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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

 

For the fiscal year ended December 31, 2014

 

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   11042-0020

(Address of principal executive offices)     (Zip Code)

 

(516) 869-9000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock, par value $.01 per share.		New York Stock Exchange
Depositary Shares, each representing one-hundredth of a share of 6.90% Class H Cumulative Redeemable Preferred Stock, par value $1.00 per share.		New York Stock Exchange
Depositary Shares, each representing one-thousandth of a share of 6.00% Class I Cumulative Redeemable Preferred Stock, par value $1.00 per share.		New York Stock Exchange
Depositary Shares, each representing one-thousandth of a share of 5.50% Class J Cumulative Redeemable Preferred Stock, par value $1.00 per share.		New York Stock Exchange
Depositary Shares, each representing one-thousandth of a share of 5.625% Class K Cumulative Redeemable Preferred Stock, par value $1.00 per share.		New York Stock Exchange

 

Securities registered pursuant to section 12(g) of the Act:      None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

 

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☑

 

 

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 12b-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 12b-2 of the Act). Yes ☐     No ☑

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $9.1 billion based upon the closing price on the New York Stock Exchange for such equity on June 30, 2014.

 

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

 

412,577,958 shares as of February 25, 2015.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Part III incorporates certain information by reference to the Registrant's definitive proxy statement to be filed with respect to the Annual Meeting of Stockholders expected to be held on May 5, 2015.

 

Index to Exhibits begins on page 37.

 

 

TABLE OF CONTENTS

 

 

Item No.		Form 10-K Report Page
	PART I
1.	Business	3
1A.	Risk Factors	5
1B.	Unresolved Staff Comments	12
2.	Properties	12
3.	Legal Proceedings	13
4.	Mine Safety Disclosures	13
	PART II
5.	Market for Registrant's Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities	14
6.	Selected Financial Data	16
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
7A.	Quantitative and Qualitative Disclosures About Market Risk	34
8.	Financial Statements and Supplementary Data	35
9.	Changes in and Disagreements With Accountants on Accounting andFinancial Disclosure	35
9A.	Controls and Procedures	35
9B.	Other Information	35
	PART III
10.	Directors, Executive Officers and Corporate Governance	35
11.	Executive Compensation	36
12.	Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters	36
13.	Certain Relationships and Related Transactions, and DirectorIndependence	36
14.	Principal Accounting Fees and Services	36
	PART IV
15.	Exhibits, Financial Statement Schedules	36

 

 

FORWARD-LOOKING STATEMENTS

 

This annual report on Form 10-K (“Form 10-K”), 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,” “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 are, in some cases, 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) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms to the Company, (iv) the Company’s ability to raise capital by selling its assets, (v) changes in governmental laws and regulations, (vi) the level and volatility of interest rates and foreign currency exchange rates and managements’ ability to estimate the impact thereof, (vii) risks related to the Company’s international operations, (viii) the availability of suitable acquisition, disposition, development and redevelopment opportunities , and risks related to acquisitions not performing in accordance with our expectations, (ix) valuation and risks related to the Company’s joint venture and preferred equity investments, (x) valuation of marketable securities and other investments, (xi) increases in operating costs, (xii) changes in the dividend policy for the Company’s common stock, (xiii) the reduction in the Company’s income in the event of multiple lease terminations by tenants or a failure by multiple tenants to occupy their premises in a shopping center, (xiv) impairment charges, (xv) unanticipated changes in the Company’s intention or ability to prepay certain debt prior to maturity and/or hold certain securities until maturity and (xvi) the risks and uncertainties identified under Item 1A, “Risk Factors” and elsewhere in this Form 10-K and in the Company’s other filings with the SEC. 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 or related subjects in the Company’s reports on Form 10-Q and Form 8-K that the Company files with the Securities and Exchange Commission (“SEC”).

 

PART I

 

Item 1.  Business

 

Background

 

Kimco Realty Corporation, a Maryland corporation, is one of the nation's largest owners and operators of neighborhood and community shopping centers.  The terms "Kimco," the "Company," "we," "our" and "us" each refer to Kimco Realty Corporation and our subsidiaries, unless the context indicates otherwise.  The Company is a self-administered real estate investment trust ("REIT") and has owned and operated neighborhood and community shopping centers for more than 50 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 December 31, 2014, the Company had interests in 754 shopping center properties (the “Combined Shopping Center Portfolio”), aggregating 109.5 million square feet of gross leasable area (“GLA”), and 533 other property interests, primarily through the Company’s preferred equity investments and other real estate investments, totaling 11.7 million square feet of GLA, for a grand total of 1,287 properties aggregating 121.2 million square feet of GLA, located in 41 states, Puerto Rico, Canada, Mexico and Chile. 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 believes its portfolio of neighborhood and community shopping center properties is the largest (measured by GLA) currently held by any publicly traded REIT.

 

The Company's executive offices are located at 3333 New Hyde Park Road, New Hyde Park, New York 11042-0020 and its telephone number is (516) 869-9000. Nearly all operating functions, including leasing, legal, construction, data processing, maintenance, finance and accounting are administered by the Company from its executive offices in New Hyde Park, New York and supported by the Company’s regional offices. As of December 31, 2014, a total of 580 persons were employed by the Company.

 

The Company’s Web site is located at http://www.kimcorealty.com. The information contained on our Web site does not constitute part of this Form 10-K. On the Company’s Web site you can obtain, free of charge, a copy of our Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934, as amended, as soon as reasonably practicable, after we file such material electronically with, or furnish it to, the SEC. The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

 

  

The Company began operations through its predecessor, The Kimco Corporation, which was organized in 1966 upon the contribution of several shopping center properties owned by its principal stockholders. In 1973, these principals formed the Company as a Delaware corporation, and, in 1985, the operations of The Kimco Corporation were merged into the Company. The Company completed its initial public stock offering (the "IPO") in November 1991, and, commencing with its taxable year which began January 1, 1992, elected to qualify as a REIT in accordance with Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). If, as the Company believes, it is organized and operates in such a manner so as to qualify and remain qualified as a REIT under the Code, the Company generally will not be subject to federal income tax, provided that distributions to its stockholders equal at least the amount of its REIT taxable income, as defined under the Code. In 1994, the Company reorganized as a Maryland corporation. In March 2006, the Company was added to the S & P 500 Index, an index containing the stock of 500 Large Cap companies, most of which are U.S. corporations. The Company's common stock, Class H Depositary Shares, Class I Depositary Shares, Class J Depositary Shares and Class K Depositary Shares are traded on the New York Stock Exchange (“NYSE”) under the trading symbols “KIM”, “KIMprH”, “KIMprI”, “KIMprJ” and “KIMprK”, respectively.

 

The Company’s initial growth resulted primarily from ground-up development and the construction of shopping centers. Subsequently, the Company revised its growth strategy to focus on the acquisition of existing shopping centers and continued its expansion across the nation. The Company implemented its investment real estate management format through the establishment of various institutional joint venture programs, in which the Company has noncontrolling interests. The Company earns management fees, acquisition fees, disposition fees as well as promoted interests based on achieving certain performance metrics. The Company continued its geographic expansion with investments in Canada, Mexico, Chile, Brazil and Peru; however during 2013, based upon a perceived change in market conditions, the Company began its efforts to exit its investments in Mexico and South America. By the fourth quarter of 2014, the Company had substantially liquidated its investments in Mexico, Brazil and Peru. The Company’s revenues and equity in income (including gains on sales and impairment losses) from its foreign investments in U.S. dollar equivalents and their respective local currencies are as follows (in millions):

 

		2014				2013				2012
Revenues (consolidated in USD):
Mexico		$	29.4			$	49.5			$	47.3
Brazil		$	-			$	3.2			$	3.8
Peru		$	0.1			$	0.4			$	0.4
Chile		$	8.1			$	9.2			$	7.4
Revenues (consolidated):
Mexico (Mexican Pesos “MXN”)			382.3				673.8				626.5
Brazil (Brazilian Real)			-				6.8				7.2
Peru (Peruvian Nuevo Sol)			0.4				1.2				1.1
Chile (Chilean Pesos “CLP”)			4,485.9				4,464.7				3,648.0
Equity in income (unconsolidated joint ventures, including preferred equity investments in USD):
Canada		$	49.3			$	46.6			$	45.7
Mexico (2014 includes the release of cumulative foreign currency translation adjustment “CTA”)		$	(3.7	)		$	98.1			$	15.0
Chile		$	(0.1	)		$	4.2			$	0.4
Equity in income (unconsolidated joint ventures, including preferred equity investments in local currencies):
Canada (Canadian dollars)			54.6				48.0				46.0
Mexico (MXN)			(550.8	)			232.3				152.8
Chile (CLP)			(55.3	)			2,141.2				194.2

 

The Company, through its taxable REIT subsidiaries (“TRS”), as permitted by the Tax Relief Extension Act of 1999, has previously engaged in various retail real estate related opportunities, including (i) ground-up development of neighborhood and community shopping centers and the subsequent sale thereof upon completion and (ii) retail real estate management and disposition services, which primarily focused on leasing and disposition strategies for real estate property interests of both healthy and distressed retailers. The Company may consider other investments through its TRS should suitable opportunities arise.

 

In addition, the Company has capitalized on its established expertise in retail real estate by establishing other ventures in which the Company owns a smaller equity interest and provides management, leasing and operational support for those properties. The Company has also provided preferred equity capital in the past to real estate entrepreneurs and, from time to time, provides real estate capital and management services to both healthy and distressed retailers. The Company has also made selective investments in secondary market opportunities where a security or other investment is, in management’s judgment, priced below the value of the underlying assets, however these investments are subject to volatility within the equity and debt markets.

 

 

Operating and Investment Strategy

 

The Company’s strategy is to be the premier owner and operator of neighborhood and community shopping centers through investments primarily in the U.S.  To achieve this strategy the Company is (i) striving to transform the quality of its portfolio by disposing of lesser quality assets and acquiring larger higher quality properties in key markets identified by the Company, (ii) simplifying its business by exiting Mexico and South America and reducing the number of joint venture investments and (iii) pursuing redevelopment opportunities within its portfolio to increase overall value and certain development opportunities for long-term investment. The Company has an active capital recycling program and during the second quarter of 2014, the Company implemented a plan to accelerate the disposition of certain U.S. properties. This plan effectively shortened the Company’s anticipated hold period for these properties and as such caused the Company to recognize impairment charges on certain consolidated operating properties to reflect their estimated fair values. If the Company accepts sales prices for these assets that are less than their net carrying values, the Company would be required to take additional impairment charges. In order to execute the Company’s strategy, the Company intends to continue to strengthen its balance sheet by pursuing deleveraging efforts over time, providing it the necessary flexibility to invest opportunistically and selectively, primarily focusing on neighborhood and community shopping centers. The Company also has an institutional management business with domestic and foreign institutional partners for the purpose of investing in neighborhood and community shopping centers. In an effort to further its simplification strategy, the Company is actively pursuing opportunities to reduce its institutional management business through partner buy-outs, property acquisitions from institutional joint ventures and/or third party property sales.

 

The Company's investment objective is to increase cash flow, current income and, consequently, the value of its existing portfolio of properties and to seek continued growth in desirable demographic areas with successful retailers through (i) the retail re-tenanting, renovation and expansion of its existing centers and (ii) the selective acquisition of established income-producing real estate properties and properties requiring significant re-tenanting and redevelopment, primarily in neighborhood and community shopping centers in geographic regions in which the Company presently operates. The Company may consider investments in other real estate sectors and in geographic markets where it does not presently operate should suitable opportunities arise.

 

The Company's neighborhood and community shopping center properties are designed to attract local area customers and are typically anchored by a supermarket, a discount department store, a home improvement center or a drugstore tenant offering day-to-day necessities rather than high-priced luxury items. The Company may either purchase or lease income-producing properties in the future and may also participate with other entities in property ownership through partnerships, joint ventures or similar types of co-ownership. Equity investments may be subject to existing mortgage financing and/or other indebtedness. Financing or other indebtedness may be incurred simultaneously or subsequently in connection with such investments. Any such financing or indebtedness would have priority over the Company’s equity interest in such property. The Company may make loans to joint ventures in which it may or may not participate.

 

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 December 31, 2014, no single neighborhood and community shopping center accounted for more than 1.8% 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, or more than 1.4% of the Company’s total shopping center GLA. At December 31, 2014, the Company’s five largest tenants were TJX Companies, The Home Depot, Wal-Mart, Kohl’s and Bed Bath & Beyond which represented 3.3%, 2.4%, 1.8%, 1.8% and 1.8%, 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.

 

As one of the original participants in the growth of the shopping center industry and one of the nation's largest owners and operators of neighborhood and community shopping centers, the Company has established close relationships with a large number of major national and regional retailers and maintains a broad network of industry contacts. Management is associated with and/or actively participates in many shopping center and REIT industry organizations. Notwithstanding these relationships, there are numerous regional and local commercial developers, real estate companies, financial institutions and other investors who compete with the Company for the acquisition of properties and other investment opportunities and in seeking tenants who will lease space in the Company’s properties. 

 

Item 1A. Risk Factors

 

We are subject to certain business and legal risks including, but not limited to, the following:

 

Loss of our tax status as a real estate investment trust or changes in federal tax laws, regulations, administrative interpretations or court decisions relating to real estate investment trusts could have significant adverse consequences to us and the value of our securities.

 

We have elected to be taxed as a REIT for federal income tax purposes under the Code. We believe that we have operated so as to qualify as a REIT under the Code and that our current organization and method of operation comply with the rules and regulations promulgated under the Code to enable us to continue to qualify as a REIT. However, there can be no assurance that we have qualified or will continue to qualify as a REIT for federal income tax purposes.

 

 

Qualification as a REIT involves the application of highly technical and complex Code provisions, for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT. New legislation, regulations, administrative interpretations or court decisions could significantly change the tax laws with respect to qualification as a REIT, the federal income tax consequences of such qualification or the desirability of an investment in a REIT relative to other investments.

 

In order to qualify as a REIT, we must satisfy a number of requirements, including requirements regarding the composition of our assets and a requirement that at least 95% of our gross income in any year be derived from qualifying sources, such as “rents from real property.” Also, we must make distributions to stockholders aggregating annually at least 90% of our REIT taxable income, excluding net capital gains. Furthermore, we own a direct or indirect interest in certain subsidiary REITs which elected to be taxed as REITs for federal income tax purposes under the Code. Provided that each subsidiary REIT qualifies as a REIT, our interest in such subsidiary REIT will be treated as a qualifying real estate asset for purposes of the REIT asset tests. To qualify as a REIT, the subsidiary REIT must independently satisfy all of the REIT qualification requirements. The failure of a subsidiary REIT to qualify as a REIT could have an adverse effect on our ability to comply with the REIT income and asset tests, and thus our ability to qualify as a REIT.

 

If we lose our REIT status, we will face serious tax consequences that will substantially reduce the funds available to pay dividends to stockholders for each of the years involved because:

 

●

we would not be allowed a deduction for distributions to stockholders in computing our taxable income and we would be subject to federal income tax at regular corporate rates;

●

we could be subject to the federal alternative minimum tax and possibly increased state and local taxes;

●

unless we were entitled to relief under statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified; and

●

we would not be required to make distributions to stockholders.

 

As a result of all these factors, our failure to qualify as a REIT or changes in federal tax laws with respect to qualification as a REIT or the tax consequences of such qualification could also impair our ability to expand our business or raise capital and materially adversely affect the value of our securities.

 

To maintain our REIT status, we may be forced to borrow funds on a short-term basis during unfavorable market conditions.

 

To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our REIT taxable income each year, excluding capital gains, and we will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our net taxable income each year. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. While we have historically satisfied these distribution requirements by making cash distributions to our stockholders, a REIT is permitted to satisfy these requirements by making distributions of cash or other property, including, in limited circumstances, its own stock. Assuming we continue to satisfy these distributions requirements with cash, we may need to borrow funds to meet the REIT distribution requirements even if the then prevailing market conditions are not favorable for these borrowings. These borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments.

 

Adverse global market and economic conditions may impede our ability to generate sufficient income and maintain our properties.

 

The economic performance and value of our properties is subject to all of the risks associated with owning and operating real estate, including:

 

●

changes in the national, regional and local economic climate;

●

local conditions, including an oversupply of, or a reduction in demand for, space in properties like those that we own;

●

trends toward smaller store sizes as retailers reduce inventory and new prototypes;

●

increasing use by customers of e-commerce and online store sites;

●

the attractiveness of our properties to tenants;

●

the ability of tenants to pay rent, particularly anchor tenants with leases in multiple locations;

●

tenants who may declare bankruptcy and/or close stores;

●

competition from other available properties to attract and retain tenants;

●

changes in market rental rates;

●

the need to periodically pay for costs to repair, renovate and re-let space;

●

changes in operating costs, including costs for maintenance, insurance and real estate taxes;

●

the expenses of owning and operating properties, which are not necessarily reduced when circumstances such as market factors and competition cause a reduction in income from the properties;

●

changes in laws and governmental regulations, including those governing usage, zoning, the environment and taxes;

●

acts of terrorism and war, acts of God and physical and weather-related damage to our properties; and

●

the potential risk of functional obsolescence of properties over time.

 

 

Competition may limit our ability to purchase new properties or generate sufficient income from tenants and may decrease the occupancy and rental rates for our properties.

 

Our properties consist primarily of community and neighborhood shopping centers and other retail properties. Our performance, therefore, is generally linked to economic conditions in the market for retail space. In the future, the market for retail space could be adversely affected by:

 

●

weakness in the national, regional and local economies;

●

the adverse financial condition of some large retailing companies;

●

the impact of internet sales on the demand for retail space;

●

ongoing consolidation in the retail sector; and

●

the excess amount of retail space in a number of markets.

 

In addition, numerous commercial developers and real estate companies compete with us in seeking tenants for our existing properties and properties for acquisition. New regional malls, open-air lifestyle centers or other retail shopping centers with more convenient locations or better rents may attract tenants or cause them to seek more favorable lease terms at or prior to renewal. Retailers at our properties may face increasing competition from other retailers, e-commerce, outlet malls, discount shopping clubs, catalog companies, direct mail, telemarketing or home shopping networks, all of which could (i) reduce rents payable to us; (ii) reduce our ability to attract and retain tenants at our properties; or (iii) lead to increased vacancy rates at our properties. We may fail to anticipate the effects of changes in consumer buying practices, particularly of growing online sales and the resulting retailing practices and space needs of our tenants or a general downturn in our tenants’ businesses, which may cause tenants to close stores or default in payment of rent.

 

Our performance depends on our ability to collect rent from tenants, our tenants’ financial condition and our tenants maintaining leases for our properties.

 

At any time our tenants, particularly small local stores, may experience a downturn in their business that may significantly weaken their financial condition. As a result, our tenants may delay a number of lease commencements, decline to extend or renew leases upon expiration, fail to make rental payments when due, close stores or declare bankruptcy. Any of these actions could result in the termination of tenants’ leases and the loss of rental income attributable to these tenants’ leases. In the event of a default by a tenant, we may experience delays and costs in enforcing our rights as landlord under the terms of the leases.

 

In addition, multiple lease terminations by tenants or a failure by multiple tenants to occupy their premises in a shopping center could result in lease terminations or significant reductions in rent by other tenants in the same shopping centers under the terms of some leases. In that event, we may be unable to re-lease the vacated space at attractive rents or at all, and our rental payments from our continuing tenants could significantly decrease. The occurrence of any of the situations described above, particularly if it involves a substantial tenant with leases in multiple locations, could have a material adverse effect on our financial condition, results of operations and cash flows.

 

A tenant that files for bankruptcy protection may not continue to pay us rent. A bankruptcy filing by, or relating to, one of our tenants or a lease guarantor would bar all efforts by us to collect pre-bankruptcy debts from the tenant or the lease guarantor, or their property, unless the bankruptcy court permits us to do so. A tenant or lease guarantor bankruptcy could delay our efforts to collect past due balances under the relevant leases and could ultimately preclude collection of these sums. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. As a result, it is likely that we would recover substantially less than the full value of any unsecured claims we hold, if at all.

 

We may be unable to sell our real estate property investments when appropriate or on terms favorable to us.

 

Real estate property investments are illiquid and generally cannot be disposed of quickly. In addition, the federal tax code restricts a REIT’s ability to dispose of properties that are not applicable to other types of real estate companies. Therefore, we may not be able to vary our portfolio in response to economic or other conditions promptly or on terms favorable to us within a time frame that we would need. 

 

 

We may acquire or develop properties or acquire other real estate related companies, and this may create risks.

 

We may acquire or develop properties or acquire other real estate related companies when we believe that an acquisition or ground-up development is consistent with our business strategies. We may not succeed in consummating desired acquisitions or in completing developments on time or within budget. When we do pursue a project or acquisition, we may not succeed in leasing newly developed or acquired properties at rents sufficient to cover the costs of acquisition or development and operations. Difficulties in integrating acquisitions may prove costly or time-consuming and could divert management’s attention from other activities. Acquisitions or developments in new markets or industries where we do not have the same level of market knowledge may result in poorer than anticipated performance. We may also abandon acquisition or development opportunities that management has begun pursuing and consequently fail to recover expenses already incurred and will have devoted management’s time to a matter not consummated. Furthermore, our acquisitions of new properties or companies will expose us to the liabilities of those properties or companies, some of which we may not be aware of at the time of the acquisition. In addition, development of our existing properties presents similar risks.

 

Newly acquired or re-developed properties may have characteristics or deficiencies currently unknown to us that affect their value or revenue potential. It is also possible that the operating performance of these properties may decline under our management. As we acquire additional properties, we will be subject to risks associated with managing new properties, including lease-up and tenant retention. In addition, our ability to manage our growth effectively will require us to successfully integrate our new acquisitions into our existing management structure. We may not succeed with this integration or effectively manage additional properties, particularly in secondary markets. Also, newly acquired properties may not perform as expected.

 

We face competition in pursuing acquisition or development opportunities that could increase our costs.

 

We face competition in the acquisition, development, operation and sale of real property from others engaged in real estate investment that could increase our costs associated with purchasing and maintaining assets. Some of these competitors may have greater financial resources than we do. This could result in competition for the acquisition of properties for tenants who lease or consider leasing space in our existing and subsequently acquired properties and for other real estate investment opportunities.

 

We do not have exclusive control over our joint venture and preferred equity investments, such that we are unable to ensure that our objectives will be pursued.

 

We have invested in some properties as a co-venturer or partner, instead of owning directly. In these investments, we do not have exclusive control over the development, financing, leasing, management and other aspects of these investments. As a result, the co-venturer or partner might have interests or goals that are inconsistent with ours, take action contrary to our interests or otherwise impede our objectives. These investments involve risks and uncertainties. The co-venturer or partner may fail to provide capital or fulfill its obligations, which may result in certain liabilities to us for guarantees and other commitments, conflicts arising between us and our partners and the difficulty of managing and resolving such conflicts, and the difficulty of managing or otherwise monitoring such business arrangements. The co-venturer or partner also might become insolvent or bankrupt, which may result in significant losses to us.

 

Although our joint venture arrangements may allow us to share risks with our joint-venture partners, these arrangements may also decrease our ability to manage risk. Joint ventures implicate additional risks, such as:

 

●

potentially inferior financial capacity, diverging business goals and strategies and the need for our venture partner’s continued cooperation;

●

our inability to take actions with respect to the joint venture activities that we believe are favorable to us if our joint venture partner does not agree;

●

our inability to control the legal entity that has title to the real estate associated with the joint venture;

●

our lenders may not be easily able to sell our joint venture assets and investments or may view them less favorably as collateral, which could negatively affect our liquidity and capital resources;

●

our joint venture partners can take actions that we may not be able to anticipate or prevent, which could result in negative impacts on our debt and equity; and

●

our joint venture partners’ business decisions or other actions or omissions may result in harm to our reputation or adversely affect the value of our investments.

 

Our joint venture and preferred equity investments generally own real estate properties for which the economic performance and value is subject to all the risks associated with owning and operating real estate as described above. 

 

 

We intend to continue to sell our non-strategic assets and may not be able to recover our investments, which may result in significant losses to us.

 

There can be no assurance that we will be able to recover the current carrying amount of all of our non-strategic properties and investments and those of our unconsolidated joint ventures in the future. Our failure to do so would require us to recognize impairment charges for the period in which we reached that conclusion, which could materially and adversely affect our business, financial condition, operating results and cash flows.

 

We have significant international operations, which may be affected by economic, political and other risks associated with international operations, and this could adversely affect our business.

 

The risks we face in international business operations include, but are not limited to:

 

●

currency risks, including currency fluctuations;

●

unexpected changes in legislative and regulatory requirements, including changes in applicable laws and regulations in the United States that affect foreign operations;

●

potential adverse tax burdens;

●

burdens of complying with different accounting and permitting standards, labor laws and a wide variety of foreign laws;

●

obstacles to the repatriation of earnings and cash;

●

regional, national and local political uncertainty;

●

economic slowdown and/or downturn in foreign markets;

●

difficulties in staffing and managing international operations;

●

difficulty in administering and enforcing corporate policies, which may be different than the normal business practices of local cultures; and

●

reduced protection for intellectual property in some countries.

 

Each of these risks might impact our cash flow or impair our ability to borrow funds, which ultimately could adversely affect our business, financial condition, operating results and cash flows.

 

Currency fluctuations between local currency and the U.S. dollar during the period in which the Company held its investment result in a cumulative translation adjustment (“CTA”), which is recorded as a component of Accumulated other comprehensive income (“AOCI”) on the Company’s Consolidated Balance Sheets. The CTA amounts are subject to future changes resulting from ongoing fluctuations in the respective foreign currency exchange rates. Changes in exchange rates are impacted by many factors that cannot be forecasted with reliable accuracy. Any change could have a favorable or unfavorable impact on the Company’s CTA balance. The Company’s aggregate CTA net gain balance at December 31, 2014, is $0.3 million, this amount consists of unrealized gains in Canada aggregating $15.2 million, offset by unrealized losses in Chile aggregating $14.9 million.

 

Under U.S. GAAP, the Company is required to release CTA balances into earnings when the Company has substantially liquidated its investment in a foreign entity. During 2013, the Company began selling properties within its Latin American portfolio and during the fourth quarter 2014 the Company substantially liquidated its investment in Mexico and Peru and recognized a loss from foreign currency translation in the amount of $140.1 million before noncontrolling interest of $5.8 million. The Company may, in the near term, substantially liquidate its investment in Chile which will require the then unrealized loss on foreign currency translation to be recognized as a charge against earnings.

 

In order to fully develop our international operations, we must overcome cultural and language barriers and assimilate different business practices. In addition, we are required to create compensation programs, employment policies and other administrative programs that comply with laws of multiple countries. We also must communicate and monitor standards and directives in our international locations. Our failure to successfully manage our geographically diverse operations could impair our ability to react quickly to changing business and market conditions and to enforce compliance with standards and procedures. Since a portion of our revenues are generated internationally, we must devote an appropriate level of resources to managing our international operations.

 

Our future success will be influenced by our ability to anticipate and effectively manage these and other risks associated with our international operations. Any of these factors could, however, materially adversely affect our international operations and, consequently, our financial condition, results of operations and cash flows.

 

We cannot predict the impact of laws and regulations affecting our international operations nor the potential that we may face regulatory sanctions.

 

Our international operations include properties in Canada, Mexico and Chile and are subject to a variety of United States and foreign laws and regulations, including the United States Foreign Corrupt Practices Act (“FCPA”). We have policies and procedures designed to promote compliance with the FCPA and other anti-corruption laws, but we cannot assure you that we will continue to be found to be operating in compliance with, or be able to detect violations of, any such laws or regulations. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject, the manner in which existing laws might be administered or interpreted, or the potential that we may face regulatory sanctions. 

 

 

We cannot assure you that our employees will adhere to our Code of Conduct or any other of our policies, applicable anti-corruption laws, including the FCPA, or other legal requirements. Failure to comply or violations of any applicable policies, anti-corruption laws, or other legal requirements may subject us to legal, regulatory or other sanctions, including criminal and civil penalties and other remedial measures. We have received a subpoena from the Enforcement Division of the SEC in connection with the SEC’s investigation, In the Matter of Wal-Mart Stores, Inc. (FW-3678), that the SEC Staff is currently conducting with respect to possible violations of the FCPA. We are cooperating with the SEC investigation and a parallel investigation by the U.S. Department of Justice (“DOJ”). See “Item 3. Legal Proceedings,” below. The DOJ and the SEC have a broad range of civil and criminal sanctions under the FCPA and other laws and regulations, which they may seek to impose against corporations and individuals in appropriate circumstances including, but not limited to, injunctive relief, disgorgement, fines, penalties and modifications to business practices and compliance programs. Any of these remedial measures, if applicable to us, could have a material adverse impact on our business, results of operations, financial condition and liquidity.

 

We face risks relating to cybersecurity attacks, loss of confidential information and other business disruptions.

 

Our business is at risk from and may be impacted by cybersecurity attacks, including attempts to gain unauthorized access to our confidential data and other electronic security breaches. Such cyber-attacks can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats. While we employ a number of measures to prevent, detect and mitigate these threats including password protection, backup servers and annual penetration testing, there is no guarantee such efforts will be successful in preventing a cyber-attack. Cybersecurity incidents could compromise the confidential information of our tenants, employees and third party vendors and disrupt and effect the efficiency of our business operations.

 

We may be unable to obtain financing through the debt and equities market, which would have a material adverse effect on our growth strategy, our results of operations and our financial condition. 

 

We cannot assure you that we will be able to access the capital and credit markets to obtain additional debt or equity financing or that we will be able to obtain financing on terms favorable to us. The inability to obtain financing on a timely basis could have negative effects on our business, such as:

 

●

we could have great difficulty acquiring or developing properties, which would materially adversely affect our business strategy;

●

our liquidity could be adversely affected;

●

we may be unable to repay or refinance our indebtedness;

●

we may need to make higher interest and principal payments or sell some of our assets on terms unfavorable to us to fund our indebtedness; or

●

we may need to issue additional capital stock, which could further dilute the ownership of our existing shareholders.

 

Adverse changes in our credit ratings could impair our ability to obtain additional debt and equity financing on terms favorable to us, if at all, and could significantly reduce the market price of our publicly traded securities.

 

We are subject to financial covenants that may restrict our operating and acquisition activities.

 

Our revolving credit facility, term loan and the indentures under which our senior unsecured debt is issued contain certain financial and operating covenants, including, among other things, certain coverage ratios and limitations on our ability to incur debt, make dividend payments, sell all or substantially all of our assets and engage in mergers and consolidations and certain acquisitions. These covenants may restrict our ability to pursue certain business initiatives or certain acquisition transactions that might otherwise be advantageous. In addition, failure to meet any of the financial covenants could cause an event of default under our revolving credit facility, term loan and the indentures and/or accelerate some or all of our indebtedness, which would have a material adverse effect on us.

 

Changes in market conditions could adversely affect the market price of our publicly traded securities.

 

The market price of our publicly traded securities depends on various market conditions, which may change from time-to-time. Among the market conditions that may affect the market price of our publicly traded securities are the following:

 

●

the extent of institutional investor interest in us;

●

the reputation of REITs generally and the reputation of REITs with portfolios similar to ours;

●

the attractiveness of the securities of REITs in comparison to securities issued by other entities, including securities issued by other real estate companies;

●

our financial condition and performance;

●

the market’s perception of our growth potential, potential future cash dividends and risk profile;

●

an increase in market interest rates, which may lead prospective investors to demand a higher distribution rate in relation to the price paid for our shares; and

●

general economic and financial market conditions.

  

 

We may change the dividend policy for our common stock in the future.

 

The decision to declare and pay dividends on our common stock in the future, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our Board of Directors and will depend on our earnings, operating cash flows, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our indebtedness including preferred stock, the annual distribution requirements under the REIT provisions of the Code, state law and such other factors as our Board of Directors deems relevant or are requirements under the Code or state or federal laws. Any change in our dividend policy could have a material adverse effect on the market price of our common stock.

 

We may not be able to recover our investments in marketable securities mortgage receivables or other investments, which may result in significant losses to us.

 

Our investments in marketable securities are subject to specific risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer, which may result in significant losses to us. Marketable securities are generally unsecured and may also be subordinated to other obligations of the issuer. As a result, investments in marketable securities are subject to risks of:

 

●

limited liquidity in the secondary trading market;

●

substantial market price volatility, resulting from changes in prevailing interest rates;

●

subordination to the prior claims of banks and other senior lenders to the issuer;

●

the possibility that earnings of the issuer may be insufficient to meet its debt service and distribution obligations; and

●

the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic downturn.

 

These risks may adversely affect the value of outstanding marketable securities and the ability of the issuers to make distribution payments.

 

In the event of a default by a borrower, it may be necessary for us to foreclose our mortgage or engage in costly negotiations. Delays in liquidating defaulted mortgage loans and repossessing and selling the underlying properties could reduce our investment returns. Furthermore, in the event of default, the actual value of the property securing the mortgage may decrease. A decline in real estate values will adversely affect the value of our loans and the value of the mortgages securing our loans.

 

Our mortgage receivables may be or become subordinated to mechanics' or materialmen's liens or property tax liens. In these instances we may need to protect a particular investment by making payments to maintain the current status of a prior lien or discharge it entirely. Where that occurs, the total amount we recover may be less than our total investment, resulting in a loss. In the event of a major loan default or several loan defaults resulting in losses, our investments in mortgage receivables would be materially and adversely affected.

 

The economic performance and value of our other investments, which we do not control and are in retail operations, are subject to risks associated with owning and operating retail businesses, including:

 

●

changes in the national, regional and local economic climate;

	●	the adverse financial condition of some large retailing companies;
	●	increasing use by customers of e-commerce and online store sites; and

●

ongoing consolidation in the retail sector.

 

A decline in the value of our other investments may require us to recognize an other-than-temporary impairment (“OTTI”) against such assets. When the fair value of an investment is determined to be less than its amortized cost at the balance sheet date, we assess whether the decline is temporary or other-than-temporary. If we intend to sell an impaired asset, or it is more likely than not that we will be required to sell the impaired asset before any anticipated recovery, then we must recognize an OTTI through charges to earnings equal to the entire difference between the assets amortized cost and its fair value at the balance sheet date. When an OTTI is recognized through earnings, a new cost basis is established for the asset and the new cost basis may not be adjusted through earnings for subsequent recoveries in fair value.

 

 

We may be subject to liability under environmental laws, ordinances and regulations.

 

Under various federal, state, and local laws, ordinances and regulations, we may be considered an owner or operator of real property and may be responsible for paying for the disposal or treatment of hazardous or toxic substances released on or in our property, as well as certain other potential costs relating to hazardous or toxic substances (including governmental fines and injuries to persons and property). This liability may be imposed whether or not we knew about, or were responsible for, the presence of hazardous or toxic substances.

 

Item 1B. Unresolved Staff Comments

 

None

 

Item 2.  Properties

 

Real Estate Portfolio. As of December 31, 2014, the Company had interests in 754 shopping center properties (the “Combined Shopping Center Portfolio”) aggregating 109.5 million square feet of gross leasable area (“GLA”) and 533 other property interests, primarily through the Company’s preferred equity investments and other real estate investments, totaling 11.7 million square feet of GLA, for a grand total of 1,287 properties aggregating 121.2 million square feet of GLA, located in 41 states, Puerto Rico, Canada, Mexico and Chile.  The Company’s portfolio includes noncontrolling interests. Neighborhood and community shopping centers comprise the primary focus of the Company's current portfolio.  As of December 31, 2014, the Company’s Combined Shopping Center Portfolio was 95.6% leased.

 

The Company's neighborhood and community shopping center properties, which are generally owned and operated through subsidiaries or joint ventures, had an average size of 145,226 square feet as of December 31, 2014. The Company generally retains its shopping centers for long-term investment and consequently pursues a program of regular physical maintenance together with major renovations and refurbishing to preserve and increase the value of its properties. This includes renovating existing facades, installing uniform signage, resurfacing parking lots and enhancing parking lot lighting. During 2014, the Company capitalized $22.2 million in connection with these property improvements and expensed to operations $33.8 million.

 

The Company's management believes its experience in the real estate industry and its relationships with numerous national and regional tenants gives it an advantage in an industry where ownership is fragmented among a large number of property owners. The Company's neighborhood and community shopping centers are usually "anchored" by a national or regional discount department store, supermarket or drugstore. As one of the original participants in the growth of the shopping center industry and one of the nation's largest owners and operators of shopping centers, the Company has established close relationships with a large number of major national and regional retailers. Some of the major national and regional companies that are tenants in the Company's shopping center properties include TJX Companies, The Home Depot, Wal-Mart, Kohl’s, Bed Bath & Beyond, Royal Ahold, Petsmart, Ross Stores, Best Buy and Safeway.

 

A substantial portion of the Company's income consists of rent received under long-term leases. Most of the leases provide for the payment of fixed-base rentals monthly in advance and for the payment by tenants of an allocable share of the real estate taxes, insurance, utilities and common area maintenance expenses incurred in operating the shopping centers. Although many of the leases require the Company to make roof and structural repairs as needed, a number of tenant leases place that responsibility on the tenant, and the Company's standard small store lease provides for roof repairs to be reimbursed by the tenant as part of common area maintenance. 

 

Minimum base rental revenues and operating expense reimbursements accounted for 98% and other revenues, including percentage rents, accounted for 2% of the Company's total revenues from rental property for the year ended December 31, 2014. The Company's management believes that the base rent per leased square foot for many of the Company's existing leases is generally lower than the prevailing market-rate base rents in the geographic regions where the Company operates, reflecting the potential for future growth.

 

Approximately 31.2% of the Company's leases of consolidated properties also contain provisions requiring the payment of additional rent calculated as a percentage of tenants’ gross sales above predetermined thresholds.  Percentage rents accounted for less than 1% of the Company's revenues from rental property for the year ended December 31, 2014.  Additionally, a majority of the Company’s leases have provisions requiring contractual rent increases. The Company’s leases may also include escalation clauses, which provide for increases based upon changes in the consumer price index or similar inflation indices.

 

As of December 31, 2014, the Company’s consolidated operating portfolio, comprised of 57.6 million square feet of GLA, was 95.7% leased. The U.S. properties make up the majority of the Company’s consolidated operating portfolio consisting of 57.2 million of the total 57.6 million square feet.  For the period January 1, 2014 to December 31, 2014, the Company increased the average base rent per leased square foot, which includes the impact of tenant concessions, in its U.S. consolidated portfolio of neighborhood and community shopping centers from $12.61 to $13.50, an increase of $0.89.  This increase primarily consists of (i) a $0.34 increase relating to acquisitions, (ii) a $0.31 increase relating to dispositions, and (iii) an $0.24 increase relating to new leases signed net of leases vacated and rent step-ups within the portfolio.

 

 

The Company has a total of 5,569 leases in the U.S. 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, 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)			232				687			$	12,846				1.8	%
2015			600				3,167			$	47,336				6.5	%
2016			784				6,134			$	80,059				11.0	%
2017			873				7,432			$	100,813				13.8	%
2018			774				6,241			$	89,340				12.2	%
2019			724				6,123			$	84,778				11.6	%
2020			398				4,531			$	58,196				8.0	%
2021			219				2,602			$	34,624				4.7	%
2022			213				2,290			$	32,082				4.4	%
2023			210				2,343			$	33,567				4.6	%
2024			224				3,228			$	45,236				6.2	%
2025			106				1,530			$	18,974				2.6	%

 

(1) Leases currently under month to month lease or in process of renewal

 

During 2014, the Company executed 872 leases totaling over 6.6 million square feet in the Company’s consolidated operating portfolio comprised of 354 new leases and 518 renewals and options. The leasing costs associated with these leases are estimated to aggregate $45.4 million or $23.73 per square foot. These costs include $35.9 million of tenant improvements and $9.5 million of leasing commissions. The average rent per square foot on new leases was $16.68 and on renewals and options was $12.78. The Company will seek to obtain rents that are higher than amounts within its expiring leases, however, there are many variables and uncertainties which can significantly affect the leasing market at any time; as such, the Company cannot guarantee that future leases will continue to be signed for rents that are equal to or higher than current amounts.

 

Ground-Leased Properties. The Company has interests in 49 consolidated shopping center properties and interests in 24 shopping center properties in unconsolidated joint ventures that are subject to long-term ground leases where a third party owns and has leased the underlying land to the Company (or an affiliated joint venture) to construct and/or operate a shopping center. The Company or the joint venture pays rent for the use of the land and generally is responsible for all costs and expenses associated with the building and improvements. At the end of these long-term leases, unless extended, the land together with all improvements revert to the landowner.

 

More specific information with respect to each of the Company's property interests is set forth in Exhibit 99.1, which is incorporated herein by reference.

 

Item 3.  Legal Proceedings

 

The Company is not presently involved in any litigation nor, to its knowledge, is any litigation threatened against the Company or its subsidiaries that, in management's opinion, would result in any material adverse effect on the Company's ownership, management or operation of its properties taken as a whole, or which is not covered by the Company's liability insurance.

 

On January 28, 2013, the Company received a subpoena from the Enforcement Division of the SEC in connection with an investigation, In the Matter of Wal-Mart Stores, Inc. (FW-3678), that the SEC Staff is currently conducting with respect to possible violations of the Foreign Corrupt Practices Act. The Company is responding to the subpoena and intends to cooperate fully with the SEC in this matter. The U.S. Department of Justice (“DOJ”) is conducting a parallel investigation, and the Company is cooperating with the DOJ investigation. At this point, we are unable to predict the duration, scope or result of the SEC or DOJ investigation.

 

Item 4.  Mine Safety Disclosures

 

Not applicable.

 

 

PART II

 

Item 5.  Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information There were no common stock offerings completed by the Company during the three-year period ended December 31, 2014.

 

The table below sets forth, for the quarterly periods indicated, the high and low sales prices per share reported on the NYSE Composite Tape and declared dividends per share for the Company’s common stock. The Company’s common stock is traded on the NYSE under the trading symbol "KIM".

 

		Stock Price
Period		High				Low				Dividends
2013:
First Quarter		$	22.49			$	19.41			$	0.21
Second Quarter		$	25.09			$	20.25			$	0.21
Third Quarter		$	23.24			$	19.68			$	0.21
Fourth Quarter		$	21.83			$	19.22				0.225	(a)
2014:
First Quarter		$	22.70			$	19.61			$	0.225
Second Quarter		$	23.63			$	21.41			$	0.225
Third Quarter		$	23.82			$	21.54			$	0.225
Fourth Quarter		$	26.04			$	21.56				0.24	(b)

 

(a)

Paid on January 15, 2014, to stockholders of record on January 2, 2014.

(b)

Paid on January 15, 2015, to stockholders of record on January 2, 2015.

 

Holders The number of holders of record of the Company's common stock, par value $0.01 per share, was 2,521 as of January 31, 2015.

 

Dividends Since the IPO, the Company has paid regular quarterly cash dividends to its stockholders. While the Company intends to continue paying regular quarterly cash dividends, future dividend declarations will be paid at the discretion of the Board of Directors and will depend on the actual cash flows of the Company, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Directors deems relevant. 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 operating fundamentals. The Company is required by the Code to distribute at least 90% of its REIT taxable income. The actual cash flow available to pay dividends will be affected by a number of factors, including the revenues received from rental properties, the operating expenses of the Company, the interest expense on its borrowings, the ability of lessees to meet their obligations to the Company, the ability to refinance near-term debt maturities and any unanticipated capital expenditures.

 

The Company has determined that the $0.90 dividend per common share paid during 2014 represented 36% ordinary income, a 36% return of capital and 28% capital gain to its stockholders. The $0.84 dividend per common share paid during 2013 represented 46% ordinary income, a 36% return of capital and 18% capital gain to its stockholders.

 

In addition to its common stock offerings, the Company has capitalized the growth in its business through the issuance of unsecured fixed and floating-rate medium-term notes, underwritten bonds, unsecured bank debt, mortgage debt and construction loans, convertible preferred stock and perpetual preferred stock. Borrowings under the Company's revolving credit facility have also been an interim source of funds to both finance the purchase of properties and other investments and meet any short-term working capital requirements. The various instruments governing the Company's issuance of its unsecured public debt, bank debt, mortgage debt and preferred stock impose certain restrictions on the Company with regard to dividends, voting, liquidation and other preferential rights available to the holders of such instruments. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Footnotes 12, 13 and 16 of the Notes to Consolidated Financial Statements included in this Form 10-K.

 

The Company does not believe that the preferential rights available to the holders of its Class H Preferred Stock, Class I Preferred Stock, Class J Preferred Stock and Class K Preferred Stock, the financial covenants contained in its public bond indentures, as amended, its term loan, or its revolving credit agreements will have an adverse impact on the Company's ability to pay dividends in the normal course to its common stockholders or to distribute amounts necessary to maintain its qualification as a REIT.

 

The Company maintains a dividend reinvestment and direct stock purchase plan (the "Plan") pursuant to which common and preferred stockholders and other interested investors may elect to automatically reinvest their dividends to purchase shares of the Company’s common stock or, through optional cash payments, purchase shares of the Company’s common stock. The Company may, from time-to-time, either (i) purchase shares of its common stock in the open market or (ii) issue new shares of its common stock for the purpose of fulfilling its obligations under the Plan.

 

  

Issuer Purchases of Equity Securities During the year ended December 31, 2014, the Company repurchased 128,147 shares in connection with common shares surrendered or deemed surrendered to the Company to satisfy statutory minimum tax withholding obligations in connection with the vesting of restricted stock awards under the Company’s equity-based compensation plans. The Company expended approximately $2.8 million to repurchase these shares.

 

Period				Total Number of Shares Purchased				Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
January 1, 2014	–	January 31, 2014			2,329			$	20.01				-			$	-
February 1, 2014	-	February 28, 2014			83,826			$	21.37				-				-
March 1, 2014	-	March 31, 2014			39,678			$	22.01				-				-
April 1, 2014	-	April 30, 2014			-			$	-				-				-
May 1, 2014	-	May 31, 2014			557			$	22.73				-				-
June 1, 2014	-	June 30, 2014			302			$	23.40				-				-
July 1, 2014	–	July 31, 2014			789			$	23.51				-				-
August 1, 2014	–	August 31, 2014			666			$	22.37				-				-
September 1, 2014	–	December 31, 2014			-			$	-				-				-
Total					128,147			$	22.13				-			$	-

 

Total Stockholder Return Performance The following performance chart compares, over the five years ended December 31, 2014, the cumulative total stockholder return on the Company’s common stock with the cumulative total return of the S&P 500 Index and the cumulative total return of the NAREIT Equity REIT Total Return Index (the "NAREIT Equity Index") prepared and published by the National Association of Real Estate Investment Trusts ("NAREIT"). Equity real estate investment trusts are defined as those which derive more than 75% of their income from equity investments in real estate assets. The NAREIT Equity Index includes all tax qualified equity real estate investment trusts listed on the New York Stock Exchange, American Stock Exchange or the NASDAQ National Market System. Stockholder return performance, presented quarterly for the five years ended December 31, 2014, is not necessarily indicative of future results. All stockholder return performance assumes the reinvestment of dividends. The information in this paragraph and the following performance chart are deemed to be furnished, not filed.

 

 

 

Item 6.  Selected Financial Data

 

The following table sets forth selected, historical, consolidated financial data for the Company and should be read in conjunction with the Consolidated Financial Statements of the Company and Notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-K.

 

The Company believes that the book value of its real estate assets, which reflects the historical costs of such real estate assets less accumulated depreciation, is not indicative of the current market value of its properties. Historical operating results are not necessarily indicative of future operating performance.

 

		Year ended December 31,   (2)
		2014				2013				2012				2011				2010
		(in thousands, except per share information)
Operating Data:
Revenues from rental properties (1)		$	958,888			$	825,210			$	755,851			$	698,211			$	673,367
Interest expense (3)		$	203,759			$	212,240			$	223,736			$	219,599			$	219,766
Early extinguishment of debt charges		$	-			$	-			$	-			$	-			$	10,811
Depreciation and amortization (3)		$	258,074			$	224,713			$	214,827			$	197,956			$	188,706
Gain on sale of development properties		$	-			$	-			$	-			$	12,074			$	2,080
Gain on sale of operating properties, net of tax (3)		$	389			$	1,432			$	4,299			$	108			$	2,377
Provision for income taxes, net (4)		$	22,438			$	32,654			$	15,603			$	24,928			$	6,279
Impairment charges (5)		$	39,808			$	32,247			$	10,289			$	13,077			$	32,661
Income from continuing operations (6)		$	375,133			$	276,884			$	172,760			$	100,059			$	65,091
Income per common share, from continuing operations:
Basic		$	0.77			$	0.53			$	0.19			$	0.10			$	0.03
Diluted		$	0.77			$	0.53			$	0.19			$	0.10			$	0.03
Weighted average number of shares of common stock:
Basic			409,088				407,631				405,997				406,530				405,827
Diluted			411,038				408,614				406,689				407,669				406,201
Cash dividends declared per common share		$	0.915			$	0.855			$	0.78			$	0.73			$	0.66

 

		December 31,
		2014				2013				2012				2011				2010
		(in thousands)
Balance Sheet Data:
Real estate, before accumulated depreciation		$	10,018,226			$	9,123,344			$	8,947,287			$	8,771,257			$	8,592,760
Total assets		$	10,285,728			$	9,663,630			$	9,751,234			$	9,628,762			$	9,833,875
Total debt		$	4,620,298			$	4,221,401			$	4,195,317			$	4,114,385			$	4,058,987
Total stockholders' equity		$	4,774,785			$	4,632,417			$	4,765,160			$	4,686,386			$	4,935,842
Cash flow provided by operations		$	629,343			$	570,035			$	479,054			$	448,613			$	479,935
Cash flow provided by/(used for) investing activities		$	126,705			$	72,235			$	(51,000	)		$	(20,760	)		$	37,904
Cash flow used for financing activities		$	(717,494	)		$	(635,377	)		$	(399,061	)		$	(440,125	)		$	(514,743	)

 

(1)	Does not include revenues (i) from rental property relating to unconsolidated joint ventures, (ii) relating to the investment in retail store leases and (iii) from properties included in discontinued operations.

(2)	All years have been adjusted to reflect the impact of operating properties sold during the years ended December 31, 2014, 2013, 2012, 2011 and 2010, which are reflected in discontinued operations in the Consolidated Statements of Income.

(3)	Does not include amounts reflected in discontinued operations.

(4)	Does not include amounts reflected in discontinued operations. Amounts include income taxes related to gain on transfer/sale of operating properties.

(5)	Amounts exclude noncontrolling interests and amounts reflected in discontinued operations.

(6)	Amounts include gain on transfer/sale of operating properties, net of tax and net income attributable to noncontrolling interests.

  

 

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this Form 10-K. Historical results and percentage relationships set forth in the Consolidated Statements of Income contained in the Consolidated Financial Statements, including trends, should not be taken as indicative of future operations.

 

Executive Summary

 

Kimco Realty Corporation is one of the nation’s largest publicly-traded owners and operators of neighborhood and community shopping centers. As of December 31, 2014, the Company had interests in 754 shopping center properties (the “Combined Shopping Center Portfolio”), aggregating 109.5 million square feet of gross leasable area (“GLA”) and 533 other property interests, primarily through the Company’s preferred equity investments and other real estate investments, totaling 11.7 million square feet of GLA, for a grand total of 1,287 properties aggregating 121.2 million square feet of GLA, located in 41 states, Puerto Rico, Canada, Mexico, and Chile.

 

The executive officers are engaged in the day-to-day management and operation of real estate exclusively with the Company, with nearly all operating functions, including leasing, asset management, maintenance, construction, legal, finance and accounting, administered by the Company.

 

The Company’s strategy is to be the premier owner and operator of neighborhood and community shopping centers through investments primarily in the U.S.  To achieve this strategy the Company is (i) striving to transform the quality of its portfolio by disposing of lesser quality assets and acquiring larger higher quality properties in key markets identified by the Company, (ii) simplifying its business by exiting Mexico and South America and reducing the number of joint venture investments and (iii) pursuing redevelopment opportunities within its portfolio to increase overall value and certain development opportunities for long-term investment. The Company has an active capital recycling program and during the second quarter of 2014, the Company implemented a plan to accelerate the disposition of certain non-strategic U.S. properties. This plan effectively shortened the Company’s anticipated hold period for these properties and as such caused the Company to recognize impairment charges on certain consolidated operating properties. If the Company accepts sales prices for these assets that are less than their net carrying values, the Company would be required to take additional impairment charges. In order to execute the Company’s strategy, the Company intends to continue to strengthen its balance sheet by pursuing deleveraging efforts over time, providing it the necessary flexibility to invest opportunistically and selectively, primarily focusing on neighborhood and community shopping centers in the U.S. The Company also has an institutional management business with domestic and foreign institutional partners for the purpose of investing in neighborhood and community shopping centers. In an effort to further its simplification strategy, the Company is actively pursuing opportunities to reduce its institutional management business through partner buy-outs, property acquisitions from institutional joint ventures and/or third party property sales.

 

The following highlights the Company’s significant transactions, events and results that occurred during the year ended December 31, 2014:

 

Portfolio Information:

 

●

Net income available to common shareholders increased by $187.7 million to $365.7 million for the year ended December 31, 2014, as compared to $178.0 million for the corresponding period in 2013.

●

Funds from operations (“FFO”) increased from $1.35 per diluted share for the year ended December 31, 2013, to $1.45 per diluted share for the year ended December 31, 2014 (see additional disclosure on FFO beginning on page 31).

●

FFO as adjusted increased from $1.33 per diluted share for the year ended December 31, 2013, to $1.40 per diluted share for the year ended December 31, 2014 (see additional disclosure on FFO beginning on page 31).

●

Combined Same Property net operating income (“NOI”) increased 2.5% for the year ended December 31, 2014, as compared to the corresponding period in 2013; excluding the negative impact of foreign currency fluctuation, this increase would have been 3.3% (see additional disclosure on NOI beginning on page 32).

●

Occupancy rose from 94.6% at December 31, 2013, to 95.6% at December 31, 2014 in the Combined Shopping Center Portfolio.

●

Occupancy rose from 94.9% at December 31, 2013, to 95.7% at December 31, 2014 for the U.S. combined shopping center portfolio.

●

Generated U.S. cash-basis leasing spreads of 8.8%; new leases increased 19.5% and renewals/options increased 6.3%.

●

Executed 2,124 leases, renewals and options totaling approximately 9.8 million square feet in the Combined Shopping Center Portfolio.

  

 

Acquisition Activity (see Footnotes 3 and 7 of the Notes to Consolidated Financial Statements included in this Form 10-K):

 

●

Acquired 63 shopping center properties and five outparcels comprising an aggregate 7.1 million square feet of GLA, for an aggregate purchase price of $1.4 billion including the assumption of $702.6 million of non-recourse mortgage debt encumbering 53 of the properties. The Company acquired 34 of these properties for an aggregate sales price of $1.0 billion from joint ventures in which the Company held noncontrolling ownership interests. The Company evaluated these transactions pursuant to the Financial Accounting Statements Boards (“FASB”) Consolidation guidance. As such, the Company recognized an aggregate gain of $107.2 million from the fair value adjustment associated with its original ownership due to a change in control.

●

Additionally, during the year ended December 31, 2014, the Company acquired $53.5 million in land related to three development projects which will be held as long-term investments. The Company anticipates completing these projects over the next four years.

 

U.S. Disposition Activity (see Footnotes 4, 5, and 6 of the Notes to Consolidated Financial Statements included in this Form 10-K):

 

●

During 2014, the Company disposed of 63 operating properties, in separate transactions, for an aggregate sales price of $535.8 million. These transactions, which are included in Discontinued Operations, resulted in an aggregate gain of $166.6 million, before income taxes of $8.7 million, and aggregate impairment charges of $60.4 million, before income tax benefits of $2.0 million.

 

Latin America Disposition Activity (see Footnotes 4, 5, 6 and 7 of Notes to the Consolidated Financial Statements included in this Form 10-K):

 

●

During 2014, the Company sold 27 consolidated properties in its Latin American portfolio for an aggregate sales price of $297.7 million. These transactions, which are included in Discontinued Operations, resulted in an aggregate gain of $33.4 million, after income taxes of $3.3 million and aggregate impairment charges of $24.7 million.

●

During 2014, joint ventures in which the Company held noncontrolling interests sold 14 operating properties located throughout Mexico for $324.5 million. These transactions resulted in an aggregate net gain to the Company of $40.0 million, after income tax, and aggregate impairment charges of $0.9 million.

●

These transactions contributed to the Company’s substantial liquidation of its investment in Mexico and Peru during the fourth quarter, which resulted in the release of a cumulative foreign currency translation loss of $134.4 million, after noncontrolling interests of $5.8 million. This loss has been recorded on the Company’s Consolidated Statements of Income as follows: (i) $92.9 million is included in Impairment/loss on operating properties, net of tax, within Discontinued operations (ii) $47.3 million is included in Equity in income of joint ventures, net and (iii) $5.8 million is included in Net income attributable to noncontrolling interest.

 

Capital Activity (for additional details see Liquidity and Capital Resources below):

 

●

During March 2014, the Company established a new $1.75 billion unsecured revolving credit facility (the “Credit Facility”) with a group of banks, which is scheduled to expire in March 2018, with two additional six-month options to extend the maturity date, at the Company’s discretion, to March 2019. The Credit Facility, which can be increased to $2.25 billion through an accordion feature, accrues interest at a rate of LIBOR plus 92.5 basis points on drawn funds.

●

During 2014, the Company issued $500.0 million of 7-year Senior Unsecured Notes at an interest rate of 3.20% payable semi-annually in arrears which are scheduled to mature in May 2021. Net proceeds were used for general corporate purposes including reducing borrowings under the Credit Facility and repayment of maturing debt.

●

Also during 2014, the Company repaid (i) its $100.0 million 5.95% senior unsecured notes, which matured in June 2014 and (ii) its remaining $194.6 million 4.82% senior unsecured notes, which also matured in June 2014.

●

The Company repaid its 1.0 billion Mexican peso (“MXN”) (USD $76.3 million) term loan which was scheduled to mature in March 2018, and bore interest at a rate equal to TIIE (Equilibrium Interbank Interest Rate) plus 1.35% during September 2014.

 

Critical Accounting Policies

 

The Consolidated Financial Statements of the Company include the accounts of the Company, its wholly-owned subsidiaries and all entities in which the Company has a controlling interest, including where the Company has been determined to be a primary beneficiary of a variable interest entity in accordance with the consolidation guidance of the FASB Accounting Standards Codification (“ASC”). The Company applies these provisions to each of its joint venture investments to determine whether the cost, equity or consolidation method of accounting is appropriate. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Consolidated Financial Statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported amounts of assets and liabilities. These estimates are based on, but not limited to, historical results, industry standards and current economic conditions, giving due consideration to materiality. The most significant assumptions and estimates relate to revenue recognition and the recoverability of trade accounts receivable, depreciable lives, valuation of real estate and intangible assets and liabilities, valuation of joint venture investments and other investments, realizability of deferred tax assets and uncertain tax positions. Application of these assumptions requires the exercise of judgment as to future uncertainties, and, as a result, actual results could materially differ from these estimates.

 

 

The Company is required to make subjective assessments as to whether there are impairments in the value of its real estate properties, investments in joint ventures, marketable securities and other investments. The Company’s reported net earnings are directly affected by management’s estimate of impairments and/or valuation allowances.

 

Revenue Recognition and Accounts Receivable

 

Base rental revenues from rental property are recognized on a straight-line basis over the terms of the related leases. Certain of these leases also provide for percentage rents based upon the level of sales achieved by the lessee. These percentage rents are recorded once the required sales level is achieved. Operating expense reimbursements are recognized as earned. Rental income may also include payments received in connection with lease termination agreements. In addition, leases typically provide for reimbursement to the Company of common area maintenance, real estate taxes and other operating expenses.

 

The Company makes estimates of the uncollectability of its accounts receivable related to base rents, straight-line rent, expense reimbursements and other revenues. The Company analyzes accounts receivable and historical bad debt levels, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy are analyzed and estimates are made in connection with the expected recovery of pre-petition and post-petition claims. The Company’s reported net earnings are directly affected by management’s estimate of the collectability of accounts receivable.

 

Real Estate

 

The Company’s investments in real estate properties are stated at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations and replacements, which improve and extend the life of the asset, are capitalized.

 

Upon acquisition of real estate operating properties, the Company estimates the fair value of acquired tangible assets (consisting of land, building, building improvements and tenant improvements) and identified intangible assets and liabilities (consisting of above and below-market leases, in-place leases and tenant relationships, where applicable), assumed debt and redeemable units issued at the date of acquisition, based on evaluation of information and estimates available at that date. Fair value is determined based on an exit price approach, which contemplates the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If, up to one year from the acquisition date, information regarding fair value of the assets acquired and liabilities assumed is received and estimates are refined, appropriate adjustments, if material, are made to the purchase price allocation on a retrospective basis. The Company expenses transaction costs associated with business combinations in the period incurred.

 

Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets, as follows:

 

Buildings and building improvements		15 to 50 years
Fixtures, leasehold and tenant improvements		Terms of leases or useful
(including certain identified intangible assets)		lives, whichever is shorter

 

The Company is required to make subjective assessments as to the useful lives of its properties for purposes of determining the amount of depreciation to reflect on an annual basis with respect to those properties. These assessments have a direct impact on the Company’s net earnings.

 

On a continuous basis, management assesses whether there are any indicators, including property operating performance, changes in anticipated holding period and general market conditions, that the value of the real estate properties (including any related amortizable intangible assets or liabilities) may be impaired. A property value is considered impaired only if management’s estimate of current and projected operating cash flows (undiscounted and unleveraged) of the property over its anticipated hold period is less than the net carrying value of the property. Such cash flow projections consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. To the extent impairment has occurred, the carrying value of the property would be adjusted to reflect the estimated fair value of the property.

 

When a real estate asset is identified by management as held-for-sale, the Company ceases depreciation of the asset and estimates the sales price of such asset net of selling costs. If, in management’s opinion, the net sales price of the asset is less than the net book value of such asset, an adjustment to the carrying value would be recorded to reflect the estimated fair value of the property.

 

Investments in Unconsolidated Joint Ventures

 

The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting as the Company exercises significant influence, but does not control, these entities. These investments are recorded initially at cost and are subsequently adjusted for cash contributions and distributions. Earnings for each investment are recognized in accordance with each respective investment agreement and, where applicable, are based upon an allocation of the investment’s net assets at book value as if the investment was hypothetically liquidated at the end of each reporting period.

 

 

The Company’s joint ventures and other real estate investments primarily consist of co-investments with institutional and other joint venture partners in neighborhood and community shopping center properties, consistent with its core business. These joint ventures typically obtain non-recourse third-party financing on their property investments, thus contractually limiting the Company’s exposure to losses to the amount of its equity investment, and, due to the lender’s exposure to losses, a lender typically will require a minimum level of equity in order to mitigate its risk. The Company’s exposure to losses associated with its unconsolidated joint ventures is primarily limited to its carrying value in these investments. The Company, on a limited selective basis, obtained unsecured financing for certain joint ventures. These unsecured financings are guaranteed by the Company with guarantees from the joint venture partners for their proportionate amounts of any guaranty payment the Company is obligated to make.

 

On a continuous basis, management assesses whether there are any indicators, including property operating performance and general market conditions, that the value of the Company’s investments in unconsolidated joint ventures may be impaired. An investment’s value is impaired only if management’s estimate of the fair value of the investment is less than the carrying value of the investment and such difference is deemed to be other-than-temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the estimated fair value of the investment.

 

The Company’s estimated fair values are based upon a discounted cash flow model for each joint venture that includes all estimated cash inflows and outflows over a specified holding period and, where applicable, any estimated debt premiums. Capitalization rates, discount rates and credit spreads utilized in these models are based upon rates that the Company believes to be within a reasonable range of current market rates.

 

Realizability of Deferred Tax Assets and Uncertain Tax Positions

 

The Company is subject to federal, state and local income taxes on the income from its activities relating to its TRS activities and subject to local taxes on certain non-U.S. investments. The Company accounts for income taxes using the asset and liability method, which requires that deferred tax assets and liabilities be recognized based on future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted.

 

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required, if based on the evidence available, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized.

 

The Company considers all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed. Information about an enterprise's current financial position and its results of operations for the current and preceding years is supplemented by all currently available information about future years. The Company must use judgment in considering the relative impact of negative and positive evidence.

 

The Company believes, when evaluating deferred tax assets within its taxable REIT subsidiaries, special consideration should be given to the unique relationship between the Company as a REIT and its taxable REIT subsidiaries. This relationship exists primarily to protect the REIT’s qualification under the Code by permitting, within certain limits, the REIT to engage in certain business activities in which the REIT cannot directly participate. As such, the REIT controls which and when investments are held in, or distributed or sold from, its taxable REIT subsidiaries. This relationship distinguishes a REIT and taxable REIT subsidiary from an enterprise that operates as a single, consolidated corporate taxpayer.

 

The Company primarily utilizes a twenty year projection of pre-tax book income and taxable income as positive evidence to overcome any negative evidence. Although items of income and expense utilized in the projection are objectively verifiable there is also significant judgment used in determining the duration and timing of events that would impact the projection. Based upon the Company’s analysis of positive and negative evidence the Company will make a determination of the need for a valuation allowance against its deferred tax assets. If future income projections do not occur as forecasted, the Company will reevaluate the need for a valuation allowance. In addition, the Company can employ additional strategies to realize its deferred tax assets, including transferring a greater portion of its property management business to the TRS, sale of certain built-in gain assets, and reducing intercompany debt.

 

The Company recognizes and measures benefits for uncertain tax positions, which requires significant judgment from management. Although the Company believes it has adequately reserved for any uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in the Company’s income tax expense in the period in which a change is made, which could have a material impact on operating results (see Footnote 21 of the Notes to Consolidated Financial Statements included in this Form 10-K).

 

 

Results of Operations

 

Comparison 2014 to 2013

		2014				2013				Increase				% change
		(amounts in millions)
Revenues from rental properties (1)		$	958.9			$	825.2			$	133.7				16.2%
Rental property expenses: (2)
Rent		$	14.3			$	13.3			$	1.0				7.5%
Real estate taxes			124.7				108.7				16.0				14.7%
Operating and maintenance			119.7				99.4				20.3				20.4%
		$	258.7			$	221.4			$	37.3				16.8%
Depreciation and amortization (3)		$	258.1			$	224.7			$	33.4				14.9%

 

(1)

Revenues from rental property increased primarily from the combined effect of (i) the acquisition of operating properties during 2014 and 2013, providing incremental revenues for the year ended December 31, 2014, of $110.1 million, as compared to the corresponding period in 2013 and (ii) an overall increase in the consolidated shopping center portfolio occupancy to 95.7% at December 31, 2014, as compared to 94.0% at December 31, 2013, the completion of certain redevelopment projects, tenant buyouts and net growth in the current portfolio, providing incremental revenues for the year ended December 31, 2014, of $23.6 million, as compared to the corresponding period in 2013.

 

(2)

Rental property expenses include (i) rent expense relating to ground lease payments for which the Company is the lessee, (ii) real estate tax expense for consolidated properties for which the Company has a controlling ownership interest and (iii) operating and maintenance expense, which 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. Rental property expenses increased for the year ended December 31, 2014, as compared to the corresponding period in 2013, primarily due to acquisitions of properties during 2014 and 2013, resulting in (i) an increase in real estate taxes of $16.0 million, (ii) an increase in repairs and maintenance costs of $6.8 million, (iii) an increase in snow removal costs of $3.4 million, (iv) an increase in property services of $3.7 million, (v) an increase in utilities expense of $1.8 million and (vi) an increase in insurance expense of $3.9 million, due to an increase in insurance claims.

 

(3)	Depreciation and amortization increased for the year ended December 31, 2014, as compared to the corresponding period in 2013, primarily due to operating property acquisitions during 2014 and 2013.

 

General and administrative costs include employee-related expenses (salaries, bonuses, equity awards, benefits, severance costs and payroll taxes), professional fees, office rent, travel expense, and other company-specific expenses. General and administrative expenses decreased $5.3 million to $122.2 million for the year ended December 31, 2014, as compared to $127.5 million for the corresponding period in 2013. This decrease is primarily due to a decrease in professional fees of $3.4 million in connection with the Company’s response to a subpoena from the Enforcement Division of the SEC and a parallel investigation by the DOJ, in connection with the investigation of Wal-Mart Stores, Inc. with respect to the Foreign Corrupt Practices Act (see Item 3) and a decrease in personnel related costs of $1.8 million for the year ended December 31, 2014, as compared to the corresponding period in 2013.

 

During the year ended December 31, 2014, the Company recognized impairment charges of $217.8 million, of which $178.0 million, before income tax benefits of $1.7 million, is included in discontinued operations. These impairment charges consist of (i) $118.4 million related to adjustments to property carrying values, (ii) the release of a cumulative foreign currency translation loss of $92.9 million relating to the substantial liquidation of the Company’s investment in Mexico, (iii) $4.8 million related to a cost method investment and (iv) $1.6 million related to a preferred equity investment. The adjustments to property carrying values were recognized in connection with the Company’s efforts to market certain properties and management’s assessment as to the likelihood and timing of such potential transactions and the anticipated hold period for such properties. During the second quarter ended June 30, 2014, the Company implemented a plan to accelerate its disposition of certain properties. This plan effectively shortened the Company’s anticipated hold period for these properties and as a result the Company recognized impairment charges on various operating properties. Certain of the calculations to determine fair value utilized unobservable inputs and as such are classified as Level 3 of the fair value hierarchy. For additional disclosure, see Footnote 15 of the Notes to Consolidated Financial Statements included in this Form 10-K.

 

During the year ended December 31, 2013, the Company recognized impairment charges of $190.2 million of which $158.0 million, before noncontrolling interests and income tax, is included in discontinued operations. These impairment charges consist of (i) $175.6 million related to adjustments to property carrying values, (ii) $10.4 million related to a cost method investment, (iii) $1.0 million related to certain joint venture investments and (iv) $3.2 million related to a preferred equity investment. Certain of the calculations to determine fair value utilized unobservable inputs and as such are classified as Level 3 of the fair value hierarchy. For additional disclosure, see Footnote 15 of the Notes to Consolidated Financial Statements included in this Form 10-K.

 

 

Interest, dividends and other investment income decreased $15.8 million to $1.0 million for the year ended December 31, 2014, as compared to $16.8 million for the corresponding period in 2013. This decrease is primarily due to (i) a decrease in realized gains of $12.1 million resulting from the sale of certain marketable securities during the year ended December 31, 2013, (ii) a decrease in excess cash distributions related to cost method investments of $2.8 million for the year ended December 31, 2013 and (iii) a decrease in dividend income of $1.2 million resulting from the sale of certain marketable securities during the year ended December 31, 2013.

 

Other (expense)/income, net changed $9.7 million to an expense of $8.5 million for the year ended December 31, 2014, as compared to income of $1.2 million for the corresponding period in 2013. This change is primarily due to a decrease in gains from land sales of $8.0 million and an increase in acquisition related costs of $1.4 million related to an increase in acquisitions during 2014 as compared to 2013.

 

Interest expense decreased $8.4 million to $203.8 million for the year ended December 31, 2014, as compared to $212.2 million for the year ended December 31, 2013.  This decrease is primarily related to lower implied interest rates and reduced borrowing levels during 2014, as compared to 2013.

 

Provision for income taxes, net decreased $10.3 million to $22.4 million for the year ended December 31, 2014, as compared to $32.7 million for the corresponding period in 2013. This change is primarily due to (i) a decrease in foreign tax expense of $9.5 million primarily relating to the sale of certain unconsolidated properties during 2013 within the Company’s Latin American portfolio which were subject to foreign taxes at a consolidated reporting entity level offset by an increase in other foreign uncertain tax positions of $5.5 million, (ii) a decrease in tax provision of $9.1 million relating to a change in control gain recognized during the year ended December 31, 2013, (iii) a decrease in tax provision of $3.4 million related to gains on land sales during 2013, and (iv) a decrease in tax provision of $2.4 million related to gains on sale of certain marketable securities during 2013, partially offset by (v) a partial release of the deferred tax valuation allowance of $8.7 million during the year ended December 31, 2013 related to the Company’s FNC Realty Corp. (“FNC”) portfolio based on the Company’s estimated future earnings of FNC and (vi) a decrease in tax benefit of $4.3 million relating to equity losses recognized in connection with the Company’s Albertson’s investment.

 

Equity in income of joint ventures, net decreased $49.1 million to $159.6 million for the year ended December 31, 2014, as compared to $208.7 million for the corresponding period in 2013. This decrease is primarily the result of (i) the release of a cumulative foreign currency translation loss of $47.3 million relating to the substantial liquidation of the Company’s investment in Mexico, (ii) a decrease in gains of $21.7 million resulting from the sale of properties within various joint venture investments and interests in joint ventures primarily located in Latin America during 2013, (iii) a decrease in equity in income of $1.4 million due to the sale of the InTown portfolio in 2013 and (iv) a decrease of equity in income of $7.5 million related to the sale of various joint ventures within the Company’s Latin American portfolio during 2014, partially offset by (v) an increase in equity in income of $15.6 million primarily resulting from a cash distribution received in excess of the Company’s carrying basis during 2014, and (vi) a decrease in impairment charges of $8.2 million relating to various joint venture properties primarily located in Mexico taken during the year ended 2013, as compared to 2014.

 

During 2014, the Company acquired 34 properties from joint ventures in which the Company had noncontrolling interests. The Company recorded an aggregate net gain on change in control of interests of $107.2 million related to the fair value adjustment associated with its original ownership of these properties.

 

During 2013, the Company acquired four properties from joint ventures in which the Company had noncontrolling interests.  The Company recorded an aggregate net gain on change in control of interests of $21.7 million related to the fair value adjustment associated with its original ownership of these properties.

 

Equity in income from other real estate investments, net increased $6.9 million to $38.0 million for the year ended December 31, 2014, as compared to $31.1 million for the corresponding period in 2013. This increase is primarily due to an increase of $10.7 million in equity in income, resulting from lower net losses in the Albertson’s joint venture during the year ended December 31, 2014, as compared to the corresponding period in 2013, partially offset by a decrease of $5.8 million in earnings from the Company’s Preferred Equity Program primarily resulting from the sale of the Company’s interests in certain preferred equity investments during 2014 and 2013.

 

During 2014, the Company disposed of 90 operating properties, in separate transactions, for an aggregate sales price of $833.5 million, including 27 operating properties in Latin America. These transactions, which are included in Discontinued Operations on the Company’s Consolidated Statements of Income, resulted in (i) an aggregate gain of $203.3 million, before income taxes of $12.0 million (ii) the release of a cumulative foreign currency translation loss of $92.9 million relating to the substantial liquidation of the Company’s investment in Mexico and (iii) aggregate impairment charges of $85.1 million before income tax benefits of $1.7 million.

 

During 2013, the Company disposed of 36 operating properties and three out-parcels in separate transactions, for an aggregate sales price of $279.5 million. These transactions, which are included in Discontinued operations in the Company’s Consolidated Statements of Income, resulted in an aggregate gain of $25.4 million and impairment charges of $61.9 million, before income tax.

 

 

Additionally, during 2013, the Company sold eight properties in its Latin American portfolio for an aggregate sales price of $115.4 million. These transactions, which are included in Discontinued operations in the Company’s Consolidated Statements of Income, resulted in an aggregate gain of $23.3 million, before income taxes, and aggregate impairment charges of $26.9 million (including the release of a cumulative foreign currency translation loss of $7.8 million associated with the sale of the Company’s interest in two properties within Brazil, which represents a full liquidation of the Company’s investment in Brazil), before income taxes.

 

Net income attributable to the Company increased $187.7 million to $424.0 million for the year ended December 31, 2014, as compared to $236.3 million for the corresponding period in 2013. On a diluted per share basis, net income attributable to the Company was $0.89 for 2014, as compared to net income of $0.43 for 2013. These changes are primarily attributable to (i) incremental earnings due to the acquisition of operating properties during 2014 and 2013 and increased profitability from the Company’s operating properties, (ii) an increase in gains on sale of operating properties, (iii) an increase in gain on change in control of interests, (iv) a decrease in tax provision relating to decreased gains on sales from joint venture properties during 2014, and (v) an increase in equity in income of other real estate investments, net, partially offset by, (vi), a decrease in equity in income of joint ventures, net, including the release of a cumulative foreign currency translation loss relating to the substantial liquidation of the Company’s Mexican Portfolio (vii) a decrease in interest, dividends and other investment income, (viii) a decrease in other income/(expense), net and (ix) an increase in impairment charges, including the release of a cumulative foreign currency translation loss relating to the substantial liquidation of the Company’s Mexican Portfolio, during the year ended December 31, 2014, as compared to the corresponding period in 2013.

 

Results of Operations

 

Comparison 2013 to 2012

		2013				2012				Increase				% change
		(amounts in millions)
Revenues from rental properties (1)		$	825.2			$	755.9			$	69.3				9.2	%
Rental property expenses: (2)
Rent		$	13.3			$	12.7			$	0.6				4.7	%
Real estate taxes			108.7				101.8				6.9				6.8	%
Operating and maintenance			99.4				92.4				7.0				7.6	%
		$	221.4			$	206.9			$	14.5				7.0	%
Depreciation and amortization (3)		$	224.7			$	214.8			$	9.9				4.6	%

 

(1)

Revenues from rental properties increased primarily from the combined effect of (i) the acquisition of operating properties during 2013 and 2012, providing incremental revenues for the year ended December 31, 2013 of $46.5 million, as compared to the corresponding period in 2012, (ii) an overall increase in the consolidated shopping center portfolio occupancy to 94.0% at December 31, 2013, as compared to 93.4% at December 31, 2012 and the completion of certain development and redevelopment projects, tenant buyouts and net growth in the current portfolio, providing incremental revenues for the year ended December 31, 2013, of $22.7 million, as compared to the corresponding period in 2012, and (iii) an increase in revenues relating to the Company’s Latin America portfolio of $0.1 million for the year ended December 31, 2013, as compared to the corresponding period in 2012.

 

(2)

Rental property expenses include (i) rent expense relating to ground lease payments for which the Company is the lessee; (ii) real estate tax expense for consolidated properties for which the Company has a controlling ownership interest and (iii) operating and maintenance expense, which 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. Rental property expenses increased for the year ended December 31, 2013, as compared to the corresponding period in 2012, primarily due to acquisitions of properties during 2013 and 2012 resulting in (i) an increase in real estate taxes of $6.9 million, (ii) an increase in repairs and maintenance costs of $5.0 million, (iii) an increase in snow removal costs of $2.1 million, (iv) an increase in property services of $1.6 million and (v) an increase in utilities expense of $1.3 million, partially offset by (vi) a decrease in insurance expense of $3.0 million due to a decrease in insurance claims.

 

(3)

Depreciation and amortization increased for the year ended December 31, 2013, as compared to the corresponding period in 2012, primarily due to (i) operating property acquisitions during 2013 and 2012 and (ii) expensing of unamortized tenant costs related to tenant vacancies prior to their lease expiration, partially offset by (iii) certain operating property dispositions during 2013 and 2012.

 

General and administrative costs include employee-related expenses (salaries, bonuses, equity awards, benefits, severance costs and payroll taxes), professional fees, office rent, travel expense, and other company-specific expenses. General and administrative expenses increased $4.0 million to $127.5 million for the year ended December 31, 2013, as compared to $123.5 million for the corresponding period in 2012. This increase is primarily a result of an increase in professional fees related to the Company’s response to a subpoena from the Enforcement Division of the SEC and a parallel investigation by the DOJ, in connection with the investigation of Wal-Mart Stores, Inc. with respect to the Foreign Corrupt Practices Act (see Item 3).

 

During the year ended December 31, 2013, the Company recognized impairment charges of $190.2 million of which $158.0 million, before noncontrolling interests and income tax, is included in Discontinued operations. These impairment charges consist of (i) $175.6 million related to adjustments to property carrying values, (ii) $10.4 million related to a cost method investment, (iii) $1.0 million related to certain joint venture investments and (iv) $3.2 million related to a preferred equity investment. Certain of the calculations to determine fair value utilized unobservable inputs and as such are classified as Level 3 of the fair value hierarchy. For additional disclosure, see Footnote 15 of the Notes to Consolidated Financial Statements included in this Form 10-K.

 

 

During the year ended December 31, 2012, the Company recognized impairment charges related to adjustments to property carrying values of $59.6 million, of which $49.3 million, before income taxes and noncontrolling interests, is included in Discontinued operations. The Company’s estimated fair values for these assets were primarily based upon (i) estimated sales prices from third party offers relating to property carrying values and joint venture investments. The Company does not have access to the unobservable inputs used by the third parties to determine these estimated fair values.  The discounted cash flows model includes all estimated cash inflows and outflows over a specified holding period. These cash flows were comprised of unobservable inputs which include forecasted revenues and expenses based upon market conditions and expectations for growth. Based on these inputs the Company determined that its valuation of these investments was classified within Level 3 of the fair value hierarchy. The property carrying value impairment charges resulted from the Company’s efforts to market certain assets and management’s assessment as to the likelihood and timing of such potential transactions.

 

Mortgage financing income decreased $3.2 million to $4.3 million for the year ended December 31, 2013, as compared to $7.5 million for the corresponding period in 2012. This decrease is primarily due to a decrease in interest income resulting from the repayment of certain mortgage receivables during 2013 and 2012.

 

Interest, dividends and other investment income increased $14.8 million to $16.8 million for the year ended December 31, 2013, as compared to $2.0 million for the corresponding period in 2012. This increase is primarily due to an increase in realized gains of $12.1 million resulting from the sale of certain marketable securities during 2013 and an increase in cash distributions received in excess of basis related to cost method investments of $2.2 million for the year ended December 31, 2013, as compared to the corresponding period in 2012.

 

Other (expense)/income, net changed $8.1 million to $1.2 million of income for the year ended December 31, 2013, as compared to $6.9 million of an expense for the year ended December 31, 2012. This change is primarily due to (i) increases in gains on land sales of $8.2 million for year ended December 31, 2013, as compared to the corresponding period in 2012 and (ii) an increase in gains on foreign currency of $1.5 million relating to changes in foreign currency exchange rates, partially offset by (iii) an increase in other corporate expenses of $1.9 million for the year ended December 31, 2013, as compared to the corresponding period in 2012.

 

Interest expense decreased $11.5 million to $212.2 million for the year ended December 31, 2013, as compared to $223.7 million for the year ended December 31, 2012.  This decrease is primarily related to lower interest rates on borrowings during 2013, as compared to 2012.

 

Provision for income taxes, net increased $17.1 million to $32.7 million for the year ended December 31, 2013, as compared to $15.6 million for the corresponding period in 2012. This increase is primarily due to (i) an increase in foreign taxes of $23.6 million primarily relating to the sale of the Company’s joint venture interest in a portfolio of 84 operating properties in Mexico, (ii) an increase in income tax expense of $9.1 million relating to a change in control gain resulting from the purchase of a partner’s noncontrolling joint venture interest, (iii) a tax provision of $6.0 million resulting from incremental earnings due to increased profitability from properties within the Company’s taxable REIT subsidiaries and (iv) a tax provision of $2.4 million related to gains on sale of certain marketable securities, partially offset by (v) a partial release of the deferred tax valuation allowance of $8.7 million related to FNC based on the Company’s estimated future earnings of FNC, (vi) an increase in income tax benefit of $7.9 million related to impairments taken during 2013, as compared to the 2012, and (vii) a decrease in tax provision of $9.4 million relating to a decrease in equity in income recognized in connection with the Albertson’s investment.

 

Equity in income of joint ventures, net increased $95.8 million to $208.7 million for the year ended December 31, 2013, as compared to $112.9 million for the corresponding period in 2012. This increase is primarily the result of (i) an increase in gains of $120.7 million resulting from the sale of properties within various joint venture investments, primarily located in Mexico during 2013, as compared to 2012, (ii) an increase in equity in income from three joint ventures of $4.0 million due to the Company’s increase in ownership percentage and (iii) incremental earnings due to increased profitability from properties within the Company’s joint venture program, partially offset by (iv) an increase in impairment charges of $18.4 million recognized against certain joint venture investment properties primarily located in Mexico, resulting from pending property sales, taken during 2013, as compared to 2012, (v) the recognition of $7.5 million in income on the sale of certain air rights at a property within one of the Company’s joint venture investments in Canada during 2012 and (vi) a decrease in equity in income of $2.6 million from the Company’s InTown Suites investment during 2013, as compared to 2012, resulting from the sale of this investment in 2013.

 

During June 2013, the Company sold its unconsolidated investment in the InTown portfolio for a sales price of $735.0 million which included the assignment of $609.2 million in debt. This transaction resulted in a deferred gain to the Company of $21.7 million. The Company maintains its guarantee on a portion of the debt ($139.7 million as of December 31, 2013) assumed by the buyer. The guarantee is collateralized by the buyer’s ownership interest in the portfolio. The Company is entitled to a guarantee fee, for the initial term of the loan, which is scheduled to mature in December 2015. The guarantee fee is calculated based upon the difference between LIBOR plus 1.15% and 5.0% per annum multiplied by the outstanding amount of the loan. Additionally, the Company has entered into a commitment to provide financing up to the outstanding amount of the guaranteed portion of the loan for five years past the date of maturity. This commitment can be in the form of extensions with the current lender, a new lender or financing directly from the Company to the buyer. Due to this continued involvement, the Company deferred its gain until such time that the guarantee and commitment expire. On February 24, 2015, the outstanding debt balance of $139.7 million was fully repaid and as such, the Company was relieved of its related commitments and guarantee.

 

 

During 2013, the Company acquired four properties from joint ventures in which the Company had noncontrolling interests.  The Company recorded an aggregate net gain on change in control of interests of $21.7 million related to the fair value adjustment associated with its original ownership of these properties. During 2012, the Company acquired four properties from joint ventures in which the Company had noncontrolling interests.  The Company recorded an aggregate gain on change in control of interests of $15.6 million related to the fair value adjustment associated with its original ownership.

 

Equity in income from other real estate investments, net decreased $22.3 million to $31.1 million for the year ended December 31, 2013, as compared to $53.4 million for the corresponding period in 2012. This decrease is primarily due to a decrease of $23.5 million in equity in income from the Albertson’s joint venture primarily due to start-up costs associated with the purchase of additional Albertson’s stores from SuperValu Inc. during 2013, as compared to 2012.

 

During 2013, the Company disposed of 36 operating properties and three out-parcels in separate transactions, for an aggregate sales price of $279.5 million. These transactions, which are included in Discontinued operations in the Company’s Consolidated Statements of Income, resulted in an aggregate gain of $25.4 million and impairment charges of $61.9 million, before income taxes.

 

Additionally, during 2013, the Company sold eight properties in its Latin American portfolio for an aggregate sales price of $115.4 million. These transactions, which are included in Discontinued operations in the Company’s Consolidated Statements of Income, resulted in an aggregate gain of $23.3 million, before income taxes, and aggregate impairment charges of $26.9 million (including the release of a cumulative foreign currency translation loss of $7.8 million associated with the sale of the Company’s interest in two properties within Brazil, which represents a full liquidation of the Company’s investment in Brazil), before income taxes and noncontrolling interests.

 

During 2012, the Company disposed of 62 operating properties and two outparcels, in separate transactions, for an aggregate sales price of $418.9 million. These transactions resulted in an aggregate gain of $85.9 million and impairment charges of $22.5 million, before income taxes, which is included in Discontinued operations in the Company’s Consolidated Statements of Income.

 

During 2012, the Company sold a previously consolidated operating property to a newly formed unconsolidated joint venture in which the Company has a 20% noncontrolling interest for a sales price of $55.5 million. This transaction resulted in a pre-tax gain of $10.0 million, of which the Company deferred $2.0 million due to its continued involvement. This gain has been recorded as Gain on sale of operating properties, net of tax in the Company’s Consolidated Statements of Income.

 

Net income attributable to the Company decreased $29.8 million to $236.3 million for the year ended December 31, 2013, as compared to $266.1 million for the corresponding period in 2012. On a diluted per share basis, net income attributable to the Company was $0.43 for 2013, as compared to net income of $0.42 for 2012. These changes are primarily attributable to (i) additional incremental earnings due to increased profitability from the Company’s operating properties and the acquisition of operating properties during 2013 and 2012, (ii) an increase in equity in income of joint ventures, net primarily due to gains on sales of operating properties sold within various joint venture portfolios during 2013 and (iii) an increase in gains on sale of marketable securities during 2013, partially offset by (iv) an increase in impairment charges recognized during the year ended December 31, 2013, as compared to the corresponding period in 2012 and (v) a decrease in gains on sale of operating properties. The 2012 diluted per share results were decreased by a reduction in net income available to common shareholders of $21.7 million resulting from the deduction of original issuance costs associated with the redemption of the Company’s 6.65% Class F Cumulative Redeemable Preferred Stock and 7.75% Class G Cumulative Redeemable Preferred Stock.

 

Liquidity and Capital Resources

 

The Company’s capital resources include accessing the public debt and equity capital markets, mortgage and construction loan financing, borrowings under term loans and immediate access to an unsecured revolving credit facility with bank commitments of $1.75 billion.

 

The Company’s cash flow activities are summarized as follows (in millions):

 

		Year Ended December 31,
		2014				2013				2012
Net cash flow provided by operating activities		$	629.3			$	570.0			$	479.1
Net cash flow provided by/(used for) investing activities		$	126.7			$	72.2			$	(51.0	)
Net cash flow used for financing activities		$	(717.5	)		$	(635.4	)		$	(399.1	)

  

 

Operating Activities

 

The Company anticipates that cash on hand, borrowings under its revolving credit facility, issuance of equity and public debt, as well as other debt and equity alternatives, will provide the necessary capital required by the Company.  Net cash flow provided by operating activities for the year ended December 31, 2014, was primarily attributable to (i) cash flow from the diverse portfolio of rental properties, (ii) the acquisition of operating properties during 2014 and 2013, (iii) new leasing, expansion and re-tenanting of core portfolio properties and (iv) operational distributions from the Company’s joint venture programs.

 

Cash flow provided by operating activities for the year ended December 31, 2014, was $629.3 million, as compared to $570.0 million for the comparable period in 2013. The change of $59.3 million is primarily attributable to (i) higher operational income from operating properties including properties acquired during 2014 and 2013 and (ii) changes in other operating assets and liabilities due to timing of payments, partially offset by (iii) changes in accounts payable and accrued expenses due to timing of payments and (iv) decreased operational distributions from joint ventures and other real estate investments.

 

Investing Activities

 

Cash flows provided by investing activities for the year ended December 31, 2014, was $126.7 million, as compared to cash flows provided by investing activities of $72.2 million for the comparable period in 2013. This increase of $54.5 million resulted primarily from (i) an increase in proceeds from the sale of operating properties of $226.9 million, (ii) a decrease in investments and advances to real estate joint ventures of $202.7 million, (iii) a decrease in investment in marketable securities of $22.1 million, (iv) a decrease in investment in other investments of $21.4 million and (v) a decrease in investment in other real estate investments of $19.2 million, partially offset by, (vi) a decrease in reimbursements of investments and advances to real estate joint ventures of $217.6 million, (vii) an increase in acquisitions of real estate under development of $65.7 million, (viii) an increase in investment/collection, net in mortgage loans receivable of $59.4 million, (ix) an increase in acquisition of operating real estate of $30.5 million, (x) a decrease in proceeds from sale/repayments of marketable securities of $22.6 million, (xi) an increase in improvements to operating real estate of $24.5 million, (xii) a decrease in reimbursements of investments and advances to other real estate investments of $13.8 million, and (xiii) a decrease in reimbursements of other investments of $9.2 million.

 

Acquisitions of Operating Real Estate

 

During the years ended December 31, 2014 and 2013, the Company expended $384.8 million, towards the acquisition of operating real estate properties. The Company’s strategy is to continue to transform its operating portfolio through its capital recycling program by acquiring what the Company believes are high quality U.S. retail properties and disposing of lesser quality assets. The Company anticipates acquiring approximately $1.1 billion to $1.3 billion of operating properties during 2015. The Company intends to fund these acquisitions with proceeds from property dispositions, cash flow from operating activities, assumption of mortgage debt, if applicable, increased borrowings through the Company's term loan and availability under the Company’s revolving line of credit.

 

Improvements to Operating Real Estate

 

During the years ended December 31, 2014 and 2013, the Company expended $131.8 million and $107.3 million, respectively, towards improvements to operating real estate. These amounts are made up of the following (in thousands):

 

		Year Ended December 31,
		2014				2013
Redevelopment/renovations		$	86,639			$	39,531
Tenant improvements/tenant allowances			40,060				57,473
Other			5,096				10,273
Total		$	131,795			$	107,277

 

Additionally, during the years ended December 31, 2014 and 2013, the Company capitalized interest of $2.4 million and $1.3 million, respectively, and capitalized payroll of $3.4 million and $1.6 million, respectively, in connection with the Company’s improvements to its operating real estate.

 

During the years ended December 31, 2014 and 2013, the Company capitalized personnel costs of $15.5 million and $15.2 million, respectively, to deferred leasing costs and $0.6 million and $1.3 million, respectively, to software development costs.

 

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 has identified three categories of redevelopment, (i) large scale redevelopment, which involves building new square footage, (ii) value creation redevelopment, which includes the subdivision of large anchor spaces into multiple tenant layouts, and (iii) creation of out-parcels and pads which are located in the front of the shopping center properties. The Company anticipates its capital commitment toward these redevelopment projects and re-tenanting efforts during 2015 will be approximately $200 million to $250 million. The funding of these capital requirements will be provided by cash flow from operating activities and availability under the Company’s revolving line of credit.

 

 

Ground-Up Development

 

The Company is engaged in certain ground-up development projects, which will be held as long-term investments by the Company. As of December 31, 2014, the Company had in progress a total of four ground-up development projects located in the U.S. The Company anticipates its capital commitment toward these development projects during 2015 will be approximately $50 million to $100 million. The funding of these capital requirements will be provided by cash flow from operating activities and availability under the Company’s revolving line of credit.

 

Investments and Advances to Real Estate Joint Ventures

 

During the year ended December 31, 2014, the Company expended $93.8 million for investments and advances to real estate joint ventures, primarily related to the repayment of mortgage debt and received $222.6 million from reimbursements of investments and advances to real estate joint ventures, including refinancing of debt and sales of properties (see Footnote 7 of the Notes to Consolidated Financial Statements included in this Form 10-K).

 

Financing Activities

 

Cash flow used for financing activities for the year ended December 31, 2014, was $717.5 million, as compared to $635.4 million for the comparable period in 2013. This change of $82.1 million resulted primarily from (i) a decrease in proceeds from unsecured term loan/notes of $121.6 million, (ii) an increase in principal payments of $70.7 million, (iii) an increase in repayments/borrowings, net under the Company’s unsecured revolving credit facility of $36.6 million, (iv) an increase in dividends paid of $27.5 million, (v) a decrease in proceeds from mortgage loan financing of $20.3 million and (vi) a decrease in proceeds from issuance of stock of $6.3 million, partially offset by, (vii) a decrease in repayments under unsecured term loan/notes of $175.9 million and (viii) a decrease in redemption of noncontrolling interests of $28.8 million.

 

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.  The Company has noticed a continuing trend that although pricing remains dependent on specific deal terms, generally spreads for non-recourse mortgage financing have been stable.  The unsecured debt markets are functioning well and credit spreads are at manageable levels. The Company continues to assess 2015 and beyond to ensure the Company is prepared if credit market conditions weaken.

 

Debt maturities for 2015 consist of:  $483.1 million of consolidated debt; $525.7 million of unconsolidated joint venture debt; and $58.7 million of preferred equity debt, assuming the utilization of extension options where available.  The 2015 consolidated debt maturities are anticipated to be extended, refinanced or repaid with operating cash flows and borrowings from the Company’s credit facility (which at December 31, 2014, had $1.65 billion available). The 2015 unconsolidated joint venture and preferred equity debt maturities are anticipated to be extended or repaid through debt refinancing 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 its investment-grade 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 $9.8 billion.  Proceeds from public capital market activities have been used for the purposes of, among other things, repaying indebtedness, acquiring interests in neighborhood and community shopping centers, funding ground-up development projects, expanding and improving properties in the portfolio and other investments.

 

During March 2014, the Company established a new $1.75 billion unsecured revolving credit facility (the “Credit Facility”) with a group of banks, which is scheduled to expire in March 2018 with two additional six-month options to extend the maturity date, at the Company’s discretion, to March 2019. This Credit Facility replaced the Company’s then existing $1.75 billion unsecured revolving credit facility which was scheduled to mature in October 2015. The Credit Facility, which can be increased to $2.25 billion through an accordion feature, accrues interest at a rate of LIBOR plus 92.5 basis points on drawn funds. In addition, the Credit Facility includes a $500 million sub-limit which provides the Company the opportunity to borrow in alternative currencies including Canadian dollars, British Pounds Sterling, Japanese Yen or Euros. Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to covenants requiring the maintenance of (i) maximum leverage ratios on both unsecured and secured debt and (ii) minimum interest and fixed coverage ratios. As of December 31, 2014, the Credit Facility had a balance of $100.0 million outstanding and $1.0 million appropriated for letters of credit.

 

 

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 12/31/14
Total Indebtedness to Gross Asset Value (“GAV”)		<60%		35%
Total Priority Indebtedness to GAV		<35%		10%
Unencumbered Asset Net Operating Income to Total Unsecured Interest Expense		>1.75x		4.26x
Fixed Charge Total Adjusted EBITDA to Total Debt Service		>1.50x		3.34x

 

For a full description of the Credit Facility’s covenants refer to the Credit Agreement dated as of March 17, 2014, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 20, 2014.

 

The Company had a 1.0 billion Mexican peso (“MXN”) term loan which was scheduled to mature in March 2018 and bore interest at a rate equal to TIIE (Equilibrium Interbank Interest Rate) plus 1.35%. During September 2014, the Company repaid the MXN 1.0 billion (USD $76.3 million) term loan.

 

As of December 31, 2014, the Company had a $400.0 million unsecured term loan with a consortium of banks, which accrued interest at LIBOR plus 105 basis points (1.21% as of December 31, 2014).  This term loan was scheduled to mature in April 2014, with three additional one-year options to extend the maturity date, at the Company’s discretion, to April 17, 2017. During January 2014, the Company exercised its option to extend the maturity date to April 17, 2015. During January 2015, the Company entered into a new $650.0 million unsecured term loan credit facility which is scheduled to mature in January 2017, with three one-year extension options at the Company’s discretion to January 2020, and accrues interest at a spread (currently 0.95%) to LIBOR or at the Company’s option at a base rate as defined per the agreement. The proceeds from the new $650 million term loan were used to repay the $400.0 million term loan and general corporate purposes. Pursuant to the terms of the term loan credit agreement, 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.  The term loan covenants are similar to the Credit Facility covenants described above.

 

During April 2012, 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 for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisitions, development and redevelopment costs and (ii) managing the Company’s debt maturities. (See Footnote 12 of the Notes to Consolidated Financial Statements included in this Form 10-K.)

 

The Company’s supplemental indenture governing its medium term notes (“MTN”) and senior notes contains the following covenants, all of which the Company is compliant with:

 

Covenant		Must Be		As of 12/31/14
Consolidated Indebtedness to Total Assets		<60%		39%
Consolidated Secured Indebtedness to Total Assets		<40%		12%
Consolidated Income Available for Debt Service to Maximum Annual Service Charge		>1.50x		5.7x
Unencumbered Total Asset Value to Consolidated Unsecured Indebtedness		>1.50x		2.7x

 

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; the Seventh Supplemental Indenture dated as of April 24, 2014; the Indenture dated April 21, 2005; the First Supplemental Indenture dated June 2, 2006; the Second Supplemental Indenture dated August 16, 2006; the Third Supplemental Indenture dated April 13, 2010; the Fourth Supplemental Indenture dated July 22, 2013; the First Supplemental Indenture dated October 31, 2006; and the Fifth Supplemental Indenture dated as of October 31, 2006, as filed with the SEC. See the Exhibits Index for specific filing information.

 

During April 2014, the Company issued $500.0 million of 7-year Senior Unsecured Notes at an interest rate of 3.20% payable semi-annually in arrears which are scheduled to mature in May 2021. The Company used the net proceeds from the offering of $495.4 million, after deducting the underwriting discount and offering expenses, for general corporate purposes including reducing borrowings under the Credit Facility and repayment of maturing debt. In connection with this issuance, the Company entered into a seventh supplemental indenture which, among other things, revised, for all securities created on or after the date of the seventh supplemental indenture, the definition of Unencumbered Total Asset Value, used to determine compliance with certain covenants within the indenture.

 

 

During 2014, the Company repaid (i) its $100.0 million 5.95% senior unsecured notes, which matured in June 2014, and (ii) its remaining $194.6 million 4.82% senior unsecured notes, which also matured in June 2014.

 

Additionally, during 2014, the Company (i) assumed $742.0 million of individual non-recourse mortgage debt relating to the acquisition of 53 operating properties, including an increase of $39.4 million associated with fair value debt adjustments (ii) paid off $328.0 million of mortgage debt that encumbered 21 properties and (iii) obtained $15.7 million of individual non-recourse debt relating to one operating property.

 

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 and construction loans to partially fund the capital needs of its ground-up development projects. As of December 31, 2014, the Company had over 370 unencumbered property interests in its portfolio.

 

In connection with its intention to continue to qualify as a REIT for 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 conservative dividend payout ratio, reserving 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 were $427.9 million in 2014, $400.4 million in 2013 and $382.7 million in 2012.

 

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. On October 28, 2014, the Board of Directors declared a quarterly cash dividend per common share of $0.24 payable to shareholders of record on January 2, 2015, which was paid on January 15, 2015. Additionally, on February 4, 2015, the Company’s Board of Directors declared a quarterly cash dividend of $0.24 per common share payable to shareholders of record on April 6, 2015, which is scheduled to be paid on April 15, 2015.

 

The Company is subject to taxes on its activities in Canada, Mexico, and Chile.  In general, under local country law applicable to the structures the Company has in place and applicable treaties, the repatriation of cash to the Company from its subsidiaries and joint ventures in Canada and Mexico generally are not subject to withholding tax. The Company does not anticipate the need to repatriate foreign funds from Chile to provide for its cash flow needs in the U.S. and, as such, no significant withholding or transaction taxes are expected in the foreseeable future. The Company will be subject to withholding taxes in Chile on the distribution of any proceeds from sale transactions. 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.

 

Contractual Obligations and Other Commitments

 

The Company has debt obligations relating to its revolving credit facility, term loan, MTNs, senior notes and mortgages with maturities ranging from less than one year to 20 years. As of December 31, 2014, the Company’s total debt had a weighted average term to maturity of 3.7 years. In addition, the Company has non-cancelable operating leases pertaining to its shopping center portfolio. As of December 31, 2014, the Company has 49 shopping center properties that are subject to long-term ground leases where a third party owns and has leased the underlying land to the Company to construct and/or operate a shopping center. In addition, the Company has 9 non-cancelable operating leases pertaining to its retail store lease portfolio. The following table summarizes the Company’s debt maturities (excluding extension options and fair market value of debt adjustments aggregating $40.1 million) and obligations under non-cancelable operating leases as of December 31, 2014 (in millions):

 

		Payments due by period
Contractual Obligations:		2015				2016				2017				2018				2019				Thereafter				Total
Long-Term Debt-Principal (1) (3)		$	907.2			$	663.4			$	748.5			$	602.2			$	310.0			$	1,348.9			$	4,580.2
Long-Term Debt-Interest (2)		$	196.9			$	158.6			$	120.4			$	83.1			$	74.0			$	123.2			$	756.2
Operating Leases:
Ground Leases		$	13.2			$	12.5			$	11.6			$	10.3			$	10.4			$	164.8			$	222.8
Retail Store Leases		$	2.1			$	2.1			$	1.6			$	1.1			$	0.4			$	0.4			$	7.7

 

(1)  Maturities utilized do not reflect extension options, which range from one to five years.

(2)  For loans which have interest at floating rates, future interest expense was calculated using the rate as of December 31, 2014.

(3)  During January 2015, the Company repaid its $400.0 million term loan which was scheduled to mature in 2015 with a new $650.0 million unsecured term loan that is scheduled to mature in 2017, with three one-year extension options, and bears interest at a rate equal to LIBOR plus 0.95%.

 

 

The Company has accrued $4.6 million of non-current uncertain tax benefits and related interest under the provisions of the authoritative guidance that addresses accounting for income taxes, which are included in Other liabilities on the Company’s Consolidated Balance Sheets at December 31, 2014. These amounts are not included in the table above because a reasonably reliable estimate regarding the timing of settlements with the relevant tax authorities, if any, cannot be made.

 

The Company has $250.0 million of medium term notes, $100.0 million of unsecured notes and $134.7 million of secured debt scheduled to mature in 2015. The Company anticipates satisfying these maturities with a combination of operating cash flows, its unsecured revolving credit facility, exercise of extension options, where available, and new debt issuances.

 

The Company has issued letters of credit in connection with completion and repayment guarantees for loans encumbering certain of the Company’s redevelopment projects and guarantee of payment related to the Company’s insurance program. As of December 31, 2014, these letters of credit aggregate $24.9 million.

 

On a select basis, the Company has provided guarantees on interest bearing debt held within real estate joint ventures. The Company is often provided with a back-stop guarantee from its partners. The Company had the following outstanding guarantees as of December 31, 2014 (amounts in millions):

 

Name of Joint Venture

Amount of Guarantee

Interest rate

Maturity, with extensions

Terms

Type of debt

InTown Suites Management, Inc.

$

139.7

LIBOR plus 1.15%

2015

(1)

Unsecured credit facility

Victoriaville

$

2.1

3.92%

2020

Jointly and severally with partner

Promissory note

Anthem K-12, LP

$

42.2

Various (2)

Various (2)

Jointly and severally with partner

Promissory note

 

(1)

During June 2013, the Company sold its unconsolidated investment in the InTown portfolio. The Company continues to maintain its guarantee of a portion of the debt assumed by the buyer ($139.7 million as of December 31, 2014). The guarantee is collateralized by the buyer’s ownership interest in the portfolio. Additionally, the Company has a commitment to provide financing up to the outstanding amount of the guaranteed portion of the loan for five years past the date of maturity. This commitment can be in the form of extensions with the current lender or a new lender or financing directly from the Company to the buyer.  On February 24, 2015, the outstanding debt balance of $139.7 million was fully repaid and as such, the Company was relieved of its related commitments and guarantee.

(2)	As of December 31, 2014, the interest rates range from 3.62% to 4.97% and maturity dates with extensions range from 2015 to 2022.

 

In connection with the construction of its development/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 December 31, 2014, the Company had $22.0 million in performance and surety bonds outstanding.

 

Off-Balance Sheet Arrangements

 

Unconsolidated Real Estate Joint Ventures

 

The Company has investments in various unconsolidated real estate joint ventures with varying structures. These joint ventures primarily operate shopping center properties or are established for development projects. Such arrangements are generally with third-party institutional investors, local developers and individuals. The properties owned by the joint ventures are primarily financed with individual non-recourse mortgage loans, however, the Company, on a selective basis, has obtained unsecured financing for certain joint ventures. These unsecured financings are guaranteed by the Company with guarantees from the joint venture partners for their proportionate amounts of any guaranty payment the Company is obligated to make (see guarantee table above). Non-recourse mortgage debt is generally defined as debt whereby the lenders’ sole recourse with respect to borrower defaults is limited to the value of the property collateralized by the mortgage. The lender generally does not have recourse against any other assets owned by the borrower or any of the constituent members of the borrower, except for certain specified exceptions listed in the particular loan documents (see Footnote 7 of the Notes to Consolidated Financial Statements included in this Form 10-K). These investments include the following joint ventures:

 

Venture		Kimco Ownership Interest				Number of Properties				Total GLA (in thousands)				Non- Recourse Mortgage Payable (in millions)				Number of Encumbered Properties				Average Interest Rate				Weighted Average Term (months)
KimPru (a)			15.0	%			60				10,573			$	920.4				39				5.53	%			23.0
RioCan Venture (b)			50.0	%			45				9,307			$	642.6				28				4.29	%			39.9
KIR (c)			48.6	%			54				11,519			$	866.4				46				5.04	%			61.9
BIG Shopping Centers (d)			50.1	%			6				1,029			$	144.6				6				5.52	%			22.0
Kimstone (e)(g)			33.3	%			39				5,595			$	704.4				38				4.45	%			28.7
CPP (f)			55.0	%			7				2,425			$	112.1				2				5.05	%			10.1

 

	(a)	Represents the Company’s joint ventures with Prudential Real Estate Investors.
	(b)	Represents the Company’s joint ventures with RioCan Real Estate Investment Trust.
	(c)	Represents the Company’s joint ventures with certain institutional investors.
	(d)	Represents the Company’s remaining joint venture with BIG Shopping Centers (TLV:BIG), an Israeli public company (see Footnote 7 of the Notes to Consolidated Financial Statements included in this Form 10-K).
	(e)	Represents the Company’s joint ventures with Blackstone.
	(f)	Represents the Company’s joint ventures with The Canadian Pension Plan Investment Board (CPPIB).
	(g)	On February 2, 2015, the Company purchased the remaining 66.7% interest in the 39-property Kimstone portfolio for a gross purchase price of $1.4 billion, including the assumption of $638.0 million in mortgage debt (see Footnote 26 of the Notes to Consolidated Financial Statements included in this Form 10-K).

 

 

The Company has various other unconsolidated real estate joint ventures with varying structures. As of December 31, 2014, these other unconsolidated joint ventures had individual non-recourse mortgage loans aggregating $1.2 billion. The aggregate debt as of December 31, 2014, of all of the Company’s unconsolidated real estate joint ventures is $4.6 billion, of which the Company’s proportionate share of this debt is $1.8 billion. As of December 31, 2014, these loans had scheduled maturities ranging from one month to 19 years and bear interest at rates ranging from 1.92% to 8.39%. Approximately $525.7 million of the aggregate outstanding loan balance matures in 2015, of which the Company’s proportionate share is $206.0 million. These maturing loans are anticipated to be repaid with operating cash flows, debt refinancing and partner capital contributions, as deemed appropriate (see Footnote 7 of the Notes to Consolidated Financial Statements included in this Form 10-K).

 

Other Real Estate Investments

 

The Company previously provided capital to owners and developers of real estate properties through its Preferred Equity program. The Company accounts for its preferred equity investments under the equity method of accounting. As of December 31, 2014, the Company’s net investment under the Preferred Equity Program was $229.1 million relating to 443 properties, including 385 net leased properties. As of December 31, 2014, these preferred equity investment properties had individual non-recourse mortgage loans aggregating $717.0 million. These loans had scheduled maturities ranging from three months to 19 years and bear interest at rates ranging from 3.4% to 10.47%. Due to the Company’s preferred position in these investments, the Company’s share of each investment is subject to fluctuation and is dependent upon property cash flows. The Company’s maximum exposure to losses associated with its preferred equity investments is primarily limited to its invested capital.

 

At December 31, 2014, the Company had a 90% equity participation interest in an existing leveraged lease of 11 properties, which is reported as a net investment in leveraged lease in accordance with the FASB’s Lease guidance. The properties are leased under a long-term bond-type net lease whose primary term expires in 2016, with the lessee having certain renewal option rights. These 11 properties were encumbered by third-party non-recourse debt of $11.2 million that is scheduled to fully amortize during the primary term of the lease from a portion of the periodic net rents receivable under the net lease. As an equity participant in the leveraged lease, the Company has no recourse obligation for principal or interest payments on the debt, which is collateralized by a first mortgage lien on the properties and collateral assignment of the lease. Accordingly, this debt has been offset against the related net rental receivable under the lease.

 

Funds From Operations

 

Funds From Operations (“FFO”) is a supplemental non-GAAP measure utilized to evaluate the operating performance of real estate companies. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income/(loss) attributable to common shareholders computed in accordance with generally accepted accounting principles (“GAAP”), excluding (i) gains or losses from sales of operating real estate assets and (ii) extraordinary items, plus (iii) depreciation and amortization of operating properties and (iv) impairment of depreciable real estate and in substance real estate equity investments and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect funds from operations on the same basis.

 

The Company presents FFO 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 when reporting results. Comparison of our presentation of FFO 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.

 

The Company also presents FFO as adjusted as an additional supplemental measure as it believes it is more reflective of the Company’s core operating performance. The Company believes FFO as adjusted provides investors and analysts an additional measure in comparing the Company’s performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. FFO as adjusted is generally calculated by the Company as FFO excluding certain transactional income and expenses and non-operating impairments which management believes are not reflective of the results within the Company’s operating real estate portfolio.

 

 

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 as a measure of liquidity.  Our method of calculating FFO and FFO as adjusted may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

 

The Company’s reconciliation of net income available to common shareholders to FFO and FFO as adjusted for the three months and years ended December 31, 2014 and 2013 is as follows (in thousands, except per share data):

 

		Three Months Ended December 31,										Year Ended December 31,
		2014					2013					2014					2013
Net income available to common shareholders		$	38,207				$	47,035				$	365,707				$	177,987
Gain on disposition of operating properties, net of tax and noncontrolling interests			(71,152	)				(16,503	)				(189,572	)				(45,330	)
Gain on disposition of joint venture operating  properties and change in control of interests			(56,262	)				(5,530	)				(193,791	)				(113,937	)
Depreciation and amortization - real estate related			70,878					64,511					263,885					250,253
Depreciation and amortization - real estate joint ventures, net of noncontrolling interests			21,113					24,448					92,343					117,743
Impairments of operating properties, net of tax  and noncontrolling interests			153,937		(2)			20,707					257,660					165,825
FFO			156,721					134,668					596,232					552,541
Transactional (income)/charges:
Profit participation from other real estate investments			(13,627	)				(474	)				(16,426	)				(13,650	)
Transactional losses from other real estate investments			-					3,091					3,497					3,091
Loss/(gains) from land sales, net of tax			436					(1,775	)				(2,550	)				(3,448	)
Acquisition costs, net of tax			2,172					2,296					7,033					5,623
Deferred tax asset valuation allowance release			-					-					-					(9,126	)
Severance costs			-					2,225					2,869					2,225
Distributions in excess of Company’s investment  basis			(2,168	)				(167	)				(17,691	)				(2,213	)
Gain on sale of marketable securities			-					(5,339	)				-					(10,668	)
Impairments on other investments, net of tax and  noncontrolling interest			1,621					455					6,494					20,754
Other income, net			(513	)				(180	)				(2,567	)				(1,419	)
Total transactional charges/(income), net			(12,079	)				132					(19,341	)				(8,831	)
FFO as adjusted		$	144,642				$	134,800				$	576,891				$	543,710
Weighted average shares outstanding for FFO calculations:
Basic			409,740					408,139					409,088					407,631
Units			1,531					1,522					1,536					1,523
Dilutive effect of equity awards			3,171					2,414					3,139					2,541
Diluted (1)			414,442		(1)			412,075		(1)			413,763		(1)			411,695		(1)
FFO per common share – basic		$	0.38				$	0.33				$	1.46				$	1.36
FFO per common share – diluted (1)		$	0.38		(1)		$	0.33		(1)		$	1.45		(1)		$	1.35		(1)
FFO as adjusted per common share – basic		$	0.35				$	0.33				$	1.41				$	1.33
FFO as adjusted per common share – diluted (1)		$	0.35		(1)		$	0.33		(1)		$	1.40		(1)		$	1.33		(1)

 

	(1)	Reflects the potential impact if certain units were converted to common stock at the beginning of the period. FFO would be increased by $795 and $641  for the three months ended December 31, 2014 and 2013, and $3,033 and $2,516 for the years ended December 31, 2014 and 2013, respectively.
	(2)	Includes cumulative foreign currency translation loss of $134.3 million due to the substantial liquidation of the Company's Mexican Portfolio.

 

Combined Same Property Net Operating Income

 

Combined Same Property Net Operating Income (“Combined 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 as a measure of liquidity. Combined Same Property NOI is considered by management to be an important performance measure of the Company’s operations and management believes that it is helpful to investors as a measure of the Company’s operating performance because it includes only the net operating income of properties that have been owned for the entire current and prior year reporting periods including those properties under redevelopment and excludes properties under development and pending stabilization. Properties are deemed stabilized at the earlier of (i) reaching 90% leased or (ii) one year following a projects inclusion in operating real estate. As such, Combined 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.

 

 

Combined Same Property NOI is calculated using revenues from rental properties (excluding straight-line rents, lease termination fees, above/below market rents and includes charges for bad debt) less operating and maintenance expense, real estate taxes and rent expense, plus the Company’s proportionate share of Combined Same Property NOI from unconsolidated real estate joint ventures, calculated on the same basis. Our method of calculating Combined Same Property NOI may differ from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

 

The following is a reconciliation of the Company’s Income from continuing operations to Combined Same Property NOI and U.S. Same Property Net Operating Income “U.S. Same Property NOI” (in thousands):

 

		Three Months Ended December 31,								Year Ended December 31,
		2014				2013				2014				2013
Income from continuing operations		$	74,474			$	56,705			$	384,506			$	288,454
Adjustments:
Management and other fee income			(8,764	)			(9,565	)			(35,009	)			(36,317	)
General and administrative expenses			27,675				31,543				122,201				127,470
Impairment charges			11,420				609				39,808				32,247
Depreciation and amortization			72,767				59,571				258,074				224,713
Other income			53,153				39,569				208,208				189,894
Provision for income taxes, net			7,727				6,333				22,438				32,654
Gain on change in control of interests, net			(23,462	)			-				(107,235	)			(21,711	)
Equity in income of other real estate investments, net			(21,638	)			(1,225	)			(38,042	)			(31,136	)
Non same property net operating income			(22,557	)			(12,021	)			(83,755	)			(80,373	)
Non-operational expense from joint ventures, net			61,988				54,227				148,918				171,503
Combined Same Property NOI			232,783				225,746				920,112				897,398
Impact from foreign currency			-				(1,907	)			-				(6,672	)
Combined Same Property NOI, before foreign currency impact			232,783				223,839				920,112				890,726
Canadian Same Property NOI, before foreign currency impact			(23,316	)			(23,060	)			(94,940	)			(92,286	)
U.S. Same Property NOI		$	209,467			$	200,779			$	825,172			$	798,440

 

Combined Same Property NOI, before foreign currency impact increased by $8.9 million or 4.0% for the three months ended December 31, 2014, as compared to the corresponding period in 2013. Combined Same Property NOI increased by $7.0 million or 3.1% for the three months ended December 31, 2014, as compared to the corresponding period in 2013. This increase is primarily the result of (i) an increase of $6.6 million related to lease-up and rent commencements in the portfolio and (ii) an increase of $2.3 million in other property income, partially offset by (iii) the impact from changes in foreign currency exchange rates of $1.9 million.

 

Combined Same Property NOI, before foreign currency impact increased by $29.4 million or 3.3% for the year ended December 31, 2014, as compared to the corresponding period in 2013. Combined Same Property NOI increased by $22.7 million or 2.5% for the year ended December 31, 2014, as compared to the corresponding period in 2013. This increase is primarily the result of (i) an increase of $25.8 million related to lease-up and rent commencements in the portfolio and (ii) an increase of $3.6 million in other property income, partially offset by (iii) the impact from changes in foreign currency exchange rates of $6.7 million.

 

Effects of Inflation

 

Many of the Company's 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 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. Most of the Company's leases require the tenant to pay an allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation.  The Company periodically evaluates its exposure to short-term interest rates and foreign currency exchange rates and will, from time-to-time, enter into interest rate protection agreements and/or foreign currency hedge agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating-rate debt and fluctuations in foreign currency exchange rates.

 

New Accounting Pronouncements

 

See Footnote 1 of the Notes to Consolidated Financial Statements included in this Form 10-K.

 

 

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

 

The Company’s primary market risk exposures are interest rate risk and foreign currency exchange rate risk. The following table presents the Company’s aggregate fixed rate and variable rate domestic and foreign debt obligations outstanding as of December 31, 2014, with corresponding weighted-average interest rates sorted by maturity date. The table does not include extension options where available. Amounts include fair value purchase price allocation adjustments for assumed debt. The information is presented in U.S. dollar equivalents, which is the Company’s reporting currency. The instruments’ actual cash flows are denominated in U.S. dollars, Canadian dollars (CAD), and Chilean Pesos (CLP) as indicated by geographic description ($USD equivalent in millions).

 

		2015				2016				2017				2018				2019				Thereafter				Total				Fair Value
U.S. Dollar Denominated Secured Debt
Fixed Rate		$	134.7			$	357.7			$	469.3			$	35.8			$	-			$	350.0			$	1,347.5			$	1,399.9
Average Interest Rate			5.17	%			6.24	%			5.86	%			4.80	%			-				5.19	%			5.69	%
Variable Rate		$	6.0			$	-			$	1.9			$	36.0			$	-			$	-			$	43.9			$	43.6
Average Interest Rate			0.08	%			-				4.00	%			2.51	%			-				-				2.24	%
Unsecured Debt
Fixed Rate		$	350.0			$	300.0			$	290.9			$	300.0			$	300.0			$	850.0			$	2,390.9			$	2,517.3
Average Interest Rate			5.29	%			5.78	%			5.70	%			4.30	%			6.88	%			3.17	%			4.72	%
Variable Rate		$	400.0			$	-			$	-			$	100.0			$	-			$	-			$	500.0			$	491.7
Average Interest Rate			1.21	%			-				-				1.09	%			-				-				1.19	%
CAD Denominated Unsecured Debt
Fixed Rate		$	-			$	-			$	-			$	129.1			$	-			$	172.2			$	301.3			$	325.4
Average Interest Rate			-				-				-				5.99	%			-				3.86	%			4.77	%
CLP Denominated Secured Debt
Variable Rate		$	-			$	-			$	-			$	-			$	-			$	36.7			$	36.7			$	41.5
Average Interest Rate			-				-				-				-				-				5.68	%			5.68	%

 

Based on the Company’s variable-rate debt balances, interest expense would have increased by $5.8 million in 2014 if short-term interest rates were 1.0% higher.

 

The following table presents the Company’s foreign investments and respective cumulative translation adjustment (“CTA”) as of December 31, 2014. Investment amounts are shown in their respective local currencies and the U.S. dollar equivalents and CTA balances are shown in US dollars:

 

Foreign Investment (in millions)
Country		Local Currency				US Dollars				CTA Gain/(Loss)
Mexican real estate investments (MXN)			708.2			$	48.0			$	-
Canadian real estate investments (CAD)			442.3			$	380.7			$	15.2
Chilean real estate investments (CLP)			32,408			$	53.4			$	(14.9	)

 

The foreign currency exchange risk has been partially mitigated, but not eliminated, through the use of local currency denominated debt.  The Company has not, and does not plan to, enter into any derivative financial instruments for trading or speculative purposes.

 

Currency fluctuations between local currency and the U.S. dollar during the period in which the Company held its investment result in a CTA, which is recorded as a component of Accumulated other comprehensive income (“AOCI”) on the Company’s Consolidated Balance Sheets. The CTA amounts are subject to future changes resulting from ongoing fluctuations in the respective foreign currency exchange rates. Changes in exchange rates are impacted by many factors that cannot be forecasted with reliable accuracy. Any change could have a favorable or unfavorable impact on the Company’s CTA balance. The Company’s aggregate CTA net gain balance at December 31, 2014, is $0.3 million.

 

 

Under U.S. GAAP, the Company is required to release CTA balances into earnings when the Company has substantially liquidated its investment in a foreign entity. During 2013, the Company began selling properties within its Latin American portfolio. During the year ended December 31, 2014, the Company continued selling properties in its Latin American portfolio and as a result substantially liquidated its investments in Mexico and Peru. Due to the substantial liquidation of its investments in Mexico and Peru, the Company recognized a loss from foreign currency translation in the aggregate amount of $134.4 million, after noncontrolling interest of $5.8 million.

 

Item 8.  Financial Statements and Supplementary Data

 

The response to this Item 8 is included in our audited Notes to Consolidated Financial Statements, which are contained in Part IV Item 15 of this Form 10-K.

 

Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A.  Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

 

Changes in Internal Control Over Financial Reporting

 

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter ended December 31, 2014, to which this report relates, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control - Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2014.

 

The effectiveness of our internal control over financial reporting as of December 31, 2014, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

 

Item 9B. Other Information

 

None.

PART III

 

Item 10.  Directors, Executive Officers and Corporate Governance

 

The information required by this item is incorporated by reference to “Proposal 1—Election of Directors,” “Corporate Governance,” “Committees of the Board of Directors” and “Other Matters—Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement.

 

We have adopted a Code of Business Conduct and Ethics that applies to all employees (the “Code of Ethics”). The Code of Ethics is available at the Investors/Governance/Governance Documents section of our website at www.kimcorealty.com. A copy of the Code of Ethics is available in print, free of charge, to stockholders upon request to us at the address set forth in Item 1 of this Annual Report on Form 10-K under the section “Business - Background.” We intend to satisfy the disclosure requirements under the Securities and Exchange Act of 1934, as amended, regarding an amendment to or waiver from a provision of our Code of Ethics by posting such information on our web site.

 

  

Item 11.  Executive Compensation

 

The information required by this item is incorporated by reference to “Compensation Discussion and Analysis,” “Executive Compensation Committee Report,” “Compensation Tables” and “Compensation of Directors” in our Proxy Statement.

 

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The information required by this item is incorporated by reference to “Security Ownership of Certain Beneficial Owners and Management” and “Compensation Tables” in our Proxy Statement.

 

Item 13.  Certain Relationships and Related Transactions, and Director Independence

 

The information required by this item is incorporated by reference to “Certain Relationships and Related Transactions” and “Corporate Governance” in our Proxy Statement.

 

Item 14.  Principal Accounting Fees and Services

 

The information required by this item is incorporated by reference to “Independent Registered Public Accountants” in our Proxy Statement.

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules

 

			Form10-K Report Page
(a)   1.	Financial Statements –  The following consolidated financial information is included as a separate section of this annual report on Form 10-K.
	Report of Independent Registered Public Accounting Firm		42
	Consolidated Financial Statements
	Consolidated Balance Sheets as of December 31, 2014 and 2013		43
	Consolidated Statements of Income for the years ended December 31, 2014, 2013 and 2012		44
	Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012		45
	Consolidated Statements of Changes in Equity for the years ended December 31, 2014, 2013 and 2012		46
	Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012		47
	Notes to Consolidated Financial Statements		48
2	. Financial Statement Schedules -
	Schedule II -	Valuation and Qualifying Accounts	96
	Schedule III -	Real Estate and Accumulated Depreciation	97
	Schedule IV -	Mortgage Loans on Real Estate	99
	All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule.
3.	Exhibits -
	The exhibits listed on the accompanying Index to Exhibits are filed as part of this report.		37

 

 

INDEX TO EXHIBITS

 

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Date of Filing	Exhibit Number	Filed Herewith	Page Number
3.1(a)	Articles of Restatement of Kimco Realty Corporation, dated January 14, 2011	10-K	1-10899	02/28/11	3.1(a)
3.1(b)	Amendment to Articles of Restatement of Kimco Realty Corporation dated May 8, 2014	-	-	-	-	X	100
3.1(c)	Articles Supplementary of Kimco Realty Corporation dated November 8, 2010	10-K	1-10899	02/28/11	3.1(b)
3.1(d)	Articles Supplementary of Kimco Realty Corporation, dated March 12, 2012	8-A12B	1-10899	03/13/12	3.2
3.1(e)	Articles Supplementary of Kimco Realty Corporation, dated July 17, 2012	8-A12B	1-10899	07/18/12	3.2
3.1(f)	Articles Supplementary of Kimco Realty Corporation, dated November 30, 2012	8-A12B	1-10899	12/03/12	3.2
3.2	Amended and Restated By-laws of Kimco Realty Corporation, dated February 25, 2009	10-K	1-10899	02/27/09	3.2
4.1	Agreement of Kimco Realty Corporation pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K	S-11	333-42588	09/11/91	4.1
4.2	Form of Certificate of Designations for the Preferred Stock	S-3	333-67552	09/10/93	4(d)
4.3	Indenture dated September 1, 1993, between Kimco Realty Corporation and Bank of New York (as successor to IBJ Schroder Bank and Trust Company)	S-3	333-67552	09/10/93	4(a)
4.4	First Supplemental Indenture, dated August 4, 1994, between Kimco Realty Corporation and Bank of New York (as successor to IBJ Schroder Bank and Trust Company)	10-K	1-10899	03/28/96	4.6
4.5	Second Supplemental Indenture, dated April 7, 1995, between Kimco Realty Corporation and Bank of New York (as successor to IBJ Schroder Bank and Trust Company)	8-K	1-10899	04/07/95	4(a)
4.6	Indenture dated April 21, 2005, between Kimco North Trust III, Kimco Realty Corporation, as guarantor  and BNY Trust Company of Canada, as trustee	8-K	1-10899	04/25/05	4.1
4.7	Third Supplemental Indenture, dated June 2, 2006, between Kimco Realty Corporation, and The Bank of New York, as trustee	8-K	1-10899	06/05/06	4.1
4.8	First Supplemental Indenture, dated October 31, 2006, among Kimco Realty Corporation, Pan Pacific Retail Properties, Inc. and Bank of New York Trust Company, N.A., as trustee	8-K	1-10899	11/03/06	4.2
4.9	Fifth Supplemental Indenture, dated October 31, 2006, among Kimco Realty Corporation, Pan Pacific Retail Properties, Inc. and Bank of New York Trust Company, N.A., as trustee	8-K	1-10899	11/03/06	4.1
4.10	First Supplemental Indenture, dated June 2, 2006, among Kimco North Trust III, Kimco Realty Corporation, as guarantor and BNY Trust Company of Canada, as trustee	10-K	1-10899	02/28/07	4.12
4.11	Second Supplemental Indenture, dated August 16, 2006, among Kimco North Trust III, Kimco Realty Corporation, as guarantor and BNY Trust Company of Canada, as trustee	10-K	1-10899	02/28/07	4.13
4.12	Fourth Supplemental Indenture, dated April 26, 2007, between Kimco Realty Corporation and The Bank of New York, as trustee	8-K	1-10899	04/26/07	1.3
4.13	Fifth Supplemental Indenture, dated September 24, 2009, between Kimco Realty Corporation and The Bank of New York Mellon, as trustee	8-K	1-10899	09/24/09	4.1
4.14	Third Supplemental Indenture, dated April 13, 2010, among Kimco North Trust III, Kimco Realty Corporation, as guarantor and BNY Trust Company of Canada, as trustee	10-Q	1-10899	05/07/10	99.2
4.15	Sixth Supplemental Indenture, dated May 23, 2013, between Kimco Realty Corporation and The Bank of New York Mellon, as trustee	8-K	1-10899	05/23/13	4.1

  

 

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Date of Filing	Exhibit Number	Filed Herewith	Page Number
4.16	Fourth Supplemental Indenture, dated July 22, 2013, among Kimco North Trust III, Kimco Realty Corporation, as guarantor and BNY Trust Company of Canada, as trustee	10-Q	1-10899	08/02/13	99.2
4.17	Seventh Supplemental Indenture, dated April 24, 2014, between Kimco Realty Corporation and The Bank of New York Mellon, as trustee	8-K	1-10899	04/24/14	4.1
10.1	Amended and Restated Stock Option Plan	10-K	1-10899	03/28/95	10.3
10.2	Second Amended and Restated 1998 Equity Participation Plan of Kimco Realty Corporation (restated February 25, 2009)	10-K	1-10899	02/27/09	10.9
10.3	Form of Indemnification Agreement	10-K	1-10899	02/27/09	99.1
10.4	Agency Agreement, dated July 17, 2013, by and among Kimco North Trust III, Kimco Realty Corporation and Scotia Capital Inc., RBC Dominion Securities Inc., CIBC World Markets Inc. and National Bank Financial Inc.	10-Q	1-10899	08/02/13	99.1
10.5	1 billion MXN Credit Agreement, dated March 3, 2008, among KRC Mexico Acquisition, LLC, as borrower, Kimco Realty Corporation, as guarantor and each of the parties named therein	10-K/A	1-10899	08/17/10	10.18
10.6	Kimco Realty Corporation Executive Severance Plan, dated March 15, 2010	8-K	1-10899	03/19/10	10.5
10.7	Kimco Realty Corporation 2010 Equity Participation Plan	8-K	1-10899	03/19/10	10.7
10.8	Form of Performance Share Award Grant Notice and Performance Share Award Agreement	8-K	1-10899	03/19/10	10.8
10.9	Credit Agreement, dated April 17, 2009, among Kimco Realty Corporation and each of the parties named therein	10-K/A	1-10899	08/17/10	10.19
10.10	$1.75 Billion Credit Agreement, dated October 27, 2011, among Kimco Realty Corporation and each of the parties named therein	8-K	1-10899	11/02/11	10.1
10.11	Agreement and General Release between Kimco Realty Corporation and Barbara Pooley, dated January 18, 2012	8-K	1-10899	01/19/12	10.1
10.12	$400 Million Credit Agreement, dated April 17, 2012, among Kimco Realty Corporation as borrower and each of the parties named therein	8-K	1-10899	04/20/12	10.1
10.13	First Amendment to the Kimco Realty Corporation Executive Severance Plan, dated March 20, 2012	10-Q	1-10899	05/10/12	10.3
10.14	$147.5 Million Credit Agreement, dated June 28, 2012, by and among InTown Hospitality Corp. as borrower, Kimco Realty Corporation as guarantor, and each of the parties named therein	8-K	1-10899	07/03/12	10.1
10.15	First Amendment to the Kimco Realty Corporation 2010 Equity Participation Plan	S-8	333-184776	11/06/12	99.1
10.16	First Amendment to Credit Agreement, dated June 3, 2013, among Kimco Realty Corporation, a Maryland corporation, the subsidiaries of Kimco party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent	8-K	1-10899	06/07/13	10.1
10.17	$1.75 Billion Amended and Restated Credit Agreement, dated March 17, 2014, among Kimco Realty Corporation, the subsidiaries of Kimco party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent	8-K	1-10899	03/20/14	10.1
10.18	First Amendment, dated March 17, 2014, to the Credit Agreement, dated April 17, 2012, among Kimco Realty Corporation, the subsidiaries of Kimco party thereto, the lenders party thereto, and PNC Bank, National Association, as administrative agent	8-K	1-10899	03/20/14	10.2
10.19	Underwriting Agreement, dated April 14, 2014, by and among Kimco Realty Corporation and Citigroup Global Markets Inc., UBS Securities LLC and Wells Fargo Securities, LLC	8-K	1-10899	04/15/14	1.1

  

 

12.1	Computation of Ratio of Earnings to Fixed Charges	—		—			—		—		X	120
12.2	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends	—		—			—		—		X	121
21.1	Significant Subsidiaries of the Company	—		—			—		—		X	122
23.1	Consent of PricewaterhouseCoopers LLP	—		—			—		—		X	123
31.1	Certification of the Company’s Chief Executive Officer, David B. Henry, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	—		—			—		—		X	124
31.2	Certification of the Company’s Chief Financial Officer, Glenn G. Cohen, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	—		—			—		—		X	125
32.1	Certification of the Company’s Chief Executive Officer, David B. Henry, and the Company’s Chief Financial Officer, Glenn G. Cohen, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	—		—			—		—		X	126
99.1	Property Chart	—		—			—		—		X	127
101.INS	XBRL Instance Document	—		—			—		—		X
101.SCH	XBRL Taxonomy Extension Schema	—		—			—		—		X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	—		—			—		—		X
101.DEF	XBRL Taxonomy Extension Definition Linkbase	—		—			—		—		X
101.LAB	XBRL Taxonomy Extension Label Linkbase	—		—			—		—		X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	—		—			—		—		X

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

KIMCO REALTY CORPORATION

By:     /s/ David B. Henry

David B. Henry

Chief Executive Officer

 

Dated:     February 27, 2015

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature		Title	Date
/s/ Milton Cooper		Executive Chairman of the Board of Directors	February 27, 2015
Milton Cooper
/s/ David B. Henry		Chief Executive Officer and Vice Chairman of	February 27, 2015
David B. Henry		the Board of Directors
/s/ Richard G. Dooley		Director	February 27, 2015
Richard G. Dooley
/s/ Joe Grills		Director	February 27, 2015
Joe Grills
/s/ Frank Lourenso		Director	February 27, 2015
Frank Lourenso
/s/ Richard Saltzman		Director	February 27, 2015
Richard Saltzman
/s/ Philip Coviello		Director	February 27, 2015
Philip Coviello
/s/ Colombe Nicholas		Director	February 27, 2015
Colombe Nicholas
/s/ Conor Flynn		President -	February 27, 2015
Conor Flynn		Chief Operating Officer
/s/ Glenn G. Cohen		Executive Vice President -	February 27, 2015
Glenn G. Cohen		Chief Financial Officer and
		Treasurer
/s/ Paul Westbrook		Vice President -	February 27, 2015
Paul Westbrook		Chief Accounting Officer

 

 

 

ANNUAL REPORT ON FORM 10-K

 

ITEM 8, ITEM 15 (a) (1) and (2)

 

INDEX TO FINANCIAL STATEMENTS

 

AND

 

FINANCIAL STATEMENT SCHEDULES

 

 

		Form10-K Page
KIMCO REALTY CORPORATION AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm		42
Consolidated Financial Statements and Financial Statement Schedules:
Consolidated Balance Sheets as of December 31, 2014 and 2013		43
Consolidated Statements of Income for the years ended December 31, 2014, 2013 and 2012		44
Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012		45
Consolidated Statements of Changes in Equity for the years ended December 31, 2014, 2013 and 2012		46
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012		47
Notes to Consolidated Financial Statements		48
Financial Statement Schedules:
II.	Valuation and Qualifying Accounts	96
III.	Real Estate and Accumulated Depreciation	97
IV.	Mortgage Loans on Real Estate	99

 

 

 

Report of Independent Registered Public Accounting Firm

 

 

To the Board of Directors and Stockholders
of Kimco Realty Corporation:

 

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Kimco Realty Corporation and its subsidiaries (the "Company") at December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/ PricewaterhouseCoopers LLP

New York, New York

February 27, 2015

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

(in thousands, except share information) 

 

		December 31, 2014				December 31, 2013
Assets:
Real Estate
Rental property
Land		$	2,365,800			$	2,072,099
Building and improvements			7,520,095				6,953,427
			9,885,895				9,025,526
Less: accumulated depreciation and amortization			(1,955,406	)			(1,878,681	)
			7,930,489				7,146,845
Real estate under development			132,331				97,818
Real estate, net			8,062,820				7,244,663
Investments and advances in real estate joint ventures			1,037,218				1,257,010
Other real estate investments			266,157				274,641
Mortgages and other financing receivables			74,013				30,243
Cash and cash equivalents			187,322				148,768
Marketable securities			90,235				62,766
Accounts and notes receivable			172,386				164,326
Deferred charges and prepaid expenses			182,630				175,698
Other assets			212,947				305,515
Total assets		$	10,285,728			$	9,663,630
Liabilities:
Notes payable		$	3,192,167			$	3,186,047
Mortgages payable			1,428,131				1,035,354
Accounts payable and accrued expenses			129,509				124,290
Dividends payable			111,143				104,496
Other liabilities			431,533				357,764
Total liabilities			5,292,483				4,807,951
Redeemable noncontrolling interests			91,480				86,153
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $1.00 par value, authorized 5,959,100 shares 102,000 shares issued and outstanding (in series), Aggregate liquidation preference $975,000			102				102
Common stock, $.01 par value, authorized 750,000,000 shares issued and outstanding 411,819,818 and 409,731,058 shares, respectively			4,118				4,097
Paid-in capital			5,732,021				5,689,258
Cumulative distributions in excess of net income			(1,006,578	)			(996,058	)
Accumulated other comprehensive income			45,122				(64,982	)
Total stockholders' equity			4,774,785				4,632,417
Noncontrolling interests			126,980				137,109
Total equity			4,901,765				4,769,526
Total liabilities and equity		$	10,285,728			$	9,663,630

 

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

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME 

(in thousands, except share information) 

 

		Year Ended December 31,
		2014				2013				2012
Revenues
Revenues from rental properties		$	958,888			$	825,210			$	755,851
Management and other fee income			35,009				36,317				37,522
Total revenues			993,897				861,527				793,373
Operating expenses
Rent			14,250				13,347				12,745
Real estate taxes			124,670				108,746				101,820
Operating and maintenance			119,697				99,405				92,409
General and administrative expenses			122,201				127,470				123,524
Provision for doubtful accounts			4,882				6,133				4,843
Impairment charges			39,808				32,247				10,289
Depreciation and amortization			258,074				224,713				214,827
Total operating expenses			683,582				612,061				560,457
Operating income			310,315				249,466				232,916
Other income/(expense)
Mortgage financing income			3,129				4,304				7,504
Interest, dividends and other investment income			966				16,847				2,022
Other (expense)/income, net			(8,544	)			1,195				(6,949	)
Interest expense			(203,759	)			(212,240	)			(223,736	)
Income from continuing operations before income taxes, equity in income of joint ventures, gain on change in control of interests and equity in income from other real estate investments			102,107				59,572				11,757
Provision for income taxes, net			(22,438	)			(32,654	)			(15,603	)
Equity in income of joint ventures, net			159,560				208,689				112,896
Gain on change in control of interests, net			107,235				21,711				15,555
Equity in income of other real estate investments, net			38,042				31,136				53,397
Income from continuing operations			384,506				288,454				178,002
Discontinued operations
Income from discontinued operating properties, net of tax			36,780				50,610				53,153
Impairment/loss on operating properties, net of tax			(176,315	)			(143,057	)			(38,432	)
Gain on disposition of operating properties, net of tax			190,520				43,914				83,253
Income/(loss) from discontinued operations			50,985				(48,533	)			97,974
Gain on sale of operating properties, net of tax			389				1,432				4,299
Net income			435,880				241,353				280,275
Net income attributable to noncontrolling interests			(11,879	)			(5,072	)			(14,202	)
Net income attributable to the Company			424,001				236,281				266,073
Preferred stock redemption costs			-				-				(21,703	)
Preferred dividends			(58,294	)			(58,294	)			(71,697	)
Net income available to the Company's common shareholders		$	365,707			$	177,987			$	172,673
Per common share:
Income from continuing operations:
-Basic		$	0.77			$	0.53			$	0.19
-Diluted		$	0.77			$	0.53			$	0.19
Net income attributable to the Company:
-Basic		$	0.89			$	0.43			$	0.42
-Diluted		$	0.89			$	0.43			$	0.42
Weighted average shares:
-Basic			409,088				407,631				405,997
-Diluted			411,038				408,614				406,689
Amounts attributable to the Company's common shareholders:
Income from continuing operations		$	316,839			$	218,590			$	79,360
Income/(loss) from discontinued operations			48,868				(40,603	)			93,313
Net income		$	365,707			$	177,987			$	172,673

 

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

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

(in thousands) 

 

		Year Ended December 31,
		2014				2013				2012
Net income		$	435,880			$	241,353			$	280,275
Other comprehensive income:
Change in unrealized gain on marketable securities			20,202				6,773				3,013
Change in unrealized (loss)/ gain on interest rate swaps			(1,404	)			-				450
Change in foreign currency translation adjustment, net			96,895				(4,208	)			43,515
Other comprehensive income			115,693				2,565				46,978
Comprehensive income			551,573				243,918				327,253
Comprehensive income attributable to noncontrolling interests			(17,468	)			(6,436	)			(19,702	)
Comprehensive income attributable to the Company		$	534,105			$	237,482			$	307,551

 

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

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 

For the Years Ended December 31, 2014, 2013 and 2012

(in thousands)

 

		Cumulative Distributions in Excess				Accumulated Other Comprehensive				Preferred Stock								Common Stock								Paid-in				Total Stockholders'				Noncontrolling				Total
		of Net Income				Income				Issued				Amount				Issued				Amount				Capital				Equity				Interests				Equity
Balance, January 1, 2012		$	(702,999	)		$	(107,660	)			954			$	954				406,938			$	4,069			$	5,492,022			$	4,686,386			$	193,757			$	4,880,143
Contributions from noncontrolling interests			-				-				-				-				-				-				-				-				1,384				1,384
Comprehensive income:
Net income attributable to the Company			266,073				-				-				-				-				-				-				266,073				14,202				280,275
Other comprehensive income, net of tax:
Change in unrealized gain on marketable securities			-				3,013				-				-				-				-				-				3,013				-				3,013
Change in unrealized gain on interest rate swaps			-				450				-				-				-				-				-				450				-				450
Change in foreign currency translation adjustment			-				38,015				-				-				-				-				-				38,015				5,500				43,515
Redeemable noncontrolling interests			-				-				-				-				-				-				-				-				(6,337	)			(6,337	)
Dividends ($0.78 per common share; $1.0344 per Class F Depositary Share, $1.5016 per Class G Depositary Share, $1.725 per Class H Depositary Share, $1.1708 per Class I Depositary Share, $0.5958 per Class J Depositary Share, and $0.0938 per Class K Depositary Share, respectively)			(387,082	)			-				-				-				-				-				-				(387,082	)			-				(387,082	)
Distributions to noncontrolling interests			-				-				-				-				-				-				-				-				(15,328	)			(15,328	)
Issuance of common stock			-				-				-				-				1,096				11				18,104				18,115				-				18,115
Issuance of preferred stock			-				-				32				32				-				-				774,125				774,157				-				774,157
Surrender of common stock			-				-				-				-				(111	)			(1	)			(2,072	)			(2,073	)			-				(2,073	)
Repurchase of common stock			-				-				-				-				(1,636	)			(16	)			(30,931	)			(30,947	)			-				(30,947	)
Exercise of common stock options			-				-				-				-				1,495				15				22,576				22,591				-				22,591
Acquisition of noncontrolling interests			-				-				-				-				-				-				(95	)			(95	)			(25,858	)			(25,953	)
Amortization of equity awards			-				-				-				-				-				-				11,557				11,557				-				11,557
Redemption of preferred stock			-				-				(884	)			(884	)			-				-				(634,116	)			(635,000	)			-				(635,000	)
Balance, December 31, 2012			(824,008	)			(66,182	)			102				102				407,782				4,078				5,651,170				4,765,160				167,320				4,932,480
Contributions from noncontrolling interests			-				-				-				-				-				-				-				-				1,026				1,026
Comprehensive income:
Net income attributable to the Company			236,281				-				-				-				-				-				-				236,281				5,072				241,353
Other comprehensive income, net of tax:
Change in unrealized gain on marketable securities			-				6,773				-				-				-				-				-				6,773				-				6,773
Change in foreign currency translation adjustment			-				(5,573	)			-				-				-				-				-				(5,573	)			1,365				(4,208	)
Redeemable noncontrolling interests			-				-				-				-				-				-				-				-				(6,892	)			(6,892	)
Dividends ($0.855 per common share; $1.725 per Class H Depositary Share, $1.5000 per Class I Depositary Share, $1.3750 per Class J Depositary Share, and $1.40625 per Class K Depositary Share, respectively)			(408,331	)			-				-				-				-				-				-				(408,331	)			-				(408,331	)
Distributions to noncontrolling interests			-				-				-				-				-				-				-				-				(10,686	)			(10,686	)
Issuance of common stock			-				-				-				-				560				5				9,208				9,213				-				9,213
Surrender of restricted stock			-				-				-				-				(247	)			(2	)			(3,889	)			(3,891	)			-				(3,891	)
Exercise of common stock options			-				-				-				-				1,636				16				30,193				30,209				-				30,209
Acquisition of noncontrolling interests			-				-				-				-				-				-				(8,894	)			(8,894	)			(20,096	)			(28,990	)
Amortization of equity awards			-				-				-				-				-				-				11,470				11,470				-				11,470
Balance, December 31, 2013			(996,058	)			(64,982	)			102				102				409,731				4,097				5,689,258				4,632,417				137,109				4,769,526
Contributions from noncontrolling interests			-				-				-				-				-				-				-				-				6,259				6,259
Comprehensive income:
Net income attributable to the Company			424,001				-				-				-				-				-				-				424,001				11,879				435,880
Other comprehensive income, net of tax:
Change in unrealized gain on marketable securities			-				20,202				-				-				-				-				-				20,202				-				20,202
Change in unrealized loss on interest rate swaps			-				(1,404	)			-				-				-				-				-				(1,404	)			-				(1,404	)
Change in foreign currency translation adjustment			-				91,306				-				-				-				-				-				91,306				5,589				96,895
Redeemable noncontrolling interests			-				-				-				-				-				-				-				-				(6,335	)			(6,335	)
Dividends ($0.915 per common share; $1.725 per Class H Depositary Share, $1.5000 per Class I Depositary Share, $1.3750 per Class J Depositary Share, and $1.40625 per Class K Depositary Share, respectively)			(434,521	)			-				-				-				-				-				-				(434,521	)			-				(434,521	)
Distributions to noncontrolling interests			-				-				-				-				-				-				-				-				(26,755	)			(26,755	)
Issuance of common stock			-				-				-				-				805				8				14,039				14,047				-				14,047
Surrender of restricted stock			-				-				-				-				(190	)			(2	)			(4,049	)			(4,051	)			-				(4,051	)
Exercise of common stock options			-				-				-				-				1,474				15				23,859				23,874				-				23,874
Acquisition of noncontrolling interests			-				-				-				-				-				-				(294	)			(294	)			(766	)			(1,060	)
Amortization of equity awards			-				-				-				-				-				-				9,208				9,208				-				9,208
Balance, December 31, 2014		$	(1,006,578	)		$	45,122				102			$	102				411,820			$	4,118			$	5,732,021			$	4,774,785			$	126,980			$	4,901,765

 

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

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

		Year Ended December 31,
		2014				2013				2012
Cash flow from operating activities:
Net income		$	435,880			$	241,353			$	280,275
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			273,093				257,855				262,742
Impairment charges			217,858				190,218				59,569
Equity award expense			17,879				18,897				17,907
Gain on sale of operating properties			(203,889	)			(51,529	)			(94,369	)
Equity in income of joint ventures, net			(159,560	)			(208,689	)			(112,896	)
Gain on change in control of interests, net			(107,235	)			(21,711	)			(15,555	)
Equity in income from other real estate investments, net			(38,042	)			(31,136	)			(53,397	)
Distributions from joint ventures and other real estate investments			255,532				258,050				194,110
Change in accounts and notes receivable			(8,060	)			7,213				2,940
Change in accounts payable and accrued expenses			(1,095	)			10,166				(11,281	)
Change in other operating assets and liabilities			(53,018	)			(100,652	)			(50,991	)
Net cash flow provided by operating activities			629,343				570,035				479,054
Cash flow from investing activities:
Acquisition of operating real estate			(384,828	)			(354,287	)			(442,541	)
Improvements to operating real estate			(131,795	)			(107,277	)			(109,928	)
Acquisition of real estate under development			(65,724	)			-				-
Improvements to real estate under development			(418	)			(591	)			(2,487	)
Investment in marketable securities			(11,445	)			(33,588	)			-
Proceeds from sale/repayments of marketable securities			3,780				26,406				156
Investments and advances to real estate joint ventures			(93,845	)			(296,550	)			(219,885	)
Reimbursements of investments and advances to real estate joint ventures			222,590				440,161				187,856
Investment in other real estate investments			(4,338	)			(23,566	)			(5,638	)
Reimbursements of investments and advances to other real estate investments			16,312				30,151				33,720
Investment in mortgage loans receivable			(50,000	)			(11,469	)			(16,021	)
Collection of mortgage loans receivable			8,302				29,192				63,600
Investment in other investments			-				(21,366	)			(924	)
Reimbursements of other investments			-				9,175				11,553
Proceeds from sale of operating properties			612,748				385,844				449,539
Proceeds from sale of development properties			5,366				-				-
Net cash flow provided by/(used for) investing activities			126,705				72,235				(51,000	)
Cash flow from financing activities:
Principal payments on debt, excluding normal amortization of rental property debt			(327,963	)			(256,346	)			(284,815	)
Principal payments on rental property debt			(22,841	)			(23,804	)			(23,130	)
Principal payments on construction loan financings			-				-				(2,177	)
Proceeds from mortgage/construction loan financings			15,700				35,974				14,776
(Repayments)/Proceeds under unsecured revolving credit facility, net			(94,354	)			(57,775	)			8,559
Proceeds from issuance of unsecured term loan/notes			500,000				621,562				400,000
Repayments under unsecured term loan/notes			(370,842	)			(546,717	)			(215,900	)
Financing origination costs			(11,911	)			(8,041	)			(2,138	)
Redemption of noncontrolling interests			(1,284	)			(30,086	)			(42,315	)
Dividends paid			(427,873	)			(400,354	)			(382,722	)
Proceeds from issuance of stock			23,874				30,210				796,748
Redemption of preferred stock			-				-				(635,000	)
Repurchase of common stock			-				-				(30,947	)
Net cash flow used for financing activities			(717,494	)			(635,377	)			(399,061	)
Change in cash and cash equivalents			38,554				6,893				28,993
Cash and cash equivalents, beginning of year			148,768				141,875				112,882
Cash and cash equivalents, end of year		$	187,322			$	148,768			$	141,875
Interest paid during the year (net of capitalized interest of $2,383, $1,263, $1,538, respectively)		$	207,632			$	216,258			$	226,775
Income taxes paid during the year		$	23,292			$	33,838			$	2,122

 

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

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts relating to the number of buildings, square footage, tenant and occupancy data, joint venture debt average interest rates and terms and estimated project costs are unaudited.

 

1.    Summary of Significant Accounting Policies:

 

Business

 

Kimco Realty Corporation and subsidiaries (the "Company" or "Kimco"), affiliates and related real estate joint ventures are engaged principally in the operation of neighborhood and community shopping centers which are anchored generally by discount department stores, supermarkets or drugstores. The Company also provides property management services for shopping centers owned by affiliated entities, various real estate joint ventures and unaffiliated third parties.

 

Additionally, in connection with the Tax Relief Extension Act of 1999 (the "RMA"), which became effective January 1, 2001, the Company is permitted to participate in activities which it was precluded from previously in order to maintain its qualification as a Real Estate Investment Trust ("REIT"), so long as these activities are conducted in entities which elect to be treated as taxable subsidiaries under the Internal Revenue Code, as amended (the "Code"), subject to certain limitations. As such, the Company, through its wholly-owned taxable REIT subsidiaries (“TRS”), has been engaged in various retail real estate related opportunities including retail real estate management and disposition services which primarily focuses on leasing and disposition strategies of retail real estate controlled by both healthy and distressed and/or bankrupt retailers. The Company may consider other investments through its TRS should suitable opportunities arise.

 

The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties, avoiding dependence on any single property and a large tenant base. At December 31, 2014, the Company's single largest neighborhood and community shopping center accounted for only 1.8% of the Company's annualized base rental revenues and only 1.4% of the Company’s total shopping center gross leasable area ("GLA"), including the proportionate share of base rental revenues from properties in which the Company has less than a 100% economic interest. At December 31, 2014, the Company’s five largest tenants were TJX Companies, The Home Depot, Wal-Mart, Kohl’s and Bed Bath & Beyond which represented 3.3%, 2.4%, 1.8%, 1.8% and 1.8%, 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.

 

The principal business of the Company and its consolidated subsidiaries is the ownership, management, development and operation of retail shopping centers, including complementary services that capitalize on the Company’s established retail real estate expertise. The Company evaluates performance on a property specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single reportable segment for disclosure purposes in accordance with accounting principles generally accepted in the United States of America ("GAAP").

 

Principles of Consolidation and Estimates

 

The accompanying Consolidated Financial Statements include the accounts of Kimco Realty Corporation and subsidiaries (the “Company”). The Company’s subsidiaries includes subsidiaries which are wholly-owned and all entities in which the Company has a controlling interest, including where the Company has been determined to be a primary beneficiary of a variable interest entity (“VIE”) or meets certain criteria of a sole general partner or managing member 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.

 

GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period. The most significant assumptions and estimates relate to the valuation of real estate and related intangible assets and liabilities, equity method investments, marketable securities and other investments, including the assessment of impairments, as well as, depreciable lives, revenue recognition, the collectability of trade accounts receivable, realizability of deferred tax assets and the assessment of uncertain tax positions. Application of these assumptions requires the exercise of judgment as to future uncertainties, and, as a result, actual results could differ from these estimates.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

Subsequent Events

 

The Company has evaluated subsequent events and transactions for potential recognition or disclosure in its consolidated financial statements (see Footnote 7, 8, 12, 19 and 26 of the Notes to Consolidated Financial Statements).

 

Real Estate

 

Real estate assets are stated at cost, less accumulated depreciation and amortization. Upon acquisition of real estate operating properties, the Company estimates the fair value of acquired tangible assets (consisting of land, building, building improvements and tenant improvements) and identified intangible assets and liabilities (consisting of above and below-market leases, in-place leases and tenant relationships, where applicable), assumed debt and redeemable units issued at the date of acquisition, based on evaluation of information and estimates available at that date. Fair value is determined based on an exit price approach, which contemplates the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If, up to one year from the acquisition date, information regarding fair value of the assets acquired and liabilities assumed is received and estimates are refined, appropriate adjustments, if material, are made to the purchase price allocation on a retrospective basis. The Company expenses transaction costs associated with business combinations in the period incurred.

 

In allocating the purchase price to identified intangible assets and liabilities of an acquired property, the value of above-market and below-market leases is estimated based on the present value of the difference between the contractual amounts, including fixed rate below-market lease renewal options, to be paid pursuant to the leases and management’s estimate of the market lease rates and other lease provisions (i.e., expense recapture, base rental changes, etc.) measured over a period equal to the estimated remaining term of the lease. The capitalized above-market or below-market intangible is amortized to rental income over the estimated remaining term of the respective leases, which includes the expected renewal option period. Mortgage debt discounts or premiums are amortized into interest expense over the remaining term of the related debt instrument. Unit discounts and premiums are amortized into noncontrolling interest in income, net over the period from the date of issuance to the earliest redemption date of the units.

 

In determining the value of in-place leases, management considers current market conditions and costs to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from vacant to existing occupancy. In estimating carrying costs, management includes real estate taxes, insurance, other operating expenses, estimates of lost rental revenue during the expected lease-up periods and costs to execute similar leases including leasing commissions, legal and other related costs based on current market demand. The value assigned to in-place leases and tenant relationships is amortized over the estimated remaining term of the leases. If a lease were to be terminated prior to its scheduled expiration, all unamortized costs relating to that lease would be written off.

 

Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets, as follows:

 

Buildings and building improvements		15 to 50 years
Fixtures, leasehold and tenant improvements		Terms of leases or useful
(including certain identified intangible assets)		lives, whichever is shorter

 

Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations and replacements, which improve or extend the life of the asset, are capitalized. The useful lives of amortizable intangible assets are evaluated each reporting period with any changes in estimated useful lives being accounted for over the revised remaining useful life.

 

When a real estate asset is identified by management as held-for-sale, the Company ceases depreciation of the asset and estimates the sales price, net of selling costs. If the net sales price of the asset is less than the net book value of the asset, an adjustment to the carrying value would be recorded to reflect the estimated fair value of the property.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

On a continuous basis, management assesses whether there are any indicators, including property operating performance, changes in anticipated holding period and general market conditions, that the value of the real estate properties (including any related amortizable intangible assets or liabilities) may be impaired. A property value is considered impaired only if management’s estimate of current and projected operating cash flows (undiscounted and unleveraged) of the property over its remaining hold period is less than the net carrying value of the property. Such cash flow projections consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. To the extent impairment has occurred, the carrying value of the property would be adjusted to an amount to reflect the estimated fair value of the property.

 

Real Estate Under Development

 

Real estate under development represents the ground-up development of neighborhood and community shopping center projects which the Company plans to hold as long-term investments. These properties are carried at cost. The cost of land and buildings under development includes specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs of personnel directly involved and other costs incurred during the period of development. The Company ceases cost capitalization when the property is held available for occupancy upon substantial completion of tenant improvements, but no later than one year from the completion of major construction activity. If, in management’s opinion, the net sales price of assets held for resale or the current and projected undiscounted cash flows of these assets to be held as long-term investments is less than the net carrying value, the carrying value would be adjusted to an amount that reflects the estimated fair value of the property.

 

Investments in Unconsolidated Joint Ventures

 

The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting as the Company exercises significant influence, but does not control these entities. These investments are recorded initially at cost and subsequently adjusted for cash contributions, distributions and our share of earnings and losses. Earnings for each investment are recognized in accordance with each respective investment agreement and where applicable, based upon an allocation of the investment’s net assets at book value as if the investment was hypothetically liquidated at the end of each reporting period.

 

The Company’s joint ventures and other real estate investments primarily consist of co-investments with institutional and other joint venture partners in neighborhood and community shopping center properties, consistent with its core business. These joint ventures typically obtain non-recourse third-party financing on their property investments, thus contractually limiting the Company’s exposure to losses primarily to the amount of its equity investment; and due to the lender’s exposure to losses, a lender typically will require a minimum level of equity in order to mitigate its risk. The Company, on a limited selective basis, has obtained unsecured financing for certain joint ventures. These unsecured financings are guaranteed by the Company with guarantees from the joint venture partners for their proportionate amounts of any guaranty payment the Company is obligated to make.

 

To recognize the character of distributions from equity investees the Company reviews the nature of the cash distribution to determine the proper character of cash flow distributions as either returns on investment, which would be included in operating activities or returns of investment, which would be included in investing activities.

 

On a continuous basis, management assesses whether there are any indicators, including the underlying investment property operating performance and general market conditions, that the value of the Company’s investments in unconsolidated joint ventures may be impaired. An investment’s value is impaired only if management’s estimate of the fair value of the investment is less than the carrying value of the investment and such difference is deemed to be other-than-temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the estimated fair value of the investment.

 

The Company’s estimated fair values are based upon a discounted cash flow model for each joint venture that includes all estimated cash inflows and outflows over a specified holding period and, where applicable, any estimated debt premiums. Capitalization rates, discount rates and credit spreads utilized in these models are based upon rates that the Company believes to be within a reasonable range of current market rates.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

Other Real Estate Investments

 

Other real estate investments primarily consist of preferred equity investments for which the Company provides capital to owners and developers of real estate. The Company typically accounts for its preferred equity investments on the equity method of accounting, whereby earnings for each investment are recognized in accordance with each respective investment agreement and based upon an allocation of the investment’s net assets at book value as if the investment was hypothetically liquidated at the end of each reporting period.

 

On a continuous basis, management assesses whether there are any indicators, including the underlying investment property operating performance and general market conditions, that the value of the Company’s Other real estate investments may be impaired. An investment’s value is impaired only if management’s estimate of the fair value of the investment is less than the carrying value of the investment and such difference is deemed to be other-than-temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the estimated fair value of the investment.

 

The Company’s estimated fair values are based upon a discounted cash flow model for each investment that includes all estimated cash inflows and outflows over a specified holding period and, where applicable, any estimated debt premiums. Capitalization rates, discount rates and credit spreads utilized in these models are based upon rates that the Company believes to be within a reasonable range of current market rates.

 

Mortgages and Other Financing Receivables

 

Mortgages and other financing receivables consist of loans acquired and loans originated by the Company. Borrowers of these loans are primarily experienced owners, operators or developers of commercial real estate. The Company’s loans are primarily mortgage loans that are collateralized by real estate. Loan receivables are recorded at stated principal amounts, net of any discount or premium or deferred loan origination costs or fees. The related discounts or premiums on mortgages and other loans purchased are amortized or accreted over the life of the related loan receivable. The Company defers certain loan origination and commitment fees, net of certain origination costs and amortizes them as an adjustment of the loan’s yield over the term of the related loan. The Company reviews on a quarterly basis credit quality indicators such as (i) payment status to identify performing versus non-performing loans, (ii) changes affecting the underlying real estate collateral and (iii) national and regional economic factors.

 

Interest income on performing loans is accrued as earned. A non-performing loan is placed on non-accrual status when it is probable that the borrower may be unable to meet interest payments as they become due. Generally, loans 90 days or more past due are placed on non-accrual status unless there is sufficient collateral to assure collectability of principal and interest. Upon the designation of non-accrual status, all unpaid accrued interest is reserved and charged against current income. Interest income on non-performing loans is generally recognized on a cash basis. Recognition of interest income on non-performing loans on an accrual basis is resumed when it is probable that the Company will be able to collect amounts due according to the contractual terms.

 

The Company has determined that it has one portfolio segment, primarily represented by loans collateralized by real estate, whereby it determines, as needed, reserves for loan losses on an asset-specific basis. The reserve for loan losses reflects management's estimate of loan losses as of the balance sheet date. The reserve is increased through loan loss expense and is decreased by charge-offs when losses are confirmed through the receipt of assets such as cash or via ownership control of the underlying collateral in full satisfaction of the loan upon foreclosure or when significant collection efforts have ceased.

 

The Company considers a loan to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due under the existing contractual terms. A reserve allowance is established for an impaired loan when the estimated fair value of the underlying collateral (for collateralized loans) or the present value of expected future cash flows is lower than the carrying value of the loan. An internal valuation is performed generally using the income approach to estimate the fair value of the collateral at the time a loan is determined to be impaired. The model is updated if circumstances indicate a significant change in value has occurred. The Company does not provide for an additional allowance for loan losses based on the grouping of loans as the Company believes the characteristics of the loans are not sufficiently similar to allow an evaluation of these loans as a group for a possible loan loss allowance. As such, all of the Company’s loans are evaluated individually for impairment purposes.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

Cash and Cash Equivalents

 

Cash and cash equivalents (demand deposits in banks, commercial paper and certificates of deposit with original maturities of three months or less). Cash and cash equivalent balances may, at a limited number of banks and financial institutions, exceed insurable amounts. The Company believes it mitigates risk by investing in or through major financial institutions and primarily in funds that are currently U.S. federal government insured. Recoverability of investments is dependent upon the performance of the issuers.

 

Marketable Securities

 

The Company classifies its marketable equity securities as available-for-sale in accordance with the FASB’s Investments-Debt and Equity Securities guidance. These securities are carried at fair market value with unrealized gains and losses reported in stockholders’ equity as a component of Accumulated other comprehensive income ("AOCI"). Gains or losses on securities sold are based on the specific identification method.

 

All debt securities are generally classified as held-to-maturity because the Company has the positive intent and ability to hold the securities to maturity. It is more likely than not that the Company will not be required to sell the debt security before its anticipated recovery and the Company expects to recover the security’s entire amortized cost basis even if the entity does not intend to sell. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. Debt securities which contain conversion features generally are classified as available-for-sale.

 

On a continuous basis, management assesses whether there are any indicators that the value of the Company’s marketable securities may be impaired, which includes reviewing the underlying cause of any decline in value and the estimated recovery period, as well as the severity and duration of the decline. In the Company’s evaluation, the Company considers its ability and intent to hold these investments for a reasonable period of time sufficient for the Company to recover its cost basis. A marketable security is impaired if the fair value of the security is less than the carrying value of the security and such difference is deemed to be other-than-temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the security over the estimated fair value in the security.

 

Deferred Leasing and Financing Costs

 

Costs incurred in obtaining tenant leases and long-term financing, included in deferred charges and prepaid expenses in the accompanying Consolidated Balance Sheets, are amortized on a straight-line basis, which approximates the effective interest method, over the terms of the related leases or debt agreements, as applicable. Such capitalized costs include salaries, lease incentives and related costs of personnel directly involved in successful leasing efforts.

 

Software Development Costs

 

Expenditures for major software purchases and software developed for internal use are capitalized and amortized on a straight-line basis generally over a 3 to 5 year period. The Company’s policy provides for the capitalization of external direct costs of materials and services associated with developing or obtaining internal use computer software. In addition, the Company also capitalizes certain payroll and payroll-related costs for employees who are directly associated with internal use computer software projects. The amount of capitalizable payroll costs with respect to these employees is limited to the time directly spent on such projects. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred.  As of December 31, 2014 and 2013, the Company had unamortized software development costs of $24.0 million and $28.2 million, respectively, which is included in Other assets on the Company’s Consolidated Balance Sheets.  The Company expensed $9.2 million, $7.6 million and $5.5 million in amortization of software development costs during the years ended December 31, 2014, 2013 and 2012, respectively.

 

Revenue Recognition and Accounts Receivable

 

Base rental revenues from rental property are recognized on a straight-line basis over the terms of the related leases. Certain of these leases also provide for percentage rents based upon the level of sales achieved by the lessee.  These percentage rents are recognized once the required sales level is achieved.  Rental income may also include payments received in connection with lease termination agreements.  In addition, leases typically provide for reimbursement to the Company of common area maintenance costs, real estate taxes and other operating expenses.  Operating expense reimbursements are recognized as earned.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

Management and other fee income consists of property management fees, leasing fees, property acquisition and disposition fees, development fees and asset management fees. These fees arise from contractual agreements with third parties or with entities in which the Company has a noncontrolling interest. Management and other fee income, including acquisition and disposition fees, are recognized as earned under the respective agreements. Management and other fee income related to partially owned entities are recognized to the extent attributable to the unaffiliated interest.

 

Gains and losses from the sale of depreciated operating property and ground-up development projects are generally recognized using the full accrual method in accordance with the FASB’s real estate sales guidance, provided that various criteria relating to the terms of sale and subsequent involvement by the Company with the properties are met.

 

Gains and losses on transfers of operating properties result from the sale of a partial interest in properties to unconsolidated joint ventures and are recognized using the partial sale provisions of the FASB’s real estate sales guidance.

 

The Company makes estimates of the uncollectability of its accounts receivable related to base rents, straight-line rent, expense reimbursements and other revenues. The Company analyzes accounts receivable and historical bad debt levels, customer credit worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy are analyzed and estimates are made in connection with the expected recovery of pre-petition and post-petition claims. The Company’s reported net earnings are directly affected by management’s estimate of the collectability of accounts receivable.

 

Accounts and notes receivable in the accompanying Consolidated Balance Sheets are net of estimated unrecoverable amounts of $10.4 million and $10.8 million of billed accounts receivable at December 31, 2014 and 2013, respectively. Additionally, Accounts and notes receivable in the accompanying Consolidated Balance Sheets are net of estimated unrecoverable amounts of $22.9 million and $23.4 million of straight-line rent receivable at December 31, 2014 and 2013, respectively.

 

Income Taxes

 

The Company has made an election to qualify, and believes it is operating so as to qualify, as a REIT for federal income tax purposes. Accordingly, the Company generally will not be subject to federal income tax, provided that distributions to its stockholders equal at least the amount of its REIT taxable income as defined under Section 856 through 860 of the Code.

 

In connection with the RMA, which became effective January 1, 2001, the Company is permitted to participate in certain activities which it was previously precluded from in order to maintain its qualification as a REIT, so long as these activities are conducted by entities which elect to be treated as taxable REIT subsidiaries under the Code. As such, the Company is subject to federal and state income taxes on the income from these activities. The Company is also subject to local taxes on certain non-U.S. investments.

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

 

The Company reviews the need to establish a valuation allowance against deferred tax assets on a quarterly basis. The review includes an analysis of various factors, such as future reversals of existing taxable temporary differences, the capacity for the carryback or carryforward of any losses, the expected occurrence of future income or loss and available tax planning strategies.

 

The Company applies the FASB’s guidance relating to uncertainty in income taxes recognized in a Company’s financial statements. Under this guidance the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also provides guidance on de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods. 

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

Foreign Currency Translation and Transactions

 

Assets and liabilities of the Company’s foreign operations are translated using year-end exchange rates, and revenues and expenses are translated using exchange rates as determined throughout the year. Gains or losses resulting from translation are included in AOCI, as a separate component of the Company’s stockholders’ equity. Gains or losses resulting from foreign currency transactions are translated to local currency at the rates of exchange prevailing at the dates of the transactions. The effect of the transactions gain or loss is included in the caption Other expense, net in the Consolidated Statements of Income. The Company is required to release cumulative translation adjustment (“CTA”) balances into earnings when the Company has substantially liquidated its investment in a foreign entity.

 

Derivative/Financial Instruments

 

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risk through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company may use derivatives to manage exposures that arise from changes in interest rates, foreign currency exchange rate fluctuations and market value fluctuations of equity securities. The Company limits these risks by following established risk management policies and procedures including the use of derivatives.

 

The Company measures its derivative instruments at fair value and records them in the Consolidated Balance Sheet as an asset or liability, depending on the Company’s rights or obligations under the applicable derivative contract.  The accounting for changes in the fair value of the derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting under the Derivatives and Hedging guidance issued by the FASB.

 

The effective portion of the changes in fair value of derivatives designated and that qualify as cash flow hedges is recorded in AOCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Any ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During 2014, 2013 and 2012, the Company had no hedge ineffectiveness.

 

Noncontrolling Interests

 

The Company accounts for noncontrolling interests in accordance with the Consolidation guidance and the Distinguishing Liabilities from Equity guidance issued by the FASB. Noncontrolling interests represent the portion of equity that the Company does not own in those entities it consolidates. The Company identifies its noncontrolling interests separately within the equity section on the Company’s Consolidated Balance Sheets. The amounts of consolidated net earnings attributable to the Company and to the noncontrolling interests are presented separately on the Company’s Consolidated Statements of Income. 

 

Noncontrolling interests also includes amounts related to partnership units issued by consolidated subsidiaries of the Company in connection with certain property acquisitions. These units have a stated redemption value or a defined redemption amount based upon the trading price of the Company’s common stock and provides the unit holders various rates of return during the holding period. The unit holders generally have the right to redeem their units for cash at any time after one year from issuance. For convertible units, the Company typically has the option to settle redemption amounts in cash or common stock.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

The Company evaluates the terms of the partnership units issued in accordance with the FASB’s Distinguishing Liabilities from Equity guidance. Units which embody an unconditional obligation requiring the Company to redeem the units for cash after a specified or determinable date (or dates) or upon an event that is certain to occur are determined to be mandatorily redeemable under this guidance and are included as Redeemable noncontrolling interest and classified within the mezzanine section between Total liabilities and Stockholders’ equity on the Company’s Consolidated Balance Sheets. Convertible units for which the Company has the option to settle redemption amounts in cash or Common Stock are included in the caption Noncontrolling interest within the equity section on the Company’s Consolidated Balance Sheets.

 

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):

 

		For the year ended December 31,
		2014				2013				2012
Computation of Basic Earnings Per Share:
Income from continuing operations		$	384,506			$	288,454			$	178,002
Gain on sale of operating properties, net of tax			389				1,432				4,299
Net income attributable to noncontrolling interests			(11,879	)			(5,072	)			(14,202	)
Discontinued operations attributable to noncontrolling interests			2,117				(7,930	)			4,661
Preferred stock redemption costs			-				-				(21,703	)
Preferred stock dividends			(58,294	)			(58,294	)			(71,697	)
Income from continuing operations available to the common shareholders			316,839				218,590				79,360
Earnings attributable to unvested restricted shares			(1,749	)			(1,360	)			(1,221	)
Income from continuing operations attributable to common shareholders			315,090				217,230				78,139
Income/(loss) from discontinued operations attributable to the Company			48,868				(40,603	)			93,313
Net income attributable to the Company’s common shareholders for basic earnings per share		$	363,958			$	176,627			$	171,452
Weighted average common shares outstanding			409,088				407,631				405,997
Basic Earnings Per Share Attributable to the Company’s Common Shareholders:
Income from continuing operations		$	0.77			$	0.53			$	0.19
Income(loss) from discontinued operations			0.12				(0.10	)			0.23
Net income		$	0.89			$	0.43			$	0.42
Computation of Diluted Earnings Per Share:
Income from continuing operations attributable to common Shareholders		$	315,090			$	217,230			$	78,139
Income/(loss) from discontinued operations attributable to the Company			48,868				(40,603	)			93,313
Net income attributable to the Company’s common shareholders for diluted earnings per share		$	363,958			$	176,627			$	171,452
Weighted average common shares outstanding – basic			409,088				407,631				405,997
Effect of dilutive securities(a):
Equity awards			1,950				983				692
Shares for diluted earnings per common share			411,038				408,614				406,689
Diluted Earnings Per Share Attributable to the Company’s Common Shareholders:
Income from continuing operations		$	0.77			$	0.53			$	0.19
Income/(loss) from discontinued operations			0.12				(0.10	)			0.23
Net income		$	0.89			$	0.43			$	0.42

 

(a)    The effect of the assumed conversion of certain convertible units had an anti-dilutive effect upon the calculation of Income from continuing operations per share. Accordingly, the impact of such conversions has not been included in the determination of diluted earnings per share calculations. Additionally, there were 7,137,120, 10,950,388 and 11,159,160, stock options that were not dilutive as of December 31, 2014, 2013 and 2012, respectively.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

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

 

Stock Compensation

 

The Company maintains two equity participation plans, the Second Amended and Restated 1998 Equity Participation Plan (the “Prior Plan”) and the 2010 Equity Participation Plan (the “2010 Plan”) (collectively, the “Plans”). The Prior Plan provides for a maximum of 47,000,000 shares of the Company’s common stock to be issued for qualified and non-qualified options and restricted stock grants. The 2010 Plan provides for a maximum of 10,000,000 shares of the Company’s common stock to be issued for qualified and non-qualified options, restricted stock, performance awards and other awards, plus the number of shares of common stock which are or become available for issuance under the Prior Plan and which are not thereafter issued under the Prior Plan, subject to certain conditions. Unless otherwise determined by the Board of Directors at its sole discretion, options granted under the Plans generally vest ratably over a range of three to five years, expire ten years from the date of grant and are exercisable at the market price on the date of grant. Restricted stock grants generally vest (i) 100% on the fourth or fifth anniversary of the grant, (ii) ratably over three or four years, (iii) over three years at 50% after two years and 50% after the third year or (iv) over ten years at 20% per year commencing after the fifth year. Performance share awards provide a potential to receive shares of restricted stock based on the Company’s performance relative to its peers, as defined, or based on other performance criteria as determined by the Board of Directors. In addition, the Plans provide for the granting of certain options and restricted stock to each of the Company’s non-employee directors (the “Independent Directors”) and permits such Independent Directors to elect to receive deferred stock awards in lieu of directors’ fees.

 

The Company accounts for equity awards in accordance with the FASB’s Stock Compensation guidance which requires that all share based payments to employees, be recognized in the Statement of Income over the service period based on their fair values. Fair value is determined, depending on the type of award, using either the Black-Scholes option pricing formula or the Monte Carlo method, both of which are intended to estimate the fair value of the awards at the grant date (see Footnote 20 for additional disclosure on the assumptions and methodology).

 

New Accounting Pronouncements

 

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 will 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 is effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is not permitted. 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 or results of operations.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). The amendments in ASU 2014-08 change the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. The amendments in ASU 2014-08 are effective for fiscal years beginning after December 15, 2014. Early adoption is permitted. The Company will adopt ASU 2014-08 beginning in its fiscal year 2015 and appropriately apply the guidance to prospective disposals of its shopping center properties. The Company believes that a significant portion of its shopping center disposals in the ordinary course of business will not qualify for discontinued operations presentation under this new standard.

 

In February 2013, the FASB issued new guidance regarding liabilities, ASU 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”), effective retrospectively for fiscal years beginning after December 15, 2013 and interim periods within those years. The amendments require an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the guidance is fixed at the reporting date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. In addition, the amendments require an entity to disclose the nature and amount of the obligation, as well as other information about the obligations. The adoption of ASU 2013-04 did not have a material impact on the Company’s financial position or results of operations.

 

2.   Real Estate:

 

The Company’s components of Rental property consist of the following (in thousands):

 

		December 31,
		2014				2013
Land		$	2,291,338			$	1,989,830
Undeveloped land			74,462				82,269
Buildings and improvements:
Buildings			4,909,152				4,572,740
Building improvements			1,349,028				1,168,959
Tenant improvements			658,868				725,570
Fixtures and leasehold improvements			61,122				61,015
Other rental property (1)			541,925				425,143
			9,885,895				9,025,526
Accumulated depreciation and amortization			(1,955,406	)			(1,878,681	)
Total		$	7,930,489			$	7,146,845

 

 

(1)  At December 31, 2014 and 2013, Other rental property (net of accumulated amortization of $290,748 and $252,810, respectively), consisted of intangible assets including (i) $399,293 and $290,838, respectively, of in-place leases, (ii) $20,858 and $21,326, respectively, of tenant relationships, and (iii) $121,774 and $112,979, respectively, of above-market leases.

 

In addition, at December 31, 2014 and 2013, the Company had intangible liabilities relating to below-market leases from property acquisitions of $255.4 million and $181.5 million, respectively, net of accumulated amortization of $169.8 million and $155.7 million, respectively. These amounts are included in the caption Other liabilities on the Company’s Consolidated Balance Sheets.  

 

The Company’s amortization associated with above and below market leases for the years ended December 31, 2014, 2013, and 2012, resulted in net increases to revenue of $13.5 million, $11.5 million and $14.4 million, respectively. The estimated net amortization associated with the Company’s above and below market leases for the next five years are as follows (in millions): 2015, $13.7; 2016, $14.2; 2017, $13.0; 2018, $9.8 and 2019, $9.9.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

The Company’s amortization expense associated with leases in place and tenant relationships for the years ended December 31, 2014, 2013 and 2012 was $41.2 million, $31.1 million and $28.1 million, respectively. The estimated net amortization associated with leases in place and tenant relationships over the next five years is as follows (in millions): 2015, $33.9; 2016, $26.7; 2017, $20.6; 2018, $15.7 and 2019, $12.2.

 

3.   Property Acquisitions, Developments and Other Investments:

 

Operating property acquisitions, ground-up development costs and other investments have been funded principally through the application of proceeds from the Company's public equity and unsecured debt issuances, proceeds from mortgage financings, proceeds from the disposition of properties and availability under the Company’s revolving line of credit.

 

Acquisition of Operating Properties –

 

During the year ended December 31, 2014, the Company acquired the following properties, in separate transactions (in thousands):

 

				Purchase Price
Property Name	Location	Month Acquired		Cash*				Debt Assumed				Other				Total				GLA**
North Valley Leasehold	Peoria, AZ	Jan-14		$	3,000			$	-			$	-			$	3,000				-
LaSalle Properties (3 properties)	Various (1)	Jan-14			62,239				23,269				7,642				93,150				316
Harrisburg Land Parcel	Harrisburg, PA	Jan-14			2,550				-				-				2,550				-
Crossroads Plaza	Cary, NC	Feb-14			18,691				72,309				-				91,000				489
Quail Corners	Charlotte, NC (2)	Mar-14			9,398				17,409				4,943				31,750				110
KIF 1 Portfolio (12 properties)	Various (3)	Apr-14			128,699				157,010				122,291				408,000				1,589
Fountain at Arbor Lakes (2 Parcels)	Maple Grove, MN	Apr-14			900				-				-				900				-
Boston Portfolio (24 properties)	Various	Apr-14			149,486				120,514				-				270,000				1,426
Vinnin Square	Swampscott, MA	May-14			2,550				-				-				2,550				6
SEB Portfolio (10 properties)	Various (4)	Jul-14			69,261				193,600				12,911				275,772				1,415
Highlands Ranch Parcel	Highlands Ranch, CO	Sep-14			3,800				-				-				3,800				10
BIG Portfolios (7 properties)	Various (5)	Oct-14			-				118,439				76,511				194,950				1,148
Springfield S.C.	Springfield, MO	Nov-14			8,800				-				-				8,800				210
North Quincy Plaza	Quincy, MA (6)	Dec-14			20,470				-				2,530				23,000				81
Belmart Plaza	West Palm Beach, FL (7)	Dec-14			3,208				-				2,807				6,015				77
Braelinn Village	Peachtree City, GA	Dec-14			27,000				-				-				27,000				227
				$	510,052			$	702,550			$	229,635			$	1,442,237				7,104

 

* Includes 1031 sales proceeds of $126.8 million

** Gross leasable area ("GLA")

 

(1)	The Company acquired three properties from a joint venture in which the Company had an 11% noncontrolling interest. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as such recognized a gain of $3.7 million from the fair value adjustment associated with the Company’s original ownership due to a change in control, which is reflected in the purchase price above in Other.
(2)	The Company acquired a 65.4% controlling ownership interest in this property and the seller retained a 34.6% noncontrolling interest in the property. The partner has the ability to put its partnership interest to the Company. As such, the Company has recorded the partners’ share of the property’s fair value of $4.9 million as Redeemable noncontrolling interests on the Company’s Consolidated Balance Sheets.
(3)	The Company acquired from its partners the remaining ownership interest in a joint venture which holds 12 encumbered properties for which the Company had a 39.1% noncontrolling interest. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as a result, recognized a gain of $65.6 million from the fair value adjustment associated with the Company’s original ownership due to a change in control, which is reflected in the purchase price above in Other. Subsequently, the Company repaid $128.4 million in debt encumbering ten of the properties. Additionally, during June 2014, the Company sold one of the properties to a third party, which approximated its carrying value.
(4)	The Company acquired from its partner the remaining ownership interest in 10 properties that were held in a joint venture in which the Company has a 15% noncontrolling interest. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as a result, recognized a gain of $14.4 million from the fair value adjustment associated with the Company’s original ownership due to a change in control, which is reflected in the purchase price above in Other.
(5)	The Company and their joint venture partner BIG divided 15 of the 21 properties in the BIG Shopping Centers venture with the Company receiving a 99% ownership interest in seven operating properties and BIG receiving a 99% ownership interest in eight operating properties. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as a result, recognized a gain of $19.5 million from the fair value adjustment associated with the Company’s original ownership due to a change in control, which is reflected in the purchase price above in Other. Additionally, during December 2014, the Company sold one of the properties to a third party, which approximated its carrying value.
(6)	The Company acquired from its partners the remaining ownership interest in this property that was held in a joint venture in which the Company had an 11% noncontrolling interest. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as a result, recognized a gain of $2.2 million from the fair value adjustment associated with the Company’s original ownership due to a change in control, which is reflected in the purchase price above in Other.
(7)	The Company increased its ownership interest to 74.8% in this property that was held in a joint venture in which the Company had a 21.5% noncontrolling interest. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as a result, recognized a gain of $1.7 million from the fair value adjustment associated with the Company’s original ownership due to a change in control, which is reflected in the purchase price above in Other.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

During the year ended December 31, 2013, the Company acquired the following properties, in separate transactions (in thousands):

 

				Purchase Price
Property Name	Location	Month Acquired		Cash				Debt Assumed				Other				Total				GLA
Santee Trolley Square	Santee, CA(1)	Jan-13		$	26,863			$	48,456			$	22,681			$	98,000				311
Shops at Kildeer	Kildeer, IL(2)	Jan-13			-				32,724				-				32,724				168
Village Commons S.C.	Tallahassee, FL	Jan-13			7,100				-				-				7,100				125
Putty Hill Plaza	Baltimore, MD(3)	Jan-13			4,592				9,115				489				14,196				91
Columbia Crossing II S.C.	Columbia, MD	Jan-13			21,800				-				-				21,800				101
Roseville Plaza Outparcel	Roseville, MN	Jan-13			5,143				-				-				5,143				80
Wilton River Park	Wilton, CT(4)	Mar-13			777				36,000				5,223				42,000				187
Canyon Square	Santa Clarita, CA(5)	Apr-13			1,950				13,800				-				15,750				97
JTS Portfolio (7 properties)	Baton Rouge, LA(6)	Apr-13			-				43,267				11,733				55,000				520
Factoria Mall	Bellevue, WA(7)	May-13			37,283				56,000				37,467				130,750				510
6 Outparcels	Various	Jun-13			13,053				-				-				13,053				97
Highlands Ranch II	Highlands Ranch, CO	July-13			14,600				-				-				14,600				44
Elmsford	Elmsford, NY	Aug-13			23,000				-				-				23,000				143
Northridge	Arvada, CO	Oct-13			8,239				11,511				-				19,750				146
Five Forks Crossing	Liburn, GA	Oct-13			9,825				-				-				9,825				74
Greenwood S.C. Outparcel	Greenwood, IN	Oct-13			4,067				-				-				4,067				30
Clark Portfolio (4 properties)	Clark, NJ	Nov-13			35,553				-				-				35,553				189
Winn Dixie Portfolio (6 properties)	Louisiana & Florida	Dec-13			43,506				-				-				43,506				392
Tomball S.C.	Houston, TX	Dec-13			35,327				-				-				35,327				149
Atascocita S.C.	Humble, TX	Dec-13			38,250				28,250				-				66,500				317
Lawrenceville	Lawrenceville, GA	Dec-13			36,824				-				-				36,824				286
				$	367,752			$	279,123			$	77,593			$	724,468				4,057

 

(1)	This property was acquired from a joint venture in which the Company had a 45% noncontrolling interest.  The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as such recognized a gain of $22.7 million, before income tax, from the fair value adjustment associated with the Company’s original ownership due to a change in control, which is reflected in the purchase price above in Other.
(2)	This property was acquired from a joint venture in which the Company had a 19% noncontrolling interest. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance. This transaction resulted in a change in control with no gain or loss recognized.
(3)	The Company acquired the remaining 80% interest in an operating property from an unconsolidated joint venture in which the Company had a 20% noncontrolling interest.  The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as such recognized a gain of $0.5 million from the fair value adjustment associated with the Company’s original ownership due to a change in control, which is reflected in the purchase price above in Other.
(4)	The acquisition of this property included the issuance of $5.2 million of redeemable units, which are redeemable at the option of the holder after one year and earn a yield of 6% per annum, which is included in the purchase price above in Other. In connection with this transaction, the Company provided the sellers a $5.2 million loan at a rate of 6.5%, which is secured by the redeemable units.
(5)	This property was acquired from a joint venture in which the Company has a 15% noncontrolling interest. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance. This transaction resulted in a change in control with no gain or loss recognized.
(6)	The Company acquired the remaining interest in a portfolio of office properties from a preferred equity investment in which the Company held a noncontrolling interest. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as such recognized a change in control loss of $9.6 million from the fair value adjustment associated with the Company’s original ownership, which is reflected in the purchase price above in Other. The debt assumed in connection with this transaction of $43.3 million was repaid in April 2013 and the properties within the portfolio were later sold during October and November 2013.
(7)	The Company acquired an additional 49% interest in this operating property from an unconsolidated joint venture in which the Company had a 50% noncontrolling interest. As such the Company now consolidates this investment. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as a result, recognized a gain of $8.2 million from the fair value adjustment associated with the Company’s original ownership due to a change in control, which is reflected in the purchase price above in Other.

 

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

The aggregate purchase price of the above 2014 and 2013 property acquisitions have been allocated as follows (in thousands):

 

		2014				2013
Land		$	414,879			$	198,263
Buildings			679,753				368,478
Below Market Rents			(81,362	)			(25,298	)
Above Market Rents			30,307				15,758
In-Place Leases			113,513				35,262
Building Improvements			290,882				115,110
Tenant Improvements			26,536				22,196
Mortgage Fair Value Adjustment			(39,368	)			(5,794	)
Other Assets			7,097				894
Other Liabilities			-				(401	)
		$	1,442,237			$	724,468

 

Additionally, during the years ended December 31, 2014 and 2013, the Company acquired the remaining interest in three and four previously consolidated joint ventures for $1.1 million and $9.4 million, respectively. The Company continues to consolidate these entities as there was no change in control from these transactions. The purchase of the remaining interests resulted in an aggregate decrease in noncontrolling interest of $0.8 million and $0.4 million for the years ended December 31, 2014 and 2013, respectively and an aggregate decrease of $0.3 million and $8.2 million to the Company’s Paid-in capital, during 2014 and 2013, respectively.

 

Ground-Up Development -

 

The Company is engaged in ground-up development projects, which will be held as long-term investments by the Company. As of December 31, 2014, the Company had in progress a total of four ground-up development projects located in the U.S.

 

During 2014, the Company acquired, in separate transactions, three land parcels located in various cities throughout the U.S., for an aggregate purchase price of $53.5 million. These land parcels will be developed into retail centers aggregating 0.9 million square feet of GLA with a total estimated aggregate project cost of $192.8 million.

 

Additionally, during the fourth quarter 2014, the Company purchased land parcels in Dania, Florida for an aggregate purchase price of $62.8 million. The Company then contributed the land to an unconsolidated joint venture to be used for a ground-up development project.

 

FNC Realty Corporation –

 

During 2013, the Company acquired the remaining 17.3% ownership interest in FNC Realty Corporation (“FNC”) for $20.4 million. As a result of this transaction the Company now owns 100% of FNC. The Company had previously and continues to consolidate FNC. No change in control resulted from this transaction, as such, the purchase of the additional interest resulted in a decrease in noncontrolling interest of $19.7 million and a decrease of $0.7 million to the Company’s Paid-in capital during 2013.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

4.    Dispositions of Real Estate:

 

Operating Real Estate –

 

During 2014, the Company disposed of 90 operating properties, in separate transactions, for an aggregate sales price of $833.5 million, including 27 operating properties in Latin America. These transactions, which are included in Discontinued operations on the Company’s Consolidated Statements of Income, resulted in an aggregate gain of $203.3 million, before income taxes and noncontrolling interests and aggregate impairment charges of $178.0 million, before income taxes and noncontrolling interests, including $92.9 million related to the release of a cumulative foreign currency translation loss due to the Company’s substantial liquidation of its investment in Mexico. The Company provided financing aggregating $52.7 million on three of these transactions which bear interest at rates ranging from LIBOR plus 250 basis points to 7% per annum and are scheduled to mature in June and August 2015. The Company evaluated these transactions pursuant to the FASB’s real estate guidance to determine sale and gain recognition.

 

During 2013, the Company disposed of 36 operating properties and three out-parcels in separate transactions, for an aggregate sales price of $279.5 million. These transactions, which are included in Discontinued operations in the Company’s Consolidated Statements of Income, resulted in an aggregate gain of $25.4 million and impairment charges of $61.9 million, before income taxes.

 

Additionally, during 2013, the Company sold eight properties in its Latin American portfolio for an aggregate sales price of $115.4 million. These transactions, which are included in Discontinued operations in the Company’s Consolidated Statements of Income, resulted in an aggregate gain of $23.3 million, before income taxes, and aggregate impairment charges of $26.9 million (including the release of the cumulative foreign currency translation loss of $7.8 million associated with the sale of the Company’s interest in two properties within Brazil, which represented a full liquidation of the Company’s investment in Brazil), before income taxes and noncontrolling interests.

 

During 2012, the Company disposed of 62 operating properties and two outparcels, in separate transactions, for an aggregate sales price of $418.9 million. These transactions, which are included in Discontinued operations in the Company’s Consolidated Statements of Income, resulted in an aggregate pre-tax gain of $85.9 million and aggregate impairment charges of $22.5 million, before income taxes. The Company provided seller financing in connection with the sale of one of the operating properties for $4.2 million, which bore interest at a rate of 6.0% and matured in November 2013.  The Company evaluated this transaction pursuant to the FASB’s real estate sales guidance and concluded that the criteria for sale recognition were met.  

 

During 2012, the Company sold a previously consolidated operating property to a newly formed unconsolidated joint venture in which the Company has a 20% noncontrolling interest for a sales price of $55.5 million. This transaction resulted in a pre-tax gain of $10.0 million, of which the Company deferred $2.0 million due to its continued involvement. This gain has been recorded as Gain on sale of operating properties, net of tax in the Company’s Consolidated Statements of Income. The Company evaluated this transaction pursuant to the FASB’s real estate sales guidance and concluded that the criteria for sale recognition were met.

 

Land Sales –

 

During 2013, the Company sold nine land parcels for an aggregate sales price of $18.2 million in separate transactions. These transactions resulted in an aggregate gain of $11.5 million, before income taxes expense and noncontrolling interest. The gains from these transactions are recorded as other income, which is included in Other income/(expense), net, in the Company’s Consolidated Statements of Income.

 

During 2012, the Company disposed of two land parcels and two outparcels for an aggregate sales price of $4.1 million and recognized an aggregate gain of $2.0 million related to these transactions. These gains are recorded as other income, which is included in Other income/(expense), net, in the Company’s Consolidated Statements of Income. The Company provided seller financing in connection with the sale of one of the land parcels for $1.8 million, which bore interest at a rate of 6.5% for the first six months and 7.5% for the remaining term and matured in March 2013.  The Company evaluated this transaction pursuant to the FASB’s real estate sales guidance and concluded that the criteria for sale recognition were met.  

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

 

Also during 2012, the Company sold a land parcel in San Juan del Rio, Mexico for a sales price of 24.3 million Mexican Pesos (“MXN”) (USD $1.9 million).  The Company recognized a gain of MXN 5.7 million (USD $0.4 million) on this transaction.   The gain from this transaction is recorded as other income, which is included in Other income/(expense), net, in the Company’s Consolidated Statements of Income.

 

5.    Discontinued Operations and Assets Held-for-Sale:

 

The Company reports as discontinued operations assets held-for-sale as of the end of the current period and assets sold during the period. All results of these discontinued operations are included in a separate component of income on the Consolidated Statements of Income under the caption Discontinued operations. This has resulted in certain reclassifications of 2014, 2013 and 2012 financial statement amounts.

 

The components of Income from discontinued operations for each of the three years in the period ended December 31, 2014, are shown below. These include the results of income through the date of each respective sale for properties sold during 2014, 2013 and 2012, and the operations for the applicable periods for those assets classified as held-for-sale as of December 31, 2014 (in thousands):

 

		2014				2013				2012
Discontinued operations:
Revenues from rental property		$	71,906			$	129,315			$	157,472
Rental property expenses			(16,657	)			(39,425	)			(49,925	)
Depreciation and amortization			(15,019	)			(33,142	)			(47,916	)
Provision for doubtful accounts			(719	)			(2,971	)			(3,423	)
Interest expense			(1,823	)			(1,371	)			(4,855	)
Income from other real estate investments			680				720				676
Other expense, net			(756	)			(880	)			(254	)
Income from discontinued operating properties, before income taxes			37,612				52,246				51,775
Impairment of property carrying value, before income taxes (1)			(178,048	)			(157,972	)			(49,280	)
Gain on disposition of operating properties, before income taxes			203,271				48,731				85,894
(Provision)/benefit for income taxes			(11,850	)			8,462				9,585
Income/(loss) from discontinued operating properties			50,985				(48,533	)			97,974
Net (income)/loss attributable to noncontrolling interests			(2,117	)			7,930				(4,661	)
Income/(loss) from discontinued operations attributable to the Company		$	48,868			$	(40,603	)		$	93,313

 

(1) The year ended December 31, 2014, includes $92.9 million related to the release of a cumulative foreign currency translation loss due to the Company’s substantial liquidation of its investment in Mexico. During 2013, the Company began selling properties within its Latin American portfolio. During the year ended December 31, 2014, the Company continued selling properties in its Latin American portfolio and as a result substantially liquidated its investment in Mexico.

 

During 2014, the Company classified as held-for-sale 35 operating properties. The aggregate book value of these properties was $239.9 million, net of accumulated depreciation of $76.5 million. The Company recognized impairment charges on 11 of these properties aggregating $56.2 million, which were sold during 2014. The book value of the remaining other 24 properties did not exceed their estimated fair value, less costs to sell, and as such no impairment charges were recognized. The Company’s determination of the fair value for each property, aggregating $316.5 million, was based upon executed contracts of sale with third parties (see Footnote 15). The Company completed the sale of the 35 held-for-sale operating properties during 2014 (these dispositions are included in Footnote 4 above). At December 31, 2014, the Company had no operating properties classified as held-for-sale.

 

During 2013, the Company classified as held-for-sale 19 operating properties, comprising 1.9 million square feet of GLA.  The aggregate book value of these properties was $178.4 million, net of accumulated depreciation of $19.2 million.   The Company recognized impairment charges of $25.2 million, after income taxes, on eight of these properties. The book value of the other properties did not exceed their estimated fair value, less costs to sell, and as such no impairment charges were recognized. The Company’s determination of the fair value for each property, aggregating $158.6 million, was based upon executed contracts of sale with third parties (see Footnote 15).   In addition, the Company completed the sale of 15 held-for-sale operating properties during the year ended December 31, 2013, one of which was classified as held-for-sale during 2012 (these dispositions are included in Footnote 4 above).  At December 31, 2013, the Company had five remaining operating properties classified as held-for-sale at a carrying amount of $70.3 million, net of accumulated depreciation of $8.1 million, which are included in Other assets on the Company’s Consolidated Balance Sheets.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

During 2012, the Company classified as held-for-sale 18 operating properties, comprising 2.1 million square feet of GLA.  The book value of these properties was $73.2 million, net of accumulated depreciation of $57.2 million.  The Company recognized impairment charges of $4.2 million on three of these properties. The book value of the other properties did not exceed their estimated fair value, less costs to sell, and as such no impairment charges were recognized.  The Company’s determination of the fair value for each property, aggregating $102.0 million, was based upon executed contracts of sale with third parties.   In addition, the Company completed the sale of 19 operating properties during the year ended December 31, 2012, of which two were classified as held-for-sale during 2011 (these dispositions are included in Footnote 4 above). 

 

6. Impairments:

 

Management assesses on a continuous basis whether there are any indicators, including property operating performance, changes in anticipated holding period and general market conditions, that the value of the Company’s assets (including any related amortizable intangible assets or liabilities) may be impaired. To the extent impairment has occurred, the carrying value of the asset would be adjusted to an amount to reflect the estimated fair value of the asset.

 

During 2014, the Company implemented a plan to accelerate the disposition of certain U.S. properties. This plan effectively shortened the Company’s anticipated hold period for these properties and as a result the Company recognized impairment charges on various consolidated operating properties. In addition, during 2013, the Company began selling properties within its Latin American portfolio as part of its overall strategy to exit these markets and as a result the Company recognized impairment charges on various Latin American operating properties. During the year ended December 31, 2014, the Company continued selling properties in its Latin American portfolio and as a result substantially liquidated its investment in Mexico which resulted in the release of a cumulative foreign currency translation loss. (See Footnote 15 for fair value disclosure).

 

The Company’s efforts to market certain assets and management’s assessment as to the likelihood and timing of such potential transactions and/or the property hold period caused the Company to recognize impairment charges for the years ended December 31, 2014, 2013 and 2012 as follows (in millions):

 

		2014				2013				2012
Impairment of property carrying values * (1)(2)(3)		$	33.3			$	18.6			$	7.6
Investments in other real estate investments* (4)			1.7				2.9				2.7
Marketable securities and other investments* (5)			4.8				10.7				-
Total Impairment charges included in operating expenses			39.8				32.2				10.3
Cumulative foreign currency translation loss included in discontinued operations (6)			92.9				5.1				-
Impairment of property carrying values included in discontinued operations **			85.1				152.9				49.3
Total gross impairment charges			217.8				190.2				59.6
Noncontrolling interests			(0.4	)			(10.6	)			(0.4	)
Income tax benefit included in discontinued operations			(1.7	)			(14.8	)			(10.6	)
Income tax benefit			(6.1	)			(7.6	)			-
Total net impairment charges		$	209.6			$	157.2			$	48.6

 

* See Footnote 15 for additional disclosure on fair value

**See Footnotes 4 & 5 above for additional disclosure

 

(1) During 2014, the Company recognized aggregate impairment charges of $33.3 million, before an income tax benefit of $6.1 million and noncontrolling interests of $0.3 million, primarily related to adjustments to property carrying values in connection with the Company’s efforts to market certain properties and management’s assessment as to the likelihood and timing of such potential transactions and the anticipated hold period for such properties.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

(2) During 2013, the Company recorded $18.6 million, before an income tax benefit of $7.6 million and noncontrolling interests of $1.0 million, in impairment charges primarily related to two land parcels and four operating properties based upon purchase prices or purchase price offers.

 

(3) During 2012, the Company recognized an aggregate impairment charge of $7.6 million, before income tax benefit of $0.3 million, relating to its investment in four land parcels. The estimated aggregate fair value of these properties was based upon purchase price offers.

 

(4) Impairment charges primarily based upon review of debt maturity status and the likelihood of foreclosure of certain underlying properties within the Company’s preferred equity investments, during 2014, 2013 and 2012. The Company believes it will not recover its investment in certain preferred equity investments and as such recorded full impairments on these investments.

 

(5) During 2014 and 2013, the Company reviewed the underlying cause of the decline in value of certain cost method investments, as well as the severity and the duration of the decline and determined that the decline was other-than-temporary. Impairment charges were recognized based upon the calculation of the investments’ estimated fair value.

 

(6) Due to the substantial liquidation of its investment in Mexico, the Company recognized a loss from foreign currency translation related to consolidated properties in the amount of $92.9 million, before noncontrolling interest of $5.8 million. (See footnote 22 for additional disclosure).

 

In addition to the impairment charges above, the Company recognized pretax impairment charges during 2014, 2013 and 2012 of $54.5 million (including $47.3 million in cumulative foreign currency translation loss relating to the Company’s substantial liquidation of its investment in Mexico), $29.5 million, and $11.1 million, respectively, relating to certain properties held by various unconsolidated joint ventures in which the Company holds noncontrolling interests. These impairment charges are included in Equity in income of joint ventures, net in the Company’s Consolidated Statements of Income (see Footnote 7).

 

The Company will continue to assess the value of its assets on an on-going basis. Based on these assessments, the Company may determine that one or more of its assets may be impaired and would therefore write-down its carrying basis accordingly.

 

7.   Investment 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 December 31, 2014 and 2013 (in millions, except number of properties):

 

		As of December 31, 2014																				As of December 31, 2013
Venture		Average Ownership Interest				Number of Properties				GLA				Gross Real Estate				The Company's Investment				Average Ownership Interest				Number of Properties				GLA				Gross Real Estate				The Company's Investment
Prudential Investment Program (“KimPru” and “KimPru II”) (1) (2)			15.0%				60				10.6			$	2,728.9			$	178.6				15.0%				60				10.6			$	2,724.0			$	179.7
Kimco Income Opportunity Portfolio (“KIR”) (2) (3)			48.6%				54				11.5				1,488.2				152.1				48.6%				57				12.0				1,496.0				163.6
Kimstone (2) (5)			33.3%				39				5.6				1,098.7				98.1				33.3%				39				5.6				1,095.3				100.3
BIG Shopping Centers (2) (6) *			50.1%				6				1.0				151.6				-				37.9%				21				3.4				520.1				29.5
The Canada Pension Plan Investment Board (“CPP”) (2) (7)			55.0%				7				2.4				504.0				188.9				55.0%				6				2.4				437.4				144.8
Kimco Income Fund (“KIF”) (2) (8)			-				-				-				-				-				39.5%				12				1.5				288.7				50.6
SEB Immobilien (2) (9)			15.0%				3				0.4				86.0				2.5				15.0%				13				1.8				361.9				0.9
Other Institutional Programs (2) (10) (11)		Various					50				1.4				327.8				8.5			Various					56				2.1				385.3				16.8
RioCan			50.0%				45				9.3				1,205.8				159.8				50.0%				45				9.3				1,314.3				156.3
Latin America (15)		Various					13				0.1				91.2				24.4			Various					28				3.7				313.2				156.7
Other Joint Venture Programs (20) (23)		Various					60				9.5				1,401.2				224.3			Various					75				11.5				1,548.9				257.8
Total							337				51.8			$	9,083.4			$	1,037.2								412				63.9			$	10,485.1			$	1,257.0

 

*   Ownership % is a blended rate

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

The table below presents the Company’s share of net income/(loss) for these investments which is included in the Company’s Consolidated Statements of Income under Equity in income of joint ventures, net for the years ended December 31, 2014, 2013 and 2012 (in millions):

 

		Year ended December 31,
		2014				2013				2012
KimPru and KimPru II (1)		$	8.1			$	9.1			$	7.4
KIR (3)(4)			26.5				25.3				23.4
Kimstone (5)			2.0				3.6				-
BIG Shopping Centers (6)			22.5				3.0				(3.7	)
CPP			7.1				5.8				5.3
KIF (8)			0.9				3.3				1.7
SEB Immobilien (9)			0.8				1.1				0.7
Other Institutional Programs (10-13)			2.6				3.2				5.5
RioCan (14)			30.6				27.6				30.4
Latin America (15- 19)			(3.8	)			103.1				15.8
Other Joint Venture Programs (20- 28)			62.3				23.6				26.4
Total		$	159.6			$	208.7			$	112.9

 

(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. During the year ended December 31, 2014, KimPru recognized impairment charges of $21.4 million related to the decline in value of two operating properties. The Company had previously taken other-than-temporary impairment charges on its investment in KimPru and had allocated these impairment charges to the underlying assets of the KimPru joint ventures including a portion to these operating properties. As such, the Company’s share of these impairment charges was $2.4 million.

(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)

During the year ended December 31, 2014 KIR, (i) sold two operating properties for a sales price of $17.7 million, for which the Company recognized its share of an aggregate net gain of $1.1 million, (ii) recognized aggregate impairment charges of $5.0 million, of which the Company’s share was $2.8 million, related to two properties which KIR anticipates selling within the next year and therefore effectively shortened its anticipated hold period for these assets which resulted in the expected future cash flows being less than the carrying value and (iii) sold one of the impaired properties for a sales price of $2.0 million.

(4)

During the year ended December 31, 2013, KIR sold an operating property in Cincinnati, OH for a sales price of $30.0 million and recognized a gain of $6.1 million. The Company’s share of this gain was $3.0 million.

(5)

During June 2013, the Company increased its ownership interest in the UBS Programs to 33.3% and simultaneously UBS transferred its remaining 66.7% ownership interest in the UBS Programs to affiliates of Blackstone Real Estate Partners VII (“Blackstone”). Both of these transactions were based on a gross purchase price of $1.1 billion. Upon completion of these transactions, Blackstone and the Company entered into a new joint venture (Kimstone) in which the Company owns a 33.3% noncontrolling interest. On February 2, 2015, the Company purchased the remaining 66.7% interest in the 39-property Kimstone portfolio from Blackstone for a gross purchase price of $1.4 billion, including the assumption of $638.0 million in mortgage debt (see Footnote 26 of the Notes to Consolidated Financial Statements).

(6)

During the year ended December 31, 2014, the Company and their joint venture partner BIG divided 15 of the 21 properties in the BIG Shopping Centers venture with the Company receiving a 99% ownership interest in seven operating properties and BIG receiving a 99% ownership interest in eight operating properties. The Company recognized a gain of $19.7 million on the properties where BIG obtained a 99% interest (see Footnote 3 of the Notes to Consolidated Financial Statements). Subsequent to this transaction the BIG Shopping Centers venture continues to hold six operating properties. During the year ended December 31, 2013, BIG recognized a gain on early extinguishment of debt of $13.7 million related to a property that was foreclosed on by a third party lender. The Company’s share of this gain was $2.4 million.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

(7)

During the year ended December 31, 2014, CPP acquired land parcels in Dania, FL, for $62.8 million. These land parcels will be developed into a retail center.

(8)

During the year ended December 31, 2014, the Company purchased the remaining interest in KIF based on a gross purchase price of $408.0 million (see Footnote 3 of the Notes to Consolidated Financial Statements).

(9)

During the year ended December 31, 2014, the Company purchased the remaining 85% interest in 10 SEB properties based on a gross purchase price of $275.8 million (see Footnote 3 of the Notes to Consolidated Financial Statements).

(10)

During the year ended December 31, 2014, the Company acquired four properties from a joint venture in which the Company has a noncontrolling interest for a total sales price of $116.2 million (see Footnote 3 of the Notes to Consolidated Financial Statements).

(11)

During the year ended December 31, 2014, two joint ventures in which the Company holds a noncontrolling interest sold two operating properties for an aggregate sales price of $46.6 million and recognized an aggregate gain of $11.1 million. The Company’s share of this gain was $2.2 million.

(12)

During the year ended December 31, 2012, a joint venture in which the Company holds a noncontrolling interest sold two encumbered operating properties to the Company for an aggregate sales price of $75.5 million.  As a result of this transaction, the Company recognized promote income of $2.6 million. Additionally, another joint venture in which the Company holds a noncontrolling interest sold an operating property to the Company for a sales price of $127.0 million.  As a result of this transaction, the Company recognized promote income of $1.1 million.

(13)

During the year ended December 31, 2012, the UBS Program recognized impairment charges of $13.0 million related to the sale of two properties. The Company’s share of these impairment charges was $2.2 million.

(14)

During the year ended December 31, 2012, the Company recognized income of $7.5 million, before taxes of $1.5 million, from the sale of certain air rights at one of the properties in the RioCan portfolio.

(15)

During the year ended December 31, 2014, the Company sold its noncontrolling interest in 14 operating properties located throughout Mexico based on a gross aggregate sales price of $324.5 million. The Company recognized a net gain of $39.1 million, before income taxes of $9.0 million.

(16)

During the fourth quarter 2014, the Company substantially liquidated its investment in Mexico, which resulted in the release of a cumulative foreign currency translation loss of $47.3 million.

(17)

During the year ended December 31, 2013, joint ventures in which the Company held noncontrolling interests sold 20 operating properties located throughout Mexico and Chile for $341.9 million. These transactions resulted in an aggregate net gain to the Company of $22.9 million, after tax.

(18)

During the year ended December 31, 2013, the Company and its joint venture partner sold their noncontrolling ownership interest in a joint venture which held interests in 84 operating properties located throughout Mexico for $603.5 million (including debt of $301.2 million). The Company’s share of the net gain was $78.2 million, before income taxes of $25.1 million.

(19)

During the year ended December 31, 2013, the Company was in advanced negotiations to sell 10 operating properties located throughout Mexico, which were held in unconsolidated joint ventures in which the Company held noncontrolling interests. Based upon the allocation of the selling price, the Company recorded its share of impairment charges of $9.4 million on six of these properties.

(20)

During the year ended December 31, 2014, a joint venture in which the Company holds a noncontrolling interest sold 16 operating properties for an aggregate sales price of $199.5 million and recognized an aggregate gain of $62.9 million.  The Company’s share of this gain was $31.7 million.

(21)

During the year ended December 31, 2014, the Company received a distribution of $15.4 million from a joint venture that was in excess of its carrying value and as such, the Company recognized this amount as equity in income.

(22)

During the year ended December 31, 2014, two joint ventures in which the Company holds a noncontrolling interest sold two operating properties for an aggregate sales price of $46.5 million and recognized an aggregate gain of $11.1 million. The Company’s share of this gain was $2.2 million.

(23)

During the year ended December 31, 2014, the Company acquired a partners’ interest in a joint venture in which the Company had a noncontrolling interest for a total price of $3.0 million (see Footnote 3 of the Notes to Consolidated Financial Statements).

(24)

During June 2013, the Intown portfolio was sold for a sales price of $735.0 million which included the assignment of $609.2 million in debt. This transaction resulted in a deferred gain to the Company of $21.7 million. The Company maintains its guarantee on a portion of the debt ($139.7 million as of December 31, 2014 and 2013) assumed by the buyer. Due to this continued involvement, the Company deferred its gain until such time that the guarantee and commitment expire. On February 24, 2015, the outstanding debt balance of $139.7 million was fully repaid and as such, the Company was relieved of its related commitments and guarantee. As a result, the Company will recognize the deferred gain of $21.7 million during the first quarter of 2015 (see Footnote 19 of the Notes to Consolidated Financial Statements).

(25)

During the year ended December 31, 2013, two joint ventures in which the Company held noncontrolling interests sold two operating properties to the Company, in separate transactions, for an aggregate price of $228.8 million (see Footnote 3 of the Notes to Consolidated Financial Statements).

(26)

During the year ended December 31, 2013, joint ventures in which the Company has noncontrolling interests sold six operating properties, in separate transactions, for an aggregate sales price of $132.1 million. In connection with these transactions, the Company recognized its share of the aggregate gains of $6.1 million and aggregate impairment charges of $1.5 million.

(27)

During the year ended December 31, 2012, two joint ventures in which the Company holds noncontrolling interests sold two properties, in separate transactions, for an aggregate sales price of $118.0 million.  The Company’s share of the aggregate gain related to these transactions was $8.3 million.

(28)

During the year ended December 31, 2012, three joint ventures in which the Company has noncontrolling interests recognized aggregate impairment charges of $12.8 million related to the sale of one operating property, the pending sale of one property and the potential foreclosure of another property. The Company’s share of these impairment charges was $6.4 million.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

 

The table below presents debt balances within the Company’s joint venture investments for which the Company held noncontrolling ownership interests at December 31, 2014 and 2013 (dollars in millions):

 

		As of December 31, 2014												As of December 31, 2013
Venture		Mortgages and Notes Payable				Average Interest Rate				Average Remaining Term (months)**				Mortgages and Notes Payable				Average Interest Rate				Average Remaining Term (months)**
KimPru and KimPru II		$	920.4				5.53	%			23.0			$	923.4				5.53	%			35.0
KIR			866.4				5.04	%			61.9				889.1				5.05	%			75.1
Kimstone			704.4				4.45	%			28.7				749.9				4.62	%			39.3
BIG Shopping Centers			144.6				5.52	%			22.0				406.5				5.39	%			40.1
CPP			112.1				5.05	%			10.1				138.6				5.23	%			19.0
Kimco Income Fund			-				-				-				158.0				5.45	%			8.7
SEB Immobilien			50.2				4.06	%			35.7				243.8				5.11	%			43.3
RioCan			642.6				4.29	%			39.9				743.7				4.59	%			48.0
Other Institutional Programs			223.1				5.47	%			20.8				272.9				5.32	%			31.0
Other Joint Venture Programs			927.5				5.31	%			58.6				1,063.1				5.53	%			60.6
Total		$	4,591.3											$	5,589.0

 

 

** Average remaining term includes extensions

 

KIR -

 

The Company holds a 48.6% noncontrolling limited partnership interest in KIR and has a master management agreement whereby the Company performs services for fees relating to the management, operation, supervision and maintenance of the joint venture properties.

 

The Company’s equity in income from KIR for the years ended December 31, 2012, exceeded 10% of the Company’s income from continuing operations before income taxes; as such the Company is providing summarized financial information for KIR as follows (in millions):

 

		December 31,
		2014				2013
Assets:
Real estate, net		$	1,024.3			$	1,064.2
Other assets			80.5				81.9
		$	1,104.8			$	1,146.1
Liabilities and Members’ Capital:
Mortgages payable		$	866.4			$	889.1
Other liabilities		19.8					21.8
Members’ capital			218.6				235.2
		$	1,104.8			$	1,146.1

 

		Year Ended December 31,
		2014				2013				2012
Revenues from rental property		$	201.6			$	197.0			$	190.6
Operating expenses			(57.7	)			(53.7	)			(50.8	)
Interest expense			(46.1	)			(47.8	)			(54.0	)
Depreciation and amortization			(39.2	)			(38.8	)			(38.8	)
Impairment charges			(3.1	)			-				-
Other expense, net			(1.5	)			(0.6	)			(1.3	)
			(147.6	)			(140.9	)			(144.9	)
Income from continuing operations			54.0				56.1				45.7
Discontinued Operations:
Income from discontinued operations			0.2				1.9				2.6
Impairment on dispositions of properties			(4.3	)			(9.8	)			(0.1	)
Gain on dispositions of properties			4.5				6.1				-
Net income		$	54.4			$	54.3			$	48.2

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

RioCan Investments -

 

The Company has three joint ventures (collectively, the "RioCan Ventures") with RioCan Real Estate Investment Trust ("RioCan"), in which the Company has 50% noncontrolling interests, to acquire retail properties and development projects in Canada. The acquisition and development projects are to be sourced and managed by RioCan and are subject to review and approval by a joint oversight committee consisting of RioCan management and the Company’s management personnel.  Capital contributions will only be required as suitable opportunities arise and are agreed to by the Company and RioCan.

 

The Company’s equity in income from the RioCan Ventures for the year ended December 31, 2012, exceeded 10% of the Company’s income from continuing operations, as such the Company is providing summarized financial information for the RioCan Ventures as follows (in millions):

 

		December 31,
		2014				2013
Assets:
Real estate, net		$	987.4			$	1,106.2
Other assets			40.7				43.8
		$	1,028.1			$	1,150.0
Liabilities and Members' Capital:
Mortgages payable		$	642.6			$	743.7
Other liabilities			13.1				13.0
Members' capital			372.4				393.3
		$	1,028.1			$	1,150.0

 

		Year ended December 31,
		2014				2013				2012
Revenues from rental properties		$	202.5			$	209.9			$	213.3
Operating expenses			(74.6	)			(76.9	)			(78.1	)
Interest expense			(31.9	)			(40.1	)			(51.9	)
Depreciation and amortization			(33.5	)			(36.0	)			(37.3	)
Other (expense)/income, net			(1.3	)			(1.8	)			14.7
			(141.3	)			(154.8	)			(152.6	)
Net income		$	61.2			$	55.1			$	60.7

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

Summarized financial information for the Company’s investment and advances in real estate joint ventures (excluding KIR and the RioCan Ventures, which are presented above) is as follows (in millions):

 

		December 31,
		2014				2013
Assets:
Real estate, net		$	5,410.3			$	6,601.8
Other assets			208.6				390.1
		$	5,618.9			$	6,991.9
Liabilities and Partners’/Members’ Capital:
Mortgages payable		$	3,061.3			$	3,956.2
Construction loans			21.0				-
Other liabilities			87.6				102.0
Noncontrolling interests			21.4				19.2
Partners’/Members’ capital			2,427.6				2,914.5
		$	5,618.9			$	6,991.9

 

		Year Ended December 31,
		2014				2013				2012
Revenues from rental property		$	655.8			$	873.3			$	1,009.2
Operating expenses			(201.2	)			(279.7	)			(330.6	)
Interest expense			(169.3	)			(228.5	)			(281.3	)
Depreciation and amortization			(187.3	)			(224.0	)			(258.4	)
Impairment charges			(20.0	)			(32.3	)			(17.0	)
Other expense, net			(11.6	)			(13.8	)			(19.8	)
			(589.4	)			(778.3	)			(907.1	)
Income from continuing operations			66.4				95.0				102.1
Discontinued Operations:
Income/(loss) from discontinued operations			2.6				12.2				(9.1	)
Impairment on dispositions of properties			0.5				(5.0	)			(21.1	)
Gain on dispositions of properties			466.6				223.4				94.5
Net income		$	536.1			$	325.6			$	166.4

 

Other liabilities included in the Company’s accompanying Consolidated Balance Sheets include accounts with certain real estate joint ventures totaling $40.3 million and $41.5 million at December 31, 2014 and 2013, respectively. The Company and its subsidiaries have varying equity interests in these real estate joint ventures, which may differ from their proportionate share of net income or loss recognized in accordance with GAAP.

 

The Company’s maximum exposure to losses associated with its unconsolidated joint ventures is primarily limited to its carrying value in these investments. Generally, such investments contain operating properties and the Company has determined these entities do not contain the characteristics of a VIE. As of December 31, 2014 and 2013, the Company’s carrying value in these investments is $1.0 billion and $1.3 billion, respectively.

 

8.   Other Real Estate Investments:

 

Preferred Equity Capital –

 

The Company previously provided capital to owners and developers of real estate properties through its Preferred Equity program. As of December 31, 2014, the Company’s net investment under the Preferred Equity program was $229.1 million relating to 443 properties, including 385 net leased properties. For the year ended December 31, 2014, the Company earned $37.2 million from its preferred equity investments, including $18.6 million in profit participation earned from six capital transactions. For the year ended December 31, 2013, the Company’s net investment under the Preferred Equity program was $236.9 million relating to 483 properties, including 392 net leased properties. For the year ended December 31, 2013, the Company earned $43.0 million from its preferred equity investments, including $20.8 million in profit participation earned from 16 capital transactions.

 

During 2013, the Company amended one of its Canadian preferred equity agreements to restructure its investment into a pari passu joint venture investment in which the Company holds a noncontrolling interest.  As a result of the amendment, the Company continues to account for this investment under the equity method of accounting and from the date of the amendment will include this investment in Investments and advances to real estate joint ventures within the Company’s Consolidated Balance Sheets.

 

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

During 2013, a preferred equity investment in a portfolio of properties was acquired by the Company. As a result of this transaction, the Company now consolidates this investment. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as such recognized a change in control loss of $9.6 million, from the fair value adjustment associated with the Company’s original ownership. The Company’s estimated fair value relating to the change in control loss was based upon a discounted cash flow model that included all estimated cash inflows and outflows over a specified holding period. The capitalization rate, and discount rate utilized in this model were based upon rates that the Company believes to be within a reasonable range of current market rates.

 

During 2012, the Company amended one of its preferred equity agreements to restructure its investment into a pari passu joint venture investment in which the Company holds a noncontrolling interest. The Company will continue to account for this investment under the equity method of accounting and from the date of the amendment will include this investment in Investments and advances in real estate joint ventures within the Company’s Consolidated Balance Sheets.

 

Included in the capital transactions described above for the year ended December 31, 2012, is the sale of three preferred equity investments in which the Company had no investment and recognized promote income of $10.0 million. In connection with this transaction, the Company provided seller financing for $7.5 million, which bore interest at a rate of 7.0% and was paid off in October 2013.  The Company evaluated this transaction pursuant to the FASB’s real estate sales guidance and concluded that the criteria for sale recognition was met.  

 

During 2007, the Company invested $81.7 million of preferred equity capital in an entity which was comprised of 403 net leased properties (“Net Leased Portfolio”) which consisted of 30 master leased pools with each pool leased to individual corporate operators. Each master leased pool is accounted for as a direct financing lease. These properties consist of a diverse array of free-standing restaurants, fast food restaurants, convenience and auto parts stores. As of December 31, 2014, the remaining 385 properties were encumbered by third party loans aggregating $317.8 million with interest rates ranging from 5.08% to 10.47% with a weighted-average interest rate of 9.2% and maturities ranging from one to nine years. The Company recognized $14.5 million, $13.2 million and $14.0 million in equity in income from this investment during the years ended December 31, 2014, 2013 and 2012, respectively.

 

The Company’s maximum exposure to losses associated with its preferred equity investments is primarily limited to its invested capital. As of December 31, 2014 and 2013, the Company’s invested capital in its preferred equity investments approximated $229.1 million and $236.9 million, respectively.

 

Summarized financial information relating to the Company’s preferred equity investments is as follows (in millions):

 

		December 31,
		2014				2013
Assets:
Real estate, net		$	456.9			$	571.7
Other assets			666.6				676.1
		$	1,123.5			$	1,247.8
Liabilities and Partners’/Members’ Capital:
Notes and mortgages payable		$	767.6			$	878.1
Other liabilities			21.6				26.1
Partners’/Members’ capital			334.3				343.6
		$	1,123.5			$	1,247.8

 

 

 

		Year Ended December 31,
		2014				2013				2012
Revenues from rental property		$	146.0			$	159.5			$	195.0
Operating expenses			(47.0	)			(34.8	)			(44.7	)
Interest expense			(47.1	)			(55.2	)			(72.0	)
Depreciation and amortization			(19.2	)			(24.0	)			(33.7	)
Impairment charges (a)			-				-				(2.7	)
Other expense, net			(7.2	)			(7.1	)			(8.3	)
Income from continuing operations			25.5				38.4				33.6
Discontinued Operations:
Gain on disposition of properties			31.5				20.8				17.5
Net income		$	57.0			$	59.2			$	51.1

 

(a)

Represents an impairment charge against one master leased pool due to decline in fair market value.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

Kimsouth -

 

Kimsouth Realty Inc. (“Kimsouth”) is a wholly-owned subsidiary of the Company that holds a 13.6% noncontrolling interest in a joint venture which owns a portion of Albertson’s Inc. During the year ended December 31, 2013, the Company funded an aggregate $70.8 million as its participation in a transaction with Supervalu, Inc. (“SVU”) through a consortium led by Cerberus Capital Management, L.P. (“Cerberus”). This investment included a contribution of $22.3 million to acquire 414 Albertsons locations from SVU through the Company’s existing joint venture in Albertsons. The Company recorded this additional investment in Other real estate investments on the Company’s Consolidated Balance Sheets and will continue to account for its investment in this joint venture under the equity method of accounting. During the years ended December 31, 2014 and 2013, the Company recorded equity losses from operations in this joint venture of $5.8 million and $16.5 million, respectively, which is included in Equity in income from other real estate investments, net on the Company’s Consolidated Statements of Income. As such, the Company’s investment in its Albertsons joint venture as of December 31, 2014 and 2013, was $0.0 million and $5.8 million, respectively. Also included in this $70.8 million aggregate funding is the Company’s contribution of $14.9 million to fund its 15% noncontrolling investment in NAI Group Holdings Inc., a C-corporation, to acquire four grocery banners (Shaw’s, Jewel-Osco, Acme and Star Market) totaling 456 locations from SVU. The Company recorded this investment in Other assets on the Company’s Consolidated Balance Sheets and accounts for this investment under the cost method of accounting. Additionally, as part of this overall funding, the Company acquired 8.2 million shares of SVU common stock for $33.6 million, which is recorded in Marketable securities on the Company’s Consolidated Balance Sheets.

 

During 2012, the Albertsons joint venture distributed $50.3 million of which the Company received $6.9 million, which was recognized as income from cash received in excess of the Company’s investment, before income tax, and is included in Equity in income from other real estate investments, net on the Company’s Consolidated Statements of Income.

 

In January 2015, the Company invested an additional $85.3 million of new equity in the Company’s Albertsons joint venture to facilitate the acquisition of Safeway Inc. by the Cerberus lead consortium. As a result, Kimco now holds a 9.8% ownership interest in the combined company which operates 2,230 stores across 34 states.

 

Leveraged Lease -

 

During June 2002, the Company acquired a 90% equity participation interest in an existing leveraged lease of 30 properties. The properties are leased under a long-term bond-type net lease whose primary term expires in 2016, with the lessee having certain renewal option rights. The Company’s cash equity investment was $4.0 million. This equity investment is reported as a net investment in leveraged lease in accordance with the FASB’s lease guidance.

 

As of December 31, 2014, 19 of these properties were sold, whereby the proceeds from the sales were used to pay down $32.3 million in mortgage debt and the remaining 11 properties remain encumbered by third-party non-recourse debt of $11.2 million that is scheduled to fully amortize during the primary term of the lease from a portion of the periodic net rents receivable under the net lease.

 

As an equity participant in the leveraged lease, the Company has no recourse obligation for principal or interest payments on the debt, which is collateralized by a first mortgage lien on the properties and collateral assignment of the lease. Accordingly, this obligation has been offset against the related net rental receivable under the lease.

 

At December 31, 2014 and 2013, the Company’s net investment in the leveraged lease consisted of the following (in millions):

 

		2014				2013
Remaining net rentals		$	8.3			$	15.9
Estimated unguaranteed residual value			30.3				30.3
Non-recourse mortgage debt			(10.1	)			(16.1	)
Unearned and deferred income			(12.9	)			(19.9	)
Net investment in leveraged lease		$	15.6			$	10.2

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

9.   Variable Interest Entities:

 

Consolidated Ground-Up Development Projects

 

Included within the Company’s ground-up development projects at December 31, 2014, is an entity that is a VIE, for which the Company is the primary beneficiary. This entity was established to develop real estate property to hold as a long-term investment. The Company’s involvement with this entity is through its majority ownership and management of the property. This entity was deemed a VIE primarily based on the fact that the equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support. The initial equity contributed to this entity was not sufficient to fully finance the real estate construction as development costs are funded by the partners throughout the construction period. The Company determined that it was the primary beneficiary of this VIE as a result of its controlling financial interest.

 

At December 31, 2014, total assets of this ground-up development VIE were $77.7 million and total liabilities were $0.1 million. The classification of these assets is primarily within Real estate under development in the Company’s Consolidated Balance Sheets and the classifications of liabilities are primarily within Accounts payable and accrued expenses on the Company’s Consolidated Balance Sheets.

 

Substantially all of the projected development costs to be funded for this ground-up development VIE, aggregating $32.8 million, will be funded with capital contributions from the Company and by the outside partners, when contractually obligated. The Company has not provided financial support to this VIE that it was not previously contractually required to provide.

 

Unconsolidated Ground-Up Development

 

Also included within the Company’s ground-up development projects at December 31, 2014, is an unconsolidated joint venture, which holds a VIE for which the Company is not the primary beneficiary. This entity was primarily established to develop real estate property for long-term investment and was deemed a VIE primarily based on the fact that the equity investment at risk was not sufficient to permit the entity to finance its activities without additional financial support.  The initial equity contributed to this entity was not sufficient to fully finance the real estate construction as development costs are funded by the partners throughout the construction period.  The Company determined that it was not the primary beneficiary of this VIE based on the fact that the Company has shared control of this entity along with the entity’s partner and therefore does not have a controlling financial interest.

 

The Company’s investment in this VIE was $35.1 million as of December 31, 2014, which is included in Investments and advances in real estate joint ventures in the Company’s Consolidated Balance Sheets. The Company’s maximum exposure to loss as a result of its involvement with this VIE is estimated to be $35.1 million, which primarily represents the Company’s current investment.  The Company has not provided financial support to this VIE that it was not previously contractually required to provide.  All future costs of development will be funded with capital contributions from the Company and the outside partner in accordance with their respective ownership percentages.

 

Unconsolidated Redevelopment Investment

 

Included in the Company’s joint venture investments at December 31, 2014, is one unconsolidated joint venture, which is a VIE for which the Company is not the primary beneficiary. This joint venture was primarily established to redevelop real estate property for long-term investment and was deemed a VIE primarily based on the fact that the equity investment at risk was not sufficient to permit the entity to finance its activities without additional financial support. The initial equity contributed to this entity was not sufficient to fully finance the real estate construction as redevelopment costs are funded by the partners throughout the construction period. The Company determined that it was not the primary beneficiary of this VIE based on the fact that the Company has shared control of this entity along with the entity’s partners and therefore does not have a controlling financial interest.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

As of December 31, 2014, the Company’s investment in this VIE was a negative $9.9 million, due to the fact that the Company had a remaining capital commitment obligation, which is included in Other liabilities in the Company’s Consolidated Balance Sheets. The Company’s maximum exposure to loss as a result of its involvement with this VIE is estimated to be $9.9 million, which is the remaining capital commitment obligation. The Company has not provided financial support to this VIE that it was not previously contractually required to provide. All future costs of redevelopment will be funded with capital contributions from the Company and the outside partner in accordance with their respective ownership percentages.

 

10.  Mortgages and Other Financing Receivables:

 

The Company has various mortgages and other financing receivables which consist of loans acquired and loans originated by the Company. For a complete listing of the Company’s mortgages and other financing receivables at December 31, 2014, see Financial Statement Schedule IV included in this annual report on Form 10-K.

 

The following table reconciles mortgage loans and other financing receivables from January 1, 2012 to December 31, 2014 (in thousands):

 

		2014				2013				2012
Balance at January 1		$	30,243			$	70,704			$	102,972
Additions:
New mortgage loans			52,728				8,527				29,496
Additions under existing mortgage loans			-				7,810				895
Write-off of loan discounts			286				-				-
Foreign currency translation			-				-				1,181
Amortization of loan discounts			126				653				247
Deductions:
Loan repayments			(7,330	)			(28,068	)			(60,740	)
Loan foreclosures			-				(25,572	)			-
Charge off/foreign currency translation			(1,066	)			(1,260	)			(430	)
Collections of principal			(972	)			(2,529	)			(2,861	)
Amortization of loan costs			(2	)			(22	)			(56	)
Balance at December 31		$	74,013			$	30,243			$	70,704

 

The Company reviews payment status to identify performing versus non-performing loans. As of December 31, 2014, the Company had a total of 16 loans aggregating $74.0 million all of which were identified as performing loans.

 

During 2013, the Company foreclosed on two non-performing loans, in separate transactions, for an aggregate $25.6 million. As such, the Company acquired 59.24 acres of undeveloped land located in Westbrook, Maine (which was sold in 2014 at price which approximated its carrying value) and 427 acres of undeveloped land located in Brantford, Ontario, which was the collateral under each of the respective loans. The carrying values of the mortgage receivables did not exceed the fair values of the underlying collateral upon foreclosure.

 

11.  Marketable Securities:

 

The amortized cost and estimated fair values of securities available-for-sale and held-to-maturity at December 31, 2014 and 2013, are as follows (in thousands):

 

		December 31, 2014
		Amortized Cost				Gross Unrealized Gains/Losses				Estimated Fair Value
Available-for-sale:
Equity securities		$	41,462			$	46,197			$	87,659
Held-to-maturity:
Debt securities			2,576				(200	)			2,376
Total marketable securities		$	44,038			$	45,997			$	90,035

 

		December 31, 2013
		Amortized Cost				Gross Unrealized Gains				Estimated Fair Value
Available-for-sale:
Equity securities		$	33,728			$	25,995			$	59,723
Held-to-maturity:
Debt securities			3,043				59				3,102
Total marketable securities		$	36,771			$	26,054			$	62,825

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

During 2014, 2013 and 2012, the Company received $3.8 million, $26.4 million and $0.2 million in proceeds from the sale/redemption of certain marketable securities, respectively. In connection with these transactions, during 2014, 2013 and 2012 the Company recognized (i) gross realizable gains of $0.0 million, $12.1 million and $0.0 million, respectively, and (ii) gross realizable losses of $0.1 million, $0.0 million and $0.0 million, respectively.

 

As of December 31, 2014, the contractual maturities of debt securities classified as held-to-maturity are as follows: after one year through five years, $1.8 million; and after five years through 10 years, $0.8 million. Actual maturities may differ from contractual maturities as issuers may have the right to prepay debt obligations with or without prepayment penalties.

 

12.  Notes Payable:

 

As of December 31, 2014 and 2013 the Company’s Notes Payable consisted of the following (dollars in millions):

 

		Balance at 12/31/14		Interest Rate Range (Low)		Interest Rate Range (High)		Maturity Date Range (Low)		Maturity Date Range (High)
Senior Unsecured Notes	$	1,540.9		3.13%		6.88%		Sep-2015		Jun-2023
Medium Term Notes		850.0		4.30%		5.78%		Feb-2015		Feb-2018
U.S. Term Loan (e)		400.0		(a)		(a)		Apr-2015		Apr-2015
Canadian Notes Payable		301.3		3.86%		5.99%		Apr-2018		Aug-2020
Credit Facility		100.0		(b)		(b)		Apr-2018		Apr-2018
	$	3,192.2

 

 

		Balance at 12/31/13		Interest Rate Range (Low)		Interest Rate Range (High)		Maturity Date Range (Low)		Maturity Date Range (High)
Senior Unsecured Notes	$	1,140.9		3.13%		6.88%		Jun-2014		Jun-2023
Medium Term Notes		1,044.6		4.30%		5.78%		Jun-2014		Feb-2018
U.S. Term Loan (d)		400.0		(a)		(a)		Apr-2014		Apr-2014
Canadian Notes Payable		329.5		3.86%		5.99%		Apr-2018		Aug-2020
Credit Facility		194.5		(a)		(a)		Oct-2015		Oct-2015
Mexican Term Loan		76.5		(c)		(c)		Mar-2018		Mar-2018
	$	3,186.0

 

(a)     Interest rate is equal to LIBOR + 1.05% (1.21% and 1.22% at December 31, 2014 and 2013, respectively).

(b)     Interest rate is equal to LIBOR + .925% (1.09% at December 31, 2014).

(c)     Interest rate is equal to TIIE (Equilibrium Interbank Interest Rate) plus 1.35% (5.15% at December 31, 2013).

(d)     During January 2014, the Company exercised its one-year extension option to extend the maturity date to April 2015.

(e)     During January 2015, the Company repaid its $400.0 million term loan which was scheduled to mature in 2015 with a new $650.0 million unsecured term loan that bears interest at a rate equal to LIBOR + .95% and is scheduled to mature in 2017, with three one-year extensions at the Company’s discretion.

 

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

 

The weighted-average interest rate for all unsecured notes payable is 4.17% as of December 31, 2014. The scheduled maturities of all unsecured notes payable as of December 31, 2014, were as follows (in millions): 2015, $750.0; 2016, $300.0; 2017, $290.9; 2018, $529.1; 2019, $300.0 and thereafter, $1,022.2.

 

Senior Unsecured Notes / Medium Term Notes –

 

During September 2009, the Company entered into a fifth supplemental indenture, under the indenture governing its Medium Term Notes ("MTN") and Senior Notes, which included the financial covenants for future offerings under the indenture that were removed by the fourth supplemental indenture.

 

In accordance with the terms of the Indenture, as amended, pursuant to which the Company's Senior Unsecured Notes, except for $300.0 million issued during April 2007 under the fourth supplemental indenture, have been issued, the Company is subject to maintaining (a) certain maximum leverage ratios on both unsecured senior corporate and secured debt, minimum debt service coverage ratios and minimum equity levels, (b) certain debt service ratios, (c) certain asset to debt ratios and (d) restricted from paying dividends in amounts that exceed by more than $26.0 million the funds from operations, as defined, generated through the end of the calendar quarter most recently completed prior to the declaration of such dividend; however, this dividend limitation does not apply to any distributions necessary to maintain the Company's qualification as a REIT providing the Company is in compliance with its total leverage limitations.

 

The Company had a MTN program pursuant to which it offered for sale its senior unsecured debt for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisitions, development and redevelopment costs and (ii) managing the Company's debt maturities.

 

Interest on the Company’s fixed-rate senior unsecured notes and medium term notes is payable semi-annually in arrears. Proceeds from these issuances were primarily used for the acquisition of neighborhood and community shopping centers, the expansion and improvement of properties in the Company’s portfolio and the repayment of certain debt obligations of the Company.

 

During April 2014, the Company issued $500.0 million of 7-year Senior Unsecured Notes at an interest rate of 3.20% payable semi-annually in arrears which are scheduled to mature in May 2021. The Company used the net proceeds from this issuance of $495.4 million, after deducting the underwriting discount and offering expenses, for general corporate purposes including reducing borrowings under the Company’s revolving credit facility and repayment of maturing debt. In connection with this issuance, the Company entered into a seventh supplemental indenture which, among other things, revised, for all securities created on or after the date of the seventh supplemental indenture, the definition of Unencumbered Total Asset Value, used to determine compliance with certain covenants within the indenture.

 

During May 2013, the Company issued $350.0 million of 10-year Senior Unsecured Notes at an interest rate of 3.125% payable semi-annually in arrears which are scheduled to mature in June 2023. Net proceeds from the issuance were $344.7 million, after related transaction costs of $0.5 million. The proceeds from this issuance were used for general corporate purposes including the partial reduction of borrowings under the Company’s revolving credit facility and the repayment of $75.0 million senior unsecured notes which matured in June 2013.

 

During July 2013, a wholly-owned subsidiary of the Company issued $200.0 million Canadian denominated (“CAD”) Series 4 unsecured notes on a private placement basis in Canada. The notes bear interest at 3.855% and are scheduled to mature on August 4, 2020. Proceeds from the notes were used to repay the Company’s CAD $200.0 million 5.180% unsecured notes, which matured on August 16, 2013.

 

During the years ended December 31, 2014 and 2013, the Company repaid the following notes (dollars in millions):

 

Type	Date Issued		Amount Repaid				Interest Rate			Maturity Date	Date Paid
MTN	Jun-05		$	194.6				4.82%		Jun-14	Jun-14
Senior Note	Oct-06		$	100.0				5.95%		Jun-14	Jun-14
MTN	Oct-03		$	100.0				5.19%		Oct-13	Oct-13
Senior Note	Oct-06		$	75.0				4.70%		Jun-13	Jun-13
Senior Note	Oct-06		$	100.0				6.125%		Jan-13	Jan-13

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

Credit Facility –

 

During March 2014, the Company established a new $1.75 billion unsecured revolving credit facility (the “Credit Facility”) with a group of banks, which is scheduled to expire in March 2018 with two additional six-month options to extend the maturity date, at the Company’s discretion, to March 2019. This Credit Facility replaced the Company’s then existing $1.75 billion unsecured revolving credit facility which was scheduled to mature in October 2015. The Credit Facility, which can be increased to $2.25 billion through an accordion feature, accrues interest at a rate of LIBOR plus 92.5 basis points on drawn funds. In addition, the Credit Facility includes a $500 million sub-limit which provides the Company the opportunity to borrow in alternative currencies including Canadian dollars, British Pounds Sterling, Japanese Yen or Euros. Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to covenants requiring the maintenance of (i) maximum leverage ratios on both unsecured and secured debt and (ii) minimum interest and fixed coverage ratios. As of December 31, 2014, the Credit Facility had a balance of $100.0 million outstanding and $1.0 million appropriated for letters of credit.

 

      U.S. Term Loan -

 

As of December 31, 2014, the Company had a $400.0 million unsecured term loan with a consortium of banks, which accrued interest at LIBOR plus 105 basis points. This term loan was scheduled to mature in April 2014, with three additional one-year options to extend the maturity date, at the Company’s discretion, to April 17, 2017.  During January 2014, the Company exercised the first of its one-year extension options to extend the maturity date to April 17, 2015. During January 2015, the Company entered into a new $650.0 million unsecured term loan credit facility which is scheduled to mature in January 2017, with three one-year extension options at the Company’s discretion, and accrues interest at a spread (currently 0.95%) to LIBOR or at the Company’s option at a base rate as defined per the agreement. The proceeds from the new term loan were used to repay the $400.0 million term loan and general corporate purposes. Pursuant to the terms of both the new term loan credit agreement and the prior term loan credit agreement, 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.

 

     Mexican Term Loan -

 

During March 2013, the Company entered into a five year 1.0 billion Mexican peso term loan which was scheduled to mature in March 2018. This term loan bore interest at a rate equal to TIIE (Equilibrium Interbank Interest Rate) plus 1.35%. The Company had the option to swap this rate to a fixed rate at any time during the term of the loan.  The Company used these proceeds to repay its 1.0 billion MXN term loan, which matured in March 2013 and bore interest at a fixed rate of 8.58%. This 1.0 billion MXN term loan (USD $76.3 million) was fully repaid during September 2014. 

 

13.  Mortgages Payable:

 

During 2014, the Company (i) assumed $742.0 million of individual non-recourse mortgage debt relating to the acquisition of 53 operating properties, including an increase of $39.4 million associated with fair value debt adjustments (ii) paid off $328.0 million of mortgage debt that encumbered 21 operating properties and (iii) obtained $15.7 million of individual non-recourse debt relating to one operating property.

 

During 2013, the Company (i) assumed $284.9 million of individual non-recourse mortgage debt relating to the acquisition of nine operating properties, including an increase of $5.8 million associated with fair value debt adjustments, (ii) paid off $256.3 million of mortgage debt that encumbered 14 properties and (iii) obtained $36.0 million of individual non-recourse debt relating to three operating properties.

 

Mortgages payable, collateralized by certain shopping center properties and related tenants' leases, are generally due in monthly installments of principal and/or interest, which mature at various dates through 2035. Interest rates range from LIBOR (0.08% as of December 31, 2014) to 9.75% (weighted-average interest rate of 5.58% as of December 31, 2014). The scheduled principal payments (excluding any extension options available to the Company) of all mortgages payable, excluding unamortized fair value debt adjustments of $40.1 million, as of December 31, 2014, were as follows (in millions): 2015, $157.2; 2016, $363.4; 2017, $457.6; 2018, $73.1; 2019, $10.0 and thereafter, $326.7.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

14.  Noncontrolling Interests:

 

Noncontrolling interests represent the portion of equity that the Company does not own in those entities it consolidates as a result of having a controlling interest or determined that the Company was the primary beneficiary of a VIE in accordance with the provisions of the FASB’s Consolidation guidance.  

 

The Company accounts and reports for noncontrolling interests in accordance with the Consolidation guidance and the Distinguishing Liabilities from Equity guidance issued by the FASB. The Company identifies its noncontrolling interests separately within the equity section on the Company’s Consolidated Balance Sheets. Units that are determined to be mandatorily redeemable are classified as Redeemable noncontrolling interests and presented in the mezzanine section between Total liabilities and Stockholder’s equity on the Company’s Consolidated Balance Sheets. The amounts of consolidated net income attributable to the Company and to the noncontrolling interests are presented separately on the Company’s Consolidated Statements of Income.  

 

The Company owns seven shopping center properties located throughout Puerto Rico. These properties were acquired partially through the issuance of $158.6 million of non-convertible units and $45.8 million of convertible units. Noncontrolling interests related to these acquisitions totaled $233.0 million of units, including premiums of $13.5 million and a fair market value adjustment of $15.1 million (collectively, the "Units"). The Company is restricted from disposing of these assets, other than through a tax free transaction until November 2015. The Units and related annual cash distribution rates consisted of the following:

 

Type		Number of Units Issued				Par Value Per Unit				Return Per Annum
Preferred A Units (1)			81,800,000			$	1.00				7.0%
Class A Preferred Units (1)			2,000			$	10,000			LIBOR plus 2.0%
Class B-1 Preferred Units (2)			2,627			$	10,000				7.0%
Class B-2 Preferred Units (1)			5,673			$	10,000				7.0%
Class C DownReit Units (2)			640,001			$	30.52			Equal to the Company’s common stock dividend

 

(1)

These units are redeemable for cash by the holder or callable by the Company and are included in Redeemable noncontrolling interests on the Company’s Consolidated Balance Sheets.

(2)

These units are redeemable for cash by the holder or at the Company’s option, shares of the Company’s common stock, based upon the conversion calculation as defined in the agreement. These units are included in Noncontrolling interests on the Company’s Consolidated Balance Sheets.

 

The following Units have been redeemed for cash as of December 31, 2014:

 

Type		Units Redeemed				Par Value Redeemed (in millions)
Preferred A Units			2,200,000			$	2.2
Class A Preferred Units			2,000			$	20.0
Class B-1 Preferred Units			2,438			$	24.4
Class B-2 Preferred Units			5,576			$	55.8
Class C DownReit Units			61,804			$	1.9

 

Noncontrolling interest relating to the remaining units was $111.6 million and $111.4 million as of December 31, 2014 and 2013, respectively.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

The Company owns two shopping center properties located in Bay Shore, NY and Centereach, NY. Included in Noncontrolling interests was $41.6 million, including a discount of $0.3 million and a fair market value adjustment of $3.8 million, in redeemable units, issued by the Company in connection with the acquisition of these properties. These units and related annual cash distribution rates consist of the following:

 

Type		Number of Units Issued				Par Value Per Unit				Return Per Annum
Class A Units (1)			13,963				$1,000				5.0%
Class B Units (2)			647,758				$37.24				Equal to the Company’s common stock dividend

 

(1)

These units are redeemable for cash by the holder or callable by the Company any time after April 3, 2016 and are included in Redeemable noncontrolling interests on the Company’s Consolidated Balance Sheets.

(2)

These units are redeemable for cash by the holder or at the Company’s option, shares of the Company’s common stock at a ratio of 1:1 and are callable by the Company any time after April 3, 2026. These units are included in Noncontrolling interests on the Company’s Consolidated Balance Sheets.

 

During 2012, all 13,963 Class A Units were redeemed by the holder in cash. Additionally, during 2007, 30,000 units, or $1.1 million par value, of the Class B Units were redeemed and at the Company's option settled in cash. As of December 31, 2014 and 2013, noncontrolling interest relating to the remaining Class B Units was $26.4 million.

 

Noncontrolling interests also includes 138,015 convertible units issued during 2006 by the Company, which were valued at $5.3 million, including a fair market value adjustment of $0.3 million, related to an interest acquired in an office building located in Albany, NY. These units are currently redeemable at the option of the holder for cash or at the option of the Company for the Company’s common stock at a ratio of 1:1. The holder is entitled to a distribution equal to the dividend rate of the Company’s common stock. The Company is restricted from disposing of these assets, other than through a tax free transaction, until January 2017.

 

The following table presents the change in the redemption value of the Redeemable noncontrolling interests for the years ended December 31, 2014 and 2013 (in thousands):

 

		2014				2013
Balance at January 1,		$	86,153			$	81,076
Issuance of redeemable partnership interests (1) (2)			4,943				5,223
Unit redemptions			-				-
Fair market value adjustment, net			225				(225	)
Other			159				79
Balance at December 31,		$	91,480			$	86,153

 

(1) During the year ended December 31, 2014, the Company acquired a 65.4% controlling ownership interest in an operating property and the seller retained a 34.6% noncontrolling interest in the property. The partner has the ability to put its partnership interest to the Company at any time after March 2015. As such, the Company has recorded the partners’ share of the property’s fair value of $4.9 million as Redeemable noncontrolling interests

 

(2) During the year ended December 31, 2013, the Company issued 5,223 redeemable units valued at $5.2 million relating to the acquisition of an operating property. These units are redeemable at the option of the holder after one year from issuance and earn a yield of 6% per annum.

 

15.  Fair Value Disclosure of Financial Instruments:

 

All financial instruments of the Company are reflected in the accompanying Condensed Consolidated Balance Sheets at amounts which, in management’s estimation based upon an interpretation of available market information and valuation methodologies, reasonably approximate their fair values except those listed below, for which fair values are disclosed.  The valuation method used to estimate fair value for fixed-rate and variable-rate debt is based on discounted cash flow analyses, with assumptions that include credit spreads, market yield curves, trading activity, loan amounts and debt maturities.  The fair values for marketable securities are based on published values, securities dealers’ estimated market values or comparable market sales.  Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

As a basis for considering market participant assumptions in fair value measurements, the FASB’s Fair Value Measurements and Disclosures guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

 

The following are financial instruments for which the Company’s estimate of fair value differs from the carrying amounts (in thousands):

 

		December 31,
		2014								2013
		Carrying Amounts				Estimated Fair Value				Carrying Amounts				Estimated Fair Value
Marketable Securities (1)		$	90,235			$	90,035			$	62,766			$	62,824
Notes Payable (2)		$	3,192,167			$	3,334,361			$	3,186,047			$	3,333,614
Mortgages Payable (3)		$	1,428,131			$	1,485,041			$	1,035,354			$	1,083,801

 

(1) As of December 31, 2014 and 2013, the Company determined that $87.7 million and $59.7 million respectively, of the Marketable securities estimated fair value were classified within Level 1 of the fair value hierarchy and the remaining $2.3 million and $3.1 million, respectively, were classified within Level 3 of the fair value hierarchy.

(2) The Company determined that its valuation of these Notes Payable was classified within Level 2 of the fair value hierarchy. 

(3) The Company determined that its valuation of these Mortgages Payable was classified within Level 3 of the fair value hierarchy. 

 

The Company has available for sale securities that must be measured under the FASB’s Fair Value Measurements and Disclosures guidance. The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.

 

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

 

The Company from time to time has used interest rate swaps to manage its interest rate risk. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).  The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.  Based on these inputs, the Company has determined that interest rate swap valuations are classified within Level 2 of the fair value hierarchy.

 

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2014 and 2013, aggregated by the level in the fair value hierarchy within which those measurements fall.

 

Assets measured at fair value on a recurring basis at December 31, 2014 and 2013 (in thousands):

 

		Balance at December 31, 2014				Level 1				Level 2				Level 3
Assets:
Marketable equity securities		$	87,659			$	87,659			$	-			$	-
Liabilities:
Interest rate swaps		$	1,404			$	-			$	1,404			$	-

 

		Balance at December 31, 2013				Level 1				Level 2				Level 3
Marketable equity securities		$	59,723			$	59,723			$	-			$	-

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

Assets measured at fair value on a non-recurring basis at December 31, 2014 and 2013 are as follows (in thousands):

 

		Balance at December 31, 2014				Level 1				Level 2				Level 3
Real estate		$	80,270			$	-			$	-			$	80,270

 

		Balance at December 31, 2013				Level 1				Level 2				Level 3
Real estate		$	217,529			$	-			$	-			$	217,529
Joint venture investments		$	59,693			$	-			$	-			$	59,693
Other real estate investments		$	2,050			$	-			$	-			$	2,050
Cost method investment		$	4,670			$	-			$	-			$	4,670

 

During the year ended December 31, 2014, the Company recognized impairment charges of $217.8 million, of which $178.0 million, before income tax benefits of $1.7 million, is included in discontinued operations. These impairment charges consist of (i) $118.4 million related to adjustments to property carrying values, (ii) the release of cumulative foreign currency translation loss of $92.9 million relating to the substantial liquidation of the Company’s investment in Mexico, (iii) $4.8 million related to a cost method investment and (iv) $1.6 million related to a preferred equity investment. During the year ended December 31, 2013, the Company recognized impairment charges of $190.2 million, of which $158.0 million, before income taxes, is included in discontinued operations. These impairment charges consist of (i) $175.6 million related to adjustments to property carrying values, (ii) $10.4 million related to a cost method investment, (iii) $1.0 million related to certain joint venture investments and (iv) $3.2 million related to a preferred equity investment.

 

The adjustments to property carrying values were recognized in connection with the Company’s efforts to market certain properties and management’s assessment as to the likelihood and timing of such potential transactions and the anticipated hold period for such properties. During the second quarter ended June 30, 2014, the Company implemented a plan to accelerate its disposition of certain U.S. non-strategic properties. This plan effectively shortened the Company’s anticipated hold period for these properties and as a result the Company recognized impairment charges on certain operating properties.

 

The Company’s estimated fair values for the year ended December 31, 2014, as it relates to property carrying values were primarily based upon (i) estimated sales prices from third party offers based on signed contracts or letters of intent (this method was used to determine $88.2 million of the $118.4 million in impairments recognized during the year ended December 31, 2014), for which the Company does not have access to the unobservable inputs used to determine these estimated fair values, and (ii) discounted cash flow models (this method was used to determine $30.2 million of the $118.4 million in impairments recognized during the year ended December 31, 2014). The discounted cash flow models include all estimated cash inflows and outflows over a specified holding period. These cash flows were comprised of unobservable inputs which include forecasted revenues and expenses based upon market conditions and expectations for growth. The capitalization rates primarily ranging from 7.0% to 12.5% and discount rates primarily ranging from 7.5% to 13.5% which were utilized in the models were based upon observable rates that the Company believes to be within a reasonable range of current market rates for each respective investments.

 

The Company’s estimated fair value as it relates to the cost method investment, was based upon a discounted cash flow model. The discounted cash flow model includes all estimated cash inflows and outflows over a specified holding period. These cash flows were comprised of unobservable inputs which include forecasted revenues and expenses based upon market conditions and expectations for growth. The capitalization rate of 6.0% and discount rate of 9.1% which were utilized in this model were based upon observable rates that the Company believes to be within a reasonable range of current market rates for the respective investment.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

The Company’s estimated fair values for the year ended December 31, 2013, were primarily based upon (i) estimated sales prices from third party offers based on signed contracts relating to property carrying values and joint venture investments and (ii) a discounted cash flow model relating to the Company’s cost method investment. The Company does not have access to the unobservable inputs used by the third parties to determine these estimated fair values. The discounted cash flows model includes all estimated cash inflows and outflows over a specified holding period. These cash flows were comprised of unobservable inputs which include forecasted revenues and expenses based upon market conditions and expectations for growth. The capitalization rate of 6.0% and discount rate of 9.5% which were utilized in this model were based upon observable rates that the Company believes to be within a reasonable range of current market rates for the respective investments.

 

Based on these inputs the Company determined that its valuation of these investments was classified within Level 3 of the fair value hierarchy. The property carrying value impairment charges resulted from the Company’s efforts to market certain assets and management’s assessment as to the likelihood and timing of such potential transactions.

 

 

16.  Preferred Stock, Common Stock and Convertible Unit Transactions –

 

Preferred Stock –

 

The Company’s outstanding Preferred Stock is detailed below (in thousands, except share information and par values):

 

As of December 31, 2014 and 2013
Series of Preferred Stock		Shares Authorized				Shares Issued and Outstanding				Liquidation Preference				Dividend Rate				Annual Dividend per Depositary Share				Par Value
Series H			70,000				70,000			$	175,000				6.90	%		$	1.72500			$	1.00
Series I			18,400				16,000				400,000				6.00	%		$	1.50000			$	1.00
Series J			9,000				9,000				225,000				5.50	%		$	1.37500			$	1.00
Series K			8,050				7,000				175,000				5.625	%		$	1.40625			$	1.00
			105,450				102,000			$	975,000

 

Series of Preferred Stock		Date Issued		Depositary Shares Issued			Fractional Interest per Share		Net Proceeds, After Expenses (in millions)				Offering/ Redemption Price			Optional Redemption Date
Series H (1)		8/30/2010			7,000,000		1/100		$	169.2			$	25.00		8/30/2015
Series I (2)		3/20/2012			16,000,000		1/1000		$	387.2			$	25.00		3/20/2017
Series J (3)		7/25/2012			9,000,000		1/1000		$	217.8			$	25.00		7/25/2017
Series K (4)		12/7/2012			7,000,000		1/1000		$	169.1			$	25.00		12/7/2017

(1)

The net proceeds received from this offering were used to repay $150.0 million in mortgages payable and for general corporate purposes.

(2)

The net proceeds received from this offering were used for general corporate purposes, including the reduction of borrowings outstanding under the Company’s revolving credit facility and the redemption of shares of the Company’s preferred stock.

(3)

The net proceeds received from this offering were used for the redemption of all the outstanding depositary shares representing the Company’s Class F preferred stock, which redemption occurred on August 15, 2012, as discussed below, with the remaining proceeds used towards the redemption of outstanding depositary shares representing the Company’s Class G preferred stock, which redemption occurred on October 10, 2012, as discussed below, and general corporate purposes.

(4)

The net proceeds received from this offering were used for general corporate purposes, including funding towards the repayment of maturing Senior Unsecured Notes.

 

The following Preferred Stock series were redeemed during the year ended December 31, 2012:

 

Series of Preferred Stock		Date Issued		Depositary Shares Issued				Redemption Amount (in millions)				Offering/ Redemption Price					Optional Redemption Date		Actual Redemption Date
Series F (1)		6/5/2003			7,000,000			$	175.0			$			25.00		6/5/2008		8/15/2012
Series G (2)		10/10/2007			18,400,000			$	460.0			$			25.00		10/10/2012		10/10/2012

 

(1)

In connection with this redemption the Company recorded a non-cash charge of $6.2 million resulting from the difference between the redemption amount and the carrying amount of the Class F Preferred Stock on the Company’s Consolidated Balance Sheets in accordance with the FASB’s guidance on Distinguishing Liabilities from Equity. The $6.2 million was subtracted from net income to arrive at net income available to common shareholders and is used in the calculation of earnings per share for the year ended December 31, 2012.

(2)

In connection with this redemption the Company recorded a non-cash charge of $15.5 million resulting from the difference between the redemption amount and the carrying amount of the Class G Preferred Stock on the Company’s Consolidated Balance Sheets in accordance with the FASB’s guidance on Distinguishing Liabilities from Equity. The $15.5 million was subtracted from net income to arrive at net income available to common shareholders and is used in the calculation of earnings per share for the year ended December 31, 2012.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

The Company’s Preferred Stock Depositary Shares for all series are not convertible or exchangeable for any other property or securities of the Company. 

 

Voting Rights - The Class H Preferred Stock, Class I Preferred Stock, Class J Preferred Stock and Class K Preferred Stock rank pari passu as to voting rights, priority for receiving dividends and liquidation preference as set forth below.

 

As to any matter on which the Class H Preferred Stock may vote, including any actions by written consent, each share of the Class H Preferred Stock shall be entitled to 100 votes, each of which 100 votes may be directed separately by the holder thereof. With respect to each share of Class H Preferred Stock, the holder thereof may designate up to 100 proxies, with each such proxy having the right to vote a whole number of votes (totaling 100 votes per share of Class H Preferred Stock). As a result, each Class H Depositary Share is entitled to one vote.

 

As to any matter on which the Class I, J, or K Preferred Stock may vote, including any actions by written consent, each share of the Class I, J or K Preferred Stock shall be entitled to 1,000 votes, each of which 1,000 votes may be directed separately by the holder thereof. With respect to each share of Class I, J or K Preferred Stock, the holder thereof may designate up to 1,000 proxies, with each such proxy having the right to vote a whole number of votes (totaling 1,000 votes per share of Class I, J or K Preferred Stock). As a result, each Class I, J or K Depositary Share is entitled to one vote.

 

Liquidation Rights –

 

In the event of any liquidation, dissolution or winding up of the affairs of the Company, preferred stock holders are entitled to be paid, out of the assets of the Company legally available for distribution to its stockholders, a liquidation preference of $2,500.00 Class H Preferred Stock per share, $25,000.00 Class I Preferred Stock per share, $25,000.00 Class J Preferred Stock per share and $25,000.00 Class K Preferred Stock per share ($25.00 per each Class H, Class I, Class J and Class K Depositary Share), plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribution of assets is made to holders of the Company’s common stock or any other capital stock that ranks junior to the preferred stock as to liquidation rights.

 

Common Stock –

 

The Company, from time to time, repurchases shares of its common stock in amounts that offset new issuances of common shares in connection with the exercise of stock options or the issuance of restricted stock awards. These share repurchases may occur in open market purchases, privately negotiated transactions or otherwise subject to prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. During 2014, 2013 and 2012, the Company repurchased 128,147 shares, 144,727 shares and 106,010 shares respectively, in connection with common shares surrendered to the Company to satisfy statutory minimum tax withholding obligations in connection with the vesting of restricted stock awards under the Company’s equity-based compensation plans. In addition, during the year ended December 31, 2012, the Company repurchased 1,635,823 shares of the Company’s common stock for $30.9 million, of which $22.6 million was provided to the Company from stock options exercised.

 

Convertible Units –

 

The Company has various types of convertible units that were issued in connection with the purchase of operating properties (see footnote 14). The amount of consideration that would be paid to unaffiliated holders of units issued from the Company’s consolidated subsidiaries which are not mandatorily redeemable, as if the termination of these consolidated subsidiaries occurred on December 31, 2014, is $41.0 million. The Company has the option to settle such redemption in cash or shares of the Company’s common stock. If the Company exercised its right to settle in Common Stock, the unit holders would receive 1.6 million shares of Common Stock.   

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

17.  Supplemental Schedule of Non-Cash Investing/Financing Activities:

 

The following schedule summarizes the non-cash investing and financing activities of the Company for the years ended December 31, 2014, 2013 and 2012 (in thousands):

		2014				2013				2012
Acquisition of real estate interests by assumption of mortgage debt		$	210,232			$	76,477			$	179,198
Acquisition of real estate interests through foreclosure		$	-			$	24,322			$	-
Acquisition of real estate interests by issuance of redeemable units/partnership interests		$	8,219			$	3,985			$	-
Acquisition of real estate interests through proceeds held in escrow		$	179,387			$	42,892			$	-
Proceeds held in escrow through sale of real estate interests		$	197,270			$	-			$	-
Disposition of real estate interest by assignment of mortgage debt		$	-			$	-			$	17,083
Disposition of real estate through the issuance of mortgage receivable		$	2,728			$	3,513			$	13,475
Investment in real estate joint venture through contribution of real estate		$	35,080			$	-			$	-
Decrease of noncontrolling interests through sale of real estate		$	17,650			$	-			$	-
Issuance of common stock		$	14,047			$	9,213			$	18,115
Surrender of common stock		$	(4,051	)		$	(3,891	)		$	(2,073	)
Declaration of dividends paid in succeeding period		$	111,143			$	104,496			$	96,518
Consolidation of Joint Ventures:
Increase in real estate and other assets		$	687,538			$	228,200			$	-
Increase in mortgage payable		$	492,318			$	206,489			$	-

 

18.  Transactions with Related Parties:

 

The Company provides management services for shopping centers owned principally by affiliated entities and various real estate joint ventures in which certain stockholders of the Company have economic interests. Such services are performed pursuant to management agreements which provide for fees based upon a percentage of gross revenues from the properties and other direct costs incurred in connection with management of the centers. Reference is made to Footnotes 3, 4, 7 and 19 for additional information regarding transactions with related parties.

 

Ripco Real Estate Corp. (“Ripco”) business activities include serving as a leasing agent and representative for national and regional retailers including Target, Best Buy, Kohls and many others, providing real estate brokerage services and principal real estate investing. Mr. Todd Cooper, an officer and 50% shareholder of Ripco, is a son of Mr. Milton Cooper, Executive Chairman of the Board of Directors of the Company. During 2014, 2013 and 2012, the Company paid brokerage commissions of $0.3 million, $0.6 million and $0.8 million, respectively, to Ripco for services rendered primarily as leasing agent for various national tenants in shopping center properties owned by the Company. The Company believes that the brokerage commissions paid were at or below the customary rates for such leasing services.

 

Additionally, the Company held joint venture investments with Ripco in which the Company and Ripco each held 50% noncontrolling interests. The Company accounted for its investment in these joint ventures under the equity method of accounting. During 2013, the one remaining joint venture investment with Ripco sold its only operating property for a sales price of $3.5 million, which was encumbered by a $2.8 million loan, which was guaranteed by the Company. As a result of this transaction the loan was fully repaid and the Company was relieved of the corresponding debt guarantee on the loan. As such, as of December 31, 2013 the Company no longer held any joint venture investments with Ripco.

 

ProHEALTH is a multi-specialty physician group practice offering one-stop health care. ProHEALTH’s CEO, Dr. David Cooper, M.D. is a son of Milton Cooper, Executive Chairman of the Company.  ProHEALTH and or its affiliates (“ProHEALTH”) have leasing arrangements with the Company whereby four property locations are currently under lease.  Total annual base rent for properties leased to ProHEALTH for the years ended December 31, 2014, 2013 and 2012 aggregated $0.7 million, $0.1 and $0.1 million, respectively.  The Company determined that the leasing terms for these leases are consistent with fair market rental values and that the transactions, taken as a whole, are no less favorable to the Company than terms available to an unaffiliated third party under similar circumstances.   

  

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

19.  Commitments and Contingencies:

 

Operations -

 

The Company and its subsidiaries are primarily engaged in the operation of shopping centers that are either owned or held under long-term leases that expire at various dates through 2095. The Company and its subsidiaries, in turn, lease premises in these centers to tenants pursuant to lease agreements which provide for terms ranging generally from 5 to 25 years and for annual minimum rentals plus incremental rents based on operating expense levels and tenants' sales volumes. Annual minimum rentals plus incremental rents based on operating expense levels and percentage rents comprised 99% of total revenues from rental property for each of the three years ended December 31, 2014, 2013 and 2012.

 

The future minimum revenues from rental property under the terms of all non-cancelable tenant leases, assuming no new or renegotiated leases are executed for such premises, for future years are as follows (in millions): 2015, $749.5; 2016, $683.6; 2017, $589.6; 2018, $490.1; 2019, $402.1 and thereafter; $1,849.2.

 

Base rental revenues from rental property are recognized on a straight-line basis over the terms of the related leases. The difference between the amount of rental income contracted through leases and rental income recognized on a straight-line basis before allowances for the years ended December 31, 2014, 2013 and 2012 was $8.4 million, $4.8 million and $6.2 million, respectively.

 

Minimum rental payments under the terms of all non-cancelable operating leases pertaining to the Company’s shopping center portfolio for future years are as follows (in millions): 2015, $13.2; 2016, $12.5; 2017, $11.6; 2018, $10.3; 2019, $10.4 and thereafter, $164.8.

 

Guarantees –

 

On a select basis, the Company had provided guarantees on interest bearing debt held within real estate joint ventures. The Company is often provided with a back-stop guarantee from its partners. The Company had the following outstanding guarantees as of December 31, 2014 (amounts in millions):

 

Name of Joint Venture

Amount of Guarantee

Interest rate

Maturity, with extensions

Terms

Type of debt

InTown Suites Management, Inc.

$

139.7

LIBOR plus 1.15%

2015

(1)

Unsecured credit facility

Victoriaville

$

2.1

3.92%

2020

Jointly and severally with partner

Promissory note

Anthem K -12, LP

$

42.2

Various (2)

Various (2)

Jointly and severally with partner

Promissory notes

 

(1)

During June 2013, the Company sold its unconsolidated investment in the InTown portfolio for a sales price of $735.0 million which included the assignment of $609.2 million in debt. This transaction resulted in a deferred gain to the Company of $21.7 million. The Company continues to maintain its guarantee of a portion of the debt assumed by the buyer ($139.7 million as of December 31, 2014). The guarantee is collateralized by the buyer’s ownership interest in the portfolio. Additionally, the Company has entered into a commitment to provide financing up to the outstanding amount of the guaranteed portion of the loan for five years past the date of maturity. This commitment can be in the form of extensions with the current lender or a new lender or financing directly from the Company to the buyer. On February 24, 2015, the outstanding debt balance of $139.7 million was fully repaid and as such, the Company was relieved of its related commitments and guarantee. As a result, the Company will recognize the deferred gain of $21.7 million during the first quarter of 2015.

(2)	As of December 31, 2014, the interest rates range from 3.62% to 4.97% and maturity dates with extensions range from 2015 to 2022.

 

The Company evaluated these guarantees in connection with the provisions of the FASB’s Guarantees guidance and determined that the impact did not have a material effect on the Company’s financial position or results of operations.

 

Letters of Credit -

 

The Company has issued letters of credit in connection with the completion and repayment guarantees for loans encumbering certain of the Company’s redevelopment projects and guaranty of payment related to the Company’s insurance program. At December 31, 2014, these letters of credit aggregated $24.9 million.

 

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 December 31, 2014, there were $22.0 million in performance and surety bonds outstanding.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

On January 28, 2013, the Company received a subpoena from the Enforcement Division of the SEC in connection with an investigation, In the Matter of Wal-Mart Stores, Inc. (FW-3678), that the SEC Staff is currently conducting with respect to possible violations of the Foreign Corrupt Practices Act. The Company is responding to the subpoena and intends to cooperate fully with the SEC in this matter. The U.S. Department of Justice (“DOJ”) is conducting a parallel investigation, and the Company is cooperating with the DOJ investigation. At this point, we are unable to predict the duration, scope or result of the SEC or DOJ investigation.

 

The Company is subject to various other legal proceedings and claims that arise in the ordinary course of business. Management believes that the final outcome of such matters will not have a material adverse effect on the financial position, results of operations or liquidity of the Company as of December 31, 2014.

 

 

20.  Incentive Plans:

 

The Company accounts for equity awards in accordance with FASB’s Compensation – Stock Compensation guidance which requires that all share based payments to employees, including grants of employee stock options, restricted stock and performance shares, be recognized in the Statement of Income over the service period based on their fair values. Fair value is determined, depending on the type of award, using either the Black-Scholes option pricing formula or the Monte Carlo method for performance shares, both of which are intended to estimate the fair value of the awards at the grant date. Fair value of restricted shares is calculated based on the price on the date of grant.

 

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing formula.  The assumption for expected volatility has a significant effect on the grant date fair value.  Volatility is determined based on the historical equity of common stock for the most recent historical period equal to the expected term of the options plus an implied volatility measure.  The expected term is determined using the simplified method due to the lack of exercise and cancelation history for the current vesting terms. During 2014, the Company did not grant any stock options. The more significant assumptions underlying the determination of fair values for options granted during 2013 and 2012 were as follows:

 

		Year Ended December 31,
		2013				2012
Weighted average fair value of options granted		$	5.04			$	4.52
Weighted average risk-free interest rates			1.46	%			1.04	%
Weighted average expected option lives (in years)			6.25				6.25
Weighted average expected volatility			35.95	%			37.53	%
Weighted average expected dividend yield			3.85	%			3.94	%

 

Information with respect to stock options under the Plan for the years ended December 31, 2014, 2013, and 2012 are as follows:

 

		Shares				Weighted- Average Exercise Price Per Share				Aggregate Intrinsic Value (in millions)
Options outstanding, January 1, 2012			17,110,592			$	28.14			$	8.0
Exercised			(1,495,432	)		$	19.84
Granted			1,522,450			$	18.78
Forfeited			(579,613	)		$	28.73
Options outstanding, December 31, 2012			16,557,997			$	28.42			$	14.9
Exercised			(1,636,300	)		$	23.15
Granted			1,354,250			$	21.55
Forfeited			(901,802	)		$	31.38
Options outstanding, December 31, 2013			15,374,145			$	28.79			$	13.1
Exercised			(1,474,432	)		$	16.19
Forfeited			(2,005,952	)		$	28.68
Options outstanding, December 31, 2014			11,893,761			$	30.23			$	29.8
Options exercisable (fully vested)-
December 31, 2012			12,830,255			$	31.57			$	7.7
December 31, 2013			12,039,439			$	31.24			$	8.2
December 31, 2014			10,159,570			$	31.96			$	19.9

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

The exercise prices for options outstanding as of December 31, 2014, range from $11.54 to $53.14 per share. The Company estimates forfeitures based on historical data. The weighted-average remaining contractual life for options outstanding as of December 31, 2014, was 3.9 years. The weighted-average remaining contractual term of options currently exercisable as of December 31, 2014, was 3.4 years. Options to purchase 9,251,021, 8,049,534 and 8,871,495, shares of the Company’s common stock were available for issuance under the Plan at December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, the Company had 1,734,191 options expected to vest, with a weighted-average exercise price per share of $20.11 and an aggregate intrinsic value of $9.9 million.

 

Cash received from options exercised under the Plan was $23.9 million, $30.2 million and $22.6 million for the years ended December 31, 2014, 2013 and 2012, respectively. The total intrinsic value of options exercised during 2014, 2013 and 2012, was $9.4 million, $7.6 million, and $7.0 million, respectively.

 

As of December 31, 2014, 2013 and 2012, the Company had restricted shares outstanding of 1,911,145, 1,591,082 and 1,562,912, respectively. Information with respect to restricted stock under the Plan for the years ended December 31, 2014, 2013, and 2012 are as follows:

 

		2014				2013				2012
Restricted stock outstanding as of January 1,			1,591,082				1,562,912				832,726
Granted			804,465				549,263				1,093,423
Vested			(418,309	)			(430,378	)			(357,987	)
Forfeited			(66,093	)			(90,715	)			(5,250	)
Restricted stock outstanding as of December 31,			1,911,145				1,591,082				1,562,912

 

As of December 31, 2014, 2013 and 2012, the Company had performance share awards outstanding of 171,400, 185,200 and 197,700, respectively. The more significant assumptions underlying the determination of fair values for these awards granted during 2014, 2013 and 2012 were as follows:

 

		Year Ended December 31,
		2014				2013				2012
Stock price		$	21.49			$	21.54			$	18.78
Dividend yield			0	%			0	%			0	%
Risk-free rate			0.65	%			0.14	%			0.16	%
Volatility			25.93	%			16.90	%			38.31	%
Term of the award (years)			0.88, 1.88, 2.88				0.88				0.87

 

The Company recognized expense associated with its equity awards of $17.9 million, $18.9 million and $17.9 million, for the years ended December 31, 2014, 2013 and 2012, respectively.  As of December 31, 2014, the Company had $25.7 million of total unrecognized compensation cost related to unvested stock compensation granted under the Plans.  That cost is expected to be recognized over a weighted average period of 3.0 years.

 

The Company maintains a 401(k) retirement plan covering substantially all officers and employees, which permits participants to defer up to the maximum allowable amount determined by the Internal Revenue Service of their eligible compensation. This deferred compensation, together with Company matching contributions, which generally equal employee deferrals up to a maximum of 5% of their eligible compensation (capped at $170,000 per the plan), is fully vested and funded as of December 31, 2014. The Company’s contributions to the plan were $2.2 million, $2.1 million, and $2.1 million for the years ended December 31, 2014, 2013 and 2012, respectively.

 

The Company recognized severance costs associated with employee terminations during the years ended December 31, 2014, 2013 and 2012 of $6.3 million, $4.3 million and $5.8 million, respectively.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

21.  Income Taxes:

 

The Company elected to qualify as a REIT in accordance with the Code commencing with its taxable year which began January 1, 1992. To qualify as a REIT, the Company must meet several organizational and operational requirements, including a requirement that it currently distribute at least 90% of its adjusted REIT taxable income to its stockholders. Management intends to adhere to these requirements and maintain the Company’s REIT status. As a REIT, the Company generally will not be subject to corporate federal income tax, provided that distributions to its stockholders equal at least the amount of its REIT taxable income. If the Company failed to qualify as a REIT in any taxable year, it would be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be permitted to elect REIT status for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company is subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed taxable income. In addition, taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to federal, state and local income taxes. The Company is also subject to local taxes on certain Non-U.S. investments.

 

Reconciliation between GAAP Net Income and Federal Taxable Income:

 

The following table reconciles GAAP net income to taxable income for the years ended December 31, 2014, 2013 and 2012 (in thousands):

 

		2014 (Estimated)				2013 (Actual)				2012 (Actual)
GAAP net income attributable to the Company		$	424,001			$	236,281			$	266,073
Less: GAAP net income of taxable REIT subsidiaries			(13,110	)			(5,950	)			(5,249	)
GAAP net income from REIT operations (a)			410,891				230,331				260,824
Net book depreciation in excess of tax depreciation			39,620				32,906				37,492
Capitalized leasing/legal commissions			(13,576	)			-				(12,986	)
Deferred/prepaid/above and below market rents, net			(20,487	)			(11,985	)			(16,050	)
Fair market value debt amortization			(7,419	)			(3,510	)			(2,977	)
Accounts receivable reserve			(681	)			(3,047	)			(741	)
Restricted stock			(1,078	)			(2,247	)			(200	)
Book/tax differences from non-qualified stock options			(5,144	)			(255	)			1,774
Book/tax differences from investments in real estate joint ventures			33,268				(11,928	)			60,441
Book/tax difference on sale of property			(152,613	)			36,896				(77,853	)
Foreign income tax from Mexico capital gains			(17,387	)			(31,130	)			-
Cumulative foreign currency translation adjustment & deferred tax adjustment			145,608				5,095				-
Book adjustment to property carrying values and marketable equity securities			93,956				22,811				2,656
Taxable currency exchange (loss)/gain, net			(73,138	)			(25,958	)			(2,620	)
Book/tax differences on capitalized costs			5,498				4,607				5,781
Repair regulation deduction			(95,033	)			-				-
Dividends from taxable REIT subsidiaries			66,745				2,980				2,304
GAAP change in control gain			(107,235	)			9,147				(15,555	)
Other book/tax differences, net			(1,052	)			(4,822	)			502
Adjusted REIT taxable income		$	300,743			$	249,891			$	242,792

 

Certain amounts in the prior periods have been reclassified to conform to the current year presentation, in the table above.

 

(a)  All adjustments to "GAAP net income from REIT operations" are net of amounts attributable to noncontrolling interest and taxable REIT subsidiaries.

 

Cash Dividends Paid and Dividends Paid Deductions (in thousands):

 

For the years ended December 31, 2014, 2013 and 2012 cash dividends paid exceeded the dividends paid deduction and amounted to $427,873, $400,354, and $382,722, respectively.

  

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

Characterization of Distributions:

 

The following characterizes distributions paid for the years ended December 31, 2014, 2013 and 2012, (in thousands):

		2014								2013								2012
Preferred F Dividends
Ordinary income		$	-				-	%		$	-				-	%		$	9,116				94	%
Capital gain			-				-	%			-				-	%			582				6	%
		$	-				-	%		$	-				-	%		$	9,698				100	%
Preferred G Dividends
Ordinary income		$	-				-	%		$	-				-	%		$	33,046				94	%
Capital gain			-				-	%			-				-	%			2,109				6	%
		$	-				-	%		$	-				-	%		$	35,155				100	%
Preferred H Dividends
Ordinary income		$	6,762				56	%		$	8,694				72	%		$	11,351				94	%
Capital gain			5,313				44	%			3,381				28	%			725				6	%
		$	12,075				100	%		$	12,075				100	%		$	12,076				100	%
Preferred I Dividends
Ordinary income		$	13,440				56	%		$	17,280				72	%		$	12,847				94	%
Capital gain			10,560				44	%			6,720				28	%			820				6	%
		$	24,000				100	%		$	24,000				100	%		$	13,667				100	%
Preferred J Dividends
Ordinary income		$	6,930				56	%		$	8,910				72	%		$	2,585				94	%
Capital gain			5,445				44	%			3,465				28	%			165				6	%
		$	12,375				100	%		$	12,375				100	%		$	2,750				100	%
Preferred K Dividends
Ordinary income		$	5,513				56	%		$	6,064				72	%		$	-				-	%
Capital gain			4,331				44	%			2,358				28	%			-				-	%
		$	9,844				100	%		$	8,422				100	%		$	-				-	%
Common Dividends
Ordinary income		$	133,048				36	%		$	158,001				46	%		$	222,751				72	%
Capital Gain			103,483				28	%			61,827				18	%			15,469				5	%
Return of capital			133,048				36	%			123,654				36	%			71,156				23	%
		$	369,579				100	%		$	343,482				100	%		$	309,376				100	%
Total dividends distributed		$	427,873							$	400,354							$	382,722

 

Taxable REIT Subsidiaries (“TRS”) and Taxable Entities:

 

The Company is subject to federal, state and local income taxes on income reported through its TRS activities, which include wholly owned subsidiaries of the Company. The Company’s TRS consists of Kimco Realty Services ("KRS"), which due to a merger on April 1, 2013 includes FNC Realty Corporation (“FNC”), and the consolidated entity, Blue Ridge Real Estate Company/Big Boulder Corporation.  On April 2, 2013, the Company contributed its interest in FNC to KRS and KRS acquired all of the outstanding stock of FNC in a reverse cash merger. The Company is also subject to local non-U.S. taxes on certain investments located outside the U.S. 

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

The Company is subject to taxes on its activities in Canada, Mexico, and Chile. In general, under local country law applicable to the structures the Company has in place and applicable treaties, the repatriation of cash to the Company from its subsidiaries and joint ventures in Canada and Mexico generally are not subject to withholding tax. The Company does not anticipate the need to repatriate foreign funds from Chile to provide for its cash flow needs in the U.S. and, as such, no significant withholding or transaction taxes are expected in the foreseeable future. The Company will be subject to withholding taxes in Chile on the distribution of any proceeds from sale transactions. 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 U.S. taxable REIT subsidiaries. Accordingly, the Company does not expect a U.S. income tax impact associated with the repatriation of undistributed earnings from the Company’s foreign subsidiaries.

 

Income taxes have been provided for on the asset and liability method as required by the FASB’s Income Tax guidance. Under the asset and liability method, deferred income taxes are recognized for the temporary differences between the financial reporting basis and the tax basis of taxable assets and liabilities.

 

The Company’s pre-tax book income/(loss) and (provision)/benefit for income taxes relating to the Company’s TRS and taxable entities which have been consolidated for accounting reporting purposes, for the years ended December 31, 2014, 2013, and 2012, are summarized as follows (in thousands):

 

		2014				2013				2012
Income/(loss) before income taxes – U.S.		$	22,176			$	(4,849	)		$	8,390
(Provision)/benefit for income taxes, net:
Federal :
Current			(522	)			(1,647	)			(503	)
Deferred			(7,156	)			9,725				(535	)
Federal tax (provision)/benefit			(7,678	)			8,078				(1,038	)
State and local:
Current			(165	)			1,159				(1,543	)
Deferred			(1,223	)			1,562				(560	)
State tax (provision)/benefit			(1,388	)			2,721				(2,103	)
Total tax (provision)/benefit – U.S.			(9,066	)			10,799				(3,141	)
Net income from U.S. taxable REIT subsidiaries		$	13,110			$	5,950			$	5,249
Income before taxes – Non-U.S.		$	116,184			$	188,215			$	33,842
(Provision)/benefit for Non-U.S. income taxes:
Current		$	(18,131	)		$	(30,102	)		$	5,790
Deferred			(6,749	)			2,045				1,239
Non-U.S. tax (provision)/benefit		$	(24,880	)		$	(28,057	)		$	7,029

 

The Company’s deferred tax assets and liabilities at December 31, 2014 and 2013, were as follows (in thousands):

 

		2014				2013
Deferred tax assets:
Tax/GAAP basis differences		$	68,702			$	50,133
Net operating losses			51,142				72,716
Related party deferred losses			3,843				6,214
Tax credit carryforwards			3,899				3,773
Capital loss carryforwards			3,995				3,867
Charitable contribution carryforwards			11				-
Non-U.S. tax/GAAP basis differences			10,566				50,920
Valuation allowance – U.S.			(25,045	)			(25,045	)
Valuation allowance – Non-U.S.			(9,257	)			(38,667	)
Total deferred tax assets			107,856				123,911
Deferred tax liabilities – U.S.			(25,503	)			(21,302	)
Deferred tax liabilities – Non-U.S.			(6,812	)			(11,367	)
Net deferred tax assets		$	75,541			$	91,242

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

As of December 31, 2014, the Company had net deferred tax assets of $75.5 million comprised of (i) $43.2 million relating to the difference between the basis of accounting for federal and state income tax reporting and GAAP reporting for real estate assets, joint ventures, and other investments, net of $25.5 million of deferred tax liabilities, (ii) $19.8 million and $6.3 million for the tax effect of net operating loss carryovers within KRS and FNC, respectively, net of a valuation allowance within FNC of $25.0 million, (iii) $3.8 million for losses deferred for federal and state income tax purposes for transactions with related parties, (iv) $3.9 million for tax credit carryovers, (v) $4.0 million for capital loss carryovers, and (vi) $1.3 million of deferred tax assets related to its investments in Canada and Latin America, net of a valuation allowance of $9.3 million and deferred tax liabilities of $6.8 million. General business tax credit carryovers of $1.5 million within KRS expire during taxable years from 2027 through 2033, and alternative minimum tax credit carryovers of $2.4 million do not expire.

 

The major differences between GAAP basis of accounting and the basis of accounting used for federal and state income tax reporting consist of impairment charges recorded for GAAP, but not recognized for tax purposes, depreciation and amortization, rental revenue recognized on the straight line method for GAAP, reserves for doubtful accounts, and the period in which certain gains were recognized for tax purposes, but not yet recognized under GAAP. The Company had foreign net deferred tax liabilities of $5.5 million, related to its operations in Canada and Latin America, which consists primarily of differences between the GAAP book basis and the basis of accounting applicable to the jurisdictions in which the Company is subject to tax.

 

Deferred tax assets and deferred tax liabilities are included in the caption Other assets and Other liabilities on the accompanying Consolidated Balance Sheets at December 31, 2014 and 2013. Operating losses and the valuation allowance are related primarily to the Company’s consolidation of its taxable REIT subsidiaries for accounting and reporting purposes. For the year ended December 31, 2014, KRS produced $27.4 million of taxable income and utilized $27.4 million of its $72.8 million net operating loss carryovers. For the year ended December 31, 2013, KRS produced $64.3 million of net operating loss carryovers which expire in 2033 and $10.0 million of capital loss carryforwards that expire in 2018. At December 31, 2014 and 2013, FNC had $94.4 million and $108.4 million, respectively, of net operating loss carryovers which expire from 2021 through 2024.

 

During 2013, the Company determined that a reduction of $8.7 million of the valuation allowance against FNC’s deferred tax assets was deemed appropriate based on expected future taxable income. The Company maintained a valuation allowance of $25.0 million within FNC to reduce the deferred tax asset of $42.5 million related to net operating loss carryovers to the amount the Company determined is more likely than not realizable. The Company analyzed projected taxable income and the expected utilization of FNC’s remaining net operating loss carryovers and determined a partial valuation allowance was appropriate.

 

The Company’s investments in Latin America are made through individual entities which are subject to local taxes. The Company assesses each entity to determine if deferred tax assets are more likely than not realizable. This assessment primarily includes an analysis of cumulative earnings and the determination of future earnings to the extent necessary to fully realize the individual deferred tax asset. Based on this analysis the Company has determined that a full valuation allowance is required for entities which have a three-year cumulative book loss and for which future earnings are not readily determinable. In addition, the Company has determined that no valuation allowance is needed for entities that have three-years of cumulative book income and future earnings are anticipated to be sufficient to more likely than not realize their deferred tax assets. At December 31, 2014, the Company had total deferred tax assets of $9.5 million relating to its Latin American investments with an aggregate valuation allowance of $9.3 million.

 

The Company’s deferred tax assets in Canada result principally from depreciation deducted under GAAP that exceed capital cost allowances claimed under Canadian tax rules. The deferred tax asset will naturally reverse upon disposition as tax basis will be greater than the basis of the assets under generally accepted accounting principles.

 

As of December 31, 2014, the Company determined that no valuation allowance was needed against a $65.5 million net deferred tax asset within KRS. The Company based its determination on an analysis of both positive evidence and negative evidence using its judgment as to the relative weight of each. The Company believes, when evaluating KRS’s deferred tax assets, special consideration should be given to the unique relationship between the Company as a REIT and KRS as a taxable REIT subsidiary. This relationship exists primarily to protect the REIT’s qualification under the Code by permitting, within certain limits, the REIT to engage in certain business activities in which the REIT cannot directly participate. As such, the REIT controls which and when investments are held in, or distributed or sold from, KRS. This relationship distinguishes a REIT and taxable REIT subsidiary from an enterprise that operates as a single, consolidated corporate taxpayer. The Company will continue through this structure to operate certain business activities in KRS.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

The Company’s analysis of KRS’s ability to utilize its deferred tax assets includes an estimate of future projected income. To determine future projected income, the Company scheduled KRS’s pre-tax book income and taxable income over a twenty year period taking into account its continuing operations (“Core Earnings”). Core Earnings consist of estimated net operating income for properties currently in service and generating rental income. Major lease turnover is not expected in these properties as these properties were generally constructed and leased within the past seven years. The Company can employ strategies to realize KRS’s deferred tax assets including transferring its property management business or selling certain built-in gain assets.

 

The Company’s projection of KRS’s future taxable income over twenty years, utilizing the assumptions above with respect to Core Earnings, net of related expenses, generates sufficient taxable income to absorb a reversal of the Company’s deductible temporary differences, including net operating loss carryovers. Based on this analysis, the Company concluded it is more likely than not that KRS’s net deferred tax asset of $65.5 million (excluding net deferred tax assets of FNC discussed above) will be realized and therefore, no valuation allowance is needed at December 31, 2014. If future income projections do not occur as forecasted or the Company incurs additional impairment losses in excess of the amount Core Earnings can absorb, the Company will reconsider the need for a valuation allowance.

 

Provision/(benefit) differ from the amounts computed by applying the statutory federal income tax rate to taxable income before income taxes as follows (in thousands):

 

		2014				2013				2012
Federal provision/(benefit) at statutory tax rate (35%)		$	7,762			$	(1,697	)		$	2,936
State and local provision/(benefit), net of federal benefit			1,304				(205	)			230
Acquisition of FNC			-				(9,126	)			-
Other			-				229				(25	)
Total tax provision/(benefit) – U.S.		$	9,066			$	(10,799	)		$	3,141

 

Uncertain Tax Positions:

 

The Company is subject to income tax in certain jurisdictions outside the U.S., principally Canada and Mexico.  The statute of limitations on assessment of tax varies from three to seven years depending on the jurisdiction and tax issue. Tax returns filed in each jurisdiction are subject to examination by local tax authorities.  The Company is currently under audit by the Canadian Revenue Agency, Mexican Tax Authority and the U.S. Internal Revenue Service (“IRS”).  In October 2011, the IRS issued a notice of proposed adjustment, which proposes pursuant to Section 482 of the Code, to disallow a capital loss claimed by KRS on the disposition of common shares of Valad Property Ltd., an Australian publicly listed company.  Because the adjustment is being made pursuant to Section 482 of the Code, the IRS believes it can assert a 100 percent “penalty” tax pursuant to Section 857(b)(7) of the Code and disallow the capital loss deduction. The notice of proposed adjustment indicates the IRS’ intention to impose the 100 percent “penalty” tax on the Company in the amount of $40.9 million and disallowing the capital loss claimed by KRS.  The Company and its outside counsel have considered the IRS' assessment and believe that there is sufficient documentation establishing a valid business purpose for the transfer, including recent case history showing support for similar positions. Accordingly, the Company strongly disagrees with the IRS’ position on the application of Section 482 of the Code to the disposition of the shares, the imposition of the 100 percent penalty tax and the simultaneous assertion of the penalty tax and disallowance of the capital loss deduction. The Company received a Notice of Proposed Assessment and filed a written protest and requested an IRS Appeals Office conference. An appeals hearing was attended by Management and its attorneys, the IRS Compliance Group and an IRS Appeals Officer in November, 2014, at which time IRS Compliance presented arguments in support of their position, as noted herein. Management and its attorneys presented rebuttal arguments in support of its position. The matter is currently under consideration by the Appeals Officer.  The Company intends to vigorously defend its position in this matter and believes it will prevail.

 

Resolutions of these audits are not expected to have a material effect on the Company’s financial statements. During 2013, the Company early adopted ASU 2013-11 prospectively and reclassified a portion of its reserve for uncertain tax positions. The reserve for uncertain tax positions included amounts related to the Company’s Canadian operations. The Company has unrecognized tax benefits reported as deferred tax assets and are available to settle adjustments made with respect to the Company’s uncertain tax positions in Canada. The Company reduced its reserve for uncertain tax positions by $12.3 million associated with its Canadian operations and reduced its deferred tax assets in accordance with ASU 2013-11. The Company does not believe that the total amount of unrecognized tax benefits as of December 31, 2014, will significantly increase or decrease within the next 12 months. As of December 31, 2014, the Company’s Canadian uncertain tax positions, which reduce its deferred tax assets, aggregated $10.4 million.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

The liability for uncertain tax benefits principally consists of estimated foreign, federal and state income tax liabilities in years for which the statute of limitations is open. Open years range from 2008 through 2014 and vary by jurisdiction and issue. The aggregate changes in the balance of unrecognized tax benefits for the years ended December 31, 2014 and 2013 were as follows (in thousands):

 

		2014				2013
Balance, beginning of year		$	4,590			$	16,890
Increases for tax positions related to current year			59				15
Reduction due to adoption of ASU 2013-11(a)			-				(12,315	)
Balance, end of year		$	4,649			$	4,590

 

(a) This amount was reclassified against the related deferred tax asset relating to the Company’s early adoption of ASU 2013-11 as discussed above.

 

22. Accumulated Other Comprehensive Income

 

The following table displays the change in the components of AOCI for the year ended December 31, 2014 and 2013:

 

		Foreign Currency Translation Adjustments					Unrealized Gains on Available-for- Sale Investments					Total
Balance as of January 1, 2013		$	(85,404	)			$	19,222				$	(66,182	)
Other comprehensive income before reclassifications			(10,668	)				16,205					5,537
Amounts reclassified from AOCI			5,095		(a)			(9,432	)	(b)			(4,337	)
Net current-period other comprehensive income			(5,573	)				6,773					1,200
Balance as of December 31, 2013		$	(90,977	)			$	25,995				$	(64,982	)

 

(a)     Amounts were reclassified to Impairment/loss on operating properties sold, net of tax, within Discontinued operations on the Company’s Consolidated Statements of Income, as a result of the full liquidation of the Company’s investment in Brazil.

 

(b)     Amounts were reclassified to Interest, dividends and other investment income on the Company’s Consolidated Statements of Income.

 

		Foreign Currency Translation Adjustments					Unrealized Gains on Available-for- Sale Investments				Unrealized Gain/(Loss) on Interest Rate Swaps				Total
Balance as of January 1, 2014		$	(90,977	)			$	25,995			$	-			$	(64,982	)
Other comprehensive income before reclassifications			(43,045	)				20,202				(1,404	)			(24,247	)
Amounts reclassified from AOCI			134,351		(c)			-				-				134,351
Net current-period other comprehensive income			91,306					20,202				(1,404	)			110,104
Balance as of December 31, 2014		$	329				$	46,197			$	(1,404	)		$	45,122

 
(c)     During 2014, the Company recognized a cumulative foreign currency translation loss as a result of the substantial liquidation of the Company’s investment in Mexico and Peru. Amounts were reclassified on the Company’s Consolidated Statements of Income as follows (i) $92.9 million of loss was reclassified to Impairment/loss on operating properties sold, net of tax, within Discontinued operations (ii) $47.3 million of loss was reclassified to Equity in income of joint ventures, net and (iii) $5.8 million of a loss was reclassified to Net income attributable to noncontrolling interest.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

At December 31, 2014, the Company had a net $0.3 million, of unrealized cumulative foreign currency translation adjustment (“CTA”) gains relating to its foreign entity investments in Canada and Chile. The CTA is comprised of $15.2 million of unrealized gains relating to its Canadian investments and $14.9 million of unrealized losses relating to its Chilean investment. CTA results from currency fluctuations between local currency and the U.S. dollar during the period in which the Company held its investment. CTA amounts are subject to future changes resulting from ongoing fluctuations in the respective foreign currency exchange rates. Under U.S. GAAP, the Company is required to release CTA balances into earnings when the Company has substantially liquidated its investment in a foreign entity. During 2013, the Company began selling properties within its Latin American portfolio and as such, the Company may, in the near term, substantially liquidate its remaining investment in Chile, which will require the then unrealized loss on foreign currency translation to be recognized as a charge against earnings.          

 

23.  Supplemental Financial Information:

 

The following represents the results of income, expressed in thousands except per share amounts, for each quarter during the years 2014 and 2013:

 

		2014 (Unaudited)
		Mar. 31				June 30				Sept. 30				Dec. 31
Revenues from rental properties (1)		$	219,152			$	237,432			$	246,555			$	255,749
Net income attributable to the Company		$	87,000			$	89,512			$	194,708			$	52,781
Net income per common share:
Basic		$	0.18			$	0.18			$	0.44			$	0.09
Diluted		$	0.18			$	0.18			$	0.44			$	0.09

 

		2013 (Unaudited)
		Mar. 31				June 30				Sept. 30				Dec. 31
Revenues from rental properties (1)		$	199,467			$	203,080			$	205,300			$	217,363
Net income attributable to the Company		$	67,770			$	51,139			$	55,763			$	61,609
Net income per common share:
Basic		$	0.13			$	0.09			$	0.10			$	0.11
Diluted		$	0.13			$	0.09			$	0.10			$	0.11

 

(1)   All periods have been adjusted to reflect the impact of operating properties sold during 2014 and 2013, which are reflected in the caption Discontinued operations on the accompanying Consolidated Statements of Income.

 

24.  Captive Insurance Company:

 

In October 2007, the Company formed a wholly-owned captive insurance company, Kimco Insurance Company, Inc., ("KIC"), which provides general liability insurance coverage for all losses below the deductible under our third-party policy. The Company entered into the Insurance Captive as part of its overall risk management program and to stabilize its insurance costs, manage exposure and recoup expenses through the functions of the captive program. The Company capitalized KIC in accordance with the applicable regulatory requirements. KIC established annual premiums based on projections derived from the past loss experience of the Company’s properties. KIC has engaged an independent third party to perform an actuarial estimate of future projected claims, related deductibles and projected expenses necessary to fund associated risk management programs. Premiums paid to KIC may be adjusted based on this estimate, like premiums paid to third-party insurance companies, premiums paid to KIC may be reimbursed by tenants pursuant to specific lease terms.

 

The Company assumes occurrence basis general liability coverage for the Company and its affiliates under the terms of the reinsurance agreement entered into by the Company and the reinsurance provider.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

From October 1, 2007 through October 1, 2015, KIC assumes 100% of the first $250,000 per occurrence risk layer. This coverage is subject to annual aggregates ranging between $7.8 million and $11.0 million per policy year. The annual aggregate is adjustable based on the amount of audited square footage of the insureds’ locations and can be adjusted for subsequent program years. Defense costs erode the stated policy limits. KIC is required to pay the reinsurance provider for unallocated loss adjustment expenses an amount ranging between 9.5% and 12.2% of incurred losses for the policy periods ending October 1, 2008 through October 1, 2015. These amounts do not erode the Company’s per occurrence or aggregate limits.

 

As of December 31, 2014 and 2013, the Company maintained an uncollateralized letter of credit in the amount of $22.0 million issued in favor of the reinsurance provider to provide security for the Company’s obligations under its agreement with the reinsurance provider. The letter of credit maintained as of December 31, 2014, has an expiration date of February 15, 2015, with automatic renewals for one year.

 

Activity in the liability for unpaid losses and loss adjustment expenses for the years ended December 31, 2014 and 2013, is summarized as follows (in thousands):

 

		2014				2013
Balance at the beginning of the year		$	17,602			$	19,884
Incurred related to:
Current year			7,281				6,679
Prior years			(1,671	)			(3,574	)
Total incurred			5,610				3,105
Paid related to:
Current year			(1,497	)			(475	)
Prior years			(3,637	)			(4,912	)
Total paid			(5,134	)			(5,387	)
Balance at the end of the year		$	18,078			$	17,602

 

As a result in changes in estimates in insured events in the prior years, incurred losses and loss adjustment expenses decreased for the years ended December 31, 2014 and 2013 by $1.7 million and $3.6 million, respectively, which was primarily due to continued regular favorable loss development on the general liability coverage assumed.

 

25.  Pro Forma Financial Information (Unaudited):

 

As discussed in Notes 3, 4 and 5, the Company and certain of its subsidiaries acquired and disposed of interests in certain operating properties during 2014. 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, 2014 and 2013, adjusted to give effect to these transactions at the beginning of 2013 and 2012, respectively.

 

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 had the transactions occurred at the beginning of 2013, nor does it purport to represent the results of income for future periods. (Amounts presented in millions, except per share figures.)

 

		Year ended December 31,
		2014				2013
Revenues from rental properties		$	1,012.5			$	954.6
Net income		$	431.5			$	394.7
Net income available to the Company’s common shareholders		$	363.4			$	323.4
Net income attributable to the Company’s common shareholders per common share:
Basic		$	0.89			$	0.79
Diluted		$	0.88			$	0.79

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

 

26.  Subsequent Events:

 

On February 2, 2015, the Company, through its wholly-owned subsidiary, KUBS Income Fund I L.P., purchased the remaining 66.7% interest in the 39-property Kimstone portfolio for a gross purchase price of $1.4 billion, including the assumption of $638.0 million in mortgage debt. The Company is evaluating this transaction pursuant to the FASB’s Consolidation guidance and as such anticipates recognizing a gain, due to a change in control, from the fair value adjustment associated with the Company’s original ownership, ranging from $130.0 million to $140.0 million.

 

The Company’s estimate of its purchase price allocation to the assets acquired and liabilities assumed is based upon their preliminary fair values at February 2, 2015. The fair values of the lease intangibles acquired were measured in a manner consistent with our purchase price allocation policy described in Footnote 1. The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed in the acquisition based upon the Company’s current best estimate. The Company is in the process of finalizing its assessment of the fair value of the assets acquired and liabilities assumed (in thousands).

 

Preliminary Purchase Price Allocation (Unaudited)
Land		$	377,319
Buildings			796,269
Below Market Rents			(62,109	)
Above Market Rents			30,588
In-Place Leases			142,598
Building Improvements			106,271
Tenant Improvements			20,785
Mortgage Fair Value Adjustment			(24,221	)
		$	1,387,500

The pro forma financial information set forth below is based upon the Company's historical Consolidated Statements of Income for the year ended December 31, 2014, adjusted to give effect to (i) acquisitions and dispositions of interests in certain operating properties during 2014 and (ii) the Kimstone transaction described above, as if these transactions occurred January 1, 2014.

 

Pro Forma Financial Information, amounts presented in millions, except per share figures (Unaudited):

 

			Year ended
			December 2014
Revenues from rental properties		$	1,123.8
Net income		$	425.6
Net income available to the Company’s common shareholders		$	357.6
Net income attributable to the Company’s common shareholders per common share:
Basic		$	0.87
Diluted		$	0.87

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

 

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

 

For Years Ended December 31, 2014, 2013 and 2012

(in thousands)

 

		Balance at beginning of period				Charged to expenses				Adjustments to valuation accounts				Deductions				Balance at end of period
Year Ended December 31, 2014
Allowance for uncollectable accounts		$	10,771			$	3,886			$	-			$	(4,289	)		$	10,368
Allowance for deferred tax asset		$	63,712			$	-			$	(29,410	)		$	-			$	34,302
Year Ended December 31, 2013
Allowance for uncollectable accounts		$	16,402			$	3,521			$	-			$	(9,152	)		$	10,771
Allowance for deferred tax asset		$	71,912			$	-			$	(8,200	)		$	-			$	63,712
Year Ended December 31, 2012
Allowance for uncollectable accounts		$	18,059			$	6,309			$	-			$	(7,966	)		$	16,402
Allowance for deferred tax asset		$	66,520			$	-			$	5,392			$	-			$	71,912

  

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 

DECEMBER 31, 2014

 

		INITIAL COST																												TOTAL COST,
		LAND				BUILDING & IMPROVEMENT				SUBSEQUENT TO ACQUISITION				LAND				BUILDING & IMPROVEMENT				TOTAL				ACCUMULATED DEPRECIATION				NET OF ACCUMULATED DEPRECIATION				ENCUMBRANCES				DATE OF ACQUISITION(A)				DATE OF CONSTRUCTION(C)
THE GROVE			18,951,763				6,403,809				28,634,088				15,575,865				38,413,795				53,989,660				4,816,207				49,173,453				-								2007
CHANDLER AUTO MALLS			9,318,595				-				(8,299,980	)			972,382				46,233				1,018,615				3,483				1,015,133				-								2004
EL MIRAGE			6,786,441				503,987				130,064				6,786,441				634,051				7,420,492				45,722				7,374,770				-								2008
TALAVI TOWN CENTER			8,046,677				17,291,542				6,040				8,046,677				17,297,582				25,344,258				9,546,644				15,797,614				-				2007
MESA PAVILIONS NORTH			6,060,018				35,955,005				261,536				6,060,018				36,216,541				42,276,559				6,674,858				35,601,701				-				2009
MESA RIVERVIEW			15,000,000				-				137,199,813				307,992				151,891,821				152,199,813				38,098,562				114,101,252				-								2005
MESA PAVILLIONS - SOUTH			-				148,508				16,146				-				164,654				164,654				77,215				87,439				-				2011
METRO SQUARE			4,101,017				16,410,632				995,691				4,101,017				17,406,323				21,507,340				7,420,535				14,086,805				-				1998
HAYDEN PLAZA NORTH			2,015,726				4,126,509				5,021,774				2,015,726				9,148,283				11,164,009				3,541,516				7,622,493				-				1998
PLAZA DEL SOL			5,324,501				21,269,943				1,062,567				4,577,869				23,079,141				27,657,011				7,083,121				20,573,890				-				1998
PLAZA @ MOUNTAINSIDE			2,450,341				9,802,046				1,408,537				2,450,341				11,210,583				13,660,924				5,003,756				8,657,168				-				1997
PINACLE PEAK- N. CANYON RANCH			1,228,000				8,774,694				20,500				1,228,000				8,795,194				10,023,194				2,515,517				7,507,678				1,044,362				2009
VILLAGE CROSSROADS			5,662,554				24,981,223				539,766				5,662,554				25,520,988				31,183,542				2,803,668				28,379,874				-				2011
NORTH VALLEY			6,861,564				18,200,901				5,604,983				3,861,272				26,806,176				30,667,448				2,914,122				27,753,326				15,425,784				2011
ASANTE RETAIL CENTER			8,702,635				3,405,683				2,865,559				11,039,472				3,934,405				14,973,877				264,060				14,709,817				-								2004
SURPRISE SPECTRUM			4,138,760				94,572				1,035				4,138,760				95,607				4,234,367				7,082				4,227,285				-								2008
BELL CAMINO CENTER			2,427,465				6,439,065				(21,392	)			2,427,465				6,417,673				8,845,138				1,082,584				7,762,554				-				2012
COLLEGE PARK SHOPPING CENTER			3,276,951				7,741,323				197,881				3,276,951				7,939,204				11,216,155				1,146,792				10,069,363				-				2011
COSTCO PLAZA - 541			4,995,639				19,982,557				472,587				4,995,639				20,455,144				25,450,783				8,802,317				16,648,466				-				1998
LAKEWOOD PLAZA			1,294,176				3,669,266				-				1,294,176				3,669,266				4,963,443				39,056				4,924,387				-				2014
MADISON PLAZA			5,874,396				23,476,190				1,496,060				5,874,396				24,972,250				30,846,646				10,330,317				20,516,329				-				1998
BROADWAY PLAZA - 544			6,460,743				25,863,153				11,771,368				6,460,743				37,634,521				44,095,264				13,938,775				30,156,489				-				1998
CORONA HILLS PLAZA			13,360,965				53,373,453				6,837,622				13,360,965				60,211,075				73,572,040				26,028,721				47,543,319				-				1998
LABAND VILLAGE SHOPPING CENTER			5,600,000				13,289,347				36,787				5,607,237				13,318,898				18,926,135				6,050,242				12,875,893				8,471,188				2008
CUPERTINO VILLAGE			19,886,099				46,534,919				11,861,337				19,886,099				58,396,256				78,282,355				16,818,162				61,464,193				-				2006
NORTH COUNTY PLAZA			10,205,305				28,934,219				13,461				10,205,305				28,947,680				39,152,984				398,429				38,754,555				30,947,741				2014
CHICO CROSSROADS			9,975,810				30,534,524				1,213,177				9,987,652				31,735,859				41,723,511				7,327,748				34,395,763				23,833,788				2008
CORONA HILLS MARKETPLACE			9,727,446				24,778,390				330,745				9,727,446				25,109,135				34,836,581				7,288,673				27,547,909				-				2007
RIVER PARK SHOPPING CENTER			4,324,000				18,018,653				1,136,480				4,324,000				19,155,133				23,479,133				2,964,121				20,515,011				-				2009
GOLD COUNTRY CENTER			3,272,212				7,864,878				37,687				3,278,290				7,896,487				11,174,777				2,802,238				8,372,539				6,711,090				2008
LA MIRADA THEATRE CENTER			8,816,741				35,259,965				(6,481,364	)			6,888,680				30,706,663				37,595,342				12,831,650				24,763,693				-				1998
KENNETH HAHN PLAZA			4,114,863				7,660,855				499,416				4,114,863				8,160,271				12,275,134				2,700,416				9,574,718				6,000,000				2010
LA VERNE TOWN CENTER			8,414,328				23,856,418				132,055				8,414,328				23,988,473				32,402,800				283,761				32,119,039				19,279,408				2014
NOVATO FAIR S.C.			9,259,778				15,599,790				403,509				9,259,778				16,003,298				25,263,076				4,175,520				21,087,557				-				2009
SOUTH NAPA MARKET PLACE			1,100,000				22,159,086				6,838,973				1,100,000				28,998,059				30,098,059				13,519,933				16,578,126				-				2006
PLAZA DI NORTHRIDGE			12,900,000				40,574,842				(21,375	)			12,900,000				40,553,467				53,453,467				12,915,656				40,537,811				-				2005
LINDA MAR SHPPING CENTER			16,548,592				37,521,194				-				16,548,592				37,521,194				54,069,786				1,567,425				52,502,361				-				2014
POWAY CITY CENTRE			5,854,585				13,792,470				7,773,023				7,247,814				20,172,265				27,420,078				7,150,417				20,269,661				-				2005
REDWOOD CITY PLAZA			2,552,000				6,215,168				-				2,552,000				6,215,168				8,767,168				843,048				7,924,120				-				2009
STANFORD RANCH			10,583,764				30,007,231				16,300				10,583,764				30,023,531				40,607,294				357,475				40,249,819				15,827,946				2014
TYLER STREET PLAZA			3,020,883				7,811,339				105,947				3,200,516				7,737,653				10,938,169				2,771,772				8,166,397				6,460,212				2008
HOME DEPOT PLAZA			4,592,364				18,345,257				-				4,592,364				18,345,257				22,937,622				7,902,816				15,034,806				-				1998
SAN/DIEGO CARMEL MOUNTAIN			5,322,600				8,873,991				28,508				5,322,600				8,902,499				14,225,099				1,775,448				12,449,651				-				2009
FULTON MARKET PLACE			2,966,018				6,920,710				972,435				2,966,018				7,893,145				10,859,163				2,686,485				8,172,678				-				2005
MARIGOLD SHOPPING CENTER			15,300,000				25,563,978				3,838,145				15,300,000				29,402,123				44,702,123				13,700,398				31,001,725				-				2005
CANYON SQUARE PLAZA			2,648,112				13,876,095				633,067				2,648,112				14,509,161				17,157,273				1,257,036				15,900,238				14,119,946				2013
BLACK MOUNTAIN VILLAGE			4,678,015				11,913,344				455,856				4,678,015				12,369,200				17,047,214				3,708,162				13,339,052				-				2007
CITY HEIGHTS			10,687,472				28,324,896				(987,362	)			13,908,563				24,116,443				38,025,006				1,441,055				36,583,951				20,885,186				2012
SANTEE TROLLEY SQUARE			40,208,683				62,204,580				5,310				40,208,683				62,209,890				102,418,573				7,836,454				94,582,119				-				2013
TRUCKEE CROSSROADS			2,140,000				8,255,753				925,899				2,140,000				9,181,653				11,321,653				5,044,938				6,276,715				2,829,081				2006
WESTLAKE SHOPPING CENTER			16,174,307				64,818,562				98,226,275				16,174,307				163,044,837				179,219,143				39,343,855				139,875,288				-				2002
LAKEWOOD VILLAGE			8,597,100				24,374,615				-				8,597,100				24,374,615				32,971,715				335,643				32,636,073				24,260,255				2014
SAVI RANCH			7,295,646				29,752,511				10,000				7,295,646				29,762,511				37,058,157				2,892,587				34,165,571				-				2012
VILLAGE ON THE PARK			2,194,463				8,885,987				6,217,522				2,194,463				15,103,509				17,297,972				5,004,590				12,293,382				-				1998
QUINCY PLACE S.C.			1,148,317				4,608,249				1,280,415				1,148,317				5,888,664				7,036,981				2,415,183				4,621,798				-				1998
EAST BANK S.C.			1,500,568				6,180,103				872,177				1,500,568				7,052,281				8,552,848				3,185,389				5,367,460				-				1998
NORTHRIDGE SHOPPING CENTER			4,932,690				16,496,175				599,365				8,934,385				13,093,846				22,028,231				750,076				21,278,155				11,581,555				2013
SPRING CREEK S.C.			1,423,260				5,718,813				(1,688,499	)			669,061				4,784,513				5,453,574				3,051,384				2,402,190				-				1998
DENVER WEST 38TH STREET			161,167				646,983				-				161,167				646,983				808,150				280,616				527,535				-				1998
ENGLEWOOD PLAZA			805,837				3,232,650				319,680				805,837				3,552,330				4,358,167				1,576,893				2,781,274				-				1998
FORT COLLINS S.C.			1,253,497				7,625,278				1,599,608				1,253,497				9,224,886				10,478,382				3,177,013				7,301,369				-				2000
GREELEY COMMONS			3,313,095				20,069,559				(22,740	)			3,313,095				20,046,819				23,359,914				2,177,258				21,182,656				-				2012
HIGHLANDS RANCH VILLAGE S.C.			8,135,427				21,579,936				(812,283	)			5,337,081				23,565,998				28,903,079				2,291,921				26,611,158				19,712,622				2011
VILLAGE CENTER WEST			2,010,519				8,361,084				21,574				2,010,519				8,382,658				10,393,177				917,584				9,475,593				5,882,591				2011
HIGHLANDS RANCH II			3,514,837				11,755,916				-				3,514,837				11,755,916				15,270,753				966,794				14,303,959				-				2013
HIGHLANDS RANCH PARCEL			1,140,000				2,660,000				-				1,140,000				2,660,000				3,800,000				13,300				3,786,700				-				2014
HERITAGE WEST S.C.			1,526,576				6,124,074				954,221				1,526,576				7,078,295				8,604,871				2,875,790				5,729,082				-				1998
MARKET AT SOUTHPARK			9,782,769				20,779,522				(664	)			9,782,769				20,778,858				30,561,627				2,568,522				27,993,105				-				2011
NEWTOWN S.C.			-				15,635,442				-				-				15,635,442				15,635,442				355,272				15,280,170				9,098,898				2014
WEST FARM SHOPPING CENTER			5,805,969				23,348,024				7,613,160				5,805,969				30,961,184				36,767,153				10,572,401				26,194,752				-				1998
HOME DEPOT PLAZA			7,704,968				30,797,640				1,079,979				7,704,968				31,877,619				39,582,587				13,478,446				26,104,141				-				1998
WILTON RIVER PARK SHOPPING CTR			7,154,585				27,509,279				(584,422	)			7,154,584				26,924,857				34,079,442				2,047,210				32,032,231				19,299,451				2012
BRIGHT HORIZONS			1,211,748				4,610,610				9,499				1,211,748				4,620,109				5,831,857				374,655				5,457,202				1,702,729				2012
WILTON CAMPUS			10,168,872				31,893,016				557,080				10,168,872				32,450,096				42,618,968				4,417,515				38,201,453				36,172,806				2013
CAMDEN SQUARE			122,741				66,738				4,087,567				3,024,375				1,252,672				4,277,046				103,325				4,173,721				-				2003
ELSMERE SQUARE			-				3,185,642				2,740,427				-				5,926,069				5,926,069				3,376,904				2,549,165				-								1979
PROMENADE AT CHRISTIANA			14,371,686				-				27,866				14,399,552				-				14,399,552				-				14,399,552				-								2014
BRANDYWINE COMMONS			-				36,057,487				-				-				36,057,487				36,057,487				974,871				35,082,616				-				2014
AUBURNDALE			751,315				-				(751,215	)			100				-				100				-				100				-				2009
CAMINO SQUARE			573,875				2,295,501				1,830,176				733,875				3,965,677				4,699,552				2,271,755				2,427,797				-				1992
BAYSHORE GARDENS			2,901,000				11,738,955				1,281,480				2,889,177				13,032,258				15,921,435				5,624,055				10,297,380				-				1998
CORAL SQUARE PROMENADE			710,000				2,842,907				3,877,939				710,000				6,720,846				7,430,846				3,130,199				4,300,647				-				1994
MAPLEWOOD PLAZA			1,649,000				6,626,301				1,153,237				1,649,000				7,779,538				9,428,538				3,159,937				6,268,601				-				1997
CURLEW CROSSING SHOPPING CTR			5,315,955				12,529,467				1,883,372				5,315,955				14,412,840				19,728,794				4,456,692				15,272,103				-				2005
SPORTS AUTHORITY PLAZA			491,676				1,440,000				4,612,511				1,007,882				5,536,305				6,544,187				2,628,193				3,915,993				-								1971
FT.LAUDERDALE/CYPRESS CREEK			14,258,760				28,042,390				2,078,485				14,258,760				30,120,875				44,379,635				7,021,309				37,358,326				-				2009
HOMESTEAD-WACHTEL LAND LEASE			150,000				-				-				150,000				-				150,000				-				150,000				-				2013
OAKWOOD BUSINESS CTR-BLDG 1			6,792,500				18,662,565				1,661,576				6,792,500				20,324,141				27,116,641				4,222,824				22,893,817				-				2009
AMELIA CONCOURSE			7,600,000				-				8,987,554				1,138,216				15,449,338				16,587,554				2,054,927				14,532,627				-								2003
KIMCO AVENUES WALK, LLC			26,984,546				-				49,780,386				33,225,306				43,539,626				76,764,932				-				76,764,932				-								2005
RIVERPLACE SHOPPING CTR.			7,503,282				31,011,027				1,263,373				7,200,050				32,577,632				39,777,682				6,427,782				33,349,899				-				2010
MERCHANTS WALK			2,580,816				10,366,090				6,290,220				2,580,816				16,656,309				19,237,126				5,477,361				13,759,765				-				2001
WAL-MART PLAZA			293,686				792,119				1,620,990				293,686				2,413,109				2,706,795				2,095,245				611,550				-								1968
LEESBURG SHOPS			-				171,636				193,651				-				365,287				365,287				316,469				48,818				-								1969
TRI-CITY PLAZA			2,832,296				11,329,185				6,713,466				2,832,296				18,042,651				20,874,947				9,084,891				11,790,056				-				1992
FT LAUDERDALE #1, FL			1,002,733				2,602,415				13,311,186				1,774,443				15,141,891				16,916,334				9,591,569				7,324,765				-								1974
LAKE WALES S.C.			601,052				-				-				601,052				-				601,052				-				601,052				-				2009
NASA PLAZA			-				1,754,000				2,666,332				-				4,420,332				4,420,332				3,139,081				1,281,252				-								1968
GROVE GATE S.C.			365,893				1,049,172				1,207,100				365,893				2,256,272				2,622,165				1,914,661				707,504				-								1968
CHEVRON OUTPARCEL			530,570				1,253,410				-				530,570				1,253,410				1,783,980				250,420				1,533,560				-				2010
IVES DAIRY CROSSING			732,914				4,080,460				11,006,213				732,914				15,086,673				15,819,587				8,514,012				7,305,575				5,946,213				1985
MILLER ROAD S.C.			1,138,082				4,552,327				4,535,974				1,138,082				9,088,302				10,226,383				5,526,281				4,700,102				-				1986
TRI-CITIES SHOPPING PLAZA			1,011,000				4,062,890				5,245,000				1,011,000				9,307,890				10,318,890				1,936,647				8,382,243				-				1997
KENDALE LAKES PLAZA			18,491,461				28,496,001				(2,241,121	)			15,362,227				29,384,113				44,746,340				5,449,760				39,296,581				-				2009
PLANTATION CROSSING			7,524,800				-				10,909,013				6,707,911				11,725,902				18,433,813				1,717,776				16,716,038				-								2005
MILTON, FL			1,275,593				-				-				1,275,593				-				1,275,593				-				1,275,593				-				2007
FLAGLER PARK			26,162,980				80,737,041				1,780,045				26,162,980				82,517,086				108,680,066				17,764,910				90,915,157				24,470,937				2007
PARK HILL PLAZA			10,763,612				19,264,248				28,078				10,763,612				19,292,327				30,055,938				2,914,492				27,141,447				7,640,345				2011
WINN DIXIE-MIAMI			2,989,640				9,410,360				(51,872	)			3,544,297				8,803,831				12,348,128				237,920				12,110,208				-				2013
MARATHON SHOPPING CENTER			2,412,929				8,069,450				614,415				1,514,731				9,582,063				11,096,794				388,968				10,707,826				-				2013
SODO S.C.			-				68,139,271				7,830,187				142,195				75,827,263				75,969,458				11,221,776				64,747,682				-				2008
RENAISSANCE CENTER			9,104,379				36,540,873				8,882,284				9,122,758				45,404,779				54,527,536				19,589,279				34,938,258				-				1998
MILLENIA PLAZA PHASE II			7,711,000				20,702,992				967,794				7,698,200				21,683,586				29,381,786				6,803,012				22,578,775				-				2009
GRAND OAKS VILLAGE			7,409,319				19,653,869				(706,149	)			5,846,339				20,510,700				26,357,039				2,479,038				23,878,001				5,813,854				2011
LOWES S.C.			1,620,203				-				40,689				954,876				706,016				1,660,892				94,135				1,566,757				-				2007
POMPANO BEACH			10,516,500				9,170,476				530,900				10,516,500				9,701,376				20,217,876				52,130				20,165,747				-				2012
UNIVERSITY TOWN CENTER			5,515,265				13,041,400				248,609				5,515,265				13,290,010				18,805,275				1,462,428				17,342,847				-				2011
PALM BEACH GARDENS			2,764,953				11,059,812				558,854				2,764,953				11,618,666				14,383,620				1,105,981				13,277,638				-				2009
OAK TREE PLAZA			-				917,360				1,266,811				-				2,184,171				2,184,171				1,204,030				980,141				-								1968
TUTTLEBEE PLAZA			254,961				828,465				1,841,942				254,961				2,670,407				2,925,368				2,093,919				831,448				-				2008
SOUTH EAST PLAZA			1,283,400				5,133,544				3,405,948				1,399,525				8,423,367				9,822,892				5,399,421				4,423,471				-				1989
SOUTH MIAMI S.C.			1,280,440				5,133,825				2,962,039				1,280,440				8,095,864				9,376,304				3,811,613				5,564,691				-				1995
WINN DIXIE-ST. AUGUSTINE			1,543,040				4,856,960				88,472				1,862,362				4,626,110				6,488,472				131,359				6,357,113				-				2013
CARROLLWOOD COMMONS			5,220,445				16,884,228				2,599,727				5,220,445				19,483,955				24,704,400				8,114,125				16,590,275				-				1997
VILLAGE COMMONS SHOPPING CENT.			2,192,331				8,774,158				2,781,462				2,192,331				11,555,619				13,747,951				4,746,004				9,001,947				-				1998
MISSION BELL SHOPPING CENTER			5,056,426				11,843,119				8,681,467				5,067,033				20,513,979				25,581,013				5,756,320				19,824,692				-				2004
VILLAGE COMMONS S.C.			2,026,423				5,106,476				1,450,555				2,026,423				6,557,031				8,583,455				1,054,061				7,529,394				-				2013
WINN DIXIE-TALLAHASSEE			1,253,720				3,946,280				127,893				1,459,079				3,868,814				5,327,893				110,298				5,217,595				-				2013
BELMART PLAZA			1,656,097				3,394,420				1,595,942				1,656,097				4,990,361				6,646,458				2,140				6,644,318				-				2014
AUGUSTA SQUARE			1,482,564				5,928,122				2,347,603				1,482,564				8,275,725				9,758,289				3,831,827				5,926,462				-				1995
MARKET AT HAYNES BRIDGE			4,880,659				21,549,424				922,613				4,889,863				22,462,832				27,352,695				5,326,197				22,026,498				15,570,842				2008
EMBRY VILLAGE			18,147,054				33,009,514				187,757				18,160,524				33,183,801				51,344,325				8,327,095				43,017,230				29,196,393				2008
VILLAGE SHOPPES-FLOWERY BRANCH			4,444,148				10,510,657				134,625				4,444,148				10,645,281				15,089,429				1,518,939				13,570,490				-				2011
LAWRENCEVILLE MARKET			8,878,266				29,691,191				(858,497	)			9,060,436				28,650,525				37,710,961				1,524,837				36,186,124				-				2013
FIVE FORKS CROSSING			2,363,848				7,906,257				15,000				2,363,848				7,921,257				10,285,105				664,564				9,620,541				-				2013
BRAELINN VILLAGE			7,314,719				20,738,792				-				7,314,719				20,738,792				28,053,512				-				28,053,512				-				2014
SAVANNAH CENTER			2,052,270				8,232,978				3,147,135				2,052,270				11,380,113				13,432,383				5,754,549				7,677,835				-				1993
CHATHAM PLAZA			13,390,238				35,115,882				1,416,989				13,403,262				36,519,847				49,923,110				10,977,250				38,945,860				27,973,341				2008
CLIVE PLAZA			500,525				2,002,101				-				500,525				2,002,101				2,502,626				971,105				1,531,521				-				1996
METRO CROSSING			3,013,647				-				37,206,165				1,514,916				38,704,896				40,219,812				3,803,183				36,416,629				-								2006
DUBUQUE CENTER			-				2,152,476				239,217				-				2,391,693				2,391,693				993,980				1,397,713				-				1997
TREASURE VALLEY			6,501,240				-				13,607,612				4,754,092				15,354,760				20,108,852				540,026				19,568,826				-								2005
BLOOMINGTON COMMONS			805,521				2,222,353				4,246,390				805,521				6,468,743				7,274,264				4,461,235				2,813,028				-								1972
NORTHFIELD SQUARE MALL			500,422				2,001,687				424,877				500,422				2,426,564				2,926,986				1,149,393				1,777,593				-				1996
CALUMET CITY-TACO BELL PARCEL			1,479,217				8,815,760				(9,194,977	)			330,000				770,000				1,100,000				-				1,100,000				-				1997
87TH STREET CENTER			-				2,687,046				879,948				-				3,566,994				3,566,994				1,626,034				1,940,960				-				1997
ELSTON CHICAGO			1,010,374				5,692,212				498,828				1,010,374				6,191,040				7,201,414				2,429,346				4,772,069				-				1997
CRYSTAL LAKE SHOPPING CENTER			179,964				1,025,811				384,683				180,269				1,410,189				1,590,458				501,571				1,088,887				-				1998
DOWNERS PARK PLAZA			2,510,455				10,164,494				1,878,719				2,510,455				12,043,213				14,553,668				4,721,629				9,832,039				-				1999
DOWNERS GROVE			811,778				4,322,956				3,348,460				811,778				7,671,416				8,483,194				2,964,198				5,518,996				-				1997
TOWN & COUNTRY S.C.			842,555				2,108,674				2,310,053				500,927				4,760,355				5,261,282				3,094,009				2,167,273				-								1972
FOREST PARK MALL			-				2,335,884				154,213				-				2,490,097				2,490,097				1,140,084				1,350,013				-				1997
FAIRVIEW CITY CENTRE			-				11,866,880				19,122,928				1,900,000				29,089,808				30,989,808				5,640,205				25,349,602				-				1998
RANDALL S.C.			500,422				12,917,712				33,551				500,422				12,951,263				13,451,685				5,588,284				7,863,401				-				1996
SHOPS AT KILDEER			5,259,542				28,141,501				482,807				5,259,542				28,624,309				33,883,851				2,259,291				31,624,560				31,683,664				2013
MOUNT PROSPECT CENTER			1,017,345				6,572,176				4,016,735				1,017,345				10,588,911				11,606,256				5,066,231				6,540,025				-				1997
MUNDELIEN SHOPPING CENTER			1,127,720				5,826,129				77,350				1,129,634				5,901,565				7,031,199				2,498,212				4,532,988				-				1998
NORRIDGE CENTER			-				2,918,315				-				-				2,918,315				2,918,315				2,918,315				-				-				1997
NAPER WEST PLAZA			669,483				4,464,998				467,447				669,483				4,932,445				5,601,928				2,017,696				3,584,232				-				1997
MARKETPLACE OF OAKLAWN			-				678,668				55,143				-				733,811				733,811				686,512				47,299				-				1998
ORLAND PARK S.C.			476,972				2,764,775				(2,694,903	)			87,998				458,846				546,844				189,146				357,698				-				1998
OAK LAWN CENTER			1,530,111				8,776,631				623,805				1,530,111				9,400,436				10,930,547				4,132,516				6,798,031				-				1997
22ND STREET PLAZA			1,527,188				8,679,108				3,298,212				1,527,188				11,977,320				13,504,508				4,965,347				8,539,161				-				1997
EVERGREEN SQUARE			-				5,081,290				2,403,560				-				7,484,850				7,484,850				7,474,693				10,157				-				1997
FREE STATE BOWLS			252,723				998,099				(485,425	)			252,723				512,674				765,396				134,667				630,729				-				2003
ROCKFORD CROSSINGS			4,575,990				11,654,022				(577,091	)			4,583,005				11,069,915				15,652,920				2,612,914				13,040,007				9,626,894				2008
SKOKIE POINTE			-				2,276,360				9,488,382				2,628,440				9,136,303				11,764,742				3,209,936				8,554,807				-				1997
STREAMWOOD S.C.			181,962				1,057,740				216,585				181,962				1,274,324				1,456,287				509,788				946,498				-				1998
HAWTHORN HILLS SQUARE			6,783,928				33,033,624				3,162,984				6,783,928				36,196,608				42,980,535				3,147,005				39,833,530				20,456,278				2012
WOODGROVE FESTIVAL			5,049,149				20,822,993				4,897,728				4,805,866				25,964,004				30,769,870				10,889,920				19,879,950				-				1998
GREENWOOD S.C.			423,371				1,883,421				9,656,624				1,801,822				10,161,594				11,963,416				3,645,968				8,317,447				-								1970
HOME DEPOT CENTER			1,183,911				6,335,308				142,374				1,185,906				6,475,686				7,661,593				2,691,802				4,969,790				-				1998
KROGER S.C.			405,217				1,743,573				872,204				405,217				2,615,776				3,020,994				1,896,581				1,124,413				-				1976
SOUTH PARK S.C.			1,675,031				6,848,209				6,181,100				1,551,079				13,153,261				14,704,340				6,713,448				7,990,892				-				1993
HAMMOND AIRE PLAZA			3,813,873				15,260,609				7,530,609				3,813,873				22,791,218				26,605,091				8,656,958				17,948,133				-				1997
CENTRE AT WESTBANK			9,554,230				24,401,082				1,194,990				9,564,644				25,585,658				35,150,302				7,190,972				27,959,329				18,600,000				2008
ACADIANA SQUARE			2,115,000				8,508,218				11,268,322				3,678,274				18,213,266				21,891,540				7,624,604				14,266,936				-				1997
PRIEN LAKE			6,426,167				15,181,072				(109,020	)			6,341,896				15,156,323				21,498,219				3,525,215				17,973,004				15,836,828				2010
PRIEN LAKE PLAZA OUTPARCEL			540,000				1,260,000				-				540,000				1,260,000				1,800,000				65,100				1,734,900				-				2012
AMBASSADOR PLAZA			1,803,672				4,260,966				(6,701	)			1,796,972				4,260,966				6,057,938				996,391				5,061,547				4,486,549				2010
BAYOU WALK			4,586,895				10,836,007				(4,151,723	)			3,076,020				8,195,160				11,271,179				2,560,276				8,710,904				12,390,148				2010
EAST SIDE PLAZA			3,295,799				7,785,942				550,993				3,295,635				8,337,099				11,632,733				1,871,165				9,761,569				8,556,878				2010
ABINGON PLAZA			10,457,183				494,652				-				10,457,183				494,652				10,951,835				22,357				10,929,478				4,644,492				2014
WASHINGTON ST.PLAZA			11,007,593				5,652,368				-				11,007,593				5,652,368				16,659,961				110,054				16,549,907				6,260,564				2014
MEMORIAL PLAZA			16,411,388				27,553,908				153,981				16,411,388				27,707,889				44,119,277				663,700				43,455,577				17,263,789				2014
MAIN ST. PLAZA			555,898				2,139,494				-				555,898				2,139,494				2,695,392				53,844				2,641,548				1,471,590				2014
MORRISSEY PLAZA			4,097,251				3,751,068				-				4,097,251				3,751,068				7,848,319				126,364				7,721,955				3,371,657				2014
GLENDALE SQUARE			4,698,891				7,141,090				114,080				4,698,891				7,255,170				11,954,061				343,738				11,610,322				5,977,673				2014
FALMOUTH PLAZA			2,361,071				13,065,817				215,450				2,361,071				13,281,267				15,642,338				461,587				15,180,751				8,411,809				2014
WAVERLY PLAZA			1,215,005				3,622,911				17,226				1,215,005				3,640,137				4,855,142				109,460				4,745,682				2,480,383				2014
CANNING PLAZA			1,153,921				3,467,368				-				1,153,921				3,467,368				4,621,289				111,466				4,509,823				2,333,744				2014
BARRINGTON PLAZA S.C.			642,170				2,547,830				7,315,207				751,124				9,754,083				10,505,207				4,408,012				6,097,195				-				1994
FESTIVAL OF HYANNIS S.C.			15,038,197				40,682,853				612,523				15,038,197				41,295,376				56,333,573				1,767,650				54,565,923				-				2014
FELLSWAY PLAZA			5,300,388				11,013,543				74,500				5,300,388				11,088,043				16,388,431				284,605				16,103,825				7,136,684				2014
DEL ALBA PLAZA			3,163,033				8,967,874				-				3,163,033				8,967,874				12,130,907				181,239				11,949,668				8,547,408				2014
NORTH QUINCY PLAZA			6,332,542				17,954,110				-				6,332,542				17,954,110				24,286,652				71,185				24,215,467				-				2014
ADAMS PLAZA			2,089,363				3,226,648				69,649				2,089,363				3,296,297				5,385,660				100,129				5,285,531				1,980,243				2014
BROADWAY PLAZA			6,485,065				343,422				-				6,485,065				343,422				6,828,487				16,855				6,811,632				3,038,976				2014
SHREWSBURY S.C.			1,284,168				5,284,853				5,044,733				1,284,168				10,329,586				11,613,754				3,646,923				7,966,831				-				2000
VINNIN SQUARE PLAZA			5,545,425				16,324,060				46,356				5,545,425				16,370,416				21,915,841				572,266				21,343,576				9,817,532				2014
PARADISE PLAZA			4,183,038				12,194,885				336,820				4,183,038				12,531,705				16,714,743				415,753				16,298,990				9,487,855				2014
BELMONT PLAZA			11,104,983				848,844				-				11,104,983				848,844				11,953,827				28,061				11,925,766				5,605,562				2014
VINNIN SQUARE IN-LINE			582,228				2,094,560				-				582,228				2,094,560				2,676,788				59,965				2,616,823				-				2014
LINDEN PLAZA			4,628,215				3,535,431				420,530				4,628,215				3,955,961				8,584,176				127,116				8,457,060				3,733,539				2014
NORTH AVE. PLAZA			1,163,875				1,194,673				-				1,163,875				1,194,673				2,358,548				37,435				2,321,113				950,010				2014
WASHINGTON ST. S.C.			7,380,918				9,987,119				-				7,380,918				9,987,119				17,368,037				236,068				17,131,968				6,727,713				2014
MILL ST. PLAZA			4,195,024				6,203,410				180,796				4,195,024				6,384,206				10,579,230				234,024				10,345,206				4,399,169				2014
FULLERTON PLAZA			14,237,901				6,743,980				-				14,237,901				6,743,980				20,981,881				385,593				20,596,288				13,038,113				2014
GREENBRIER S.C.			8,891,468				30,304,760				(67,696	)			8,891,468				30,237,065				39,128,533				1,114,660				38,013,873				13,303,001				2014
INGLESIDE S.C.			10,416,726				17,889,235				-				10,416,726				17,889,235				28,305,961				522,846				27,783,115				20,140,724				2014
SECURITY SQUARE SHOPPING CTR.			5,342,463				15,147,024				-				5,342,463				15,147,024				20,489,487				259,321				20,230,166				16,686,843				2014
WILKENS BELTWAY PLAZA			9,948,235				22,125,942				30,714				9,948,235				22,156,656				32,104,890				919,894				31,184,996				-				2014
YORK ROAD PLAZA			4,276,715				37,205,757				-				4,276,715				37,205,757				41,482,472				1,201,847				40,280,624				10,189,203				2014
PUTTY HILL PLAZA			4,192,152				11,112,111				344,880				4,192,152				11,456,991				15,649,143				1,026,032				14,623,111				-				2013
SNOWDEN SQUARE S.C.			1,929,402				4,557,934				-				1,929,402				4,557,934				6,487,336				370,428				6,116,908				-				2012
KINGS CONTRIVANCE			9,308,349				31,759,940				31,500				9,308,349				31,791,440				41,099,789				675,666				40,424,123				24,384,102				2014
WILDE LAKE			1,468,038				5,869,862				19,058,976				2,577,073				23,819,802				26,396,875				5,584,291				20,812,584				-				2002
RIVERHILL VILLAGE CENTER			16,825,496				23,282,222				40,138				16,825,496				23,322,360				40,147,856				667,724				39,480,132				23,034,214				2014
CLINTON BANK BUILDING			82,967				362,371				-				82,967				362,371				445,338				241,461				203,877				-				2003
CLINTON BOWL			39,779				130,716				4,247				38,779				135,963				174,742				76,957				97,785				-				2003
COLUMBIA CROSSING OUTPARCELS			1,279,200				2,870,800				13,844,967				4,597,200				13,397,767				17,994,967				967,121				17,027,846				-				2011
COLUMBIA CROSSING II SHOP.CTR.			3,137,628				19,868,075				-				3,137,628				19,868,075				23,005,703				1,855,060				21,150,642				-				2013
ENCHANTED FOREST S.C.			20,123,946				34,345,102				167,674				20,123,946				34,512,776				54,636,723				1,433,813				53,202,910				-				2014
SHOPPES AT EASTON			6,523,713				16,402,204				-				6,523,713				16,402,204				22,925,917				537,001				22,388,916				-				2014
VILLAGES AT URBANA			3,190,074				6,067				10,496,574				4,828,774				8,863,942				13,692,715				1,168,868				12,523,848				-				2003
GAITHERSBURG S.C.			244,890				6,787,534				239,995				244,890				7,027,529				7,272,419				2,732,822				4,539,597				-				1999
SHAWAN PLAZA			4,466,000				20,222,367				(869,619	)			4,466,000				19,352,748				23,818,748				9,308,083				14,510,665				6,524,052				2008
LAUREL PLAZA			349,562				1,398,250				2,129,108				349,562				3,527,358				3,876,920				1,494,899				2,382,021				-				1995
LAUREL PLAZA			274,580				1,100,968				434,562				274,580				1,535,531				1,810,110				1,399,631				410,480				-								1972
NORTH EAST STATION			8,219,613				9,536,990				37,950				8,219,613				9,574,941				17,794,554				230,051				17,564,503				8,761,283				2014
PERRY HALL SQUARE S.C.			3,339,309				12,377,339				1,420,860				3,339,309				13,798,200				17,137,508				6,501,393				10,636,115				-				2003
PERRY HALL CENTRE			6,901,193				8,704,689				-				6,901,193				8,704,689				15,605,882				220,207				15,385,676				-				2014
CENTRE COURT-RETAIL/BANK			1,035,359				7,785,830				(29,007	)			1,035,359				7,756,823				8,792,182				865,800				7,926,382				2,405,096				2011
CENTRE COURT-GIANT			3,854,099				12,769,628				-				3,854,099				12,769,628				16,623,727				1,344,245				15,279,483				6,998,421				2011
CENTRE COURT-OLD COURT/COURTYD			2,279,177				5,284,577				53,360				2,279,177				5,337,937				7,617,114				686,408				6,930,706				5,030,236				2011
RADCLIFFE CENTER			12,042,713				21,187,946				-				12,042,713				21,187,946				33,230,659				563,873				32,666,786				-				2014
TIMONIUM CROSSING			2,525,377				14,862,817				-				2,525,377				14,862,817				17,388,194				372,602				17,015,592				14,976,336				2014
TIMONIUM SQUARE			6,000,000				24,282,998				16,874,987				7,331,195				39,826,789				47,157,984				18,013,736				29,144,249				-				2003
TOWSON PLACE			43,886,876				101,764,931				512,513				43,270,792				102,893,529				146,164,320				10,723,770				135,440,550				-				2012
MALLSIDE PLAZA			6,930,996				18,148,727				817,964				6,939,590				18,958,098				25,897,687				5,681,919				20,215,769				14,300,274				2008
CLAWSON CENTER			1,624,771				6,578,142				8,703,950				1,624,771				15,282,092				16,906,863				5,963,037				10,943,826				-				1993
WHITE LAKE COMMONS			2,300,050				9,249,607				2,647,621				2,300,050				11,897,228				14,197,278				5,471,711				8,725,567				-				1996
DOWNTOWN FARMINGTON CENTER			1,098,426				4,525,723				2,765,594				1,098,426				7,291,317				8,389,743				3,852,205				4,537,538				-				1993
FLINT - VACANT LAND			101,424				-				-				101,424				-				101,424				-				101,424				-				2012
CENTURY PLAZA			178,785				925,818				1,194,933				178,785				2,120,751				2,299,536				1,464,309				835,228				-								1968
BELTLINE PLAZA			391,500				958,500				1,039,331				391,500				1,997,831				2,389,331				1,739,868				649,463				-				1985
CROSS CREEK S.C.			1,451,397				5,806,263				426,379				1,451,397				6,232,642				7,684,039				3,304,844				4,379,195				-				1993
GREEN ORCHARD SHOPPING CENTER			3,682,478				14,730,060				2,320,218				3,682,478				17,050,278				20,732,756				8,873,610				11,859,146				-				1993
THE FOUNTAINS AT ARBOR LAKES			28,585,296				66,699,024				11,124,979				29,485,296				76,924,003				106,409,299				19,609,958				86,799,341				-				2006
FNC ROSEVILLE PLAZA			132,842				957,340				10,302,188				1,675,667				9,716,703				11,392,370				1,192,204				10,200,166				-				2005
CREVE COUER SHOPPING CENTER			1,044,598				5,475,623				740,405				960,814				6,299,812				7,260,626				2,629,654				4,630,972				-				1998
CRYSTAL CENTER			-				234,378				-				-				234,378				234,378				97,434				136,944				-				1997
NORTH POINT SHOPPING CENTER			1,935,380				7,800,746				909,151				1,935,380				8,709,897				10,645,277				3,528,049				7,117,228				-				1998
KIRKWOOD CROSSING			-				9,704,005				14,103,051				-				23,807,056				23,807,056				13,517,898				10,289,159				-				1998
LEMAY S.C.			125,879				503,510				3,846,838				451,155				4,025,072				4,476,227				1,493,313				2,982,914				-								1974
GRAVOIS PLAZA			1,032,416				4,455,514				11,344,340				1,032,413				15,799,857				16,832,270				8,643,976				8,188,293				-				2008
HOME DEPOT PLAZA			431,960				-				758,854				431,960				758,855				1,190,814				268,487				922,327				-				1998
PRIMROSE MARKET PLACE			2,745,595				10,985,778				7,914,175				2,904,022				18,741,526				21,645,548				8,699,528				12,946,019				-				1994
PRIMROSE MARKETPLACE			905,674				3,666,386				5,083,942				905,674				8,750,328				9,656,001				2,715,617				6,940,384				825,706				2002
CENTER POINT S.C.			-				550,204				-				-				550,204				550,204				225,725				324,479				-				1998
KINGS HIGHWAY S.C.			809,087				4,430,514				2,661,361				809,087				7,091,874				7,900,962				2,920,642				4,980,319				-				1998
OVERLAND CROSSING			-				4,928,677				740,346				-				5,669,023				5,669,023				2,507,165				3,161,858				-				1997
DUNN CENTER			-				5,756,736				849,684				-				6,606,420				6,606,420				3,008,023				3,598,397				-				1997
SOUTH COUNTY CENTER			-				2,766,644				143,298				-				2,909,942				2,909,942				2,909,942				-				-				1997
CAVE SPRINGS S.C.			1,182,194				7,423,459				7,243,916				1,563,694				14,285,875				15,849,569				9,893,095				5,956,474				-				1997
SPRINGFIELD S.C.			-				608,793				11,078,003				8,800,000				2,886,796				11,686,796				1,049,041				10,637,755				-				1998
TURTLE CREEK TOWNE			11,535,281				-				33,369,729				10,150,881				34,754,129				44,905,010				7,528,602				37,376,408				-								2004
OVERLOOK VILLAGE			8,276,500				17,249,587				218,753				8,276,500				17,468,340				25,744,840				2,045,313				23,699,527				-				2012
WOODLAWN MARKETPLACE			919,251				3,570,981				2,418,716				919,251				5,989,696				6,908,948				2,638,510				4,270,438				-				2008
TYVOLA MALL			-				4,736,345				5,635,237				-				10,371,582				10,371,582				8,132,265				2,239,318				-				1986
CROSSROADS PLAZA			767,864				3,098,881				1,233,351				767,864				4,332,231				5,100,095				1,233,753				3,866,342				-				2000
JETTON VILLAGE SHOPPES			3,875,224				10,292,231				(383,613	)			2,143,695				11,640,147				13,783,842				1,077,656				12,706,186				-				2011
MOUNTAIN ISLAND MARKETPLACE			3,318,587				7,331,413				736,014				3,818,587				7,567,427				11,386,014				881,610				10,504,404				-				2012
WOODLAWN SHOPPING CENTER			2,010,725				5,833,626				-				2,010,725				5,833,626				7,844,351				520,145				7,324,206				-				2012
CROSSROADS PLAZA			13,405,529				86,455,763				-				13,405,529				86,455,763				99,861,292				4,114,165				95,747,126				76,421,201				2014
QUAIL CORNERS			7,318,321				26,675,644				181,775				7,318,321				26,857,419				34,175,740				689,797				33,485,943				18,004,290				2014
OAKCREEK VILLAGE			1,882,800				7,551,576				2,450,687				1,882,800				10,002,263				11,885,063				4,733,366				7,151,697				-				1996
DAVIDSON COMMONS			2,978,533				12,859,867				227,623				2,978,533				13,087,490				16,066,023				1,037,983				15,028,040				-				2012
WESTRIDGE SQUARE S.C.			7,456,381				19,778,703				(94,631	)			11,977,700				15,162,753				27,140,453				2,815,453				24,325,000				-				2011
SENATE/HILLSBOROUGH CROSSI			519,395				-				-				519,395				-				519,395				-				519,395				-				2003
PARK PLACE SC			5,461,478				16,163,494				76,651				5,469,809				16,231,815				21,701,624				4,542,265				17,159,359				12,983,136				2008
MOORESVILLE CROSSING			12,013,727				30,604,173				(295,147	)			11,625,801				30,696,951				42,322,752				8,068,515				34,254,238				-				2007
PLEASANT VALLEY PROMENADE			5,208,885				20,885,792				13,535,376				5,208,885				34,421,168				39,630,053				16,881,569				22,748,485				-				1993
WAKEFIELD COMMONS III			6,506,450				-				(4,116,390	)			1,380,306				1,009,754				2,390,060				425,643				1,964,417				-								2001
WAKEFIELD CROSSINGS			3,413,932				-				(3,017,960	)			336,236				59,737				395,973				4,305				391,668				-								2001
EDGEWATER PLACE			3,150,000				-				6,686,943				2,055,771				7,781,173				9,836,943				2,549,404				7,287,540				-								2003
BRENNAN STATION			7,749,751				20,556,891				(993,662	)			6,321,923				20,991,057				27,312,979				2,807,266				24,505,714				8,356,244				2011
BRENNAN STATION OUTPARCEL			627,906				1,665,576				(93,482	)			450,232				1,749,768				2,200,000				220,281				1,979,719				-				2011
CLOVERDALE PLAZA			540,667				719,655				6,540,090				540,667				7,259,745				7,800,412				3,523,753				4,276,659				4,619,745								1969
SORENSEN PARK PLAZA			5,104,294				-				30,727,693				3,791,319				32,040,667				35,831,987				4,028,576				31,803,411				-								2005
LORDEN PLAZA			8,872,529				22,548,382				447,882				8,883,004				22,985,789				31,868,793				5,781,376				26,087,417				25,180,156				2008
WEBSTER SQUARE			11,683,145				41,708,383				3,898,653				11,683,145				45,607,036				57,290,181				1,520,841				55,769,340				-				2014
ROCKINGHAM MALL-SHAWS LAND PCL			2,660,915				10,643,660				12,040,300				3,148,715				22,196,160				25,344,875				10,283,950				15,060,924				16,987,862				2008
SHOP RITE PLAZA			2,417,583				6,364,094				1,593,432				2,417,583				7,957,527				10,375,109				6,703,467				3,671,643				-								1985
MARLTON PLAZA			-				4,318,534				104,215				-				4,422,749				4,422,749				2,040,097				2,382,651				-				1996
CINNAMINSON SHOPPING CENTER			652,123				2,608,491				1,635,917				344,929				4,551,602				4,896,531				2,789,493				2,107,038				-				1996
HILLVIEW SHOPPING CENTER			16,007,647				32,607,423				-				16,007,647				32,607,423				48,615,070				846,871				47,768,199				26,518,136				2014
GARDEN STATE PAVILIONS			7,530,709				10,801,949				1,241,388				7,530,709				12,043,337				19,574,046				2,875,941				16,698,106				-				2011
CLARK SHOPRITE 70 CENTRAL AVE			3,496,673				11,693,769				(687,442	)			13,959,593				543,407				14,503,000				140,931				14,362,069				-				2013
COMMERCE CENTER WEST			385,760				1,290,080				160,534				793,595				1,042,779				1,836,374				146,477				1,689,897				-				2013
COMMERCE CENTER EAST			1,518,930				5,079,690				1,753,865				7,235,196				1,117,289				8,352,485				99,631				8,252,854				-				2013
BALLY'S & RITEAID 140 CENTRAL			3,170,465				10,602,845				(43,391	)			5,288,714				8,441,205				13,729,919				511,817				13,218,103				-				2013
EAST WINDSOR VILLAGE			9,335,011				23,777,978				63,800				9,335,011				23,841,778				33,176,789				4,577,949				28,598,839				-				2008
HILLSBOROUGH PROMENADE			11,886,809				-				(6,880,755	)			5,006,054				-				5,006,054				-				5,006,054				-								2001
HOLMDEL TOWNE CENTER			10,824,624				43,301,494				6,270,439				10,824,624				49,571,933				60,396,556				15,500,802				44,895,755				-				2002
HOLMDEL COMMONS II			16,537,556				38,759,952				3,413,848				16,537,556				42,173,800				58,711,356				14,559,140				44,152,216				18,250,289				2004
PLAZA AT HILLSDALE			7,601,596				6,994,196				361,829				7,601,596				7,356,025				14,957,621				206,008				14,751,613				6,373,510				2014
MAPLE SHADE			-				9,957,611				(13,506	)			-				9,944,104				9,944,104				1,045,074				8,899,031				-				2009
PLAZA AT SHORT HILLS			20,155,471				11,061,984				130,236				20,155,471				11,192,221				31,347,692				712,712				30,634,980				10,404,089				2014
NORTH BRUNSWICK PLAZA			3,204,978				12,819,912				21,573,552				3,204,978				34,393,464				37,598,442				15,630,063				21,968,379				-				1994
PISCATAWAY TOWN CENTER			3,851,839				15,410,851				692,255				3,851,839				16,103,106				19,954,945				6,995,110				12,959,835				10,337,257				1998
RIDGEWOOD S.C.			450,000				2,106,566				1,015,675				450,000				3,122,241				3,572,241				1,489,477				2,082,764				-				1993
UNION CRESCENT III-BEST BUY			7,895,483				3,010,640				28,918,366				8,696,579				31,127,911				39,824,489				9,183,119				30,641,371				-				2007
WESTMONT PLAZA			601,655				2,404,604				10,803,761				601,655				13,208,365				13,810,020				5,493,254				8,316,766				-				1994
WILLOWBROOK PLAZA			15,320,436				40,996,874				(949,221	)			15,320,436				40,047,653				55,368,089				9,767,694				45,600,395				-				2009
PLAZA PASEO DEL-NORTE			4,653,197				18,633,584				2,039,707				4,653,197				20,673,291				25,326,488				8,721,172				16,605,316				-				1998
WARM SPRINGS PROMENADE			7,226,363				19,109,946				2,591,393				7,226,363				21,701,339				28,927,702				6,122,329				22,805,373				-				2009
DEL MONTE PLAZA			2,489,429				5,590,415				538,239				2,210,000				6,408,083				8,618,084				2,362,517				6,255,567				3,142,741				2006
D'ANDREA MARKETPLACE			11,556,067				29,435,364				(264,352	)			11,556,067				29,171,012				40,727,079				5,719,951				35,007,129				13,162,890				2007
KEY BANK BUILDING			1,500,000				40,486,755				(0	)			1,500,000				40,486,755				41,986,755				15,145,260				26,841,495				4,383,315				2006
BRIDGEHAMPTON COMMONS-W&E SIDE			1,811,752				3,107,232				25,473,731				1,858,188				28,534,527				30,392,715				17,600,084				12,792,632				-								1972
OCEAN PLAZA			564,097				2,268,768				8,468				564,097				2,277,236				2,841,333				685,078				2,156,255				-				2003
KINGS HIGHWAY			2,743,820				6,811,268				1,338,513				2,743,820				8,149,781				10,893,601				2,781,585				8,112,016				-				2004
HOMEPORT - RALPH AVE			4,414,466				11,339,857				3,136,639				4,414,467				14,476,497				18,890,963				4,202,989				14,687,974				-				2004
BELLMORE S.C.			1,272,269				3,183,547				913,692				1,272,269				4,097,239				5,369,508				1,193,447				4,176,061				-				2004
MARKET AT BAY SHORE			12,359,621				30,707,802				2,552,934				12,359,621				33,260,736				45,620,357				9,910,717				35,709,640				12,000,000				2006
KEY FOOD - ATLANTIC AVE			2,272,500				5,624,589				515,023				4,808,822				3,603,290				8,412,112				235,843				8,176,269				-				2012
KING KULLEN PLAZA			5,968,082				23,243,404				5,401,020				5,980,130				28,632,376				34,612,506				11,497,083				23,115,423				-				1998
PATHMARK SHOPPING CENTER			6,714,664				17,359,161				526,939				6,714,664				17,886,100				24,600,764				5,224,830				19,375,934				-				2006
BIRCHWOOD PLAZA COMMACK			3,630,000				4,774,791				274,673				3,630,000				5,049,464				8,679,464				1,518,437				7,161,027				-				2007
ELMONT S.C.			3,011,658				7,606,066				2,751,121				3,011,658				10,357,187				13,368,845				2,950,622				10,418,223				-				2004
ELMSFORD CENTER 1			4,134,273				1,193,084				-				4,134,273				1,193,084				5,327,357				47,368				5,279,989				-				2013
ELMSFORD CENTER 2			4,076,403				15,598,504				287,918				4,076,403				15,886,422				19,962,825				744,122				19,218,703				-				2013
FRANKLIN SQUARE S.C.			1,078,541				2,516,581				3,861,816				1,078,541				6,378,397				7,456,937				1,743,245				5,713,693				-				2004
KISSENA BOULEVARD SHOPPING CTR			11,610,000				2,933,487				18,818				11,610,000				2,952,305				14,562,305				909,227				13,653,078				-				2007
SCOTIA CROSSING			110,002				-				-				110,002				-				110,002				-				110,002				-				2014
HAMPTON BAYS PLAZA			1,495,105				5,979,320				3,304,710				1,495,105				9,284,031				10,779,135				6,063,996				4,715,140				-				1989
HICKSVILLE PLAZA			3,542,739				8,266,375				1,962,085				3,542,739				10,228,460				13,771,199				3,154,909				10,616,290				-				2004
TURNPIKE PLAZA			2,471,832				5,839,416				125,480				2,471,832				5,964,896				8,436,728				1,387,516				7,049,212				-				2011
JERICHO COMMONS SOUTH			12,368,330				33,071,495				247,072				12,368,330				33,318,567				45,686,897				7,857,163				37,829,735				10,879,015				2007
501 NORTH BROADWAY			-				1,175,543				168,384				-				1,343,927				1,343,927				627,187				716,741				-				2007
MERRY LANE (PARKING LOT)			1,485,531				1,749				539				1,485,531				2,288				1,487,819				301				1,487,517				-				2007
FAMILY DOLLAR UNION TURNPIKE			909,000				2,249,775				230,747				1,056,709				2,332,813				3,389,522				243,658				3,145,864				-				2012
LITTLE NECK PLAZA			3,277,254				13,161,218				4,397,150				3,277,253				17,558,368				20,835,622				4,962,020				15,873,601				-				2003
KEY FOOD - 21ST STREET			1,090,800				2,699,730				(164,800	)			1,669,153				1,956,577				3,625,730				105,104				3,520,626				-				2012
MANHASSET CENTER			4,567,003				19,165,808				31,215,571				3,471,939				51,476,443				54,948,382				20,852,172				34,096,210				-				1999
MANHASSET CENTER(residential)			950,000								-				950,000				-				950,000				-				950,000				-				2012
MASPETH QUEENS-DUANE READE			1,872,013				4,827,940				931,187				1,872,013				5,759,126				7,631,139				1,758,704				5,872,435				-				2004
NORTH MASSAPEQUA S.C.			1,880,816				4,388,549				563,246				1,625,898				5,206,713				6,832,611				1,781,701				5,050,910				-				2004
MINEOLA SHOPPING CENTER			4,150,000				7,520,692				(407,329	)			4,150,000				7,113,364				11,263,364				1,699,076				9,564,288				-				2007
BIRCHWOOD PARK			3,507,162				4,126				121,538				3,507,406				125,421				3,632,827				654				3,632,172				-				2007
SMITHTOWN PLAZA			3,528,000				7,364,098				292,668				3,528,000				7,656,766				11,184,766				1,566,372				9,618,394				-				2009
MANETTO HILL PLAZA			263,693				584,031				9,795,009				263,693				10,379,040				10,642,733				5,707,110				4,935,622				-								1969
SYOSSET S.C.			106,655				76,197				1,553,836				106,655				1,630,033				1,736,688				1,056,476				680,212				-								1990
RICHMOND S.C.			2,280,000				9,027,951				11,412,579				2,280,000				20,440,530				22,720,530				10,409,009				12,311,521				-				1989
GREENRIDGE - OUT PARCEL			2,940,000				11,811,964				5,878,902				3,148,424				17,482,442				20,630,866				5,613,162				15,017,705				-				1997
FNC STATEN ISLAND PLAZA			5,600,744				6,788,460				(1,588,858	)			5,600,744				5,199,602				10,800,346				480,977				10,319,368				-				2005
HYLAN PLAZA			28,723,536				38,232,267				34,004,820				28,723,536				72,237,088				100,960,623				22,268,067				78,692,557				-				2006
FOREST AVENUE PLAZA			4,558,592				10,441,408				155,848				4,558,592				10,597,256				15,155,848				3,330,984				11,824,864				-				2005
INDEPENDENCE PLAZA			12,279,093				34,813,852				117,472				12,279,093				34,931,324				47,210,417				414,095				46,796,322				32,656,925				2014
KEY FOOD - CENTRAL AVE.			2,787,600				6,899,310				(394,910	)			2,603,321				6,688,679				9,292,000				374,670				8,917,330				-				2012
WHITE PLAINS S.C.			1,777,775				4,453,894				1,918,406				1,777,775				6,372,300				8,150,074				1,992,461				6,157,613				-				2004
CHAMPION FOOD SUPERMARKET			757,500				1,874,813				(24,388	)			2,241,118				366,807				2,607,925				53,904				2,554,021				-				2012
SHOPRITE S.C.			871,977				3,487,909				-				871,977				3,487,909				4,359,886				1,958,950				2,400,936				-				1998
ROMAINE PLAZA			782,459				1,825,737				588,133				782,459				2,413,870				3,196,329				448,118				2,748,211				-				2005
BEAVERCREEK PLAZA			635,228				3,024,722				4,282,441				635,228				7,307,163				7,942,391				4,928,357				3,014,034				-				1986
OLENTANGY PLAZA			764,517				1,833,600				2,340,830				764,517				4,174,430				4,938,947				3,792,598				1,146,349				-				1988
KENT CENTER			2,261,530				-				(1,434,789	)			747,828				78,913				826,741				65,874				760,867				-				1995
TOPS PLAZA			626,818				3,712,045				35,000				626,818				3,747,045				4,373,862				2,867,187				1,506,675				-				1999
HIGH PARK CTR RETAIL			3,783,875				-				(2,342,306	)			921,704				519,865				1,441,569				-				1,441,569				-								2001
OREGON TRAIL CENTER			5,802,422				12,622,879				448,082				5,802,422				13,070,961				18,873,383				3,992,901				14,880,482				-				2009
POWELL VALLEY JUNCTION			5,062,500				3,152,982				(2,690,840	)			2,035,125				3,489,518				5,524,642				1,239,424				4,285,219				-				2009
MCMINNVILLE PLAZA			4,062,327				-				984,452				4,062,327				984,452				5,046,779				49,822				4,996,958				-								2006
HOSPITAL GARAGE & MED. OFFICE			-				30,061,177				59,094				-				30,120,271				30,120,271				7,336,025				22,784,246				-				2004
SUBURBAN SQUARE			70,679,871				166,351,381				5,177,378				71,279,871				170,928,759				242,208,630				42,988,797				199,219,834				-				2007
CHIPPEWA PLAZA			2,881,525				11,526,101				153,289				2,881,525				11,679,391				14,560,916				4,522,581				10,038,335				4,070,899				2000
CARNEGIE PLAZA			-				3,298,908				17,747				-				3,316,655				3,316,655				1,275,637				2,041,019				-				1999
CENTER SQUARE SHOPPING CENTER			731,888				2,927,551				1,318,843				731,888				4,246,394				4,978,282				2,504,821				2,473,461				-				1996
WAYNE PLAZA			6,127,623				15,605,012				319,188				6,135,670				15,916,154				22,051,824				3,043,914				19,007,909				13,422,189				2008
CHAMBERSBURG CROSSING			9,090,288				-				26,422,967				8,790,288				26,722,967				35,513,255				5,922,971				29,590,284				-								2006
DEVON VILLAGE			4,856,379				25,846,910				4,378,945				4,856,379				30,225,855				35,082,234				2,806,261				32,275,973				-				2012
POCONO PLAZA			1,050,000				2,372,628				1,474,271				1,050,000				3,846,899				4,896,899				3,091,267				1,805,632				-								1973
RIDGE PIKE PLAZA			1,525,337				4,251,732				3,100,364				1,525,337				7,352,097				8,877,433				1,479,018				7,398,415				-				2008
ACME SUPERMARKET S.C.			176,666				4,895,360				-				176,666				4,895,360				5,072,026				1,882,831				3,189,195				-				1999
WHITELAND TOWN CENTER			731,888				2,927,551				-				731,888				2,927,551				3,659,439				1,376,200				2,283,239				-				1996
EASTWICK WELLNESS CENTER			889,001				2,762,888				3,074,728				889,001				5,837,616				6,726,617				2,570,380				4,156,238				-				1997
HARRISBURG EAST SHOPPING CTR.			452,888				6,665,238				6,524,356				3,002,888				10,639,594				13,642,482				8,061,006				5,581,475				-				2002
HAMBURG WELLNESS CENTER			439,232				-				2,023,428				494,982				1,967,677				2,462,660				644,524				1,818,136				1,835,495								2000
TOWNSHIP LINE S.C.			731,888				2,927,551				-				731,888				2,927,551				3,659,439				1,376,200				2,283,239				-				1996
NORRITON SQUARE			686,134				2,664,535				3,842,548				774,084				6,419,133				7,193,217				4,537,665				2,655,552				-				1984
NEW KENSINGTON S.C			521,945				2,548,322				781,570				521,945				3,329,892				3,851,837				2,987,164				864,673				-				1986
FRANKFORD AVENUE S.C.			731,888				2,927,551				-				731,888				2,927,551				3,659,439				1,376,200				2,283,239				-				1996
WEXFORD PLAZA			6,413,635				9,774,600				8,336,827				6,349,690				18,175,372				24,525,062				3,197,569				21,327,494				-				2010
CROSSROADS PLAZA			788,761				3,155,044				12,773,089				976,439				15,740,455				16,716,894				9,122,267				7,594,627				9,001,648				1986
SPRINGFIELD S.C.			919,998				4,981,589				11,295,550				920,000				16,277,137				17,197,137				7,778,593				9,418,544				-				1983
SHREWSBURY SQUARE S.C.			8,066,107				16,997,997				(1,656,097	)			6,410,009				16,997,997				23,408,007				647,992				22,760,015				-				2014
CENTURY III MALL			1,468,342				-				85,239				1,468,342				85,239				1,553,580				2,202				1,551,378				-				1986
WHITEHALL MALL			-				5,195,577				-				-				5,195,577				5,195,577				2,442,366				2,753,211				-				1996
WYNNEWOOD			15,042,165				-				159,278				15,201,443				-				15,201,443				-				15,201,443				-								2014
WEST MARKET ST. PLAZA			188,562				1,158,307				41,711				188,562				1,200,019				1,388,581				1,160,740				227,840				-				1986
REXVILLE TOWN CENTER			24,872,982				48,688,161				6,819,781				25,678,064				54,702,859				80,380,923				26,186,213				54,194,711				-				2006
PLAZA CENTRO - COSTCO			3,627,973				10,752,213				1,538,764				3,866,206				12,052,744				15,918,950				5,995,551				9,923,399				-				2006
PLAZA CENTRO - MALL			19,873,263				58,719,179				7,951,800				19,408,112				67,136,129				86,544,241				32,672,168				53,872,073				-				2006
PLAZA CENTRO - RETAIL			5,935,566				16,509,748				2,539,287				6,026,070				18,958,531				24,984,601				9,316,292				15,668,309				-				2006
PLAZA CENTRO - SAM'S CLUB			6,643,224				20,224,758				2,327,441				6,520,090				22,675,333				29,195,423				21,334,869				7,860,554				-				2006
LOS COLOBOS - BUILDERS SQUARE			4,404,593				9,627,903				1,364,158				4,461,145				10,935,510				15,396,655				7,795,622				7,601,033				-				2006
LOS COLOBOS - KMART			4,594,944				10,120,147				729,128				4,402,338				11,041,880				15,444,219				8,108,207				7,336,012				-				2006
LOS COLOBOS I			12,890,882				26,046,669				3,374,075				13,613,375				28,698,251				42,311,627				14,345,544				27,966,082				-				2006
LOS COLOBOS II			14,893,698				30,680,556				5,707,100				15,142,300				36,139,054				51,281,355				17,115,737				34,165,617				-				2006
WESTERN PLAZA - MAYAQUEZ ONE			10,857,773				12,252,522				1,279,762				11,241,993				13,148,064				24,390,058				7,148,603				17,241,455				-				2006
WESTERN PLAZA - MAYAGUEZ TWO			16,874,345				19,911,045				1,814,204				16,872,647				21,726,947				38,599,594				11,816,196				26,783,398				-				2006
MANATI VILLA MARIA SC			2,781,447				5,673,119				1,523,630				2,606,588				7,371,608				9,978,196				3,693,844				6,284,352				-				2006
PONCE TOWN CENTER			14,432,778				28,448,754				5,288,858				14,903,024				33,267,366				48,170,390				12,122,304				36,048,086				-				2006
TRUJILLO ALTO PLAZA			12,053,673				24,445,858				4,207,010				12,289,288				28,417,254				40,706,542				15,433,436				25,273,105				-				2006
MARSHALL PLAZA			1,886,600				7,575,302				1,962,567				1,886,600				9,537,869				11,424,469				4,391,457				7,033,012				-				1998
ST. ANDREWS CENTER			730,164				3,132,092				18,701,529				730,164				21,833,621				22,563,785				8,197,639				14,366,146				-								1978
WESTWOOD PLAZA			1,744,430				6,986,094				4,270,591				1,744,430				11,256,685				13,001,115				5,210,087				7,791,028				-				1995
GALLERY SC			2,209,812				8,850,864				1,319,204				2,209,811				10,170,069				12,379,880				4,403,460				7,976,420				-				1997
CHERRYDALE POINT			5,801,948				32,055,019				1,578,531				5,801,948				33,633,550				39,435,498				6,266,868				33,168,630				-				2009
WOODRUFF SHOPPING CENTER			3,110,439				15,501,117				1,182,533				3,465,199				16,328,890				19,794,089				1,936,862				17,857,227				-				2010
FOREST PARK			1,920,241				9,544,875				115,949				1,920,241				9,660,824				11,581,064				829,459				10,751,606				-				2012
OLD TOWNE VILLAGE			-				4,133,904				3,130,712				-				7,264,616				7,264,616				5,702,557				1,562,059				-								1978
HICKORY RIDGE COMMONS			596,347				2,545,033				(2,404,809	)			683,820				52,750				736,571				18,373				718,198				-				2000
CENTER OF THE HILLS			2,923,585				11,706,145				976,542				2,923,585				12,682,687				15,606,272				5,669,474				9,936,798				9,504,786				2008
ARLINGTON CENTER			3,160,203				2,285,378				490,738				3,160,203				2,776,116				5,936,320				1,050,759				4,885,560				-				1997
DOWLEN TOWN CENTER-II			2,244,581				-				(722,251	)			484,828				1,037,502				1,522,330				130,547				1,391,783				-								2002
GATEWAY STATION			1,373,692				28,145,158				27,589				1,374,880				28,171,558				29,546,438				2,266,614				27,279,824				-				2011
BAYTOWN VILLAGE S.C.			500,422				2,431,651				790,598				500,422				3,222,249				3,722,671				1,352,349				2,370,322				-				1996
BROWNSVILLE TOWNE CENTER			8,678,107				-				25,971,206				7,943,925				26,705,388				34,649,313				3,806,819				30,842,493				-								2005
ISLAND GATE PLAZA			-				944,562				3,713,781				-				4,658,343				4,658,343				1,469,567				3,188,776				-				1997
ISLAND GATE PLAZA			4,343,000				4,723,215				513,575				4,343,000				5,236,790				9,579,790				825,275				8,754,515				-				2011
PRESTON LEBANON CROSSING			13,552,180				-				26,376,826				12,163,694				27,765,312				39,929,006				4,143,527				35,785,479				-								2006
LAKE PRAIRIE TOWN CROSSING			7,897,491				-				27,671,718				6,783,464				28,785,745				35,569,209				3,964,706				31,604,503				-								2006
CENTER AT BAYBROOK			6,941,017				27,727,491				9,334,996				6,928,120				37,075,384				44,003,504				13,448,991				30,554,513				-				1998
CYPRESS TOWNE CENTER			6,033,932				-				1,601,808				2,251,666				5,384,074				7,635,740				542,655				7,093,085				-								2003
ATASCOCITA COMMONS SHOP.CTR.			16,322,636				54,587,066				544,867				16,099,004				55,355,565				71,454,569				2,324,207				69,130,362				29,257,986				2013
TOMBALL CROSSINGS			8,517,427				28,484,450				114,708				7,964,894				29,151,691				37,116,585				1,698,446				35,418,139				-				2013
SHOPS AT VISTA RIDGE			3,257,199				13,029,416				1,717,627				3,257,199				14,747,043				18,004,242				5,945,193				12,059,050				-				1998
VISTA RIDGE PLAZA			2,926,495				11,716,483				2,049,044				2,926,495				13,765,528				16,692,022				5,882,035				10,809,987				-				1998
VISTA RIDGE PLAZA			2,276,575				9,106,300				1,317,829				2,276,575				10,424,129				12,700,704				4,253,118				8,447,586				-				1998
SOUTH PLAINS PLAZA			1,890,000				7,555,099				429,355				1,890,000				7,984,454				9,874,454				3,391,694				6,482,760				-				1998
LAKE JACKSON			1,562,328				4,144,212				-				1,562,328				4,144,212				5,706,540				766,120				4,940,420				-				2012
KROGER PLAZA			520,340				2,081,356				1,306,697				520,340				3,388,053				3,908,393				1,586,167				2,322,226				-				1995
PARKER PLAZA - FEE			7,846,946				-				-				7,846,946				-				7,846,946				-				7,846,946				-								2005
ACCENT PLAZA			500,414				2,830,835				-				500,414				2,830,835				3,331,249				1,319,331				2,011,918				-				1996
SOUTHLAKE OAKS PHASE II-480 W.			3,011,260				7,703,844				(15,491	)			3,019,951				7,679,663				10,699,613				2,315,047				8,384,566				6,021,169				2008
WOODBRIDGE SHOPPING CENTER			2,568,705				6,813,716				60,806				2,568,705				6,874,522				9,443,227				667,659				8,775,568				-				2012
GRAND PARKWAY MARKETPLACE			25,363,548				-				143,568				25,507,115				-				25,507,115				-				25,507,115				-								2014
WESTHEIMER PLAZA			500,422				2,001,687				325,191				500,422				2,326,878				2,827,300				994,410				1,832,890				-				1996
BURKE TOWN PLAZA			-				43,240,068				-				-				43,240,068				43,240,068				1,509,822				41,730,246				-				2014
SOUTHPARK S.C.			125,376				3,476,073				2,217,311				125,376				5,693,384				5,818,760				1,526,202				4,292,558				-				1999
OLD TOWN PLAZA			4,500,000				41,569,735				(12,974,433	)			3,110,888				29,984,414				33,095,302				4,354,368				28,740,934				-				2007
SKYLINE VILLAGE			10,145,283				28,764,045				-				10,145,283				28,764,045				38,909,329				492,448				38,416,881				29,697,018				2014
WESTPARK CENTER			82,544				2,289,288				280,600				82,544				2,569,889				2,652,432				869,787				1,782,645				-				1999
BURLINGTON COAT CENTER			670,500				2,751,375				130,641				670,500				2,882,016				3,552,516				1,386,299				2,166,217				-				1995
TOWNE SQUARE			8,499,373				24,302,141				512,093				8,499,373				24,814,234				33,313,607				415,794				32,897,813				25,710,177				2014
VALLEY VIEW SHOPPING CENTER			3,440,018				8,054,004				922,790				3,440,018				8,976,794				12,416,812				2,584,068				9,832,744				-				2004
POTOMAC RUN PLAZA			27,369,515				48,451,209				305,956				27,369,515				48,757,165				76,126,680				12,570,875				63,555,805				-				2008
AUBURN NORTH			7,785,841				18,157,625				1,074,174				7,785,841				19,231,799				27,017,641				5,775,639				21,242,002				-				2007
THE MARKETPLACE AT FACTORIA			60,502,358				92,696,231				2,354,321				60,502,358				95,050,553				155,552,911				7,803,614				147,749,297				56,857,908				2013
FRONTIER VILLAGE SHOPPING CTR.			10,750,863				35,191,222				96,299				10,750,863				35,287,521				46,038,384				3,111,365				42,927,020				31,643,060				2012
OLYMPIA WEST OUTPARCEL			360,000				799,640				100,360				360,000				900,000				1,260,000				56,241				1,203,759				-				2012
SILVERDALE PLAZA			3,875,013				32,148,487				86,050				3,755,613				32,353,937				36,109,550				2,844,561				33,264,989				24,394,731				2012
CHARLES TOWN PLAZA			602,000				3,725,871				11,278,885				602,000				15,004,756				15,606,756				9,362,187				6,244,570				-				1985
BLUE RIDGE			12,346,900				71,529,796				(28,003,901	)			13,994,125				41,878,669				55,872,795				16,496,256				39,376,539				7,368,694				2005
MICROPROPERTIES			24,206,390				56,481,576				10,460,706				30,864,206				60,284,467				91,148,673				6,722,079				84,426,594				-				2012
KRC NORTH LOAN IV, INC.			23,516,663				-				(2,015,885	)			21,500,778				-				21,500,778				-				21,500,778				-				2013
CHILE-VINA DEL MAR			11,096,948				720,781				45,117,456				13,501,473				43,433,712				56,935,185				2,891,239				54,043,945				36,650,616								2008
MEXICO-HERMOSILLO			11,424,531				-				(10,355,772	)			1,068,759								1,068,759				-				1,068,759				-								2008
MEXICO-GIGANTE ACQ.			7,568,417				19,878,026				(11,908,947	)			4,795,056				10,742,440				15,537,496				3,567,521				11,969,975				-				2007
MEXICO-MOTOROLA			47,272,528				-				(40,330,101	)			6,942,427								6,942,427				-				6,942,427				-								2006
MEXICO-NON ADM BT-LOS CABOS			10,873,070				1,257,517				954,629				5,068,597				8,016,619				13,085,216				2,786,820				10,298,396				-				2007
MEXICO-PLAZA SORIANA			2,639,975				346,945				(100,696	)			2,123,700				762,524				2,886,224				-				2,886,224				-				2007
MEXICO-TAPACHULA			13,716,428				-				(12,595,351	)			1,121,076								1,121,076				-				1,121,076				-				2007
MEXICO-WALDO ACQ.			8,929,278				16,888,627				(24,120,215	)			213,904				1,483,786				1,697,690				681,793				1,015,897				-				2007
BALANCE OF PORTFOLIO			1,907,178				65,127,203				(21,908,044	)			1,918,491.90				43,207,845.06				45,126,336				32,787,696.57				12,338,639				-
TOTALS			2,535,549,532				6,092,869,128				1,391,823,000				2,446,951,825				7,571,273,950				10,018,225,775				1,955,405,720				8,062,820,055				1,428,130,972

 

 

Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets as follows:

 

Buildings....................15 to 50 years
Fixtures, building and leasehold improvements.................Terms of leases or useful lives, whichever is shorter
(including certain identified intangible assets)

 

The aggregate cost for Federal income tax purposes was approximately $8.6 billion at December 31, 2014.

 

The changes in total real estate assets for the years ended December 31, 2014, 2013 and 2012, are as follows:

 

		2014				2013				2012
Balance, beginning of period		$	9,123,343,869			$	8,947,286,646			$	8,771,256,852
Acquisitions			548,553,619				475,108,219				411,166,315
Improvements			134,921,993				107,411,806				85,801,777
Transfers from (to) unconsolidated joint ventures			1,065,330,540				317,995,154				212,231,319
Sales			(781,200,981	)			(559,328,593	)			(503,767,086	)
Assets held for sale			-				(77,664,078	)			(9,845,065	)
Adjustment of fully depreciated asset			(8,628,954	)			(4,780,841	)			(21,711,782	)
Adjustment of property carrying values			(32,935,408	)			(69,463,649	)			(34,121,504	)
Change in exchange rate			(31,158,903	)			(13,220,795	)			36,275,820
Balance, end of period		$	10,018,225,775			$	9,123,343,869			$	8,947,286,646

 

The changes in accumulated depreciation for the years ended December 31, 2014, 2013 and 2012 are as follows:

 

		2014				2013				2012
Balance, beginning of period		$	1,878,680,836			$	1,745,461,577			$	1,693,089,989
Depreciation for year			256,088,382				243,011,431				248,426,786
Transfers (to) unconsolidated joint ventures			-				-				(8,390,550	)
Sales			(167,458,882	)			(96,915,316	)			(161,515,292	)
Adjustment of fully depreciated asset			(8,628,954	)			(4,780,841	)			(21,711,782	)
Assets held for sale			-				(7,351,096	)			(6,582,611	)
Change in exchange rate			(3,275,662	)			(744,919	)			2,145,037
Balance, end of period		$	1,955,405,720			$	1,878,680,836			$	1,745,461,577

 

Reclassifications:

Certain Amounts in the Prior Period Have Been Reclassified in Order to Conform with the Current Period's Presentation.

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

Schedule IV - Mortgage Loans on Real Estate

As of December 31, 2014

(in thousands)

 

 

 

Type of Loan/Borrower	Description	Location (c)		Interest Accrual Rates				Interest Payment Rates			Final Maturity Date	Periodic Payment Terms (a)		Prior Liens				Face Amount of Mortgages or Maximum Available Credit (b)				Carrying Amount of Mortgages (b) (c)
Mortgage Loans:
Borrower A	Retail	Various, Mexico			TIIE rate + 3.25%				TIIE rate + 3.25%		8/16/2015	P& I			-			$	34,268			$	34,268
Borrower B	Retail	Various, Mexico			Libor + 2.5%				Libor + 2.5%		8/16/2015	P& I			-				15,000				15,000
Borrower C	Retail	Westport, CT			6.50	%			6.50	%	3/4/2033	I			-				5,014				5,014
Borrower D	Retail	Las Vegas, NV			12.00	%			12.00	%	5/14/2033	I			-				3,075				3,075
Borrower E	NonRetail	Toronto, ON			7.00	%			7.00	%	3/28/2018	P& I			-				3,513				2,972
Borrower F	Retail	Mexicali, Mexico			7.00	%			7.00	%	6/16/2015	I			-				2,718				2,718
Borrower G	Retail	Miami, FL			7.57	%			7.57	%	6/1/2019	P& I			-				4,201				2,363
Borrower H	Retail	Miami, FL			7.57	%			7.57	%	6/1/2019	P& I			-				3,966				2,355
Individually < 3%	(d)			(e)				(e)			(f)				-				8,550				5,754
																			80,305				73,519
Other:
Individually < 3%				(g)				(g)			(h)								600				483
Capitalized loan costs																			-				11
Total																		$	80,905			$	74,013

 

 

(a) I = Interest only; P&I = Principal & Interest

(b) The instruments actual cash flows are denominated in U.S. dollars, Canadian Dollars and Mexican pesos as indicated by the geographic location above

(c) The aggregate cost for Federal income tax purposes is $74.0 million

(d) Comprised of six separate loans with original loan amounts ranging between $0.3 million and $2.2 million

(e) Interest rates range from 6.00% to 9.0%

(f) Maturity dates range from 4.5 years to 11.75 years

(g) Interest rate 2.28%

(h) Maturity date 4/1/2027

 

For a reconcilition of mortgage and other financing receivables from January 1, 2012 to December 31, 2014 see Note 10 of the Notes to Consolidated Financial Statements included in this annual report of Form 10K.

 

 

The Company feels it is not practicable to estimate the fair value of each receivable as quoted market prices are not available.

The cost of obtaining an independent valuation on these assets is deemed excessive considering the materiality of the total receivables.

 

 

99