compliance with each party’s covenants; and

(7)

receipt by each of Weingarten and the Company of an opinion to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and of an opinion that each of Weingarten and the Company qualify as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). Neither Weingarten nor the Company can provide assurances that the Merger will be consummated on the terms or timeline currently contemplated, or at all.

Our stockholders may be diluted by the Merger.

The Merger may dilute the ownership position of our stockholders. Upon completion of the Merger, our legacy stockholders will own approximately 71% of the issued and outstanding shares of our common stock, and legacy Weingarten stockholders will own approximately 29% of the issued and outstanding shares of our common stock. Consequently, our stockholders may have less influence over our management and policies after the effective time of the Merger than they currently exercise over our management and policies.

Failure to complete the Merger could adversely affect our stock price and our future business and financial results.

If the Merger is not completed, our ongoing businesses may be adversely affected and we will be subject to numerous risks, including the following:

upon termination of the Merger Agreement under specified circumstances, Weingarten may be required to pay the Company a termination fee of $115.0 million;

we are paying substantial costs relating to the Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees and integration preparation costs that have already been incurred or will continue to be incurred until the closing of the Merger;

our management focusing on the Merger instead of on pursuing other opportunities that could be beneficial to the Company without realizing any of the benefits of having the Merger completed; and

reputational harm due to the adverse perception of any failure to successfully complete the Merger.

If the Merger is not completed, we cannot assure our stockholders that these risks will not materialize or will not materially affect the business, financial condition, results and our stock prices.

The pendency of the Merger could adversely affect the business and operations or stock price hasof the Company and may continue to be adversely impacted by the COVID-19 pandemic and such impact could be material.Weingarten.

 

In March 2020,connection with the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization.  The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide, and has caused significant volatility in U.S. and international debt and equity markets. There is significant uncertainty around the extent and duration of business disruptions related to COVID-19, as well as its impact on the U.S. economy. 

Our business and the businessespending Merger, some of our and Weingarten’s tenants have been adversely affected by the COVID-19 pandemic and actions taken to contain or prevent its spread. A substantial number of tenants have temporarily closed their businesses, have shortened their operating hoursvendors may delay or are offering reduced services. As a result, the Company has observed a substantial increase in the number of tenants that have made late or partial rent payments, requested a deferral of rent payments, or defaulted on rent payments, and it is likely that more of our tenants will be similarly impacted in the future. Impacts of COVID-19 could also result in the complete or partial closure of one or more of our tenants’ manufacturing facilities or distribution centers, temporary or long-term disruption in our tenants’ supply chains from local and international suppliers, and/or delays in the delivery of our tenants’ inventory.

Even after governmental restrictions are lifted, our tenants may continue to be impacted by economic conditions resulting from COVID-19 or public perception of the risk of COVID-19,defer decisions, which could adversely affect foot traffic tothe revenues, earnings, funds from operations, cash flows and expenses of the Company and Weingarten, regardless of whether the Merger is completed. Similarly, current and prospective employees of the Company and Weingarten may experience uncertainty about their future roles with the Company following the Merger, which may materially adversely affect our tenants’ businesses and our tenants’Weingarten’s ability to adequately staffattract and retain key personnel during the pendency of the Merger. In addition, due to interim operating covenants in the Merger Agreement, we and Weingarten may be unable (without the other party’s prior written consent), during the pendency of the Merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial.

Risks Relating to the Company after Completion of the Merger

We expect to incur substantial expenses related to the Merger.

We expect to incur substantial expenses in completing the Merger and integrating the business, operations, networks, systems, technologies, policies and procedures of the Company and Weingarten. There are a large number of processes that must be integrated in the merger, including leasing, billing, management information, purchasing, accounting and finance, sales, payroll and benefits, fixed asset, lease administration and regulatory compliance. While we and Weingarten have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond our control that could affect the total amount or the timing of integration expenses.

28

Our stockholders may be diluted by the Merger and the trading price of shares of the combined company may be affected by factors different from those affecting the price of shares of our common stock before the Merger

The Merger may dilute the ownership position of our stockholders. Upon completion of the Merger, our legacy stockholders will own approximately 71% of the issued and outstanding shares of our common stock, and legacy Weingarten stockholders will own approximately 29% of the issued and outstanding shares of our common stock. Consequently, our stockholders may have less influence over our management and policies after the effective time of the Merger than they currently exercise over our management and policies. The results of our operations and the trading price of our common stock after the Merger may also be affected by factors different from those currently affecting our results of operations and the trading prices of our common stock. For example, some of our and Weingarten’s existing institutional investors may elect to decrease their businesses. Such eventsownership in the combined company. Accordingly, the historical trading prices and financial results of the Company and Weingarten may not be indicative of these matters for the combined company after the Merger.

Following the Merger, we may be unable to integrate the business of Weingarten successfully or realize the anticipated synergies and related benefits of the Merger or do so within the anticipated time frame.

The Merger involves the combination of two companies which currently operate as independent public companies. We will be required to devote significant management attention and resources to integrating the business practices and operations of Weingarten. Potential difficulties we may encounter in the integration process include the following:

the inability to successfully combine the businesses of the Company and Weingarten in a manner that permits the Company to achieve the cost savings anticipated to result from the Merger, which would result in some anticipated benefits of the Merger not being realized in the time frame currently anticipated, or at all;

the inability to successfully realize the anticipated value from some of Weingarten’s assets, particularly from the redevelopment projects;

lost sales and tenants as a result of certain tenants of either of the Company or Weingarten deciding not to continue to do business with the combined company;

the complexities associated with integrating personnel from the two companies;

the additional complexities of combining two companies with different histories, cultures, markets, strategies and customer bases;

the failure by the Company to retain key employees of either of the two companies;

potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the merger; and

performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the Merger and integrating the companies’ operations.

For all these reasons, you should be aware that it is possible that the integration process could severely disrupt their operationsresult in the distraction of our management, the disruption of our ongoing business or inconsistencies in our services, standards, controls, procedures and policies, any of which could adversely affect the ability of the Company to maintain relationships with tenants, vendors and employees or to achieve the anticipated benefits of the Merger, or could otherwise adversely affect our business and financial results.

29

Following the Merger, we will have a substantial amount of indebtedness and may need to incur more in the future.

We have substantial indebtedness and, in connection with the Merger, will incur additional indebtedness. The incurrence of new indebtedness could have adverse consequences on our business following the Merger, such as:

requiring the Company to use a substantial portion of our cash flow from operations to service our indebtedness, which would reduce the available cash flow to fund working capital, capital expenditures, development projects, and other general corporate purposes and reduce cash for distributions;

limiting our ability to obtain additional financing to fund our working capital needs, acquisitions, capital expenditures, or other debt service requirements or for other purposes;

increasing our costs of incurring additional debt;

increasing our exposure to floating interest rates;

limiting our ability to compete with other companies that are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;

restricting the Company from making strategic acquisitions, developing properties, or exploiting business opportunities;

restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our existing and future indebtedness;

exposing the Company to potential events of default (if not cured or waived) under covenants contained in our debt instruments that could have a material adverse effect on our business, financial condition, and operating results;

increasing our vulnerability to a downturn in general economic conditions; and

limiting our ability to react to changing market conditions in its industry.

The impact of any of these potential adverse consequences could have a material adverse effect on our business, financial condition and results of operations. A downturn in our tenants’ businesses that significantly weakens their financial condition could cause them to delay lease commencements or decline to extend or renew leases upon expiration and could lead to additional failures to make rental payments when due, store closures or bankruptcies, and we may be unable to collect past due balances under relevant leases. We have begun to receive requests for rent relief from some of our tenants. We are assessing these requests on a case-by-case basis and have agreed and may continue to agree to certain relief. It is likely there will be additional requests for relief in the future.

In addition, like many other companies, due to government mandates, we have instructed our employees to work from home, which, especially if this persists for a prolonged period of time, may have an adverse impact on our employees, operations and systems. 

The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations, financial condition, and stock price will depend on numerous evolving factorsliquidity.

Counterparties to certain agreements with the Company or Weingarten may exercise their contractual rights under such agreements in connection with the Merger.

We and Weingarten are each party to certain agreements that are highly uncertaingive the counterparty certain rights following a “change in control,” including in some cases the right to terminate such agreements. Under some such agreements, for example certain debt obligations, the Merger may constitute a change in control and which wetherefore the counterparty may not be able to predict, includingexercise certain rights under the duration and scopeagreement upon the closing of the pandemic, governmental, business and individual actionsMerger. Any such counterparty may request modifications of its respective agreements as a condition to granting a waiver or consent under its agreement. There is no assurance that have been and continue to be taken in response tosuch counterparties will not exercise their rights under the pandemic,agreements, including termination rights where available, that the impact on economic activity from the pandemic and actions taken in response, the impact on our employeesexercise of any other operational disruptions or difficulties we may face, the effect on our tenants and their businesses, the ability of tenants to pay their contracted rents and any additional closures of our tenants’ businesses. These effects, individually or in the aggregate,such rights will adversely impact our tenant’s ability to pay their contracted rent. Any of these events could materially adversely impact our business, financial condition, results of operations or stock price.

Financial disruption or a prolonged economic downturn could materially and adversely affect the Company’s business.

Worldwide financial markets have recently experienced periods of extraordinary disruption and volatility, which has been exacerbated by the COVID-19 pandemic, resulting in heightened credit risk, reduced valuation of investments and decreased economic activity. Moreover, many companies have experienced reduced liquidity and uncertainty as to their ability to raise capital during such periods of market disruption and volatility. In the event that these conditions recur ornot result in a prolonged economic downturn, our resultsmaterial adverse effect or that any modifications of operations, financial position or liquidity could be materially and adversely affected. These market conditions may affectsuch agreements will not result in a material adverse effect to the Company's ability to access debt and equity capital markets. In addition, as a result of recent financial events, we may face increased regulation. Many of the other risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 identify risks that result from, or are exacerbated by, financial economic downturn. These include risks related to our real estate assets, the competitive environment and regulatory developments.combined company.

 

3130


 

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

 

Issuer Purchases of Equity Securities

 

During the three months ended March 31, 2020,2021, the Company repurchased 270,708519,127 shares for an aggregate purchase price of $5.1$9.1 million (weighted average price of $19.02$17.50 per share) in connection with common shares surrendered or deemed surrendered to the Company to satisfy statutory minimum tax withholding obligations in connection with the vesting of restricted stock awards under the Company’s equity-based compensation plans.

 

During February 2020, the Company extended its share repurchase program for a term of two years, which will expire in February 2022, pursuant to which the Company may repurchase shares of its common stock, par value $0.01 per share, with an aggregate gross purchase price of up to $300.0 million. The Company did not repurchase any shares under the share repurchase program during the three months ended March 31, 2020.2021. As of March 31, 2020,2021, the Company had $224.9 million available under this share repurchase program.

 

Period

 

Total Number

of Shares

Purchased

  

Average

Price Paid

per Share

  

Total Number of

Shares Purchased

as Part of Publicly

Announced Plans

or Programs

  

Approximate Dollar

Value of Shares that May

Yet Be Purchased Under

the Plans or Programs

(in millions)

 

January 1, 2020 – January 31, 2020

  30,631  $20.63   -  $224.9 

February 1, 2020 – February 29, 2020

  238,412   18.82   -   224.9 

March 1, 2020 – March 31, 2020

  1,665   17.76   -   224.9 

Total

  270,708  $19.02   -     

Period

 

Total Number

of Shares

Purchased

  

Average

Price Paid

per Share

  

Total Number of

Shares Purchased

as Part of Publicly

Announced Plans

or Programs

  

Approximate Dollar

Value of Shares that May

Yet Be Purchased Under

the Plans or Programs

(in millions)

 

January 1, 2021 – January 31, 2021

  75,847  $15.16   -  $224.9 

February 1, 2021 – February 28, 2021

  441,944   17.89   -   224.9 

March 1, 2021 – March 31, 2021

  1,336   19.13   -   224.9 

Total

  519,127  $17.50   -     

 

Item 3.Defaults Upon Senior Securities.

 

None.

 

Item 4.Mine Safety Disclosures.

 

Not applicable.

 

Item 5.Other Information.

 

None.

 

32

Item 6.Exhibits.

 

Exhibits –

 

4.1 Agreement to File Instruments

 

Kimco Realty Corporation (the “Registrant”) hereby agrees to file with the Securities and Exchange Commission, upon request of the Commission, all instruments defining the rights of holders of long-term debt of the Registrant and its consolidated subsidiaries, and for any of its unconsolidated subsidiaries for which financial statements are required to be filed, and for which the total amount of securities authorized thereunder does not exceed 10 percent of the total assets of the Registrant and its subsidiaries on a consolidated basis.

10.1

Amended and Restated Credit Agreement, dated as of February 27, 2020, among Kimco Realty Corporation, a Maryland corporation, the subsidiaries of Kimco from time to time parties thereto, the several banks, financial institutions and other entities from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders thereunder (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 2, 2020).

31.1

Certification of the Company’s Chief Executive Officer, Conor C. Flynn, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of the Company’s Chief Financial Officer, Glenn G. Cohen, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of the Company’s Chief Executive Officer, Conor C. Flynn, and the Company’s Chief Financial Officer, Glenn G. Cohen, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document - the instance documentInstance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

3331


 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 


 

 

 

KIMCO REALTY CORPORATION

 

 

 

 

 

 

 

 

 

May 8, 2020

April 30, 2021

 

/s/ Conor C. Flynn

(Date)

 

Conor C. Flynn

 

 

Chief Executive Officer

 

 

 

 

 

 

May 8, 2020

April 30, 2021

 

/s/ Glenn G. Cohen

(Date)

 

Glenn G. Cohen

 

 

Chief Financial Officer

 

3432