Kimco Realty Corporation — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; unaudited. Kimco is a REIT focused on open-air, generally grocery-anchored shopping centers and mixed-use properties. At quarter-end, it had interests in 533 U.S. shopping-center properties totaling 91.7 million square feet, plus 27 other property interests.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $427.2 million | $289.0 million | $854.4 million | $571.3 million |
| Net income (loss) attributable to Kimco common shareholders | $(125.8) million | $110.3 million | $105.2 million | $241.9 million |
| Diluted GAAP EPS | $(0.21) | $0.25 | $0.17 | $0.56 |
| Diluted FFO per share | $0.40 | $0.34 | $0.79 | $0.68 |
| Same-property NOI | $317.3 million | $306.9 million | $637.8 million | $601.3 million |
- Revenue growth reflected primarily the Weingarten merger and other property acquisitions, as well as stronger leasing and portfolio growth. The merger closed August 3, 2021, making 2021 comparisons less comparable.
- Same-property NOI increased 3.4% in Q2 and 6.1% for the six-month period. Management cited leasing activity and reduced pandemic-related abatements and vacancies, partly offset by changes in tenant credit losses.
- Q2 GAAP loss chiefly reflected a $261.5 million mark-to-market loss on marketable securities, primarily Albertsons common stock. For the first half, securities losses were $139.7 million, versus gains of $85.4 million in 2021. FFO, a supplemental non-GAAP measure, excludes these securities fluctuations and certain real-estate items.
- No operating margin figure is clearly presented in the filing. Q2 interest expense was $56.5 million, up from $46.8 million; first-half interest expense was $113.5 million, up from $94.5 million.
Cash flow, debt and liquidity
- First-half operating cash flow was $442.3 million, compared with $293.7 million in 2021. Investing used $155.1 million and financing used $325.1 million. Cash, cash equivalents and restricted cash ended at $296.8 million, including $2.9 million restricted.
- At June 30, notes payable were $7.057 billion and mortgages payable were $346.5 million. The $2.0 billion revolving credit facility had no outstanding balance; the company reported covenant compliance. It had over 480 unencumbered property interests.
- Kimco issued $600 million of 3.20% senior notes due 2032 and repaid $500 million of 3.40% notes due November 2022, incurring $7.2 million of early-extinguishment charges and financing-cost write-offs. It also repaid $115.3 million of mortgage debt and obtained a $19 million mortgage.
- Marketable securities were carried at $1.074 billion, down from $1.212 billion at year-end 2021. The company held 39.8 million ACI shares, subject to contractual lock-up provisions scheduled to expire September 10, 2022.
Outlook, commentary and risks
- Management expected to spend approximately $150–$250 million on operating-property acquisitions and $90–$120 million on redevelopment and re-tenanting for the remainder of 2022. These are spending expectations, not earnings guidance.
- On July 26, 2022, the board declared a quarterly common dividend of $0.22 per share, a 10% increase from $0.20, payable September 23, 2022. The filing says the board reviews dividend policy quarterly.
- Management cited inflation, supply-chain constraints, labor availability and potential COVID-19 variants as concerns affecting tenants and operating costs. Other disclosed risks include tenant distress, interest rates and financing/refinancing, property and investment valuations, and realizing merger benefits.
- Commitments and contingencies include $42.6 million of letters of credit, $27.7 million of performance and surety bonds, and an unfunded portion of a $25 million investment commitment ($14.9 million). Kimco also guarantees debt-service shortfalls on $49.7 million of Sheridan, Colorado tax-increment bonds; revenues had met debt service to date. Management said ordinary-course legal matters were not expected to have a material adverse effect.
- In July 2022, the revolving-credit agreement was amended to transition from LIBOR to SOFR, add potential margin reductions tied to sustainability and leverage criteria, and pre-approve a possible UPREIT conversion. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Review the composition, market value, concentration and eventual monetization or sale restrictions of the ACI investment, and its effect on GAAP earnings and liquidity.
- Assess underlying operating trends using same-property NOI and FFO alongside GAAP results; confirm the effects of merger-related portfolio expansion and tenant credit losses.
- Check upcoming consolidated and joint-venture debt maturities, refinancing plans, interest-rate exposure and compliance with debt covenants.
- Track execution and funding of the stated acquisition and redevelopment plans, along with leasing costs, tenant demand and future lease expirations.
- Monitor the raised dividend against operating cash generation, capital requirements and REIT distribution obligations, as well as the disclosed guarantees and other commitments.