Item 2. Management’s Discussion and Analysis
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
Forward-Looking Statements
 
This Quarterly Report on Form 10-Q, together with other statements and information publicly disseminated by Kimco Realty Corporation (the “Company”) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with the safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “expect,” “intend,” “commit,” “anticipate,” “estimate,” “project,” “will,” “target,” “forecast” or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which, in some cases, are beyond the Company’s control and could materially affect actual results, performances or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) general adverse economic and local real estate conditions, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business, (iii) the reduction in the Company’s income in the event of multiple lease terminations by tenants or a failure of multiple tenants to occupy their premises in a shopping center, (iv) the availability of suitable acquisition, disposition, development and redevelopment opportunities, and risks related to acquisitions not performing in accordance with our expectations, (v) the Company’s ability to raise capital by selling its assets, (vi) increases in operating costs due to inflation and supply chain issues, (vii) risks related to future opportunities and plans for the combined company, including the uncertainty of expected future financial performance and results of the combined company following the merger between Kimco and Weingarten Realty Investors (the "Merger"), (viii) the possibility that, if the Company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial analysts or investors, the market price of the Company’s common stock could decline, (ix) changes in governmental laws and regulations and management’s ability to estimate the impact of such changes, (x) valuation and risks related to the Company’s joint venture and preferred equity investments, (xi) valuation of marketable securities and other investments, including the shares of Albertsons Companies, Inc. common stock held by the Company, (xii) impairment charges, (xiii) pandemics or other health crises, such as coronavirus disease 2019 (“COVID-19”), (xiv) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms to the Company, (xv) the level and volatility of interest rates and management’s ability to estimate the impact thereof, (xvi) changes in the dividend policy for the Company’s common and preferred stock and the Company’s ability to pay dividends at current levels, (xvii) unanticipated changes in the Company’s intention or ability to prepay certain debt prior to maturity and/or hold certain securities until maturity, and (xviii) the other risks and uncertainties identified under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year-ended December 31, 2021. Accordingly, there is no assurance that the Company’s expectations will be realized. The Company disclaims any intention or obligation to update the forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to refer to any further disclosures the Company makes in the Current Reports on Form 8-K that the Company files with the Securities and Exchange Commission (“SEC”).
 
The following discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes thereto. These unaudited financial statements include 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.
 
Executive Overview
 
Kimco Realty Corporation, a Maryland corporation, is North America’s largest publicly traded owner and operator of open-air, grocery-anchored shopping centers, including 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’s mission is to create destinations for everyday living that inspire a sense of community and deliver value to our many stakeholders.
 
The Company is a self-administered real estate investment trust (“REIT”) and has owned and operated open-air shopping centers for over 60 years. The Company has not engaged, nor does it expect to retain, any REIT advisors in connection with the operation of its properties. As of March 31, 2022, the Company had interests in 537 U.S. shopping center properties, aggregating 92.7 million square feet of gross leasable area (“GLA”), located in 29 states. In addition, the Company had 32 other property interests, primarily through the Company’s preferred equity investments and other investments, totaling 6.2 million square feet of GLA. The Company’s ownership interests in real estate consist of its consolidated portfolio and portfolios where the Company owns an economic interest, such as properties in the Company’s investment real estate management programs, where the Company partners with institutional investors and also retains management.  
 
The Company’s primary business objective is to be the premier owner and operator of open-air, grocery-anchored shopping centers, including mixed-use assets, in the U.S. The Company believes it can achieve this objective by:
 
●
increasing the value of its existing portfolio of properties and generating higher levels of portfolio growth;
 
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●
increasing cash flows for reinvestment and/or for distribution to shareholders while maintaining conservative payout ratios;
 
●
improving debt metrics and upgraded unsecured debt ratings
 
●
continuing growth in desirable demographic areas with successful retailers, primarily focused on grocery anchors; and
 
●
increasing the number of entitlements for residential use.
 
Weingarten Merger
 
On August 3, 2021, Weingarten Realty Investors ("Weingarten") merged with and into the Company, with the Company continuing as the surviving public company, pursuant to the definitive merger agreement (the “Merger Agreement”) between the Company and Weingarten which was entered into on April 15, 2021. The Merger brought together two industry-leading retail real estate platforms with highly complementary portfolios and created the preeminent open-air shopping center and mixed-use real estate owner in the country. As a result of the Merger, the Company acquired 149 properties, including 30 held through joint venture programs. The increased scale in targeted growth markets, coupled with a broader pipeline of redevelopment opportunities, has positioned the combined company to create significant value for its shareholders.
 
COVID-19 Pandemic
 
The COVID-19 pandemic has resulted in a widespread health crisis that adversely affected businesses, economies and financial markets worldwide. The COVID-19 pandemic significantly impacted the retail sector in which the Company operates. The majority of the Company’s tenants and their operations have been, and may continue to be impacted. Through the duration of the pandemic, a substantial number of tenants had to temporarily or permanently close their business, shortened their operating hours or offer reduced services for some period of time. The development and distribution of COVID-19 vaccines has assisted in allowing many restrictions to be lifted, providing a path to recovery. The overall economy continues to recover but several issues including the lack of qualified employees, inflation risk, supply chain issues and new COVID-19 variants have impacted the pace of the recovery.
 
The Company continues to monitor the impact of COVID-19 on the Company’s business, its tenants' industries and the general economic, financial and social conditions. The magnitude and duration of the COVID-19 pandemic and its impact on the Company’s operations and liquidity remains uncertain as the pandemic continues to evolve globally and within the United States. If the Company determines that any of its assets are impaired as a result of the COVID-19 pandemic, the Company would be required to take impairment charges, and such amounts could be material. The Company did not incur any impairment charges during the three months ended March 31, 2022 relating to COVID-19.
 
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Results of Operations
 
Comparison of the three months ended March 31, 2022 and 2021
 
The following table presents the comparative results from the Company’s Condensed Consolidated Statements of Income for the three months ended March 31, 2022, as compared to the corresponding period in 2021 (in thousands, except per share data):
 
 
 
Three Months Ended March 31,
 
 
 
2022
 
 
2021
 
 
Change
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Revenues from rental properties, net
 
$
422,654
 
 
$
278,871
 
 
$
143,783
 
Management and other fee income
 
 
4,595
 
 
 
3,437
 
 
 
1,158
 
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Rent (1)
 
 
(4,081
)
 
 
(3,035
)
 
 
(1,046
)
Real estate taxes
 
 
(54,314
)
 
 
(38,936
)
 
 
(15,378
)
Operating and maintenance (2)
 
 
(69,225
)
 
 
(46,520
)
 
 
(22,705
)
General and administrative (3)
 
 
(29,948
)
 
 
(24,478
)
 
 
(5,470
)
Impairment charges
 
 
(272
)
 
 
-
 
 
 
(272
)
Depreciation and amortization
 
 
(130,294
)
 
 
(74,876
)
 
 
(55,418
)
Gain on sale of properties
 
 
4,193
 
 
 
10,005
 
 
 
(5,812
)
Other income/(expense)
 
 
 
 
 
 
 
 
 
 
 
 
Other income, net
 
 
5,983
 
 
 
3,357
 
 
 
2,626
 
Gain on marketable securities, net
 
 
121,764
 
 
 
61,085
 
 
 
60,679
 
Interest expense
 
 
(57,019
)
 
 
(47,716
)
 
 
(9,303
)
Early extinguishment of debt charges
 
 
(7,173
)
 
 
-
 
 
 
(7,173
)
Benefit/(provision) for income taxes, net
 
 
153
 
 
 
(1,308
)
 
 
1,461
 
Equity in income of joint ventures, net
 
 
23,570
 
 
 
17,752
 
 
 
5,818
 
Equity in income of other investments, net
 
 
5,373
 
 
 
3,787
 
 
 
1,586
 
Net loss/(income) attributable to noncontrolling interests
 
 
1,343
 
 
 
(3,483
)
 
 
4,826
 
Preferred dividends
 
 
(6,354
)
 
 
(6,354
)
 
 
-
 
Net income available to the Company's common shareholders
 
$
230,948
 
 
$
131,588
 
 
$
99,360
 
Net income available to the Company's common shareholders:
 
 
 
 
 
 
 
 
 
 
 
 
Diluted per common share
 
$
0.37
 
 
$
0.30
 
 
$
0.07
 
 
 
(1)
Rent expense relates to ground lease payments for which the Company is the lessee.
 
(2)
Operating and maintenance expense consists of property related costs including repairs and maintenance costs, roof repair, landscaping, parking lot repair, snow removal, utilities, property insurance costs, security and various other property related expenses.
 
(3)
General and administrative expense includes employee-related expenses (including salaries, bonuses, equity awards, benefits, severance costs and payroll taxes), professional fees, office rent, travel and entertainment costs and other company-specific expenses.
 
Net income available to the Company’s common shareholders was $230.9 million for the three months ended March 31, 2022, as compared to $131.6 million for the comparable period in 2021. On a diluted per common share basis, net income available to the Company’s common shareholders for the three months ended March 31, 2022 was $0.37, as compared to $0.30 for the comparable period in 2021.
 
The following describes the changes of certain line items included on the Company’s Condensed Consolidated Statements of Income that the Company believes changed significantly and affected Net income available to the Company's common shareholders during the three months ended March 31, 2022, as compared to the corresponding period in 2021:
 
Revenues from rental properties, net –
 
The increase in Revenues from rental properties, net of $143.8 million for the three months ended March 31, 2022, as compared to the corresponding period in 2021, is primarily from (i) an increase in revenues of $133.2 million due to properties acquired during 2022 and 2021, including the impact of the Merger, (ii) a net increase in revenues from tenants of $10.0 million primarily due to an increase in leasing activity and net growth in the current portfolio, (iii) an increase in net straight-line rental income of $5.2 million primarily due to an increase in leasing activity and a decrease in reserves and (iv) a net decrease in credit losses from tenants of $2.5 million primarily due to increased collections, partially offset by (v) a decrease in lease termination fee income of $5.1 million and (vi) a decrease in revenues of $2.0 million due to dispositions during 2022 and 2021.
 
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Real estate taxes –
 
The increase in Real estate taxes of $15.4 million for the three months ended March 31, 2022, as compared to the corresponding period in 2021, is primarily due to properties acquired during 2022 and 2021, including the impact of the Merger.
 
Operating and maintenance –
 
The increase in Operating and maintenance expense of $22.7 million for the three months ended March 31, 2022, as compared to the corresponding period in 2021 is primarily due to properties acquired during 2022 and 2021, including the impact of the Merger.
 
General and administrative –
 
The increase in General and administrative expense of $5.5 million is primarily due to an increase in employee-related expenses resulting from additional employees hired in connection with the Merger.
 
Depreciation and amortization –
 
The increase in Depreciation and amortization of $55.4 million for the three months ended March 31, 2022, as compared to the corresponding period in 2021, is primarily due to (i) an increase of $58.8 million resulting from properties acquired during 2022 and 2021, including the impact of the Merger, partially offset by (ii) a decrease of $3.4 million due to write-offs of depreciable assets primarily due to tenant vacates and property dispositions.
 
Gain on sale of properties –
 
During the three months ended March 31, 2022, the Company disposed of four land parcels, in separate transactions, for an aggregate sales price of $8.7 million, which resulted in aggregate gains of $4.2 million. During the three months ended March 31, 2021, the Company disposed of an operating property and four land parcels, in separate transactions, for an aggregate sales price of $23.0 million, which resulted in aggregate gains of $10.0 million.
 
Gain on marketable securities, net –
 
The increase in Gain on marketable securities, net of $60.7 million for the three months ended March 31, 2022, as compared to the corresponding period in 2021, is primarily the result of mark-to-market fluctuations of the shares of Albertsons Companies, Inc. “ACI” common stock held by the Company.
 
Interest expense –
 
The increase in Interest expense of $9.3 million for the three months ended March 31, 2022, as compared to the corresponding period in 2021, is primarily due (i) increased levels of borrowings resulting from the assumptions of unsecured notes and mortgages in connection with the Merger and public debt offerings, partially offset by (ii) the repayment of unsecured notes and mortgages during 2022 and 2021.
 
Early extinguishment of debt charges –
 
During the three months ended March 31, 2022, the Company redeemed its $500.0 million 3.40% senior unsecured notes, which were scheduled to mature in November 2022. As a result, the Company incurred a prepayment charge of $6.5 million and $0.7 million in write-off of deferred financing costs during the three months ended March 31, 2022.
 
Equity in income of joint ventures, net –
 
The increase in Equity in income of joint ventures, net of $5.8 million for the three months ended March 31, 2022, as compared to the corresponding period in 2021, is primarily due to (i) an increase in equity in income of $5.3 million within various joint venture investments during 2022, as compared to the corresponding period in 2021, primarily resulting from a decrease in credit losses due to collections from tenants, including straight-line rental income, (ii) an increase in equity in income of $2.3 million from ownership interests acquired in unconsolidated joint ventures in connection with the Merger and (iii) a decrease in impairment charges of $0.5 million recognized during 2022, as compared to the corresponding period in 2021, partially offset by (iv) a decrease in net gains of $2.3 million resulting from the sale of properties within various joint venture investments during 2022, as compared to the corresponding period in 2021.
 
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Net loss/(income) attributable to noncontrolling interests –
 
The change in Net loss/(income) attributable to noncontrolling interests of $4.8 million for the three months ended March 31, 2022, as compared to the corresponding period in 2021, is primarily due to (i) a decrease in net gain on sale of properties within consolidated joint ventures during 2022, as compared to the corresponding period in 2021, partially offset by (ii) an increase in net income attributable to noncontrolling interests recognized in connection with consolidated joint ventures acquired in the Merger.
 
Tenant Concentration
 
The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties and a large tenant base. As of March 31, 2022, the Company had interests in 537 U.S. shopping center properties, aggregating 92.7 million square feet of gross leasable area (“GLA”), located in 29 states. At March 31, 2022, the Company’s five largest tenants were TJX Companies, The Home Depot, Albertsons, Ross Stores and Amazon/Whole Foods, which represented 3.7%, 2.2%, 1.9%, 1.9% and 1.9%, respectively, of the Company’s annualized base rental revenues, including the proportionate share of base rental revenues from properties in which the Company has less than a 100% economic interest.
 
Liquidity and Capital Resources
 
The Company’s capital resources include accessing the public debt and equity capital markets, unsecured term loans, mortgages and construction loan financing, and immediate access to the Company’s unsecured revolving credit facility (the “Credit Facility”) with bank commitments of $2.0 billion which can be increased to $2.75 billion through an accordion feature. In addition, the Company holds 39.8 million shares of ACI, which are subject to certain contractual lock-up provisions that are scheduled to expire on June 25, 2022.
 
The Company anticipates that cash on hand, net cash flow provided by operating activities, borrowings under its Credit Facility and the issuance of equity, public debt, as well as other debt and equity alternatives, and the sale of marketable equity securities, will provide the necessary capital required by the Company. The Company will continue to evaluate its capital requirements for both its short-term and long-term liquidity needs, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in Part I, Item 1A. Risk Factors of our 10-K.
 
The Company’s cash flow activities are summarized as follows (in thousands): 
 
 
 
Three Months Ended March 31,
 
 
 
2022
 
 
2021
 
Cash, cash equivalents and restricted cash, beginning of the period
 
$
334,663
 
 
$
293,188
 
Net cash flow provided by operating activities
 
 
194,551
 
 
 
148,371
 
Net cash flow used for investing activities
 
 
(35,616
)
 
 
(83,924
)
Net cash flow used for financing activities
 
 
(123,280
)
 
 
(103,783
)
Net change in cash, cash equivalents and restricted cash
 
 
35,655
 
 
 
(39,336
)
Cash, cash equivalents and restricted cash, end of the period
 
$
370,318
 
 
$
253,852
 
 
Operating Activities
 
Net cash flow provided by operating activities for the three months ended March 31, 2022 was $194.6 million, as compared to $148.4 million for the comparable period in 2021. The increase of $46.2 million is primarily attributable to:
 
●
the acquisition of operating properties during 2022 and 2021, including those acquired from the Merger;
 
●
new leasing, expansion and re-tenanting of core portfolio properties; and
 
●
an increase in distributions from the Company’s joint ventures programs, partially offset by
 
●
changes in assets and liabilities due to timing of receipts and payments; and
 
●
the disposition of operating properties in 2022 and 2021.
 
Investing Activities
 
Net cash flow used for investing activities was $35.6 million for the three months ended March 31, 2022, as compared to $83.9 million for the comparable period in 2021.
 
Investing activities during the three months ended March 31, 2022 primarily consisted of:
 
Cash inflows:
 
●
$33.0 million in reimbursements of investments in and advances to real estate joint ventures and other investments; and
 
●
$8.4 million in proceeds from the sale of four land parcels.
 
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Cash outflows:
 
●
$29.4 million for improvements to operating real estate primarily related to tenant improvements and the Company’s active redevelopment pipeline;
 
●
$21.6 million for investments in and advances to real estate joint ventures, primarily related to a redevelopment project within the Company’s joint venture portfolio and partner buyouts, and investments in other investments, primarily related to funding commitments for certain investments;
 
●
$18.7 million for the acquisition of two parcels;
 
●
$3.0 million for investment in other financing receivable; and
 
●
$3.0 million for investment in cost method investment.
 
Investing activities during the three months ended March 31, 2021 primarily consisted of:
 
Cash inflows:
 
●
$22.2 million in proceeds from the sale of a consolidated operating property and four parcels.
 
Cash outflows:
 
●
$84.3 million for the acquisition of two consolidated operating properties;
 
●
$20.6 million for improvements to operating real estate primarily related to the Company’s active redevelopment pipeline; and
 
●
$2.2 million for investments in and advances to real estate joint ventures, primarily related to a redevelopment project within the Company's joint venture portfolio, and investments in other real estate investments, primarily related to repayment of a mortgage within the Company's Preferred Equity Program.
 
Acquisition of Operating Real Estate –
 
During the three months ended March 31, 2022 and 2021, the Company expended $18.7 million and $84.3 million, respectively, towards the acquisition of operating real estate properties. The Company anticipates spending approximately $100.0 million to $200.0 million towards the acquisition of operating properties for the remainder of 2022. The Company intends to fund these acquisitions with cash on hand, cash flow from operating activities, proceeds from property dispositions and/or availability under its Credit Facility.
 
Improvements to Operating Real Estate –
 
During the three months ended March 31, 2022 and 2021, the Company expended $29.4 million and $20.6 million, respectively, towards improvements to operating real estate. These amounts consist of the following (in thousands):
 
 
 
Three Months Ended March 31,
 
 
 
2022
 
 
2021
 
Redevelopment and renovations
 
$
12,274
 
 
$
12,908
 
Tenant improvements and tenant allowances
 
 
17,161
 
 
 
7,661
 
Total improvements (1)
 
$
29,435
 
 
$
20,569
 
 
 
(1)
During the three months ended March 31, 2022 and 2021, the Company capitalized payroll of $0.4 million and $1.5 million, respectively, and capitalized interest of $0.1 million and $0.3 million, respectively, in connection with the Company’s improvements to operating real estate.
 
The Company has an ongoing program to redevelop and re-tenant its properties to maintain or enhance its competitive position in the marketplace. The Company is actively pursuing redevelopment opportunities within its operating portfolio which it believes will increase the overall value by bringing in new tenants and improving the assets’ value. The Company anticipates its capital commitment toward these redevelopment projects and re-tenanting efforts for the remainder of 2022 will be approximately $125.0 million to $175.0 million. The funding of these capital requirements will be provided by proceeds from property dispositions, net cash flow provided by operating activities and/or availability under the Company’s Credit Facility.
 
Financing Activities
 
Net cash flow used for financing activities was $123.3 million for the three months ended March 31, 2022, as compared to $103.8 million for the comparable period in 2021.
 
Financing activities during the three months ended March 31, 2022 primarily consisted of:
 
Cash inflows:
 
●
$600.0 million in proceeds from issuance of 3.20% senior unsecured notes due in 2032; and
 
●
$19.0 million in proceeds from mortgage loan financing.
 
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Cash outflows:
 
●
$500.0 million for repayment of its 3.40% senior unsecured notes;
 
●
$123.8 million of dividends paid;
 
●
$88.3 million in principal payment on debt, including normal amortization of rental property debt;
 
●
$13.4 million in shares repurchased for employee tax withholding on equity awards;
 
●
$10.2 million in financing origination costs, in connection with the Company’s issuance of $600.0 million 3.20% senior unsecured notes;
 
●
$6.5 million for payment of early extinguishment of debt charges; and
 
●
$4.7 million in redemption/distribution of noncontrolling interests.
 
Financing activities during the three months ended March 31, 2021 primarily consisted of:
 
Cash outflows:
 
●
$80.0 million of dividends paid;
 
●
$14.9 million in principal payment on debt, including normal amortization of rental property debt; and
 
●
$9.1 million in shares repurchased for employee tax withholding on equity awards.
 
The Company continually evaluates its debt maturities, and, based on management’s current assessment, believes it has viable financing and refinancing alternatives that will not materially adversely impact its expected financial results. The Company continues to pursue borrowing opportunities with large commercial U.S. and global banks, select life insurance companies and certain regional and local banks. 
 
Debt maturities for the remainder of 2022 consist of: $333.5 million of consolidated debt and $101.2 million of unconsolidated joint venture debt, assuming the utilization of extension options where available. The 2022 consolidated debt maturities are anticipated to be repaid with operating cash flows, borrowings from the Credit Facility and public debt offerings, as deemed appropriate. The 2022 debt maturities on properties in the Company’s unconsolidated joint ventures are anticipated to be repaid through operating cash flows, debt refinancing, unsecured credit facilities, proceeds from sales of the respective entities and partner capital contributions, as deemed appropriate.
 
The Company intends to maintain strong debt service coverage and fixed charge coverage ratios as part of its commitment to maintain or improve its unsecured debt ratings. The Company may, from time to time, seek to obtain funds through additional common and preferred equity offerings, unsecured debt financings and/or mortgage/construction loan financings and other capital alternatives.
 
Since the completion of the Company’s IPO in 1991, the Company has utilized the public debt and equity markets as its principal source of capital for its expansion needs. Since the IPO, the Company has completed additional offerings of its public unsecured debt and equity, raising in the aggregate over $16.8 billion. Proceeds from public capital market activities have been used for the purposes of, among other things, repaying indebtedness, acquiring interests in open-air, grocery anchored shopping centers and mixed-use assets, expanding and improving properties in the portfolio and other investments.
 
During August 2021, the Company filed a shelf registration statement on Form S-3, which is effective for a term of three years, for the future unlimited offerings, from time to time, of debt securities, preferred stock, depositary shares, common stock and common stock warrants. The Company, pursuant to this shelf registration statement may, from time to time, offer for sale its senior unsecured debt securities for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisitions and development and redevelopment costs and (ii) managing the Company’s debt maturities.
 
Common Stock –
 
During August 2021, the Company established an at-the-market continuous offering program (the “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. In addition, the Company may from time to time enter into separate forward sale agreements with one or more banks. The Company did not issue any shares under the ATM program during the three months ended March 31, 2022. As of March 31, 2022, the Company had $422.4 million available under this ATM program.
 
The Company has a share repurchase program, which is scheduled to expire on February 29, 2024. Under this program, 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 three months ended March 31, 2022. As of March 31, 2022, the Company had $224.9 million available under this share repurchase program.
 
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Senior Notes –
 
In February 2022, the Company issued $600.0 million of senior unsecured notes, which are scheduled to mature in April 2032 and accrue interest at a rate of 3.20% per annum. Proceeds from this issuance were used for general corporate purposes, including the early redemption of the Company’s $500.0 million 3.40% senior unsecured notes outstanding, which were scheduled to mature in November 2022. As a result of this redemption, the Company incurred a prepayment charge of $6.5 million and $0.7 million in write-off of deferred financing costs during the three months ended March 31, 2022.
 
The Company’s indenture governing its senior notes contains the following covenants, all of which the Company is compliant with:
 
Covenant
 
Must Be
 
As of March 31, 2022
 
Consolidated Indebtedness to Total Assets
 
<60%
 
38%
 
Consolidated Secured Indebtedness to Total Assets
 
<40%
 
2%
 
Consolidated Income Available for Debt Service to Maximum Annual Service Charge
 
>1.50x
 
4.4x
 
Unencumbered Total Asset Value to Consolidated Unsecured Indebtedness
 
>1.50x
 
2.5x
 
 
For a full description of the various indenture covenants refer to the Indenture dated September 1, 1993; the First Supplemental Indenture dated August 4, 1994; the Second Supplemental Indenture dated April 7, 1995; the Third Supplemental Indenture dated June 2, 2006; the Fourth Supplemental Indenture dated April 26, 2007; the Fifth Supplemental Indenture dated as of September 24, 2009; the Sixth Supplemental Indenture dated as of May 23, 2013; and the Seventh Supplemental Indenture dated as of April 24, 2014, each as filed with the SEC. In connection with the Merger, the Company assumed senior unsecured notes which have covenants that are similar to the Company’s existing debt covenants for its senior unsecured notes. Please refer to the Indenture dated May 1, 1995 filed with Weingarten’s Form S-3 to the Registration Statement, with the Securities and Exchange Commission on May 1, 1995, the First Supplemental Indenture, dated as of August 2, 2006 filed with Weingarten’s Current Report on Form 8-K dated August 2, 2006, and the Second Supplemental Indenture, dated as of October 9, 2012 filed with Weingarten’s Current Report on Form 8-K dated October 9, 2012. See the Exhibits Index to our Annual Report on Form 10-K for the year ended December 31, 2021 for specific filing information.
 
Credit Facility –
 
In February 2020, the Company obtained a $2.0 billion Credit Facility with a group of banks. 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 is a green credit facility tied to sustainability metric targets, as described in the agreement. The Company achieved such targets, which effectively reduced the rate on the Credit Facility by one basis point. The Credit Facility, which accrues interest at a rate of LIBOR plus 76.5 basis points (1.22% as of March 31, 2022), can be increased to $2.75 billion through an accordion feature. 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 March 31, 2022, the Credit Facility had no outstanding balance and appropriations for letters of credit of $1.9 million.
 
Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to maintenance of various covenants. The Company is currently in compliance with these covenants. The financial covenants for the Credit Facility are as follows:
 
Covenant
 
Must Be
 
As of March 31, 2022
 
Total Indebtedness to Gross Asset Value (“GAV”)
 
<60%
 
38%
 
Total Priority Indebtedness to GAV
 
<35%
 
1%
 
Unencumbered Asset Net Operating Income to Total Unsecured Interest Expense
 
>1.75x
 
4.6x
 
Fixed Charge Total Adjusted EBITDA to Total Debt Service
 
>1.50x
 
4.1x
 
 
For a full description of the Credit Facility’s covenants, refer to the Amended and Restated Credit Agreement dated as of February 27, 2020, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 28, 2020.
 
Mortgages Payable –
 
During the three months ended March 31, 2022, the Company (i) issued $19.0 million in mortgage debt relating to a consolidated joint venture operating property and (ii) repaid $85.9 million of mortgage debt (including fair market value adjustment of $0.2 million) that encumbered four operating properties.
 
In addition to the public equity and debt markets as capital sources, the Company may, from time to time, obtain mortgage financing on selected properties to partially fund the capital needs of its real estate re-development and re-tenanting projects. As of March 31, 2022, the Company had over 480 unencumbered property interests in its portfolio.
 
Other –
 
In connection with the construction of its development and redevelopment projects and related infrastructure, certain public agencies require posting of performance and surety bonds to guarantee that the Company’s obligations are satisfied.  These bonds expire upon the completion of the improvements and infrastructure.  As of March 31, 2022, there were $12.3 million in performance and surety bonds outstanding.
 
In connection with the Merger, the Company now provides a guaranty for the payment of any debt service shortfalls on the Sheridan Redevelopment Agency issued Series A bonds which are tax increment revenue bonds issued in connection with a development project in Sheridan, Colorado. These tax increment revenue bonds have a balance of $49.7 million outstanding at March 31, 2022. The bonds are to be repaid with incremental sales and property taxes and a public improvement fee ("PIF") to be assessed on current and future retail sales and, to the extent necessary, any amounts we may have to provide under a guaranty. The revenue generated from incremental sales, property taxes and PIF have satisfied the debt service requirements to date.  The incremental taxes and PIF are to remain intact until the earlier of the payment of the bond liability in full or 2040.
 
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COVID-19 –
 
As the COVID-19 pandemic continues to evolve, uncertainty remains regarding the long-term economic impact it will have. As a result, the Company has focused on creating a strong liquidity position, including, but not limited to, maintaining availability under its Credit Facility, cash and cash equivalents on hand and having access to unencumbered property interests.
 
The Company continues to monitor the impact of COVID-19 on the Company’s business, tenants and industry as a whole. The magnitude and duration of the COVID-19 pandemic and its impact on the Company’s operations and liquidity remains uncertain as this pandemic continues to evolve globally and within the United States. However, if the COVID-19 pandemic continues, such impacts could grow, become material and materially disrupt the Company’s business operations and materially adversely affect the Company’s liquidity.
 
Dividends –
 
In connection with its intention to continue to qualify as a REIT for U.S. federal income tax purposes, the Company expects to continue paying regular dividends to its stockholders. These dividends will be paid from operating cash flows. The Company’s Board of Directors will continue to evaluate the Company’s dividend policy on a quarterly basis as they monitor sources of capital and evaluate the impact of the economy and capital markets availability on operating fundamentals. Since cash used to pay dividends reduces amounts available for capital investment, the Company generally intends to maintain a dividend payout ratio that reserves such amounts as it considers necessary for the expansion and renovation of shopping centers in its portfolio, debt reduction, the acquisition of interests in new properties and other investments as suitable opportunities arise and such other factors as the Board of Directors considers appropriate. Cash dividends paid for common and preferred issuances of stock for the three months ended March 31, 2022 and 2021 were $123.8 million and $80.0 million, respectively.
 
Although the Company receives substantially all of its rental payments on a monthly basis, it generally intends to continue paying dividends quarterly. Amounts accumulated in advance of each quarterly distribution will be invested by the Company in short-term money market or other suitable instruments. The Company’s objective is to establish a dividend level that maintains compliance with the Company’s REIT taxable income distribution requirements. On February 1, 2022, the Company’s Board of Directors declared a quarterly dividend with respect to the Company’s classes of cumulative redeemable preferred shares (Classes L and M) which were paid on April 15, 2022 to shareholders of record on April 1, 2022. In addition, the Company’s Board of Directors declared a quarterly cash dividend of $0.19 per common share, payable to shareholders of record on March 10, 2022, which was paid on March 24, 2022.
 
On April 26, 2022, the Company’s Board of Directors declared quarterly dividends with respect to the Company’s classes of cumulative redeemable preferred shares (Classes L and M), which are scheduled to be paid on July 15, 2022, to shareholders of record on July 1, 2022. Additionally, on April 26, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per common share, representing a 5.3% increase from the prior quarterly dividend of $0.19, payable on June 23, 2022 to shareholders of record on June 9, 2022.
 
Funds From Operations
 
Funds From Operations (“FFO”) is a supplemental non-GAAP financial measure utilized to evaluate the operating performance of real estate companies. NAREIT defines FFO as net income/(loss) available to the Company’s common shareholders computed in accordance with generally accepted accounting principles in the United States (“GAAP”), excluding (i) depreciation and amortization related to real estate, (ii) gains or losses from sales of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis. The Company also made an election to exclude from its calculation of FFO (i) gains and losses on the sale of assets and impairments of assets incidental to its main business and (ii) mark-to-market changes in the value of its equity securities. As such, the Company does not include gains/impairments on land parcels, gains/losses (realized or unrealized) from marketable securities, allowance for credit losses on mortgage receivables or gains/impairments on preferred equity participations in NAREIT defined FFO.
 
The Company presents FFO available to the Company’s common shareholders as it considers it an important supplemental measure of our operating performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO available to the Company’s common shareholders when reporting results. Comparison of our presentation of FFO available to the Company’s common shareholders to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.
 
FFO is a supplemental non-GAAP financial measure of real estate companies’ operating performances, which does not represent cash generated from operating activities in accordance with GAAP and therefore, should not be considered an alternative for net income or cash flows from operations as a measure of liquidity. 
 
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The Company’s reconciliation of Net income available to the Company’s common shareholders to FFO available to the Company’s common shareholders is reflected in the table below (in thousands, except per share data).
 
 
 
Three Months Ended March 31,
 
 
 
2022
 
 
2021
 
Net income available to the Company ’ s common shareholders
 
$
230,948
 
 
$
131,588
 
Gain on sale of properties
 
 
(4,193
)
 
 
(10,005
)
Gain on sale of joint venture properties
 
 
(2,986
)
 
 
(5,283
)
Depreciation and amortization - real estate related
 
 
129,461
 
 
 
74,113
 
Depreciation and amortization - real estate joint ventures
 
 
16,885
 
 
 
10,007
 
Impairment charges
 
 
700
 
 
 
1,068
 
Profit participation from other investments, net
 
 
(3,663
)
 
 
195
 
Gain on marketable securities, net
 
 
(121,764
)
 
 
(61,085
)
(Benefit)/provision for income taxes (1)
 
 
(11
)
 
 
1,046
 
Noncontrolling interests (1)
 
 
(4,730
)
 
 
2,626
 
FFO available to the Company ’ s common shareholders (3)
 
$
240,647
 
 
$
144,270
 
Weighted average shares outstanding for FFO calculations:
 
 
 
 
 
 
 
 
Basic
 
 
614,767
 
 
 
430,524
 
Units
 
 
2,546
 
 
 
654
 
Dilutive effect of equity awards
 
 
1,874
 
 
 
1,606
 
Diluted (2)
 
 
619,187
 
 
 
432,784
 
 
 
 
 
 
 
 
 
 
FFO per common share – basic
 
$
0.39
 
 
$
0.34
 
FFO per common share – diluted (2)
 
$
0.39
 
 
$
0.33
 
 
 
(1)
Related to gains, impairments, and depreciation on properties, where applicable.
 
(2)
Reflects the potential impact if certain units were converted to common stock at the beginning of the period, which would have a dilutive effect on FFO available to the Company’s common shareholders. FFO available to the Company’s common shareholders would be increased by $473 and $97 for the three months ended March 31, 2022 and 2021, respectively. The effect of other certain convertible units would have an anti-dilutive effect upon the calculation of FFO available to the Company’s common shareholders per share. Accordingly, the impact of such conversion has not been included in the determination of diluted FFO per share calculations.
 
(3)
Includes Early extinguishment of debt charges $7.2 million recognized during the three months ended March 31, 2022.
 
Same Property Net Operating Income ( “ Same property NOI ” )
 
Same property NOI is a supplemental non-GAAP financial measure of real estate companies’ operating performance and should not be considered an alternative to net income in accordance with GAAP or cash flows from operations as a measure of liquidity. The Company considers Same property NOI as an important operating performance measure because it is frequently used by securities analysts and investors to measure only the net operating income of properties that have been owned by the Company for the entire current and prior year reporting periods. It excludes properties under redevelopment, development and pending stabilization; properties are deemed stabilized at the earlier of (i) reaching 90% leased or (ii) one year following a project’s inclusion in operating real estate. Same property NOI assists in eliminating disparities in net income due to the development, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent performance measure for the comparison of the Company's properties.
 
For the three months ended March 31, 2022, and 2021, the Company included Same property NOI from the Weingarten properties acquired through the Merger, as the Company owned these properties for the full three months ended March 31, 2022. The amount of the adjustment relating to Weingarten Same property NOI for the three months ended March 31, 2021, included in the table below, represents the Same property NOI from Weingarten properties prior to the Merger, which is not included in the Company's Net income available to the Company’s common shareholders for the corresponding period.
 
Same property NOI is calculated using revenues from rental properties (excluding straight-line rent adjustments, lease termination fees, TIFs and amortization of above/below market rents) less charges for bad debt, operating and maintenance expense, real estate taxes and rent expense plus the Company’s proportionate share of Same property NOI from unconsolidated real estate joint ventures, calculated on the same basis. The Company’s method of calculating Same property NOI available to the Company’s common shareholders may differ from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
 
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The following is a reconciliation of net income available to the Company’s common shareholders to Same property NOI (in thousands):
 
 
 
Three Months Ended March 31,
 
 
 
2022
 
 
2021
 
Net income available to the Company ’ s common shareholders
 
$
230,948
 
 
$
131,588
 
Adjustments:
 
 
 
 
 
 
 
 
Management and other fee income
 
 
(4,595
)
 
 
(3,437
)
General and administrative
 
 
29,948
 
 
 
24,478
 
Impairment charges
 
 
272
 
 
 
-
 
Depreciation and amortization
 
 
130,294
 
 
 
74,876
 
Gain on sale of properties
 
 
(4,193
)
 
 
(10,005
)
Interest and other expense, net
 
 
58,209
 
 
 
44,359
 
Gain on marketable securities, net
 
 
(121,764
)
 
 
(61,085
)
(Benefit)/provision for income taxes, net
 
 
(153
)
 
 
1,308
 
Equity in income of other investments, net
 
 
(5,373
)
 
 
(3,787
)
Net (loss)/income attributable to noncontrolling interests
 
 
(1,343
)
 
 
3,483
 
Preferred dividends
 
 
6,354
 
 
 
6,354
 
Weingarten same property NOI (1)
 
 
-
 
 
 
91,950
 
Non same property net operating income
 
 
(17,419
)
 
 
(17,422
)
Non-operational expense from joint ventures, net
 
 
19,684
 
 
 
11,963
 
Same property NOI
 
$
320,869
 
 
$
294,623
 
 
 
(1)
Amounts for the three months ended March 31, 2021, represent the Same property NOIs from Weingarten properties, not included in the Company's Net income available to the Company's common shareholders for the same period.
 
Same property NOI increased by $26.2 million or 8.9% for the three months ended March 31, 2022, as compared to the corresponding period in 2021. This increase is primarily the result of (i) an increase in net operating income of $21.6 million primarily related to an increase in leasing activity and a decrease in tenant rent abatements and vacancies as a result of the COVID-19 pandemic and (ii) a decrease in credit losses of $5.0 million due to increased collections, partially offset by (iii) an increase in non-recoverable operating expenses of $0.4 million.
 
Effects of Inflation
 
Many of the Company's long-term leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive payment of additional rent calculated as a percentage of tenants' gross sales above pre-determined thresholds, which generally increase as prices rise, and/or as a result of escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses often include increases based upon changes in the consumer price index or similar inflation indices.  In addition, many of the Company's leases are for terms of less than 10 years, which permits the Company to seek to increase rents to market rates upon renewal. To assist in mitigating the Company's exposure to increases in costs and operating expenses, including common area maintenance costs, real estate taxes and insurance, resulting from inflation the Company’s leases include provisions that either (i) require the tenant to pay an allocable share of these operating expenses or (ii) contain fixed contractual amounts, which include escalation clauses, to reimburse these operating expenses.
 
Leasing Activity
 
During the three months ended March 31, 2022, the Company executed 532 leases totaling over 4.3 million square feet in the Company’s consolidated operating portfolio comprised of 147 new leases and 385 renewals and options. The leasing costs associated with these new leases are estimated to aggregate $37.3 million or $51.30 per square foot. These costs include $30.7 million of tenant improvements and $6.6 million of external leasing commissions. The average rent per square foot for (i) new leases was $22.62 and (ii) renewals and options was $15.92.
 
Tenant Lease Expirations
 
At March 31, 2022, the Company has a total of 8,226 leases in its consolidated operating portfolio. The following table sets forth the aggregate lease expirations for each of the next ten years, assuming no renewal options are exercised. For purposes of the table, the Total Annual Base Rent Expiring represents annualized rental revenue, excluding the impact of straight-line rent, for each lease that expires during the respective year. Amounts in thousands, except for number of lease data:
 
Year Ending December 31,
 
Number of Leases
Expiring
 
 
Square Feet
Expiring
 
 
Total Annual
Base Rent Expiring
 
 
% of Gross
Annual Rent
 
(1)
 
 
205
 
 
 
492
 
 
$
12,164
 
 
 
1.0
%
2022
 
 
632
 
 
 
2,617
 
 
$
54,655
 
 
 
4.6
%
2023
 
 
1,223
 
 
 
7,631
 
 
$
140,582
 
 
 
11.7
%
2024
 
 
1,193
 
 
 
7,841
 
 
$
148,481
 
 
 
12.4
%
2025
 
 
1,078
 
 
 
7,970
 
 
$
145,940
 
 
 
12.2
%
2026
 
 
1,036
 
 
 
9,368
 
 
$
153,071
 
 
 
12.7
%
2027
 
 
840
 
 
 
8,566
 
 
$
141,375
 
 
 
11.8
%
2028
 
 
471
 
 
 
5,387
 
 
$
95,382
 
 
 
7.9
%
2029
 
 
386
 
 
 
3,533
 
 
$
64,759
 
 
 
5.4
%
2030
 
 
300
 
 
 
2,473
 
 
$
54,829
 
 
 
4.6
%
2031
 
 
346
 
 
 
2,552
 
 
$
55,965
 
 
 
4.7
%
2032
 
 
274
 
 
 
2,144
 
 
$
40,630
 
 
 
3.4
%
 
 
(1)
Leases currently under month-to-month lease or in process of renewal.
 
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.