Kimco Realty Corporation — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed February 23, 2021. Kimco is a REIT focused on open-air, predominantly grocery-anchored shopping centers and mixed-use properties, primarily in major U.S. metropolitan markets. At year-end it had interests in 400 shopping centers totaling 70.1 million square feet, plus 122 other property interests.
Financial performance and position
| Metric | FY2020 | FY2019 | Change / context |
|---|---|---|---|
| Rental property revenue, net | $1,044.9 million | $1,142.3 million | Down 8.5% |
| Total revenue | $1,057.9 million | $1,158.9 million | Down 8.7% |
| Net income available to common shareholders | $975.4 million | $340.0 million | Increase mainly reflects large ACI investment gains |
| Diluted GAAP EPS | $2.25 | $0.80 | Not representative of underlying operating trend |
| FFO per diluted share | $1.17 | $1.44 | Down 18.8% |
| Same-property NOI | $784.5 million | $852.5 million | Down 8.0% |
| Cash from operating activities | $589.9 million | $583.6 million | Up $6.3 million |
| Year-end cash and cash equivalents | $293.2 million | $123.9 million | Up $169.2 million |
| Total debt | $5,355.5 million | $5,315.8 million | Up $39.7 million |
Q4 snapshot: Revenue was $269.4 million; net income attributable to Kimco was $201.2 million; diluted common EPS was $0.45. The quarter’s reported income included material investment valuation effects.
Margins and occupancy: The filing does not present a directly comparable consolidated operating-margin figure. Same-property NOI declined 8.0% for the year, primarily due to potentially uncollectible revenue. The consolidated operating portfolio was 93.9% leased at year-end, versus 96.2% in 2019. Average base rent per leased square foot rose to $18.16 from $17.96.
Liquidity and debt: Kimco reported $2.3 billion of immediate liquidity, including $293.2 million of cash, and had no balance outstanding on its $2.0 billion revolving credit facility at year-end. The facility can increase to $2.75 billion and matures in March 2024, with extension options. Consolidated debt had a 3.41% weighted-average interest rate and 10.9-year weighted-average maturity. Reported covenant measures were within limits, including total indebtedness to gross asset value of 45% against a maximum of 60%.
Cash investment and distributions: 2020 operating-property improvements totaled $221.3 million, including $175.7 million for redevelopment and renovations. Cash dividends paid were $379.9 million versus $531.6 million in 2019. Common dividends declared were $0.54 per share versus $1.12 in 2019; the Board declared a $0.17 quarterly common dividend in February 2021.
Material changes versus 2019
- Rental revenue fell $97.4 million. Kimco attributed the decline chiefly to higher reductions for potentially uncollectible rent and to property dispositions, partly offset by completed projects and portfolio growth.
- Kimco reduced reported revenue by $81.0 million for potentially uncollectible revenues, including $15.2 million of straight-line rent receivables, primarily associated with COVID-19.
- Net income rose sharply, but was boosted by a $594.8 million net gain on marketable securities, primarily ACI mark-to-market gains, and a $190.8 million gain on sale of a cost-method investment. These gains are not a measure of recurring property operations and are excluded from the company’s FFO calculation.
- FFO fell to $503.7 million from $608.4 million; same-property NOI decreased $68.0 million. Occupancy also declined 2.3 percentage points.
- Kimco issued $400 million of 1.90% notes due 2028 and $500 million of 2.70% green notes due 2030, and redeemed $484.9 million of 3.20% notes due 2021, incurring a $7.5 million early-extinguishment charge. A $590 million term loan raised during the year was fully repaid and terminated in July.
- Kimco monetized $227.3 million of its ACI investment and held 39.8 million ACI shares at year-end, valued at $700.4 million. The remaining stake is subject to contractual lock-up provisions.
Outlook, commentary, and risks
- Management did not provide a specific earnings or FFO forecast in the supplied filing text. For 2021, it anticipated $75–$100 million of operating-property acquisitions and $75–$150 million of redevelopment and re-tenanting investment.
- COVID-19 remains a major uncertainty. Shopping centers remained open, but tenants experienced closures, reduced hours, late or partial payments, rent relief requests, defaults, and bankruptcies. Tenant rent collections improved from 74% of pro-rata base rent in Q2 to 92% in Q4; January 2021 collections were 91%.
- Since the pandemic began, Kimco granted selective deferrals covering approximately 9% of pro-rata annual base rent and forgave $13.7 million of pro-rata rent. Deferrals generally carry repayment periods of six to 18 months. At year-end, mandated or voluntary closures represented 2.7% of pro-rata annual base rent.
- Management emphasized leasing, tenant retention, cost monitoring, redevelopment, and a grocery-anchored portfolio concentrated in major markets. It also cited e-commerce, tenant financial health, property operating costs, financing access, interest rates, climate and weather events, cybersecurity, and potential asset impairments as risks.
- Potential contingencies include Mexican tax assessments involving historical operations. Kimco disputed the assessments and appealed adverse rulings; it stated it intended to continue defending its position, but the outcome is uncertain. The filing reports no litigation expected by management to materially affect the portfolio as a whole.
- Other notable items include $6.6 million of property impairment charges in 2020, $36.2 million of letters of credit, and $16.3 million of performance and surety bonds. The auditor identified real estate impairment analysis and collectability of receivables as critical audit matters; the financial statements received an unqualified audit opinion.
Most important facts for investors to verify
- Whether rent collection, occupancy, tenant bankruptcies, and repayment of deferred rent continue to improve after year-end.
- How much of reported GAAP earnings and the value of Kimco’s ACI stake depends on market-price changes, and the impact of the ACI lock-up and any future monetization.
- Whether FFO and same-property NOI stabilize or recover, and how much future rent relief or uncollectible revenue is required.
- Debt maturities and refinancing needs, covenant headroom, and the sustainability of the reduced common dividend relative to operating cash flow and REIT distribution requirements.
- Execution, cost, leasing, and expected returns for planned 2021 redevelopment and acquisition spending, as well as the outcome of the Mexican tax appeals and future impairment assessments.