Kimco Realty Corporation — Q3 2023 Form 10-Q
Business context and reporting period
Unaudited results cover the three and nine months ended September 30, 2023, compared with the same 2022 periods. Kimco owns and operates open-air, primarily grocery-anchored shopping centers and mixed-use properties. At quarter-end, it had interests in 527 U.S. shopping centers totaling 90.4 million square feet. The filing combines Kimco Realty Corporation and its operating company, Kimco Realty OP, LLC; substantially all assets and operations are held or conducted through Kimco OP. The UPREIT reorganization took effect January 1, 2023, and comparative statements are presented as if it had occurred at the earliest period shown.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $446.1m | $433.4m | $1,331.8m | $1,287.9m |
| Operating income | $140.5m | $144.3m | $470.2m | $420.8m |
| Net income attributable to Kimco | $118.2m | $58.0m | $514.6m | $175.8m |
| Net income available to common shareholders | $112.0m | $51.6m | $495.9m | $156.8m |
| Diluted EPS | $0.18 | $0.08 | $0.80 | $0.25 |
| Diluted FFO per share, non-GAAP | $0.40 | $0.41 | $1.18 | $1.20 |
| Same-property NOI, non-GAAP | $332.4m | $324.1m | $980.7m | $961.3m |
Same-property NOI increased 2.6% in Q3 and 2.0% for the nine-month period, primarily reflecting rental revenue growth from leasing, partly offset by higher tenant credit losses. Q3 total revenue rose 2.9%; nine-month revenue rose 3.4%. Operating cash flow for the nine months was $881.4m, versus $705.8m; the increase included the $194.1m ACI special dividend and should not be read as solely recurring property cash flow. Investing cash flow was an outflow of $76.0m and financing cash flow an outflow of $531.0m. Cash and restricted cash ended at $424.3m.
At September 30, 2023, total assets were $18.0bn and total equity was $9.7bn. Notes payable were $6.77bn and mortgages payable were $356.9m, for approximately $7.13bn of reported debt. Marketable securities were $327.1m, including 14.2m Albertsons shares valued at $323.3m. The $2.0bn revolving credit facility had no outstanding balance; the company reported covenant compliance. Reported consolidated leverage was 36% of gross asset value, and fixed-charge coverage was 4.7x under the credit facility covenant calculation.
Material changes and unusual items
- Reported earnings rose sharply year over year, while FFO per share declined slightly. Comparisons were affected by volatile Albertsons share-price marks: marketable securities produced a $13.2m gain in Q3 2023 versus a $75.5m loss in Q3 2022; nine-month results included gains of $17.6m in 2023 versus losses of $215.2m in 2022.
- Nine-month 2023 results included $194.1m of ACI special-dividend income, a $52.4m gain on property sales, and $61.1m of income-tax provision, primarily from taxable gains on ACI share sales. The company sold 14.1m ACI shares for net proceeds of $282.3m.
- Rental-property revenue increased $44.2m over nine months, driven mainly by tenant revenue growth and acquired properties. Operating and maintenance expense increased $16.5m and general and administrative expense increased $13.6m. Interest expense increased $16.5m.
- Kimco recorded $14.0m of property impairment charges for the nine months, down from $21.8m in 2022. Q3 included $3.8m of costs related to the pending RPT Realty merger. Q3 also included a $10.8m pension settlement gain and $2.2m of excise taxes associated with reversion of excess pension assets.
Outlook, management commentary and risks
Kimco expects the RPT Realty acquisition to close in early 2024, subject to RPT shareholder approval and other closing conditions. The announced consideration is 0.6049 Kimco common shares for each eligible RPT common share. The transaction is expected to add 56 shopping centers and 13.3 million square feet of GLA; the filing states that RPT’s results are not included in Kimco’s reported periods. Closing, integration, cost, dilution, financing and realization-of-benefits risks remain.
Management expects to spend approximately $50m–$75m on redevelopment and re-tenanting for the remainder of 2023, and anticipates up to approximately $25m of additional acquisitions or purchases of property interests. It reported no formal earnings or FFO guidance in the provided filing text. In October 2023, after quarter-end, Kimco issued $500m of 6.40% senior unsecured notes due 2034. The board also declared a quarterly common dividend of $0.24 per share, a 4.3% increase from $0.23.
Kimco said inflation, higher interest rates, slower economic growth or recession, tenant bankruptcies, labor and supply-chain constraints, and rent or demand pressure could adversely affect tenants and property results. It also flagged impairment risk, market-value changes in ACI shares and financing/refinancing risk. The company anticipates it may need a special dividend to satisfy REIT distribution requirements following the ACI special dividend; its amount and form had not been determined in this filing. It reported $64.7m in investment funding commitments, of which $48.4m had been funded, $39.6m of letters of credit, and a $45.5m Sheridan project bond-service shortfall guarantee; debt service on the Sheridan bonds had been met to date. Management said ordinary-course legal matters were not expected to have a material adverse effect.
Important facts for investors to verify
- Progress toward RPT shareholder approval, closing conditions, final financing, integration costs and expected dilution.
- Whether an ACI-related special dividend is declared, and whether it is paid in cash, stock or a combination.
- Underlying operating trends: same-property NOI, leasing and renewal economics, tenant credit losses, and operating-cost growth.
- Debt maturities, refinancing terms and interest-rate exposure; the October 2023 notes were issued after the reported balance-sheet date.
- How much reported earnings and operating cash flow depends on securities marks, asset sales, special dividends and other nonrecurring items; FFO and same-property NOI are non-GAAP measures.