kim20160330_10q.htm Table Of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2016

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                 to                

 

Commission File Number:   1-10899

 

Kimco Realty Corporation

(Exact name of registrant as specified in its charter)

 

Maryland

  

13-2744380

(State or other jurisdiction of incorporation or organization)

  

(I.R.S. Employer Identification No.)

 

3333 New Hyde Park Road, New Hyde Park, NY 11042

(Address of principal executive offices) (Zip Code)

 

(516) 869-9000

(Registrant’s telephone number, including area code)

 

        N/A        

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12-b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

(Do not check if a smaller reporting company)

  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act). Yes ☐ No ☒

 

As of April 19, 2016, the registrant had 419,648,970 shares of common stock outstanding.

 



 

 
 

Table Of Contents
 

 

PART I FINANCIAL INFORMATION
     

Item 1.

Financial Statements of Kimco Realty Corporation and Subsidiaries (Unaudited)

  

  

  

  

Condensed Consolidated Financial Statements -

  

  

  

  

  

Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015

3

  

  

  

  

Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2016 and 2015

4

  

  

  

  

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2016 and 2015

5

  

  

  

  

Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2016 and 2015

6

  

  

  

  

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015

7

  

  

  

Notes to Condensed Consolidated Financial Statements

8

  

  

  

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

  

  

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

  

  

 

Item 4.

Controls and Procedures

27

  

  

  

PART II

OTHER INFORMATION

  

  

Item 1.

Legal Proceedings

28

  

 

Item 1A.

Risk Factors

28

  

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

28

   

Item 6.

Exhibits

29

  

 

Signatures

30

 

 
2

Table Of Contents
 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS 

(Unaudited)

(in thousands, except share information) 

 

   

March 31,

   

December 31,

 
   

2016

   

2015

 

Assets:

               

Operating real estate, net of accumulated depreciation

               

of $2,155,365 and $2,115,320, respectively

  $ 9,156,544     $ 9,274,299  

Investments and advances in real estate joint ventures

    702,586       742,559  

Real estate under development

    189,811       179,190  

Other real estate investments

    217,272       215,836  

Mortgages and other financing receivables

    24,000       23,824  

Cash and cash equivalents

    222,000       189,534  

Marketable securities

    5,716       7,565  

Accounts and notes receivable

    174,005       175,252  

Other assets

    557,427       536,112  

Total assets

  $ 11,249,361     $ 11,344,171  
                 
                 

Liabilities:

               

Notes payable

  $ 3,660,666     $ 3,761,328  

Mortgages payable

    1,501,796       1,614,982  

Dividends payable

    116,631       115,182  

Other liabilities

    566,206       584,019  

Total liabilities

    5,845,299       6,075,511  

Redeemable noncontrolling interests

    86,705       86,709  
                 

Commitments and Contingencies

               
                 

Stockholders' equity:

               

Preferred stock, $1.00 par value, authorized 6,029,100 shares 32,000 shares issued and outstanding (in series) Aggregate liquidation preference $800,000

    32       32  

Common stock, $.01 par value, authorized 750,000,000 shares issued and outstanding 418,281,954 and 413,430,756 shares, respectively

    4,183       4,134  

Paid-in capital

    5,721,011       5,608,881  

Cumulative distributions in excess of net income

    (550,103 )     (572,335 )

Accumulated other comprehensive income

    7,496       5,588  

Total stockholders' equity

    5,182,619       5,046,300  

Noncontrolling interests

    134,738       135,651  

Total equity

    5,317,357       5,181,951  

Total liabilities and equity

  $ 11,249,361     $ 11,344,171  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
3

Table Of Contents
 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(Unaudited) 

(in thousands, except per share data) 

 

   

Three Months Ended March 31,

 
   

2016

   

2015

 
                 

Revenues

               

Revenues from rental properties

  $ 293,091     $ 275,506  

Management and other fee income

    4,111       7,950  
                 

Total revenues

    297,202       283,456  
                 

Operating expenses

               

Rent

    2,818       3,554  

Real estate taxes

    34,472       36,072  

Operating and maintenance

    34,553       33,902  

General and administrative expenses

    31,929       32,705  

Provision for doubtful accounts

    3,475       2,297  

Impairment charges

    5,840       6,391  

Depreciation and amortization

    84,856       74,569  

Total operating expenses

    197,943       189,490  
                 

Operating income

    99,259       93,966  
                 

Other income/(expense)

               

Mortgage financing income

    410       1,136  

Other expense, net

    (580 )     (768 )

Interest expense

    (52,451 )     (52,578 )
                 

Income from continuing operations before income taxes, equity in income of joint ventures, gain on change in control of interests and equity in income of other real estate investments

    46,638       41,756  
                 

Provision for income taxes, net

    (12,112 )     (12,717 )

Equity in income of joint ventures, net

    69,933       97,550  

Gain on change in control of interests, net

    -       139,801  

Equity in income of other real estate investments, net

    10,799       14,369  
                 

Income from continuing operations

    115,258       280,759  
                 

Discontinued operations

               

Loss from discontinued operating properties, net of tax

    -       (15 )

Impairment/loss on operating properties, net of tax

    -       (60 )

Loss from discontinued operations

    -       (75 )
                 

Gain on sale of operating properties, net of tax

    26,896       32,055  
                 

Net income

    142,154       312,739  
                 

Net income attributable to noncontrolling interests

    (1,441 )     (2,397 )
                 

Net income attributable to the Company

    140,713       310,342  
                 

Preferred dividends

    (11,555 )     (14,573 )
                 

Net income available to the Company's common shareholders

  $ 129,158     $ 295,769  
                 

Per common share:

               

Income from continuing operations:

               

-Basic

  $ 0.31     $ 0.72  

-Diluted

  $ 0.31     $ 0.71  

Net income attributable to the Company:

               

-Basic

  $ 0.31     $ 0.72  

-Diluted

  $ 0.31     $ 0.71  
                 

Weighted average shares:

               

-Basic

    412,630       410,433  

-Diluted

    414,145       415,396  
                 

Amounts attributable to the Company's common shareholders:

               

Income from continuing operations

  $ 129,158     $ 295,844  

Loss from discontinued operations

    -       (75 )

Net income

  $ 129,158     $ 295,769  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
4

Table Of Contents
 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

 

   

Three Months Ended March 31,

 
   

2016

   

2015

 
                 

Net income

  $ 142,154     $ 312,739  

Other comprehensive income:

               

Change in unrealized gain on marketable securities

    2       15,718  

Change in unrealized loss on interest rate swaps

    (604 )     (352 )

Change in foreign currency translation adjustment, net

    2,510       (9,532 )

Other comprehensive income:

    1,908       5,834  
                 

Comprehensive income

    144,062       318,573  
                 

Comprehensive income attributable to noncontrolling interests

    (1,441 )     (2,397 )
                 

Comprehensive income attributable to the Company

  $ 142,621     $ 316,176  

 

 
5

Table Of Contents
 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 

For the Three Months Ended March 31, 2016 and 2015

(Unaudited)

(in thousands)

 

   

Cumulative

Distributions

in Excess of

   

Accumulated

Other

Comprehensive

   

Preferred Stock

   

Common Stock

   

Paid-in

   

Total

Stockholders'

   

Noncontrolling

   

Total

 
   

Net Income

   

Income

   

Issued

   

Amount

   

Issued

   

Amount

   

Capital

   

Equity

   

Interests

   

Equity

 
                                                                                 

Balance, January 1, 2015

  $ (1,006,578 )   $ 45,122       102     $ 102       411,820     $ 4,118     $ 5,732,021     $ 4,774,785     $ 126,980     $ 4,901,765  
                                                                                 

Contributions from noncontrolling interests

    -       -       -       -       -       -       -       -       66,163       66,163  
                                                                                 

Comprehensive income:

                                                                               

Net income

    310,342       -       -       -       -       -       -       310,342       2,397       312,739  

Other comprehensive income, net of tax:

                                                                             

Change in unrealized gain on marketable securities

    -       15,718       -       -       -       -       -       15,718       -       15,718  

Change in unrealized loss on interest rate swaps

    -       (352 )     -       -       -       -       -       (352 )     -       (352 )

Change in foreign currency translation adjustment, net

    -       (9,532 )     -       -       -       -       -       (9,532 )     -       (9,532 )
                                                                                 

Redeemable noncontrolling interests income

    -       -       -       -       -       -       -       -       (1,522 )     (1,522 )

Dividends ($0.24 per common share; $0.4313 per

                                                                               

Class H Depositary Share and $0.3750 per

                                                                               

Class I Depositary Share, and $0.3438 per

                                                                               

Class J Depositary Share. and $0.3516 per

                                                                               

Class K Depositary Share, respectively)

    (113,613 )                                                     (113,613 )     -       (113,613 )

Distributions to noncontrolling interests

    -       -       -       -       -       -       -       -       (260 )     (260 )

Issuance of common stock

    -       -       -       -       539       5       481       486       -       486  

Surrender of restricted stock

    -       -       -       -       (204 )     (2 )     (5,170 )     (5,172 )     -       (5,172 )

Exercise of common stock options

    -       -       -       -       554       6       10,252       10,258       -       10,258  

Sale of interests in investments, net of tax of $16.0 million

    -       -       -       -       -       -       23,336       23,336       -       23,336  

Amortization of equity awards

    -       -       -       -       -       -       6,918       6,918       -       6,918  

Balance, March 31, 2015

  $ (809,849 )   $ 50,956       102     $ 102       412,709     $ 4,127     $ 5,767,838     $ 5,013,174     $ 193,758     $ 5,206,932  
                                                                                 

Balance, January 1, 2016

  $ (572,335 )   $ 5,588       32     $ 32       413,431     $ 4,134     $ 5,608,881     $ 5,046,300     $ 135,651     $ 5,181,951  
                                                                                 

Contributions from noncontrolling interests

    -       -       -       -       -       -       -       -       -       -  
                                                                                 

Comprehensive income:

                                                                               

Net income

    140,713       -       -       -       -       -       -       140,713       1,441       142,154  

Other comprehensive income, net of tax:

                                                                             

Change in unrealized gain on marketable securities

    -       2       -       -       -       -       -       2       -       2  

Change in unrealized loss on interest rate swaps

    -       (604 )     -       -       -       -       -       (604 )     -       (604 )

Change in foreign currency translation adjustment, net

    -       2,510       -       -       -       -       -       2,510       -       2,510  
                                                              -                  

Redeemable noncontrolling interests income

    -       -       -       -       -       -       -       -       (1,078 )     (1,078 )

Dividends ($0.255 per common share; $0.3750 per

                                                                               

Class I Depositary Share, and $0.3438 per

                                                                               

Class J Depositary Share. and $0.3516 per

                                                                               

Class K Depositary Share, respectively)

    (118,481 )     -       -       -       -       -       -       (118,481 )     -       (118,481 )

Distributions to noncontrolling interests

    -       -       -       -       -       -       -       -       (1,276 )     (1,276 )

Issuance of common stock

    -       -       -       -       4,487       45       100,911       100,956       -       100,956  

Surrender of restricted stock

    -       -       -       -       (228 )     (2 )     (5,906 )     (5,908 )     -       (5,908 )

Exercise of common stock options

    -       -       -       -       592       6       10,539       10,545       -       10,545  

Amortization of equity awards

    -       -       -       -       -       -       6,586       6,586       -       6,586  

Balance, March 31, 2016

  $ (550,103 )   $ 7,496       32     $ 32       418,282     $ 4,183     $ 5,721,011     $ 5,182,619     $ 134,738     $ 5,317,357  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
6

Table Of Contents
 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

   

Three Months Ended March 31,

 
   

2016

   

2015

 

Cash flow from operating activities:

               

Net income

  $ 142,154     $ 312,739  

Adjustments to reconcile net income to net cash provided by operating activities: by operating activities:

               

Depreciation and amortization

    84,856       74,569  

Impairment charges

    5,840       6,473  

Equity award expense

    7,877       8,394  

Gain on sale of operating properties

    (30,883 )     (32,055 )

Gain on change in control of interests, net

    -       (139,801 )

Equity in income of joint ventures, net

    (69,933 )     (97,550 )

Equity in income from other real estate investments, net

    (10,799 )     (14,369 )

Distributions from joint ventures and other real estate investments

    26,730       40,110  

Change in accounts and notes receivable

    1,247       (5,981 )

Change in accounts payable and accrued expenses

    8,869       11,985  

Change in other operating assets and liabilities

    (29,002 )     (1,424 )

Net cash flow provided by operating activities

    136,956       163,090  
                 

Cash flow from investing activities:

               

Acquisition of operating real estate and other related net assets

    (11,436 )     (537,223 )

Improvements to operating real estate

    (32,866 )     (29,888 )

Acquisition of real estate under development

    (12,895 )     -  

Improvements to real estate under development

    (5,333 )     (2,021 )

Proceeds from sale/repayments of marketable securities

    1,850       700  

Investments and advances to real estate joint ventures

    (17,505 )     (29,720 )

Reimbursements of investments and advances to real estate joint ventures

    28,327       7,599  

Distributions from liquidation of real estate joint ventures

    50,902       53,450  

Return on investment from liquidation of real estate joint ventures

    40,000       20,889  

Investment in other real estate investments

    (190 )     (239 )

Reimbursements of investments and advances to other real estate investments

    2,921       17,946  

Collection of mortgage loans receivable

    231       292  

Investment in other investments

    -       (190,278 )

Proceeds from sale of operating properties

    79,245       81,037  

Proceeds from sale of development properties

    4,551       -  

Net cash flow used for/(provided by) investing activities

    127,802       (607,456 )
                 

Cash flow from financing activities:

               

Principal payments on debt, excluding normal amortization of rental property debt

    (101,205 )     (49,286 )

Principal payments on rental property debt

    (5,971 )     (7,155 )

Proceeds under the unsecured revolving credit facility, net

    180,000       40,000  

Proceeds from issuance of unsecured term loan/notes

    -       1,000,000  

Repayments under unsecured term loan/notes

    (300,000 )     (500,000 )

Financing origination costs

    (91 )     (9,161 )

Change in tenants' security deposits

    594       1,267  

Contributions from noncontrolling interests

    -       105,498  

Dividends paid

    (117,030 )     (113,400 )

Proceeds from issuance of stock

    111,411       10,258  

Net cash flow (used for)/provided by financing activities

    (232,292 )     478,021  
                 

Change in cash and cash equivalents

    32,466       33,655  
                 

Cash and cash equivalents, beginning of period

    189,534       187,322  

Cash and cash equivalents, end of period

  $ 222,000     $ 220,977  
                 

Interest paid during the period (net of capitalized interest of $1,699, and $1,134, respectively)

  $ 39,508     $ 37,564  
                 

Income taxes paid during the period

  $ 23,960     $ 4,055  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
7

Table Of Contents
 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

                                          

 

1. Interim Financial Statements

 

Principles of Consolidation -

 

The accompanying Condensed Consolidated Financial Statements include the accounts of Kimco Realty Corporation and subsidiaries, (the “Company”). The Company’s subsidiaries include subsidiaries which are wholly-owned and all entities in which the Company has a controlling financial 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 2015 Annual Report on Form 10-K for the year ended December 31, 2015 (the “10-K”), as certain disclosures in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016, that would duplicate those included in the 10-K are not included in these Condensed Consolidated Financial Statements.

 

Subsequent Events -

 

The Company has evaluated subsequent events and transactions for potential recognition or disclosure in the condensed consolidated financial statements (see Footnotes 3 and 10).

 

Income Taxes -

 

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, the Company must distribute at least 90 percent of its taxable income and will not pay federal income taxes on the amount distributed to its shareholders.  Therefore, the Company is not 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 (“TRS”), which permit the Company to engage in certain business activities in which the REIT may not conduct directly.  A TRS is subject to federal and state income taxes on the income from these activities and the Company includes 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 subsidiary. 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.

 

 

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

March 31,

 
   

2016

   

2015

 

Computation of Basic Earnings Per Share:

               

Income from continuing operations

  $ 115,258     $ 280,759  

Gain on sale of operating properties, net of tax

    26,896       32,055  

Net income attributable to noncontrolling interests

    (1,441 )     (2,397 )

Preferred stock dividends

    (11,555 )     (14,573 )

Income from continuing operations available to the common shareholders

    129,158       295,844  

Earnings attributable to participating securities

    (629 )     (1,341 )

Income from continuing operations attributable to common shareholders

    128,529       294,503  

Loss from discontinued operations attributable to the Company

    -       (75 )

Net income attributable to the Company’s common shareholders for basic earnings per share

  $ 128,529     $ 294,428  

Weighted average common shares outstanding – basic

    412,630       410,433  
                 

Basic Earnings Per Share Attributable to the Company’s Common Shareholders:

               

Income from continuing operations

  $ 0.31     $ 0.72  

Loss from discontinued operations

    -       -  

Net income

  $ 0.31     $ 0.72  
                 

Computation of Diluted Earnings Per Share:

               

Income from continuing operations attributable to common shareholders

  $ 128,529     $ 294,503  

Loss from discontinued operations attributable to the Company

    -       (75 )

Distributions on convertible units

    13       817  

Net income attributable to the Company’s common shareholders for diluted earnings per share

  $ 128,542     $ 295,245  

Weighted average common shares outstanding – basic

    412,630       410,433  
Effect of dilutive securities (a):                

Equity awards

    1,453       3,393  

Assumed conversion of convertible units

    62       1,570  

Shares for diluted earnings per common share

    414,145       415,396  
                 

Diluted Earnings Per Share Attributable to the Company’s Common Shareholders:

               

Income from continuing operations

  $ 0.31     $ 0.71  

Loss from discontinued operations

    -       -  

Net income attributable to the Company

  $ 0.31     $ 0.71  

 

 

(a)

For the three months ended March 31, 2016 and 2015, the effect of certain convertible units would have an anti-dilutive effect upon the calculation of Income from continuing operations per share.  Accordingly, the impact of such conversion has not been included in the determination of diluted earnings per share calculations.  Additionally, there were 5,235,280 and 6,857,810 stock options that were not dilutive at March 31, 2016 and 2015, respectively.

 

The Company's unvested restricted share awards and convertible units (the “Participating securities”) contain non-forfeitable rights to distributions or distribution equivalents. The impact of the Participating securities on earnings per share has been calculated using the two-class method whereby earnings are allocated to the Participating securities based on dividends declared and the Participating securities rights in undistributed earnings.

 

New Accounting Pronouncements

 

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The ASU is expected to impact the Company’s consolidated financial statements as the Company has certain operating and land lease arrangements for which it is the lessee. ASU 2016-02 supersedes the previous leases standard, Leases (Topic 840). The standard is effective on January 1, 2019, with early adoption permitted. The Company is currently in the process of evaluating the impact the adoption of ASU 2016-02 will have on the Company’s financial position and/or results of operations.

 

 

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 focuses to minimize situations under previously existing guidance in which a reporting entity was required to consolidate another legal entity in which that reporting entity did not have: (1) the ability through contractual rights to act primarily on its own behalf; (2) ownership of the majority of the legal entity's voting rights; or (3) the exposure to a majority of the legal entity's economic benefits. ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. ASU 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU 2015-02 did not have a material effect on the Company’s financial position or results of operations.

 

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter, early adoption is permitted. The Company does not expect the adoption of ASU 2014-15 to have a material effect on the Company’s consolidated financial statements.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. ASU 2014-09 was anticipated to be effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption was not permitted. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”), which delayed the effective date of ASU 2014-09 by one year making it effective for the first interim period within annual reporting periods beginning after December 15, 2017. Early adoption is permitted as of the original effective date. The Company is currently in the process of evaluating the impact the adoption of ASU 2014-09 will have on the Company’s financial position and/or results of operations.

 

Revisions

 

In the fourth quarter of 2015, the Company changed the classification within the Company’s cash flow statement for certain transactions that occurred in the three months ended March 31, 2015 involving the sale of equity interests in entities owning real estate. This change of $53.5 million was reclassified for the three months ended March 31, 2015 for purposes of reflecting comparative periods. The Company believes the new classification is a more meaningful reflection of these transactions and changed the Company’s cash flow from the initially reported amounts to reduce Distributions from joint ventures and other real estate investments within its cash flow from operating activities and increase Distributions from liquidation of real estate joint ventures within its cash flow from investing activities by $53.5 million for the three months ended March 31, 2015.

 

2. Operating Property Activities

 

Acquisitions of Real Estate Under Development -

 

During the three months ended March 31, 2016, the Company acquired, in separate transactions, two additional land parcels adjacent to an existing development project for an aggregate purchase price of $13.0 million.

 

Dispositions –

 

During the three months ended March 31, 2016, the Company disposed of seven consolidated operating properties, in separate transactions, for an aggregate sales price of $101.2 million. These transactions resulted in an aggregate gain of $26.9 million, after income tax expense.

 

Impairments

 

During the three months ended March 31, 2016, the Company recognized aggregate impairment charges of $5.8 million which are included in Impairment charges under Operating expenses on the Company’s Condensed Consolidated Statements of Income. These impairment charges resulted from the Company's decision to sell a property. The Company’s estimated fair value was based on a third party offer through a signed contract. (See Footnote 9 for fair value disclosure).

 

 
10

Table Of Contents
 

  

3. Investments and Advances in Real Estate Joint Ventures

 

The Company and its subsidiaries have investments and advances in 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 March 31, 2016 and December 31, 2015 (in millions, except number of properties):

 

   

As of March 31, 2016

   

As of December 31, 2015

 

Venture

 

Ownership Interest

   

Number of

Properties

   

GLA

   

Gross

Real

Estate

   

The

Company's

Investment

   

Ownership Interest

   

Number

of

Properties

   

GLA

   

Gross

Real

Estate

   

The

Company's

Investment

 

Prudential Investment Program (“KimPru” and “KimPru II”) (1) (2)

    15.0 %     51       9.2     $ 2,492.8     $ 175.8       15.0 %     53       9.6     $ 2,531.6     $ 175.5  

Kimco Income Opportunity Portfolio (“KIR”) (2)

    48.6 %     47       10.8       1,423.8       130.9       48.6 %     47       10.8       1,422.8       131.0  

Canada Pension Plan Investment Board  (“CPP”) (2) (3)

    55.0 %     7       2.4       534.7       177.1       55.0 %     7       2.4       524.1       195.6  

Other Institutional Programs (2)

    Various       7       1.0       301.5       5.6    

 

Various       9       1.5       301.5       5.2  

Other Joint Venture Programs

    Various       38       5.2       776.2       68.2       Various       40       5.2       782.8       64.0  

Canadian Properties

    Various       28       4.2       502.1       145.0       Various       35       5.9       695.3       171.3  

Total

            178       32.8     $ 6,031.1     $ 702.6               191       35.4     $ 6,258.1     $ 742.6  

 

 

(1)

This venture represents four separate joint ventures, with four separate accounts managed by Prudential Real Estate Investors (“PREI”), three of these ventures are collectively referred to as KimPru and the remaining venture is referred to as KimPru II.

 

(2)

The Company manages these joint venture investments and, where applicable, earns acquisition fees, leasing commissions, property management fees, asset management fees and construction management fees.

 

(3)

In April 2016, the Company acquired its partner’s interest in one operating property and one development project for a gross purchase price of $299.2 million, including the assumption of $100.0 million in mortgage debt, which encumbered the operating property.

 

The table below presents the Company’s share of net income for the above investments which is included in the Company’s Condensed Consolidated Statements of Income in Equity in income of joint ventures, net for the three months ended March 31, 2016 and 2015 (in millions):

 

   

Three Months Ended

March 31,

 
   

2016

   

2015

 

KimPru and KimPru II

  $ 2.2     $ 1.2  

KIR

    7.4       7.5  

CPP

    3.9       2.5  

Other Institutional Programs

    0.3       1.0  

Other Joint Venture Programs (1) (2)

    3.0       23.0  

Canadian Properties

    53.1       62.4  

Total

  $ 69.9     $ 97.6  

 

 

(1)

During 2013, the Intown portfolio was sold and the Company maintained its guarantee on a portion of debt that was assumed by the buyer at closing. The transaction resulted in a deferred gain to the Company of $21.7 million due to the Company’s continued involvement through its guarantee of the debt. On February 24, 2015, the outstanding debt balance was fully repaid by the buyer and as such, the Company was relieved of its related commitments and guarantee. As a result, the Company recognized the deferred gain of $21.7 million during the three months ended March 31, 2015.

 

(2)

During the three months ended March 31, 2015, a joint venture in which the Company holds a noncontrolling interest recognized aggregate impairment charges of $2.6 million relating to the pending sale of various land parcels. The Company’s share of these impairment charges was $1.3 million.

 

The following tables provide a summary of properties and land parcels disposed of through the Company’s real estate joint ventures or sold interest to joint venture partners during the three months ended March 31, 2016 and 2015. These transactions resulted in an aggregate net gain to the Company of $54.1 million and $53.4 million, before income taxes, for the three months ended March 31, 2016 and 2015, respectively, and which are included in Equity in income of joint ventures, net on the Company’s Condensed Consolidated Statements of Income:

 

   

Three Months Ended March 31, 2016

 
   

Number of

properties

   

Number of

land parcels

   

Aggregate

sales price

(in millions)

 

Other Joint Venture Programs

    2       -     $ 21.6  

Canadian Properties

    7       -     $ 322.9  

 

   

Three Months Ended March 31, 2015

 
   

Number of

properties

   

Number of

land parcels

   

Aggregate

sales price

(in millions)

 

KimPru and KimPru II

    1       -     $ 23.2  

Other Joint Venture Programs (1)

    1       -     $ 5.8  

Canadian Properties

    3       1     $ 190.7  

 

 

(1)

The Company acquired the remaining interest in this property during the three months ended March 31, 2015.

 

 

The table below presents debt balances within the Company’s unconsolidated joint venture investments for which the Company held noncontrolling ownership interests at March 31, 2016 and December 31, 2015 (dollars in millions):

 

   

As of March 31, 2016

   

As of December 31, 2015

 

Venture

 

Mortgages

and

Notes

Payable

   

Weighted

Average

Interest Rate

   

Weighted

Average

Remaining

Term

(months)*

   

Mortgages

and

Notes

Payable

   

Weighted

Average

Interest Rate

   

Weighted

Average

Remaining

Term

(months)*

 

KimPru and KimPru II

  $ 729.4       5.55

%

    9.7     $ 777.1       5.54 %     12.6  

KIR

    808.6       4.61

%

    60.7       811.6       4.64 %     62.3  

CPP

    149.1       1.97

%

    22.4       109.9       5.25 %     3.5  

Other Institutional Programs

    215.4       4.91