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Note 2 - Weingarten Merger | 12 Months Ended
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Dec. 31, 2022
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | 4. Property Acquisitions: Acquisition/Consolidation of Operating Properties During the year ended December 31, 2022, the Company acquired the following operating properties, through direct asset purchases (in thousands):
|  |  |  |  |  |  |  |  |  | Purchase Price |  |  |  |  |
Property Name |  | Location |  |  | Month Acquired |  |  | Cash |  |  | Debt |  |  | Other |  |  | Total |  |  | GLA* |
Rancho San Marcos Parcel |  | San Marcos, CA |  |  | Jan-22 |  |  | $ | 2,407 |  |  | $ | - |  |  | $ | - |  |  | $ | 2,407 |  |  |  | 6 |
Columbia Crossing Parcel |  | Columbia, MD |  |  | Feb-22 |  |  |  | 16,239 |  |  |  | - |  |  |  | - |  |  |  | 16,239 |  |  |  | 60 |
Oak Forest Parcel |  | Houston, TX |  |  | Jun-22 |  |  |  | 3,846 |  |  |  | - |  |  |  | - |  |  |  | 3,846 |  |  |  | 4 |
Devon Village (1) |  | Devon, PA |  |  | Jun-22 |  |  |  | 733 |  |  |  | - |  |  |  | - |  |  |  | 733 |  |  |  | - |
Fishtown Crossing |  | Philadelphia, PA |  |  | Jul-22 |  |  |  | 39,291 |  |  |  | - |  |  |  | - |  |  |  | 39,291 |  |  |  | 133 |
Carman’s Plaza |  | Massapequa, NY |  |  | Jul-22 |  |  |  | 51,423 |  |  |  | - |  |  |  | - |  |  |  | 51,423 |  |  |  | 195 |
Pike Center (1) |  | Rockville, MD |  |  | Jul-22 |  |  |  | 21,850 |  |  |  | - |  |  |  | - |  |  |  | 21,850 |  |  |  | - |
Baybrook Gateway (1) |  | Webster, TX |  |  | Oct-22 |  |  |  | 2,978 |  |  |  | - |  |  |  | - |  |  |  | 2,978 |  |  |  | - |
Portfolio (8 Properties) (2) |  | Long Island, NY |  |  | Nov-22 |  |  |  | 152,078 |  |  |  | 88,792 |  |  |  | 135,663 |  |  |  | 376,533 |  |  |  | 536 |
Gordon Plaza (1) |  | Woodbridge, VA |  |  | Nov-22 |  |  |  | 5,573 |  |  |  | - |  |  |  | - |  |  |  | 5,573 |  |  |  | - |
The Gardens at Great Neck (1) |  | Great Neck, NY |  |  | Dec-22 |  |  |  | 4,019 |  |  |  | - |  |  |  | - |  |  |  | 4,019 |  |  |  | - |
|  |  |  |  |  |  |  |  |  | $ | 300,437 |  |  | $ | 88,792 |  |  | $ | 135,633 |  |  | $ | 524,892 |  |  |  | 934 |
* Gross leasable area ("GLA")
(1) | Land parcel
(2) | Other consists of redeemable noncontrolling interest of $79.7 million and an embedded derivative liability associated with put and call options of these units of $56.0 million. See Footnotes 15 and 16 of the Company’s Consolidated Financial Statements for additional discussion regarding fair value allocation to unitholders for noncontrolling interests.
During the year ended December 31, 2021, in addition to the properties acquired in the Merger (see Footnote 2 of the Notes to Consolidated Financial Statements), the Company acquired the following operating properties, through direct asset purchases or consolidation due to change in control resulting from the purchase of additional interests or obtaining control through the modification of a joint venture investment (in thousands):
|  |  |  |  |  |  |  |  |  | Purchase Price |  |  |  |  |
Property Name |  | Location |  |  | Month Acquired/ Consolidated |  |  | Cash |  |  | Debt |  |  | Other |  |  | Total |  |  | GLA |
Distribution Center #1 (1) |  | Lancaster, CA |  |  | Jan-21 |  |  | $ | 58,723 |  |  | $ | - |  |  | $ | 11,277 |  |  | $ | 70,000 |  |  |  | 927 |
Distribution Center #2 (1) |  | Woodland, CA |  |  | Jan-21 |  |  |  | 27,589 |  |  |  | - |  |  |  | 6,411 |  |  |  | 34,000 |  |  |  | 508 |
Jamestown Portfolio (6 properties) (2) |  | Various |  |  | Oct-21 |  |  |  | 172,899 |  |  |  | 170,000 |  |  |  | 87,094 |  |  |  | 429,993 |  |  |  | 1,226 |
KimPru Portfolio (2 properties) (2) |  | Various |  |  | Oct-21 |  |  |  | 61,705 |  |  |  | 64,169 |  |  |  | 15,212 |  |  |  | 141,086 |  |  |  | 478 |
Columbia Crossing Parcel |  | Columbia, MD |  |  | Oct-21 |  |  |  | 12,600 |  |  |  | - |  |  |  | - |  |  |  | 12,600 |  |  |  | 45 |
Centro Arlington (2) |  | Arlington, VA |  |  | Nov-21 |  |  |  | 24,178 |  |  |  | - |  |  |  | 184,850 |  |  |  | 209,028 |  |  |  | 72 |
|  |  |  |  |  |  |  |  |  | $ | 357,694 |  |  | $ | 234,169 |  |  | $ | 304,844 |  |  | $ | 896,707 |  |  |  | 3,256 |
(1) | Other consists of the fair value of the assets acquired which exceeded the purchase price upon closing. The transaction was a sale-leaseback with the seller which resulted in the recognition of a prepayment of rent of $17.7 million in accordance with ASC 842, Leases at closing. The prepayment of rent was amortized over the initial term of the lease through Revenues from rental properties, net on the Company's Consolidated Statements of Income. See Footnote 16 of the Company’s Consolidated Financial Statements for additional discussion regarding fair value allocation of partnership interest for noncontrolling interests.
(2) | Other includes the Company’s previously held equity investments and net gains on change in control. The Company evaluated these transactions pursuant to the FASB’s Consolidation guidance and as a result, recognized net gains on change in control of interests of $5.0 million, in aggregate, resulting from the fair value adjustments associated with the Company’s previously held equity interests, which are included in Equity in income of joint ventures, net on the Company’s Consolidated Statements of Income. The Company previously held an ownership interest of 30.0% in Jamestown Portfolio, 15.0% in KimPru Portfolio and 90.0% in Centro Arlington.
Included in the Company’s Consolidated Statements of Income are $9.1 million and $10.3 million in total revenues from the date of acquisition through December 31, 2022 and 2021, respectively, for operating properties acquired during each of the respective years. Purchase Price Allocations The purchase price for these acquisitions is allocated to real estate and related intangible assets acquired and liabilities assumed, as applicable, in accordance with our accounting policies for asset acquisitions. The purchase price allocations for properties acquired/consolidated during the years ended December 31, 2022 and 2021, are as follows (in thousands):
|  | Allocation as of December 31, 2022 |  |  | Weighted- Average Useful Life (in Years) |  |  | Allocation as of December 31, 2021 |  |  | Weighted- Average Useful Life (in Years) |
Land |  | $ | 207,067 |  |  |  | n/a |  |  | $ | 154,320 |  |  |  | n/a |
Buildings |  |  | 271,525 |  |  |  | 50.0 |  |  |  | 679,646 |  |  |  | 50.0 |
Building improvements |  |  | 13,273 |  |  |  | 45.0 |  |  |  | 18,476 |  |  |  | 45.0 |
Tenant improvements |  |  | 11,689 |  |  |  | 7.9 |  |  |  | 16,391 |  |  |  | 8.5 |
Solar panels |  |  | 2,308 |  |  |  | 20.0 |  |  |  | - |  |  |  | n/a |
In-place leases |  |  | 28,405 |  |  |  | 6.9 |  |  |  | 48,648 |  |  |  | 9.1 |
Above-market leases |  |  | 8,408 |  |  |  | 8.3 |  |  |  | 6,581 |  |  |  | 6.5 |
Below-market leases |  |  | (24,069 | ) |  |  | 16.1 |  |  |  | (39,712 | ) |  |  | 38.9 |
Mortgage fair value adjustment |  |  | 9,430 |  |  |  | 6.5 |  |  |  | - |  |  |  | n/a |
Other assets |  |  | - |  |  |  | n/a |  |  |  | 21,331 |  |  |  | n/a |
Other liabilities |  |  | (3,144) |  |  |  | n/a |  |  |  | (8,974 | ) |  |  | n/a |
Net assets acquired/consolidated |  | $ | 524,892 |  |  |  |  |  |  | $ | 896,707 |  |  |  |  |
Weingarten Realty Investors [Member] |
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | 2. Weingarten Merger Overview On August 3, 2021, the Company completed the Merger with Weingarten, under which Weingarten merged with and into the Company, with the Company continuing as the surviving public company. The total purchase price of the Merger was $4.1 billion, which consists primarily of shares of the Company’s common stock issued in exchange for Weingarten common shares, plus $281.1 million of cash consideration. The total purchase price was calculated based on the closing price of the Company’s common stock on August 3, 2021, which was $20.78 per share. At the effective time of the Merger, each Weingarten common share, issued and outstanding immediately prior to the effective time of the Merger (other than any shares owned directly by the Company or Weingarten and in each case not held on behalf of third parties) was converted into 1.408 shares of newly issued shares of the Company’s common stock. The number of Weingarten common shares outstanding as of August 3, 2021 converted to shares of the Company’s common stock was determined as follows:
Weingarten common shares outstanding as of August 3, 2021 |  |  | 127,784,006 |
Exchange ratio |  |  | 1.408 |
Kimco common stock issued |  |  | 179,919,880 |
The following table presents the purchase price and the total value of stock consideration paid by Kimco at the close of the Merger (in thousands except share price of Kimco common stock):
|  | Price of Kimco Common Stock |  |  | Equity Consideration Given (Kimco Shares Issued) |  |  | Calculated Value of Weingarten Consideration |  |  | Cash Consideration * |  |  | Total Value of Consideration |
As of August 3, 2021 |  | $ | 20.78 |  |  |  | 179,920 |  |  | $ | 3,738,735 |  |  | $ | 320,424 |  |  | $ | 4,059,159 |
* Amount includes additional consideration of $39.3 million relating to reimbursements paid by the Company to Weingarten at the closing of the Merger for transaction costs incurred by Weingarten. As a result of the Merger, Kimco acquired 149 properties, including 30 held through joint venture programs. The consolidated net assets and results of operations of Weingarten are included in the consolidated financial statements from the closing date, August 3, 2021. Purchase Price Allocation In accordance with ASC 805-10, Business Combinations, the Company accounted for the Merger as a business combination using the acquisition method of accounting. Based on the value of the common shares issued and cash consideration paid, the total fair value of the assets acquired and liabilities assumed in the Merger was $4.1 billion. The fair value of the real estate assets acquired were determined using either (i) a direct capitalization method, (ii) a discounted cash flow analysis or (iii) estimated sales prices from signed contracts or letters of intent from third party offers. Market data and comparable sales information were used in estimating the fair value of the land acquired. The Company determined that these valuation methodologies are classified within Level 3 of the fair value hierarchy. The assumptions and estimates included in these methodologies include stabilized net operating income, future income growth, capitalization rates, discount rates, capital expenditures, and cash flow projections at the respective properties. Under the direct capitalization method, the Company derived a normalized net operating income and applied a current market capitalization rate for each property. The estimates of normalized net operating income are based on a number of factors, including historical operating results, known trends, fair market lease rates and market/economic conditions. Capitalization rates utilized to derive these fair values ranged from 4.50% to 9.50%. The discounted cash flow analyses were based on estimated future cash flow projections that utilize discount rates, terminal capitalization rates and planned capital expenditures. These estimates approximate the inputs the Company believes would be utilized by market participants in assessing fair value. The estimates of future cash flow projections are based on a number of factors, including historical operating results, estimated growth rates, known and anticipated trends, fair market lease rates and market/economic conditions. Capitalization and discount rates utilized to derive the fair values ranged from 6.00% to 8.25% and 6.75% to 9.00%, respectively. The Company allocated the purchase price of the acquired properties to tangible and identifiable intangible assets or liabilities based on their respective fair values. The fair value of any tangible real estate assets acquired is determined by valuing the building as if it were vacant, and the fair value is then allocated to land, buildings and improvements. The Company values above and below-market lease intangibles based on estimates of market rent compared to contractual rents over expected lease terms using an appropriate discount rate. In-place leases are valued based on the costs to obtain new leases and an estimate of lost revenues and expenses over an anticipated lease up term. The Company determined that this valuation methodology is classified within Level 2 and Level 3 of the fair value hierarchy. The Company determined the fair value of unsecured debt assumed using current market-based pricing and interest rate yields for similar debt instruments. The Company determined the fair value of secured debt assumed by calculating the net present value of the scheduled debt service payments using current market-based terms for interest rates for debt with similar terms that the Company believes it could obtain on similar structures and maturities. For the fair value of secured debt assumed, weighted average credit spreads utilized were 3.33% and London Inter-bank Offered Rate (“LIBOR”) + 2.14% for the fixed and floating rate debt, respectively. Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining term of the loan. Finance lease obligations assumed are measured at fair value and are included as a liability on the accompanying balance sheet and the Company recorded the corresponding right-of-use assets. The Company determined that the valuation methodology used for its unsecured debt is classified within Level 2 of the fair value hierarchy and the valuation methodology used for its secured debt is classified within Level 3 of the fair value hierarchy. The following table summarizes the final purchase price allocation, including the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed (in thousands):
|  | Purchase Price Allocation |
Land |  | $ | 1,174,407 |
Building and improvements |  |  | 4,040,244 |
In-place leases |  |  | 370,685 |
Above-market leases |  |  | 42,133 |
Real estate assets |  |  | 5,627,469 |
Investments in and advances to real estate joint ventures |  |  | 585,382 |
Cash, accounts receivable and other assets |  |  | 241,582 |
Total assets acquired |  |  | 6,454,433 |
Notes payable |  |  | (1,497,632 | )
Mortgages payable |  |  | (317,671 | )
Accounts payable and other liabilities |  |  | (283,559 | )
Below-market leases |  |  | (119,373 | )
Noncontrolling interests |  |  | (177,039 | )
Total liabilities assumed |  |  | (2,395,274 | )
Total purchase price |  | $ | 4,059,159 |
The following table details the weighted average amortization periods, in years, of the purchase price allocated to real estate and related intangible assets and liabilities acquired arising from the Merger:
|  | Weighted Average Amortization Period (in Years) |
Land |  |  | n/a |
Building |  |  | 50.0 |
Building improvements |  |  | 45.0 |
Tenant improvements |  |  | 7.1 |
Fixtures and leasehold improvements |  |  | 6.2 |
In-place leases |  |  | 5.6 |
Above-market leases |  |  | 10.1 |
Below-market leases |  |  | 31.5 |
Right-of-use intangible assets |  |  | 30.9 |
Fair market value of debt adjustment |  |  | 3.7 |
Revenues from rental properties, net and Net income available to the Company’s common shareholders in the Company’s Consolidated Statements of Income includes revenues of $198.3 million and net income of $25.8 million (excluding $50.2 million of merger related charges), respectively, resulting from the Merger for the year ended December 31, 2021. Pro forma Information (Unaudited) The pro forma financial information set forth below is based upon the Company’s historical Consolidated Statements of Income for the years ended December 31, 2021 and 2020, adjusted to give effect as if the Merger occurred as of January 1, 2020. The pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of income would have been, nor does it purport to represent the results of income for future periods. (Amounts presented in millions).
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |
Revenues from rental properties, net |  | $ | 2,341.4 |  |  | $ | 2,234.9 |
Net income (1) |  | $ | 1,114.6 |  |  | $ | 1,193.1 |
Net income available to the Company’s common shareholders (1) |  | $ | 1,084.1 |  |  | $ | 1,166.3 |
| (1) | The pro forma earnings for the year ended December 31, 2021 were adjusted to exclude $50.2 million of merger costs while the pro forma earnings for the year ended December 31, 2020 were adjusted to include $50.2 million of merger costs incurred.

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