The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Organization
Kimco Realty Corporation, a Maryland corporation, is one of North America’s largest publicly traded owners and operators of open-air, grocery-anchored shopping centers and mixed-use assets. The terms “Kimco,” the “Company,” “we,” “our” and “us” each refers to Kimco Realty Corporation and our subsidiaries, unless the context indicates otherwise. The Company, its affiliates and related real estate joint ventures are engaged principally in the ownership, management, development and operation of open-air shopping centers, which are anchored generally by grocery stores, off-price retailers, home improvement centers, discounters and/or service-oriented tenants. Additionally, the Company provides complementary services that capitalize on the Company’s established retail real estate expertise.
The Company elected status as a Real Estate Investment Trust (a “REIT”) for federal income tax purposes beginning in its taxable year ended December 31, 1991 and operates in a manner that enables the Company to maintain its status as a REIT. As a REIT, with respect to each taxable year, the Company must distribute at least 90 percent of its taxable income (excluding capital gain) and does not pay federal income taxes on the amount distributed to its shareholders. The Company is not generally subject to federal income taxes if it distributes 100 percent of its taxable income. Most states where the Company holds investments in real estate, conform to the federal rules recognizing REITs. Certain subsidiaries have made a joint election with the Company to be treated as taxable REIT subsidiaries (“TRSs”), which permit the Company to engage in certain business activities which the REIT may not conduct directly. A TRS is subject to federal and state income taxes on its income, and the Company includes, when applicable, a provision for taxes in its condensed consolidated financial statements. The Company is subject to and also includes in its tax provision non-U.S. income taxes on certain investments located in jurisdictions outside the U.S. These investments are held by the Company at the REIT level and not in the Company’s taxable REIT subsidiaries. Accordingly, the Company does not expect a U.S. income tax impact associated with the repatriation of undistributed earnings from the Company’s foreign subsidiaries.
COVID-19 Pandemic -
In March 2020, coronavirus disease 2019 (“COVID-19”) was recognized as a pandemic by the World Health Organization ("WHO"). Shortly thereafter, the President of the United States declared a national emergency throughout the United States. The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies, and financial markets worldwide, and has caused significant volatility in U.S. and international debt and equity markets. The impact of COVID-19 on the retail industry for both landlords and tenants has been wide ranging, including, but not limited to, the temporary closures of many businesses, "shelter in place" orders, social distancing guidelines and other governmental, business and individual actions taken in response to the COVID-19 pandemic. There has also been reduced consumer spending due to job losses, government restrictions in response to COVID-19 and other effects attributable to COVID-19.
The COVID-19 pandemic, while still unfolding, has significantly impacted the Company’s stakeholders. The Company is aware of the critical role its shopping centers play in the communities they serve, often providing access to essential goods and services such as groceries, drug stores, and medical care. The Company’s shopping centers generally remain open to continue to provide access to these essential goods and services, and the Company has taken steps to protect the shoppers and tenants at its sites, following the guidance of the Centers for Disease Control and Prevention ("CDC") and the WHO.
In March 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, a substantial tax and spending package intended to provide additional economic stimulus to address the impact of the COVID-19 pandemic. The Company continues to monitor the impact of the COVID-19 pandemic closely, as well as any effects that may result from the CARES Act on the Company's tenants which would then indirectly affect the Company.
The COVID-19 pandemic has created significant economic uncertainty and volatility. The extent to which the COVID-19 pandemic impacts the Company’s financial condition, results of operations and cash flows, in the near term, will depend on future developments, which are highly uncertain and cannot be predicted at this time. The Company’s business, operations and financial results will depend on numerous evolving factors that the Company is not able to predict at this time, including the duration and scope of the pandemic, governmental, business and individual actions that have been and continue to be, taken in response to the pandemic, the impact on economic activity from the pandemic and actions taken in response, the effect on the Company’s tenants and their businesses, the ability of tenants to make their rental payments, additional closures of tenants’ businesses and the impact of opening and reclosing of communities in response to the resurgence of COVID-19. Any of these events could materially adversely impact the Company’s business, financial condition, results of operations or stock price. The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will assess its asset portfolio for any impairment indicators. In addition, The Company will continue to monitor for any material or adverse effects resulting from the COVID-19 pandemic.
The health and safety of the Company’s employees and their families is a top priority. The Company has taken the necessary steps to protect its employees and to empower them to work from home and care for their family members and children, whose lives have also been impacted.
|
●
|
Beginning March 11, 2020, the Company transitioned nearly 100% of its workforce to work from home, ensuring they are safely situated during this critical social distancing period.
|
|
●
|
All business travel has been stopped until further notice.
|
|
●
|
The Company has benefited from recent investments in new technology and software over the last year, as its entire team is equipped with new laptops and cellular capability to enable them to work remotely.
|
|
●
|
Daily webinar training was provided to ensure associates are fully supported to work from home. The Company’s human resources and information technology teams are available to all employees to address any needs or concerns they may have.
|
|
●
|
Associates will be provided paid time off to care for themselves or family members diagnosed with COVID-19.
|
|
●
|
The Company has ramped up communications at all levels and has initiated Company-wide virtual meetings such that executives are accessible, able to keep associates informed, and able to answer questions.
|
The Company will continue to evaluate individual situations as they arise and adjust its approach as appropriate, with the goal to enable its employees to be as productive as possible while offering them the flexibility they need to care for themselves and their families.
Since the outbreak of the COVID-19 pandemic, the Company’s shopping centers have remained open; however, a substantial number of tenants had or continue to have temporarily closed their businesses. Others had, or continue to have, shortened their operating hours or offered reduced services. The Company has also observed a substantial increase in the number of tenants that have made late or partial rent payments, requested a deferral of rent payments or defaulted on rent payments. The Company considered the effects COVID-19 has had on its tenants when evaluating the adequacy of the collectability of the lessee’s total accounts receivable balance, including the corresponding straight-line rent receivable. During the six months ended June 30, 2020, the Company recorded a $50.5 million adjustment associated with potentially uncollectible revenues and disputed amounts, which includes $11.5 million for straight-line rent receivables, primarily attributable to the COVID-19 pandemic. Management’s estimate of the collectability of accrued rents and accounts receivable is based on the best information available to management at the time of evaluation.
As a result of the current economic uncertainty and the impact to many of the Company's tenants, the Company has taken important steps to offer its support, including:
|
(1)
|
The Company has, and continues to have, worked with these tenants to grant rent deferrals on a tenant-by-tenant basis. The deferrals are anticipated to be paid within six to 18 months.
|
|
(2)
|
During April 2020, the Company began piloting a Tenant Assistance Program to assist small business tenants in identifying and applying for federal and state aid to help support their businesses during the COVID-19 pandemic. The Company is working in partnership with law firms to provide assistance with the application process at the Company’s expense. Legal professionals will assist tenants in identifying suitable loan programs, identifying potential lending institutions, and preparing and submitting applications.
|
|
(3)
|
The Company is closely monitoring recommendations and mandates of federal, state and local governments, and health authorities.
|
|
(4)
|
At the onset of the COVID-19 pandemic in the U.S., the Company immediately increased the frequency and intensity of its janitorial services to help prevent the spread of the virus. Areas such as public bathrooms, interior concourses and hallways, vestibules and shared doors, and elevators and escalators are being sanitized multiple times per day.
|
|
(5)
|
The Company’s teams worked to provide additional assistance in the communities where it operates, finding creative ways to use its conveniently located shopping centers during this difficult time. The Company fast-tracked the approval of drive-thru testing centers, blood-drive locations, and school lunch pick-ups.
|
|
(6)
|
The Company launched the Kimco Curbside Pickup™ program designating dedicated parking spots for curbside pickup at its centers for use by all tenants and their customers.
|
2. Summary of Significant Accounting Policies
Principles of Consolidation -
The accompanying Condensed Consolidated Financial Statements include the accounts of the Company. The Company’s subsidiaries include subsidiaries which are wholly-owned or which the Company has a controlling interest, including where the Company has been determined to be a primary beneficiary of a variable interest entity (“VIE”) in accordance with the Consolidation guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). All inter-company balances and transactions have been eliminated in consolidation. The information presented in the accompanying Condensed Consolidated Financial Statements is unaudited and reflects all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature. These Condensed Consolidated Financial Statements should be read in conjunction with the Company's audited Annual Report on Form 10-K for the year ended December 31, 2019 (the “10-K”), as certain disclosures in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020, that would duplicate those included in the 10-K are not included in these Condensed Consolidated Financial Statements.
Reclassifications -
Certain amounts in the prior period have been reclassified in order to conform to the current period’s presentation. For comparative purposes, the Company reclassified (i) $9.4 million of Marketable securities from Other assets on the Company’s Condensed Consolidated Balance Sheets at December 31, 2019 and (ii) $0.1 million and $1.6 million of Gain on marketable securities, net from Other income, net on the Company’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2019, respectively.
Subsequent Events -
The Company has evaluated subsequent events and transactions for potential recognition or disclosure in its condensed consolidated financial statements (See Footnotes 3, 8 and 16 to the Notes to the Company’s Condensed Consolidated Financial Statements).
New Accounting Pronouncements –
In April 2020, the FASB staff developed a question-and-answer document, Topic 842 and Topic 840: Accounting for Lease Concessions related to the Effects of the COVID-19 Pandemic, which focuses on the application of the lease guidance in Topic 842, Leases, and Topic 840, Leases (if Topic 842 has not yet been adopted) for lease concessions related to the effects of the COVID-19 pandemic. The FASB staff has been made aware that, given the unprecedented and global nature of the COVID-19 pandemic, it may be exceedingly challenging for entities to determine whether existing contracts provide enforceable rights and obligations for lease concessions and, if so, whether those concessions are consistent with the terms of the contract or are modifications to a contract. As such, an entity can elect not to evaluate whether certain relief provided by a lessor in response to the COVID-19 pandemic is a lease modification. An entity that makes this election can then elect to apply the modification guidance to that relief or account for the concession as if it were contemplated as part of the existing contract. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.
Some concessions will provide a deferral of payments with no substantive changes to the consideration in the original contract. A deferral affects the timing of cash receipts, but the amount of the consideration is substantially the same as that required by the original contract. The FASB staff expects that there will be multiple ways to account for those deferrals, none of which the FASB staff believes are preferable to the others. Two of those methods are:
|
(i)
|
Account for the concessions as if no changes to the lease contract were made. Under that accounting, a lessor would increase its lease receivable, and a lessee would increase its accounts payable as receivables/payments accrue. In its income statement, a lessor would continue to recognize income, and a lessee would continue to recognize expense during the deferral period.
|
|
(ii)
|
Account for the deferred payments as variable lease payments.
|
The Company has elected to apply the modification relief as mentioned in (i) above to the lease concessions it has entered into during the six months ended June 30, 2020 related to the COVID-19 pandemic as a lessor related to rental income recognized.
The following table represents ASUs to the FASB’s ASC that, as of June 30, 2020, are not yet effective for the Company and for which the Company has not elected early adoption, where permitted:
ASU
|
Description
|
Effective
Date
|
Effect on the financial
statements or other significant
matters
|
ASU 2020-01, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force)
|
The amendments clarify the interaction between the accounting for equity securities, equity method investments, and certain derivative instruments. This ASU, among other things, clarifies that an entity should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323 for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.
|
January 1, 2021; Early adoption permitted
|
The adoption of this ASU is not expected to have a material impact on the Company’s financial position and/or results of operations.
|
The following ASUs to the FASB’s ASC have been adopted by the Company as of the date listed:
ASU
|
Description
|
Adoption Date
|
Effect on the financial statements or other significant matters
|
ASU 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting
|
This ASU is intended to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.
|
This guidance is effective immediately, and the Company may elect to apply the amendments prospectively through December 31, 2022.
|
The adoption of this ASU did not have a material impact on the Company’s financial position and/or results of operations.
|
ASU 2020-03, Codification Improvements to Financial Instruments
|
This ASU improves and clarifies various financial instruments topics. The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications.
|
The amendment is divided into issues 1 to 7 with different effective dates.
|
The Company adopted issues 1-7 of this ASU, the adoption did not have a material impact on the Company’s financial position and/or results of operations.
|
ASU 2018-17, Consolidation (Topic 810) – Targeted Improvements to Related Party Guidance for Variable Interest Entities
|
The amendment to Topic 810 clarifies the following areas:
(i) Applying the variable interest entity (VIE) guidance to private companies under common control, and
(ii) Considering indirect interests held through related parties under common control, for determining whether fees paid to decision makers and service providers are variable interests.
This update improves the accounting for those areas, thereby improving general purpose financial reporting. Retrospective adoption is required.
|
January 1, 2020; Early adoption permitted
|
The adoption of this ASU did not have a material impact on the Company’s financial position and/or results of operations
|
ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract
|
The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.
|
January 1, 2020; Early adoption permitted
|
The adoption of this ASU did not have a material impact on the Company’s financial position and/or results of operations
|
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement
|
The amendment modifies the disclosure requirements for fair value measurements in Topic 820, based on the concepts in the FASB Concepts Statement, Conceptual Framework for Financial Reporting – Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits.
|
January 1, 2020; Early adoption permitted
|
The adoption of this ASU did not have a material impact on the Company’s financial position and/or results of operations.
|
ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses
ASU 2019-05, Financial Instruments – Credit Losses (Topic 326), Targeted Transition Relief
ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses
|
The new guidance introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses.
In November 2018, the FASB issued ASU 2018-19, which includes amendments to (i) clarify receivables arising from operating leases are within the scope of the new leasing standard (Topic 842) discussed below and (ii) align the implementation date for nonpublic entities’ annual financial statements with the implementation date for their interim financial statements. Early adoption is permitted as of the original effective date.
In May 2019, the FASB issued ASU 2019-05, which amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (i) were previously recorded at amortized cost and (ii) are within the scope of ASC 326-203 if the instruments are eligible for the fair value option under ASC 825-10.4. The fair value option election does not apply to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. These amendments should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings balance in the statement of financial position as of the date that an entity adopted the amendments in ASU 2016-13. Certain disclosures are required. The effective date will be the same as the effective date in ASU 2016-13.
In November 2019, the FASB issued ASU 2019-11, which clarifies treatment of certain credit losses and disclosure requirements.
|
January 1, 2020; Early adoption permitted
|
The Company adopted this standard using the modified retrospective method.
While the Company’s mortgages and other financing receivables are impacted by this ASU, the adoption did not have a material impact to the Company’s Condensed Consolidated Financial Statements.
|
3. Real Estate
Acquisitions of Operating Properties -
During the six months ended June 30, 2020, the Company acquired the following operating property, through a direct asset purchase (in thousands):
|
|
|
|
Purchase Price
|
|
|
|
|
|
Property Name
|
Location
|
Month Acquired
|
|
Cash
|
|
|
GLA*
|
|
North Valley Parcel
|
Peoria, AZ
|
Feb-20
|
|
$
|
7,073
|
|
|
|
9
|
|
* Gross leasable area ("GLA")
Purchase Price Allocation -
The purchase price for this acquisition is allocated to real estate and related intangible assets acquired, as applicable, in accordance with our accounting policies for asset acquisitions. The purchase price allocation for the property acquired during the six months ended June 30, 2020, is as follows (in thousands):
|
|
Allocation as of
June 30, 2020
|
|
|
Weighted Average
Amortization Period (in Years)
|
|
Land
|
|
$
|
935
|
|
|
|
n/a
|
|
Building
|
|
|
4,610
|
|
|
|
50.0
|
|
Building improvements
|
|
|
221
|
|
|
|
45.0
|
|
Tenant improvements
|
|
|
382
|
|
|
|
19.4
|
|
In-place leases
|
|
|
925
|
|
|
|
19.4
|
|
Net assets acquired
|
|
$
|
7,073
|
|
|
|
|
|
Real Estate Under Development –
The Company had a real estate development project located in Dania Beach, FL for long-term investment. During June 2020, this real estate development project, aggregating $229.9 million (including internal capitalized costs of $31.2 million), was placed in service and reclassified $228.8 million to Operating real estate, net and $1.1 million to Other assets on the Company’s Condensed Consolidated Balance Sheets. The Company capitalized (i) interest of $4.0 million and $3.1 million, (ii) real estate taxes, insurance and legal costs of $0.6 million and $0.4 million and (iii) payroll of $1.0 million and $0.3 million during the six months ended June 30, 2020 and 2019, respectively, in connection with this real estate development project. As of June 30, 2020, the Company had one land parcel located in Dania Beach, FL which is held for future development included in Real estate under development on the Company’s Condensed Consolidated Balance Sheets.
Redevelopment –
As a result of the COVID-19 pandemic, the Company continues to evaluate its current redevelopment and re-tenanting projects and is moving forward with the projects it feels are necessary.
Dispositions -
The table below summarizes the Company’s disposition activity relating to consolidated operating properties and parcels (dollars in millions):
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Aggregate sales price (1)
|
|
$
|
17.2
|
|
|
$
|
110.1
|
|
Gain on sale of properties
|
|
$
|
5.7
|
|
|
$
|
38.4
|
|
Number of properties sold
|
|
|
3
|
|
|
|
7
|
|
Number of out-parcels sold
|
|
|
-
|
|
|
|
5
|
|
|
(1)
|
During the six months ended June 30, 2020, the Company held in escrow an aggregate of $3.2 million of net proceeds in connection with these sales associated with a reverse exchange in accordance with Internal Revenue Code 26 U.S.C. §1031, which was returned to the Company in July 2020.
|
Impairments -
During the six months ended June 30, 2020 and 2019, the Company recognized aggregate impairment charges of $3.1 million and $21.6 million, respectively, related to adjustments to property carrying values for properties which the Company has sold or marketed for sale as part of its active capital recycling program and as such has adjusted the anticipated hold period for such properties. The Company’s estimated fair values of these properties were primarily based upon estimated sales prices from signed contracts or letters of intent from third party offers. See Footnote 11 to the Notes to the Company’s Condensed Consolidated Financial Statements for fair value disclosure.
The COVID-19 pandemic has significantly impacted the retail sector in which the Company operates and if the effects of the pandemic are prolonged, it could have a significant adverse impact to the underlying industries of many of the Company’s tenants. Management cannot, at this point, estimate ultimate losses related to the COVID-19 pandemic. The Company will continue to monitor the economic, financial, and social conditions resulting from this pandemic and will assess its asset portfolio for any impairment indicators. If the Company has determined that any of its assets are impaired the Company would be required to take impairment charges, and such amounts could be material.
4. Investments in and Advances to Real Estate Joint Ventures
The Company has investments in and advances to various real estate joint ventures. These joint ventures are engaged primarily in the operation of shopping centers which are either owned or held under long-term operating leases. The Company and the joint venture partners have joint approval rights for major decisions, including those regarding property operations. As such, the Company holds noncontrolling interests in these joint ventures and accounts for them under the equity method of accounting.
The table below presents joint venture investments for which the Company held an ownership interest at June 30, 2020 and December 31, 2019 (dollars in millions):
|
|
Ownership
|
|
|
The Company’s Investment
|
|
Joint Venture
|
|
Interest
|
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Prudential Investment Program (1)
|
|
|
15.0%
|
|
|
$
|
170.8
|
|
|
$
|
169.5
|
|
Kimco Income Opportunity Portfolio (“KIR”) (1)
|
|
|
48.6%
|
|
|
|
175.8
|
|
|
|
175.0
|
|
Canada Pension Plan Investment Board (“CPP”) (1)
|
|
|
55.0%
|
|
|
|
157.7
|
|
|
|
151.7
|
|
Other Joint Venture Programs
|
|
Various
|
|
|
|
81.1
|
|
|
|
81.9
|
|
Total*
|
|
|
|
|
|
$
|
585.4
|
|
|
$
|
578.1
|
|
* Representing 98 property interests and 21.3 million square feet of GLA, as of both June 30, 2020 and December 31, 2019.
(1)
|
The Company manages these joint venture investments and, where applicable, earns property management fees, construction management fees, property acquisition and disposition fees, leasing management fees and asset management fees.
|
The table below presents the Company’s share of net income for the above investments which is included in Equity in income of joint ventures, net on the Company’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2020 and 2019 (in millions):
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
Joint Venture
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Prudential Investment Program
|
|
$
|
1.8
|
|
|
$
|
2.8
|
|
|
$
|
4.4
|
|
|
$
|
5.7
|
|
KIR
|
|
|
5.0
|
|
|
|
17.2
|
|
|
|
14.7
|
|
|
|
31.8
|
|
CPP
|
|
|
1.7
|
|
|
|
1.6
|
|
|
|
2.7
|
|
|
|
3.0
|
|
Other Joint Venture Programs (1)
|
|
|
1.7
|
|
|
|
0.9
|
|
|
|
2.0
|
|
|
|
0.8
|
|
Total
|
|
$
|
10.2
|
|
|
$
|
22.5
|
|
|
$
|
23.8
|
|
|
$
|
41.3
|
|
During the six months ended June 30, 2019, certain of the Company’s real estate joint ventures disposed of five operating properties, in separate transactions, for an aggregate sales price of $128.2 million. These transactions resulted in an aggregate net gain to the Company of $11.9 million for the six months ended June 30, 2019.
The table below presents debt balances within the Company’s unconsolidated joint venture investments for which the Company held noncontrolling ownership interests at June 30, 2020 and December 31, 2019 (dollars in millions):
|
|
As of June 30, 2020
|
|
|
As of December 31, 2019
|
|
Joint Venture
|
|
Mortgages and
Notes Payable, Net
|
|
|
Weighted
Average
Interest Rate
|
|
|
Weighted
Average
Remaining
Term (months)*
|
|
|
Mortgages
and
Notes
Payable, Net
|
|
|
Weighted
Average
Interest
Rate
|
|
|
Weighted
Average
Remaining
Term (months)*
|
|
Prudential Investment Program
|
|
$
|
535.6
|
|
|
|
2.31
|
%
|
|
|
40.7
|
|
|
$
|
538.1
|
|
|
|
3.46
|
%
|
|
|
46.8
|
|
KIR
|
|
|
558.5
|
|
|
|
4.04
|
%
|
|
|
29.0
|
|
|
|
556.0
|
|
|
|
4.39
|
%
|
|
|
28.4
|
|
CPP
|
|
|
84.8
|
|
|
|
3.25
|
%
|
|
|
36.0
|
|
|
|
84.8
|
|
|
|
3.25
|
%
|
|
|
42.0
|
|
Other Joint Venture Programs
|
|
|
424.2
|
|
|
|
3.45
|
%
|
|
|
89.1
|
|
|
|
415.2
|
|
|
|
3.87
|
%
|
|
|
80.9
|
|
Total
|
|
$
|
1,603.1
|
|
|
|
|
|
|
|
|
|
|
$
|
1,594.1
|
|
|
|
|
|
|
|
|
|
* Includes extension options
The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will assess its joint venture portfolio for any impairment indicators. If the Company has determined that any of its assets are impaired, the Company would be required to take impairment charges, and such amounts could be material.
5. Other Real Estate Investments
The Company has provided capital to owners and developers of real estate properties through its Preferred Equity Program. The Company’s maximum exposure to losses associated with its preferred equity investments is primarily limited to its net investment. As of June 30, 2020, the Company’s net investment under the Preferred Equity Program was $157.3 million relating to 189 properties, including 179 net leased properties. During the six months ended June 30, 2020, the Company recognized income of $15.9 million from its preferred equity investments, including profit participation of $7.5 million. During the six months ended June 30, 2019, the Company recognized income of $19.5 million from its preferred equity investments, including profit participation of $9.8 million. These amounts are included in Equity in income of other real estate investments, net on the Company’s Condensed Consolidated Statements of Income.
6. Marketable Securities
The amortized cost and unrealized gains/(losses), net of marketable securities as of June 30, 2020 and December 31, 2019, are as follows (in thousands):
|
|
As of June 30, 2020
|
|
|
As of December 31, 2019
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
Amortized cost (1)
|
|
$
|
114,587
|
|
|
$
|
12,064
|
|
Unrealized gains/(losses), net (1)
|
|
|
518,964
|
|
|
|
(2,711
|
)
|
Total fair value
|
|
$
|
633,551
|
|
|
$
|
9,353
|
|
|
(1)
|
See Albertsons Companies, Inc. discussion below.
|
During the three months ended June 30, 2020 and 2019, the net unrealized gains on marketable securities were $526.2 million and $0.1 million, respectively. In addition, during the six months ended June 30, 2020 and 2019, the net unrealized gains on marketable securities were $521.6 million and $1.6 million, respectively. These net unrealized gains are included in Gain on marketable securities, net on the Company’s Condensed Consolidated Statements of Income. See Footnote 11 to the Notes to the Company’s Condensed Consolidated Financial Statements for fair value disclosure.
Albertsons Companies, Inc. (“ACI”) –
The Company owned 9.29% of the common stock of ACI, one of the largest food and drug retailers in the United States, and accounted for this $140.2 million investment on the cost method, which was included in Other assets on the Company’s Condensed Consolidated Balance Sheets. During the six months ended June 30, 2020, ACI issued $1.75 billion of convertible preferred stock and used the net proceeds of $1.68 billion to repurchase approximately 17.5% of ACI’s common stock owned by its current shareholders. As a result of this transaction, the Company received net proceeds of $156.1 million, recognized a gain of $131.6 million, which is included in Gain on sale of cost method investment on the Company’s Condensed Consolidated Statements of Income and held a 7.5% ownership interest in ACI.
On June 25, 2020, ACI announced its initial public offering of 50.0 million shares of its common stock had been priced at $16.00 per share. In connection with this transaction, the Company received net proceeds of $71.4 million, net of fees, from the sale of 4.7 million common shares in ACI and recognized a gain of $59.2 million, which is included in Gain on sale of cost method investment on the Company’s Condensed Consolidated Statements of Income. The shares are now traded on the New York Stock Exchange (NYSE) under the symbol "ACI", which began trading as of June 26, 2020. As of June 30, 2020, the Company holds 39.8 million common shares in ACI which are accounted for as available-for-sale marketable securities and are included in Marketable securities on the Company’s Condensed Consolidated Balance Sheets. As of June 30, 2020, the Company’s investment in ACI was $628.2 million, including a mark-to-market gain of $524.7 million.
7. Leases
Lessor Leases
The Company’s primary source of revenues are derived from lease agreements, which includes rental income and expense reimbursement. The Company’s lease income is comprised of minimum base rent, expense reimbursements, percentage rent, lease termination fee income, ancillary income, amortization of above-market and below-market rent adjustments and straight-line rent adjustments.
The disaggregation of the Company’s lease income, which is included in Revenue from rental properties on the Company’s Condensed Consolidated Statements of Income, as either fixed or variable lease income based on the criteria specified in ASC 842, for the six months ended June 30, 2020 and 2019, is as follows (in thousands):
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Lease income:
|
|
|
|
|
|
|
|
|
Fixed lease income (1)
|
|
$
|
393,423
|
|
|
$
|
430,618
|
|
Variable lease income (2)
|
|
|
115,018
|
|
|
|
127,234
|
|
Above-market and below-market leases amortization, net
|
|
|
13,524
|
|
|
|
13,492
|
|
Total lease income (3)
|
|
$
|
521,965
|
|
|
$
|
571,344
|
|
|
(1)
|
Includes minimum base rents, expense reimbursements, ancillary income and straight-line rent adjustments.
|
|
(2)
|
Includes minimum base rents, expense reimbursements, percentage rent, lease termination fee income and ancillary income.
|
|
(3)
|
During the six months ended June 30, 2020, the Company recorded a $50.5 million adjustment associated with potentially uncollectible revenues and disputed amounts, which includes $11.5 million for straight-line rent receivables, primarily attributable to the COVID-19 pandemic.
|
Lessee Leases
The Company currently leases real estate space under noncancelable operating lease agreements for ground leases and administrative office leases. The Company’s leases have remaining lease terms ranging from less than one year to 51.7 years, some of which include options to extend the terms for up to an additional 75 years. The Company does not include any of its renewal options in its lease terms for calculating its lease liability as the renewal options allow the Company to maintain operational flexibility, and the Company is not reasonably certain it will exercise these renewal options at this time. The weighted average remaining non-cancelable lease term for the Company’s operating leases was 20.9 years at June 30, 2020. The weighted average discount rate was 6.65% at June 30, 2020. The Company’s operating lease liabilities are determined based on the estimated present value of the Company’s minimum lease payments under its lease agreements. The discount rate used to determine the lease liabilities is based on the estimated incremental borrowing rate on a lease by lease basis. When calculating the incremental borrowing rates, the Company utilized data from (i) its recent debt issuances, (ii) publicly available data for instruments with similar characteristics, (iii) observable mortgage rates and (iv) unlevered property yields and discount rates. The Company then applied adjustments to account for considerations related to term and security that may not be fully incorporated by the data sets.
The components of the Company’s lease expense, which are included in rent expense and general and administrative expense on the Company’s Condensed Consolidated Statements of Income for the six months ended June 30, 2020 and 2019, were as follows (in thousands):
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Lease cost:
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
5,196
|
|
|
$
|
6,557
|
|
Variable lease cost
|
|
|
1,455
|
|
|
|
804
|
|
Total lease cost
|
|
$
|
6,651
|
|
|
$
|
7,361
|
|
8. Notes, Mortgages and Construction Loan Payable
Notes Payable –
In February 2020, the Company obtained a new $2.0 billion unsecured revolving credit facility (the “Credit Facility”) with a group of banks, which replaced the Company’s existing $2.25 billion unsecured revolving credit facility. The Credit Facility is scheduled to expire in March 2024, with two additional six-month options to extend the maturity date, at the Company’s discretion, to March 2025. The Credit Facility, which accrues interest at a rate of LIBOR plus 77.5 basis points (1.18% as of June 30, 2020), can be increased to $2.75 billion through an accordion feature. The Credit Facility is a green credit facility tied to climate actions, as described in the agreement. Upon achieving such climate actions, the rate on the Credit Facility is reduced by 1 basis point. Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to covenants requiring the maintenance of (i) maximum indebtedness ratios and (ii) minimum interest and fixed charge coverage ratios. As of June 30, 2020, the Credit Facility had no outstanding balance and $0.3 million appropriated for letters of credit and the Company was in compliance with its covenants.
In April 2020, the Company entered into a new unsecured term loan credit facility with total outstanding borrowings of $590.0 million (the “Term Loan”) pursuant to a credit agreement with a group of banks. The Term Loan was scheduled to mature in April 2021, with a one-year extension option to extend the maturity date, at the Company’s discretion, to April 2022. The Term Loan accrued interest at a rate of LIBOR plus 140 basis points (1.65% as of June 30, 2020) or, at the Company’s option, a spread of 40 basis points to the base rate defined in the Term Loan, that in each case fluctuated in accordance with changes in the Company’s senior debt ratings. The Term Loan could be increased by an additional $750.0 million through an accordion feature. Pursuant to the terms of the Term Loan, the Company was subject to covenants that were substantially the same as those in the Credit Facility. The Company repaid $265.0 million of the outstanding borrowings under the Term Loan in June 2020. As of June 30, 2020, the Term Loan had an outstanding balance of $325.0 million and the Company was in compliance with its covenants. Subsequent to June 30, 2020, the Term Loan was fully repaid and the facility was terminated.
In July 2020, the Company issued $500.0 million in unsecured notes (the “Green Bond”), which are scheduled to mature in October 2030 and accrue interest at a rate of 2.70% per annum. The net proceeds from this offering are allocated to finance or refinance, in whole or in part, recently completed, existing or future Eligible Green Projects, in alignment with the four core components of the Green Bond Principles, 2018 ("GBP") as administered by the International Capital Market Association. Eligible Green Projects include projects with disbursements made in the three years preceding the issue date of the notes.
On July 15, 2020, the Company announced the partial redemption of $200.0 million of its 3.20% senior unsecured notes outstanding, which mature in May 2021. These notes will be redeemed on July 30, 2020, and the Company will incur a prepayment charge of approximately $3.3 million resulting from the partial repayment. As of June 30, 2020, $484.9 million was outstanding on these notes.
Mortgages and Construction Loan Payable -
In August 2018, the Company closed on a construction loan commitment of $67.0 million relating to one development property. This loan commitment was scheduled to mature in August 2020, with six additional six-month options to extend the maturity date to August 2023 and bore interest at a rate of LIBOR plus 180 basis points. This construction loan was fully repaid in January 2020.
During the six months ended June 30, 2020, the Company repaid $21.6 million of mortgage debt (including fair market value adjustment of $0.2 million) that encumbered two operating properties.
9. Noncontrolling Interests
Noncontrolling interests represent the portion of equity that the Company does not own in entities it consolidates as a result of having a controlling interest or determining that the Company was the primary beneficiary of a VIE in accordance with the provisions of the FASB’s Consolidation guidance. The Company accounts and reports for noncontrolling interests in accordance with the Consolidation guidance and the Distinguishing Liabilities from Equity guidance issued by the FASB. The Company identifies its noncontrolling interests separately within the equity section on the Company’s Condensed Consolidated Balance Sheets. The amounts of consolidated net income attributable to the Company and to the noncontrolling interests are presented separately on the Company’s Condensed Consolidated Statements of Income.
During the six months ended June 30, 2020, the Company acquired its partners’ interests in two consolidated entities, in separate transactions, for an aggregate purchase price of $20.6 million. This transaction resulted in a net decrease in Noncontrolling interests of $1.3 million and a corresponding net increase in Paid-in capital of $19.3 million on the Company’s Condensed Consolidated Balance Sheets. There are no remaining partners in one of these consolidated entities.
Included within noncontrolling interests are units that were determined to be contingently redeemable that are classified as Redeemable noncontrolling interests and presented in the mezzanine section between Total liabilities and Stockholder’s equity on the Company’s Condensed Consolidated Balance Sheets.
The following table presents the change in the redemption value of the Redeemable noncontrolling interests for the six months ended June 30, 2020 and 2019 (in thousands):
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Balance at January 1,
|
|
$
|
17,943
|
|
|
$
|
23,682
|
|
Income
|
|
|
605
|
|
|
|
185
|
|
Distributions
|
|
|
(605
|
)
|
|
|
(177
|
)
|
Balance at June 30,
|
|
$
|
17,943
|
|
|
$
|
23,690
|
|
10. Variable Interest Entities (“VIE”)
Included within the Company’s consolidated operating properties at both June 30, 2020 and December 31, 2019, are 22 consolidated entities that are VIEs, for which the Company is the primary beneficiary. These entities have been established to own and operate real estate property. The Company’s involvement with these entities is through its majority ownership and management of the properties. The entities were deemed VIEs primarily because the unrelated investors do not have substantive kick-out rights to remove the general or managing partner by a vote of a simple majority or less, and they do not have substantive participating rights. The Company determined that it was the primary beneficiary of these VIEs as a result of its controlling financial interest. At June 30, 2020, total assets of these VIEs were $1.0 billion and total liabilities were $64.8 million. At December 31, 2019, total assets of these VIEs were $0.9 billion and total liabilities were $70.9 million.
The majority of the operations of these VIEs are funded with cash flows generated from the properties. The Company has not provided financial support to any of these VIEs that it was not previously contractually required to provide, which consists primarily of funding any capital expenditures, including tenant improvements, which are deemed necessary to continue to operate the entity and any operating cash shortfalls that the entity may experience.
Additionally, included within the Company’s real estate development projects at December 31, 2019, is one consolidated entity that was a VIE, for which the Company was the primary beneficiary. This entity had been established to develop a real estate property to hold as a long-term investment. The Company’s involvement with this entity is through its majority ownership and management of the property. This entity was deemed a VIE primarily because the equity investments at risk were not sufficient to permit the entity to finance its activities without additional financial support. The initial equity contributed to this entity was not sufficient to fully finance the real estate construction as development costs are funded by the partners throughout the construction period. The Company determined that it was the primary beneficiary of this VIE as a result of its controlling financial interest. At December 31, 2019, total assets of this real estate development VIE were $346.9 million and total liabilities were $82.5 million. During the six months ended June 30, 2020 the Company purchased the partner’s noncontrolling interest and maintains full ownership of the entity. As a result, the entity is no longer a VIE.
All liabilities of these consolidated VIEs are non-recourse to the Company (“VIE Liabilities”). The assets of the unencumbered VIEs are not restricted for use to settle only the obligations of these VIEs. The remaining VIE assets are encumbered by third party non-recourse mortgage debt and a construction loan. The assets associated with these encumbered VIEs (“Restricted Assets”) are collateral under the respective mortgages and a construction loan and are therefore restricted and can only be used to settle the corresponding liabilities of the VIE. The table below summarizes the consolidated VIEs and the classification of the Restricted Assets and VIE Liabilities on the Company’s Condensed Consolidated Balance Sheets as follows (dollars in millions):
|
|
As of June 30, 2020
|
|
|
As of December 31, 2019
|
|
Number of unencumbered VIEs
|
|
|
19
|
|
|
|
19
|
|
Number of encumbered VIEs
|
|
|
3
|
|
|
|
4
|
|
Total number of consolidated VIEs
|
|
|
22
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
Restricted Assets:
|
|
|
|
|
|
|
|
|
Real estate, net
|
|
$
|
98.7
|
|
|
$
|
228.9
|
|
Cash and cash equivalents
|
|
|
2.2
|
|
|
|
9.2
|
|
Accounts and notes receivable, net
|
|
|
1.7
|
|
|
|
3.8
|
|
Other assets
|
|
|
1.6
|
|
|
|
3.6
|
|
Total Restricted Assets
|
|
$
|
104.2
|
|
|
$
|
245.5
|
|
|
|
|
|
|
|
|
|
|
VIE Liabilities:
|
|
|
|
|
|
|
|
|
Mortgages and construction loan payable, net
|
|
$
|
37.3
|
|
|
$
|
104.5
|
|
Other liabilities
|
|
|
27.5
|
|
|
|
48.9
|
|
Total VIE Liabilities
|
|
$
|
64.8
|
|
|
$
|
153.4
|
|
11. Fair Value Measurements
All financial instruments of the Company are reflected in the accompanying Condensed Consolidated Balance Sheets at amounts which, in management’s estimation, based upon an interpretation of available market information and valuation methodologies, reasonably approximate their fair values except those listed below, for which fair values are disclosed. The valuation method used to estimate fair value for fixed-rate and variable-rate debt is based on discounted cash flow analyses, with assumptions that include credit spreads, market yield curves, trading activity, loan amounts and debt maturities. The fair values for marketable securities are based on published values, securities dealers’ estimated market values or comparable market sales. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition.
As a basis for considering market participant assumptions in fair value measurements, the FASB’s Fair Value Measurements and Disclosures guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
The following are financial instruments for which the Company’s estimated fair value differs from the carrying value (in thousands):
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
Notes payable, net (1)
|
|
$
|
4,961,972
|
|
|
$
|
5,044,336
|
|
|
$
|
4,831,759
|
|
|
$
|
4,983,763
|
|
Mortgages and construction loan payable, net (2)
|
|
$
|
388,406
|
|
|
$
|
387,440
|
|
|
$
|
484,008
|
|
|
$
|
486,042
|
|
|
(1)
|
The Company determined that the valuation of its Senior Unsecured Notes were classified within Level 2 of the fair value hierarchy and its unsecured revolving credit facility and term loan were classified within Level 3 of the fair value hierarchy. The estimated fair value amounts classified as Level 2, as of June 30, 2020 and December 31, 2019, were $4.7 billion and $4.8 billion, respectively. The estimated fair value amounts classified as Level 3, as of June 30, 2020 and December 31, 2019, were $325.0 million and $199.9 million, respectively.
|
|
(2)
|
The Company determined that its valuation of its mortgages and construction loan were classified within Level 3 of the fair value hierarchy.
|
The Company has certain financial instruments that must be measured under the FASB’s Fair Value Measurements and Disclosures guidance, including available for sale securities. The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.
The tables below present the Company’s financial assets measured at fair value on a recurring basis at June 30, 2020 and December 31, 2019, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):
|
|
Balance at
June 30, 2020
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities
|
|
$
|
633,551
|
|
|
$
|
633,551
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Balance at
December 31, 2019
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities
|
|
$
|
9,353
|
|
|
$
|
9,353
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Assets measured at fair value on a non-recurring basis at June 30, 2020 and December 31, 2019, are as follows (in thousands):
|
|
Balance at
June 30, 2020
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
$
|
5,300
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,300
|
|
|
|
Balance at
December 31, 2019
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
$
|
39,510
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
39,510
|
|
Other real estate investments
|
|
$
|
32,974
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
32,974
|
|
During the six months ended June 30, 2020 and 2019, the Company recognized impairment charges related to adjustments to property carrying values of $3.1 million and $21.6 million, respectively. The Company’s estimated fair values of these properties were primarily based upon estimated sales prices from signed contracts or letters of intent from third party offers. The Company does not have access to the unobservable inputs used to determine the estimated fair values of third party offers. Based on these inputs, the Company determined that its valuation of these investments was classified within Level 3 of the fair value hierarchy. (See Footnote 3 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional discussion regarding impairment charges).
12. Incentive Plans
In May 2020, the Company’s stockholders approved the 2020 Equity Participation Plan (the “2020 Plan”), which is a successor to the Restated Kimco Realty Corporation 2010 Equity Participation Plan that expired in March 2020. The 2020 Plan provides for a maximum of 10,000,000 shares of the Company’s common stock to be reserved for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, stock payments and deferred stock awards. At June 30, 2020, the Company had 10.0 million shares of common stock available for issuance under the 2020 Plan.
The Company accounts for equity awards in accordance with FASB’s Compensation – Stock Compensation guidance which requires that all share-based payments to employees, including grants of employee stock options, restricted stock and performance shares, be recognized in the Condensed Consolidated Statements of Income over the service period based on their fair values. Fair value is determined, depending on the type of award, using either the Black-Scholes option pricing formula or the Monte Carlo method for performance shares, both of which are intended to estimate the fair value of the awards at the grant date. Fair value of restricted shares is calculated based on the price on the date of grant.
The Company recognized expenses associated with its equity awards of $11.5 million and $10.3 million for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, the Company had $46.3 million of total unrecognized compensation cost related to unvested stock compensation granted under the Plans. That cost is expected to be recognized over a weighted average period of approximately 3.1 years.
13. Earnings Per Share
The following table sets forth the reconciliation of earnings and the weighted average number of shares used in the calculation of basic and diluted earnings per share (amounts presented in thousands except per share data):
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Computation of Basic and Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to the Company's common shareholders
|
|
$
|
741,539
|
|
|
$
|
86,493
|
|
|
$
|
825,285
|
|
|
$
|
188,128
|
|
Earnings attributable to participating securities
|
|
|
(5,253
|
)
|
|
|
(660
|
)
|
|
|
(5,687
|
)
|
|
|
(1,285
|
)
|
Net income available to the Company’s common shareholders for basic earnings per share
|
|
|
736,286
|
|
|
|
85,833
|
|
|
|
819,598
|
|
|
|
186,843
|
|
Distributions on convertible units
|
|
|
33
|
|
|
|
-
|
|
|
|
81
|
|
|
|
20
|
|
Net income available to the Company’s common shareholders for diluted earnings per share
|
|
$
|
736,319
|
|
|
$
|
85,833
|
|
|
$
|
819,679
|
|
|
$
|
186,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – basic
|
|
|
429,967
|
|
|
|
419,697
|
|
|
|
429,851
|
|
|
|
419,581
|
|
Effect of dilutive securities (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity awards
|
|
|
970
|
|
|
|
949
|
|
|
|
1,469
|
|
|
|
1,166
|
|
Assumed conversion of convertible units
|
|
|
233
|
|
|
|
-
|
|
|
|
207
|
|
|
|
51
|
|
Weighted average common shares outstanding – diluted
|
|
|
431,170
|
|
|
|
420,646
|
|
|
|
431,527
|
|
|
|
420,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to the Company's common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.71
|
|
|
$
|
0.20
|
|
|
$
|
1.91
|
|
|
$
|
0.45
|
|
Diluted earnings per share
|
|
$
|
1.71
|
|
|
$
|
0.20
|
|
|
$
|
1.90
|
|
|
$
|
0.44
|
|
(1)
|
The effect of the assumed conversion of certain convertible units had an anti-dilutive effect upon the calculation of Net income available to the Company’s common shareholders per share. Accordingly, the impact of such conversions has not been included in the determination of diluted earnings per share calculations. Additionally, there were 1.2 million and 1.3 million stock options that were not dilutive as of June 30, 2020 and 2019, respectively, and 2.5 million shares of restricted stock that were not dilutive for the three months ended June 30, 2020.
|
The Company's unvested restricted share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the unvested restricted share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted share awards based on dividends declared and the unvested restricted shares' participation rights in undistributed earnings.
14. Stockholders’ Equity
Preferred Stock -
The Company’s outstanding Preferred Stock is detailed below:
As of June 30, 2020 and December 31, 2019
|
Class of
Preferred
Stock
|
|
Shares
Authorized
|
|
|
Shares
Issued and Outstanding
|
|
|
Liquidation Preference
(in thousands)
|
|
|
Dividend
Rate
|
|
|
Annual
Dividend per
Depositary
Share
|
|
|
Par
Value
|
|
Optional
Redemption
Date
|
Class L
|
|
|
10,350
|
|
|
|
9,000
|
|
|
$
|
225,000
|
|
|
|
5.125%
|
|
|
$
|
1.28125
|
|
|
$
|
1.00
|
|
8/16/2022
|
Class M
|
|
|
10,580
|
|
|
|
10,580
|
|
|
|
264,500
|
|
|
|
5.250%
|
|
|
$
|
1.31250
|
|
|
$
|
1.00
|
|
12/20/2022
|
|
|
|
|
|
|
|
19,580
|
|
|
$
|
489,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock -
During February 2020, the Company extended its share repurchase program for a term of two years, which will expire in February 2022, pursuant to which the Company may repurchase shares of its common stock, par value $0.01 per share, with an aggregate gross purchase price of up to $300.0 million. The Company did not repurchase any shares under the share repurchase program during the six months ended June 30, 2020. As of June 30, 2020, the Company had $224.9 million available under this share repurchase program.
During September 2019, the Company established an at the market continuous offering program (“ATM program”), pursuant to which the Company may offer and sell from time to time shares of its common stock, par value $0.01 per share, with an aggregate gross sales price of up to $500.0 million through a consortium of banks acting as sales agents. Sales of the shares of common stock may be made, as needed, from time to time in “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, including by means of ordinary brokers’ transactions on the New York Stock Exchange or otherwise (i) at market prices prevailing at the time of sale, (ii) at prices related to prevailing market prices or (iii) as otherwise agreed to with the applicable sales agent. The Company did not offer for sale any shares of common stock under the ATM program during the six months ended June 30, 2020.
Dividends Declared -
The following table provides a summary of the dividends declared per share:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Common Shares (1)
|
|
$
|
-
|
|
|
$
|
0.28000
|
|
|
$
|
0.28000
|
|
|
$
|
0.56000
|
|
Class I Depositary Shares (2)
|
|
$
|
-
|
|
|
$
|
0.37500
|
|
|
$
|
-
|
|
|
$
|
0.75000
|
|
Class J Depositary Shares (2)
|
|
$
|
-
|
|
|
$
|
0.34375
|
|
|
$
|
-
|
|
|
$
|
0.68750
|
|
Class K Depositary Shares (2)
|
|
$
|
-
|
|
|
$
|
0.35156
|
|
|
$
|
-
|
|
|
$
|
0.70312
|
|
Class L Depositary Shares
|
|
$
|
0.32031
|
|
|
$
|
0.32031
|
|
|
$
|
0.64062
|
|
|
$
|
0.64062
|
|
Class M Depositary Shares
|
|
$
|
0.32813
|
|
|
$
|
0.32813
|
|
|
$
|
0.65626
|
|
|
$
|
0.65626
|
|
|
(1)
|
For the three months ended June 30, 2020, as a result of the COVID-19 pandemic and the future economic uncertainties, out of an abundance of caution, the Company’s Board of Directors has temporarily suspended the dividend on its common shares. The Company’s Board of Directors will continue to monitor the Company’s financial performance and economic outlook, as well as the Company’s compliance with REIT taxable income distribution requirements.
|
|
(2)
|
Shares were fully redeemed during 2019.
|
15. Supplemental Schedule of Non-Cash Investing / Financing Activities
The following schedule summarizes the non-cash investing and financing activities of the Company for the six months ended June 30, 2020 and 2019 (in thousands):
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Acquisition of real estate interests through proceeds held in escrow
|
|
$
|
-
|
|
|
$
|
30,970
|
|
Proceeds held in escrow through sale of real estate interests
|
|
$
|
3,194
|
|
|
$
|
-
|
|
Surrender of restricted common stock
|
|
$
|
5,325
|
|
|
$
|
3,689
|
|
Declaration of dividends paid in succeeding period
|
|
$
|
5,366
|
|
|
$
|
130,460
|
|
Capital expenditures accrual
|
|
$
|
46,860
|
|
|
$
|
61,473
|
|
16. Subsequent Events
See Footnote 3 to the Notes to the Company’s Condensed Consolidated Financial Statements for return of escrow in connection with a §1031 reverse exchange subsequent to June 30, 2020.
See Footnote 8 to the Notes to the Company’s Condensed Consolidated Financial Statements for debt and financing transactions subsequent to June 30, 2020, including Term Loan payoff, Green Bond issuance and partial redemption of senior unsecured notes.