Kimco Realty Corporation — Q1 2022 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2022, compared with Q1 2021. Kimco owns and operates open-air, grocery-anchored shopping centers and related mixed-use assets. At quarter-end, it held interests in 537 U.S. shopping center properties totaling 92.7 million square feet. Comparisons are affected by the August 2021 Weingarten merger, which added 149 properties; Q1 2021 predates the merger.
Financial performance and liquidity
- Revenue: Total revenue was $427.2 million, versus $282.3 million in Q1 2021. Rental property revenue was $422.7 million, up $143.8 million, primarily reflecting acquired properties, including Weingarten, alongside leasing and collection improvements.
- Profit: Net income attributable to the company was $237.3 million, compared with $137.9 million; net income available to common shareholders was $230.9 million, or $0.37 per diluted share, versus $131.6 million, or $0.30. Results included a $121.8 million net gain on marketable securities, primarily mark-to-market gains on Albertsons shares.
- Operating measures: Same-property NOI increased 8.9% to $320.9 million. FFO available to common shareholders was $240.6 million, or $0.39 per diluted share, compared with $144.3 million, or $0.33. FFO is a non-GAAP measure and excludes marketable-security gains.
- Cash flow: Operating activities provided $194.6 million, compared with $148.4 million. Investing activities used $35.6 million and financing activities used $123.3 million. Cash, cash equivalents and restricted cash ended at $370.3 million.
- Debt and liquidity: Notes payable were $7.11 billion and mortgages payable were $378.6 million. The $2.0 billion revolving credit facility had no borrowings outstanding, and Kimco reported covenant compliance. Debt covenants included debt-to-asset measures of 38%, versus a 60% limit, and fixed-charge coverage of 4.1x, versus a 1.50x minimum.
- Margins: The filing does not present a conventional operating margin measure. Same-property NOI growth is the company’s cited property-level performance measure.
Material changes versus the prior comparable period
- Higher rental revenue and operating cash flow reflected the merger-acquired portfolio, leasing activity, improved collections and reduced tenant credit losses. Same-property NOI also benefited from lower rent abatements and vacancies.
- Operating expenses rose, including depreciation and amortization, largely due to acquired properties. Interest expense increased by $9.3 million, primarily reflecting debt assumed in the merger and debt offerings.
- Marketable-security gains rose to $121.8 million from $61.1 million. This non-operating, market-sensitive item materially affected reported earnings.
- Kimco issued $600 million of 3.20% senior notes due 2032 and redeemed $500 million of 3.40% notes due November 2022, incurring $7.2 million in early-extinguishment charges and financing-cost write-offs.
- Cash dividends paid increased to $123.8 million from $80.0 million. Common dividend declared for Q1 was $0.19 per share.
Outlook, risks, contingencies and unusual items
- Management anticipated spending approximately $100–$200 million on operating-property acquisitions and $125–$175 million on redevelopment and re-tenanting for the remainder of 2022. These are spending expectations, not earnings guidance.
- On April 26, 2022, the board declared a $0.20 quarterly common dividend, a 5.3% increase, payable June 23, 2022. The board evaluates dividend policy quarterly.
- Kimco held 39.8 million Albertsons shares, subject to contractual lock-up provisions scheduled to expire June 25, 2022. The share value and related mark-to-market gains may fluctuate.
- Remaining 2022 debt maturities were $333.5 million of consolidated debt and $101.2 million of unconsolidated joint-venture debt, assuming available extension options. Management expects to address consolidated maturities through operating cash flow, the credit facility and/or public debt offerings.
- Management cited continuing uncertainty from COVID-19, inflation, labor shortages, supply-chain issues and new variants. Other identified risks include tenant financial distress, interest rates, refinancing access, merger integration and investment valuations.
- Commitments included $42.6 million of letters of credit, a $25.0 million investment funding commitment with $9.4 million funded, and $12.3 million of performance and surety bonds. Kimco also guaranteed potential debt-service shortfalls on $49.7 million of Sheridan, Colorado tax-increment bonds; revenues had met debt service to date.
- Management reported no material adverse effect expected from ordinary-course legal matters and no material changes to previously disclosed risk factors. Disclosure controls were assessed as effective.
Important facts for investors to verify
- How much reported earnings growth reflects the Weingarten merger versus underlying same-property performance; Q1 2021 is not a merger-comparable period.
- The composition, valuation sensitivity and potential monetization timing of the Albertsons holding, including the June 2022 lock-up expiration.
- Coverage of 2022 consolidated and joint-venture maturities, and the effect of refinancing rates on interest expense and liquidity.
- Whether leasing, tenant collections and same-property NOI trends persist amid inflation, labor and supply-chain pressures.
- Progress and actual spending against the stated 2022 acquisition and redevelopment ranges, and the sustainability of dividend growth.