Kimco Realty Corporation — Q1 2023 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2023, compared with Q1 2022. Kimco owns and operates open-air, primarily grocery-anchored shopping centers, with a growing mixed-use portfolio. At quarter-end it had interests in 529 U.S. shopping centers totaling 90.2 million square feet, plus 22 other property interests, primarily through investments. In January 2023, the company completed a reorganization into an UPREIT structure; Kimco Realty Corporation is the parent and Kimco Realty OP, LLC is its operating company. The parent owned 100% of Kimco OP at quarter-end.
Financial and operating results
Unless otherwise stated, amounts are in U.S. dollars. Financial statement amounts below are rounded to millions.
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Total revenue | $442.9 million | $427.2 million | Up 3.7% |
| Net income | $293.8 million | $236.0 million | Up 24.5% |
| Net income available to common shareholders | $283.5 million | $230.9 million | Up 22.8% |
| Diluted earnings per share | $0.46 | $0.37 | Up $0.09 |
| FFO per diluted share, company-presented non-GAAP | $0.39 | $0.39 | Flat |
| Same-property NOI, company-presented non-GAAP | $326.2 million | $321.8 million | Up 1.4% |
| Cash from operating activities | $345.2 million | $194.6 million | Up $150.6 million |
Rental property revenue rose to $438.3 million from $422.7 million. Management attributed growth to leasing and portfolio expansion, partly offset by higher tenant credit losses and property dispositions. Same-property NOI growth reflected higher rental revenue, partly offset by a $8.9 million adverse year-over-year change in tenant credit losses.
Reported earnings included $194.1 million of special dividend income from Albertsons Companies (ACI), a $39.2 million gain on property sales, and a $10.1 million net loss on marketable securities. In Q1 2022, marketable securities produced a $121.8 million net gain. FFO excludes the ACI special dividend, marketable-security mark-to-market changes and specified real-estate items; thus, FFO per share was flat despite higher GAAP earnings.
Operating cash flow included the $194.1 million ACI special dividend, so its increase does not solely reflect property operations. Investing activities provided $43.6 million, versus $35.6 million used in Q1 2022; financing activities used $209.4 million. Cash, cash equivalents and restricted cash ended at $329.2 million.
Balance sheet, debt and liquidity
- Total assets were $18.0 billion and total liabilities were $8.1 billion at March 31, 2023. Notes payable were $6.78 billion and mortgages payable were $374.3 million, for approximately $7.15 billion of reported debt.
- Marketable securities were $451.6 million, including 21.2 million ACI shares valued at $440.8 million. The company also reported $1.09 billion invested in and advanced to real estate joint ventures.
- In February, Kimco replaced its $2.0 billion revolving facility with a new $2.0 billion unsecured facility due March 2027, with extension options through March 2028 and an accordion feature to $2.75 billion. It was undrawn at quarter-end; the company reported covenant compliance.
- Reported covenant measures included total indebtedness to gross asset value of 37% against a maximum of 60%, and fixed-charge coverage of 4.7x against a minimum of 1.50x. Consolidated floating-rate debt was $18.2 million; management estimated a 1 percentage-point rate increase would raise quarterly interest expense by $0.05 million, based on that balance.
- The filing does not provide a standard current ratio or an explicit operating margin measure suitable for assessing liquidity or recurring property profitability.
Material changes, outlook, risks and unusual items
- Q1 acquisitions or consolidations totaled $166.2 million across properties and parcels; dispositions had aggregate sales price or gross fair value of $117.6 million and generated $39.2 million of gains. The company recorded $11.8 million of property impairments, principally for assets being marketed for sale.
- Interest expense rose to $61.3 million from $57.0 million. General and administrative expense increased by $4.8 million, including costs related to the UPREIT reorganization. Operating and maintenance expense increased by $6.0 million.
- Management anticipated spending $75 million–$125 million on acquisitions or additional property interests and $180 million–$220 million on redevelopment and re-tenanting for the remainder of 2023. These are capital-spending expectations, not earnings or FFO guidance.
- Following the ACI special dividend, the company said it may need to make a special distribution to meet REIT requirements. It expected to announce its decision and whether payment would be in cash, stock or a combination during 2023. It sold 7.1 million ACI shares in Q1 for $137.4 million net proceeds and reported a further sale of 7.0 million shares in April for $144.9 million net proceeds; related estimated taxes were $30.0 million and $32.7 million, respectively.
- Management cited inflation, higher interest rates, bank and liquidity pressures, slower growth or recession, tenant bankruptcies, labor shortages and supply-chain issues as potential risks to tenants, leasing demand, rents and property values. The filing also identifies refinancing, investment valuation, impairment, cybersecurity, climate and other risks. It reported no material change to previously disclosed risk factors.
- Other disclosed exposures include $64.7 million of investment funding commitments, of which $41.7 million was funded; $39.8 million of letters of credit; $17.4 million of performance and surety bonds; and a guaranty relating to $45.5 million of Sheridan tax-increment bonds. Management stated that ordinary-course legal matters were not expected to materially adversely affect the company.
Most important facts for investors to verify
- How much of reported earnings and operating cash flow was attributable to ACI dividends, securities valuation changes and property-sale gains, versus recurring rental operations.
- Whether same-property NOI and leasing trends improve, particularly given the credit-loss headwind and the modest 1.4% same-property NOI increase.
- The company’s decision, timing and payment form for any special REIT distribution, and the remaining ACI shareholding and proceeds after the April sale.
- Actual acquisition and redevelopment spending compared with management’s 2023 expectations, and the returns generated on that investment.
- Debt maturities, refinancing terms, interest-rate exposure and continued covenant compliance as financing conditions evolve.