Kimco Realty Corporation — Q1 2021 Form 10-Q
Business context and reporting period. Kimco is a REIT focused on open-air, grocery-anchored shopping centers and mixed-use properties. This unaudited filing covers the three months ended March 31, 2021, compared with the three months ended March 31, 2020. At quarter-end, Kimco had interests in 398 U.S. shopping center properties totaling 69.8 million square feet, plus 122 other property interests, primarily through investments.
Financial and operating highlights
| Metric | Q1 2021 | Q1 2020 or comparison |
|---|---|---|
| Total revenue | $282.3 million | $289.7 million; down 2.6% |
| Net income attributable to Kimco | $137.9 million | $90.1 million |
| Net income available to common shareholders | $131.6 million; $0.30 diluted EPS | $83.7 million; $0.19 diluted EPS |
| FFO available to common shareholders | $144.3 million; $0.33 diluted per share | $160.5 million; $0.37 diluted per share |
| Same-property NOI | $205.1 million | $217.5 million; down 5.7% |
| Operating cash flow | $148.4 million | $155.2 million |
| Cash and cash equivalents | $253.9 million | $293.2 million at Dec. 31, 2020 |
| Debt carrying value | $5.34 billion: $5.05 billion notes and $295.6 million mortgages | $5.36 billion at Dec. 31, 2020 |
Q1 investing cash outflow was $83.9 million, including $84.3 million for two property acquisitions and $20.6 million of operating-property improvements, partly offset by property-sale proceeds. Financing cash outflow was $103.8 million, including $80.0 million of dividends and $14.9 million of debt principal payments. Cash declined by $39.3 million during the quarter.
Kimco reported $767.989 million of marketable securities at quarter-end. Total assets were $11.70 billion, total liabilities $5.95 billion, and total equity $5.73 billion. Its $2.0 billion revolving credit facility had no outstanding balance and $0.3 million reserved for letters of credit; the facility can be increased to $2.75 billion. Kimco reported compliance with its debt covenants and no variable-rate debt outstanding at March 31.
Material changes and drivers
- Common-shareholder net income rose, but the increase was substantially influenced by a $61.1 million unrealized gain on marketable securities, primarily related to Kimco’s Albertsons investment. The comparable 2020 period had a $4.7 million securities loss. This gain is excluded from the company’s FFO calculation.
- Despite higher reported net income, FFO declined by about 10% and same-property NOI fell 5.7%. Management attributed lower rental revenue mainly to COVID-related rent relief, potentially uncollectible amounts and vacancies; higher lease-termination income partly offset the decline.
- Rental-property revenue declined $7.1 million year over year. Operating and maintenance costs rose $4.1 million, while depreciation and amortization rose $5.5 million. Kimco recorded no impairment charge in Q1 2021, compared with $3.0 million in Q1 2020.
- The quarterly common dividend was $0.17 per share, down from $0.28 in Q1 2020. Preferred dividends were unchanged.
Outlook, commentary and risks
- COVID-19 and collections: Shopping centers remained open, but tenants experienced closures, shorter hours and reduced services. Kimco reported improving rent collections and said it continued tenant-by-tenant rent relief arrangements. At March 31, management identified 50% of consolidated accounts receivable and 15% of straight-line rent receivables as potentially uncollectible; it warned further adjustments could be material. The ultimate pandemic impact remained uncertain.
- Capital plans: Excluding the proposed merger, Kimco anticipated spending approximately $25–$50 million on acquisitions and $75–$125 million on redevelopment and re-tenanting for the remainder of 2021. The filing does not provide earnings guidance.
- Debt maturities: Remaining 2021 maturities were expected to include $125.7 million of consolidated debt, $54.9 million of unconsolidated joint-venture debt and $19.9 million in the Preferred Equity Program. Kimco expected to address consolidated maturities with operating cash flow and credit-facility borrowings.
- Proposed Weingarten merger: Announced April 15, 2021, after quarter-end. Each Weingarten common share is to be exchanged for 1.408 newly issued Kimco shares plus $2.89 cash; the filing cited approximately $30.32 per Weingarten share based on Kimco’s April 14 closing price. Closing was expected in the second half of 2021, subject to shareholder approvals and other conditions. Kimco cited potential dilution, execution and integration challenges, transaction costs, additional debt and failure-to-close risks.
- Other risks: Key exposures include tenant financial distress, economic and real-estate conditions, interest rates and refinancing, property and investment valuations, impairment, operating-cost increases, dividend policy and the ability to complete and realize benefits from the merger. Management stated it was not involved in litigation expected to have a material adverse effect on the portfolio.
Most important facts for investors to verify
- How much of reported earnings growth reflects the $61.1 million unrealized marketable-securities gain, and how operating measures such as FFO and same-property NOI trend in subsequent quarters.
- Whether rent collections improve and potentially uncollectible receivables and rent-relief concessions decline, including the risk of additional credit-loss adjustments.
- Whether the Weingarten merger receives required approvals, closes on the expected terms and timeline, and delivers anticipated benefits without materially worsening leverage or dilution.
- Execution of 2021 debt maturities, redevelopment spending and acquisition plans, and continued covenant compliance and dividend capacity.