Kimco Realty Corporation — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; filed May 8, 2020. Kimco is a REIT owning and operating open-air, primarily grocery-anchored shopping centers and mixed-use properties. At quarter-end, it had interests in 401 U.S. shopping center properties (70.0 million square feet) and 215 other property interests, primarily through investments.
Financial performance and position
| Metric | Q1 2020 | Q1 2019 / prior date |
|---|---|---|
| Total revenue | $289.7 million | $295.0 million |
| Net income attributable to Kimco | $90.1 million | $116.2 million |
| Net income available to common shareholders | $83.7 million; $0.19 per diluted share | $101.6 million; $0.24 per diluted share |
| FFO available to common shareholders (non-GAAP) | $160.5 million; $0.37 per diluted share | $158.4 million; $0.38 per diluted share |
| Same-property NOI (non-GAAP) | $215.6 million | $212.5 million; up 1.5% |
| Cash from operating activities | $155.2 million | $155.3 million |
| Cash and cash equivalents | $451.8 million | $123.9 million at December 31, 2019 |
| Total assets / total liabilities | $11.31 billion / $6.41 billion | $11.00 billion / $6.05 billion at December 31, 2019 |
| Notes payable / mortgages and construction loan payable | $5.30 billion / $404.9 million | $4.83 billion / $484.0 million at December 31, 2019 |
Investing cash outflow was $66.6 million, mainly for property improvements and development; financing cash inflow was $239.2 million, including $475.0 million of net revolving-facility borrowings. Consolidated debt balances shown above total approximately $5.71 billion. The new $2.0 billion revolving facility had $675.0 million outstanding and $0.3 million allocated to letters of credit at quarter-end. Kimco reported compliance with its debt covenants. Its April 2020 term loan was initially $375.0 million and later increased to $590.0 million.
Material changes versus the prior period
- Revenue declined $5.3 million (about 1.8%) and common-shareholder net income fell $17.9 million. Diluted GAAP earnings per share decreased from $0.24 to $0.19.
- Lower property-sale gains were a major year-over-year difference: $3.8 million in Q1 2020 versus $23.6 million in Q1 2019. Joint-venture income also declined $5.1 million, while income from other real estate investments rose $4.7 million.
- Rental-property revenue decreased $4.6 million, partly offset by contributions from completed redevelopment projects and portfolio growth. General and administrative expense decreased $4.8 million.
- FFO increased in total but declined per share. Same-property NOI increased 1.5%, with higher rental revenue partly offset by higher operating expenses.
- Cash increased substantially, primarily reflecting revolving-credit borrowings. Cash used in investing rose to $66.6 million from $15.5 million, while financing shifted from a $139.6 million outflow in 2019 to a $239.2 million inflow in 2020.
Outlook, COVID-19, and other important items
- COVID-19 exposure: Management said there had been no significant business disruption through March 31 and recorded no impairment specifically related to the pandemic. By the end of April, however, a substantial number of tenants had closed temporarily, reduced hours or services, or paid rent late, partially, or not at all. About 44% of annual base rent was associated with tenants subject to mandatory or voluntary closure. April rent-deferral requests represented approximately 35% of pro-rata minimum base rent; Kimco had selectively granted deferrals for 14% and was negotiating collection of the balance.
- Liquidity and risks: Management cited quarter-end cash, the revolving facility, the subsequent term loan and more than 320 unencumbered property interests as liquidity resources. It cautioned that the pandemic’s duration and effects on tenants, rent collections, operations, asset values and financing markets were uncertain and could materially adversely affect results and liquidity.
- Capital plans: For the remainder of 2020, management anticipated up to $75 million of operating-property acquisitions, $80 million to $130 million for redevelopment and re-tenanting, and $20 million to $40 million for the active development project. These plans were subject to reassessment due to COVID-19; the filing estimated $25 million to $50 million of total remaining costs to complete that development.
- Dividends: The $0.28 common dividend declared in January was paid April 15. The board subsequently temporarily suspended the common dividend amid economic uncertainty and said it intended to reinstate a 2020 dividend of at least the amount needed to meet REIT taxable-income distribution requirements. Preferred dividends continued to be declared.
- Debt maturities and rates: Management reported $83.6 million of consolidated debt maturities for 2020, assuming available extensions. It noted that financing spreads had widened. A 1.0 percentage-point increase in short-term interest rates would have increased quarterly interest expense by $1.7 million, based on quarter-end variable-rate debt.
- Other: Q1 impairment charges of $3.0 million related to properties marketed for sale, not COVID-19. The filing reported no litigation expected by management to have a material adverse effect and no defaults on senior securities. Management stated disclosure controls were effective.
Key facts investors should verify
- Subsequent rent collections, tenant defaults, deferral approvals and repayment schedules, particularly compared with the April figures disclosed in the filing.
- Whether and when the common dividend is reinstated, and the amount relative to REIT distribution requirements.
- Cash, revolver availability, term-loan borrowings, debt maturities and covenant headroom as pandemic conditions evolve.
- Changes in asset valuations, impairment charges, development and redevelopment commitments, and the timing or reduction of planned spending.
- How FFO and same-property NOI trends develop; both are non-GAAP measures and should be considered alongside GAAP results and cash flows.