10-Q 1 kim_10q-033113.htm FORM 10-Q kim_10q-033113.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

Form 10-Q

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

For the quarterly period ended March 31, 2013

or

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

For the transition period from                 to                

Commission File Number:   1-10899
 
Kimco Realty Corporation
(Exact name of registrant as specified in its charter)

Maryland
 
13-2744380
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

3333 New Hyde Park Road, New Hyde Park, NY 11042
(Address of principal executive offices) (Zip Code)
 
(516) 869-9000
(Registrant’s telephone number, including area code)
 
N/A

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

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

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 ý   No o

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

Large accelerated filer
ý
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act). Yes o No ý
 
As of April 24, 2013, the registrant had 408,754,457 shares of common stock outstanding.



 
 

 
 

 
PART I FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements of Kimco Realty Corporation and Subsidiaries
 
     
Condensed Consolidated Financial Statements -
 
     
 
Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012
3
     
 
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2013 and 2012
4
     
 
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2013 and 2012
5
     
 
Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2013 and 2012
6
     
 
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012
7
     
Notes to Condensed Consolidated Financial Statements
8
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
29
     
Item 4.
Controls and Procedures
30
     
PART II
OTHER INFORMATION
   
Item 1.
Legal Proceedings
30
   
Item 1A.
Risk Factors
30
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
30
     
Item 4.
Mine Safety Disclosures
30
     
Item 6.
Exhibits
30
   
Signatures
32
 
 
2

 

 KIMCO REALTY CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 (in thousands, except share information)
 
   
March 31,
2013
   
December 31,
2012
 
Assets:
           
Operating real estate, net of accumulated depreciation of $1,801,679 and $1,745,462, respectively
  $ 7,307,210     $ 7,104,562  
Investments and advances in real estate joint ventures
    1,442,240       1,428,155  
Real estate under development
    97,260       97,263  
Other real estate investments
    334,082       317,557  
Mortgages and other financing receivables
    72,361       70,704  
Cash and cash equivalents
    166,894       141,875  
Marketable securities
    76,786       36,541  
Accounts and notes receivable
    164,510       171,540  
Other assets
    400,492       383,037  
Total assets
  $ 10,061,835     $ 9,751,234  
                 
                 
Liabilities:
               
Notes payable
  $ 3,337,420     $ 3,192,127  
Mortgages payable
    1,113,653       1,003,190  
Dividends payable
    99,156       96,518  
Other liabilities
    469,494       445,843  
Total liabilities
    5,019,723       4,737,678  
Redeemable noncontrolling interests
    86,324       81,076  
                 
Stockholders' equity:
               
Preferred stock, $1.00 par value, authorized 5,961,200 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 408,622,972 and 407,782,102 shares, respectively
    4,086       4,078  
Paid-in capital
    5,667,845       5,651,170  
Cumulative distributions in excess of net income
    (856,620 )     (824,008 )
Accumulated other comprehensive income
    (27,678 )     (66,182 )
Total stockholders' equity
    4,787,735       4,765,160  
Noncontrolling interests
    168,053       167,320  
Total equity
    4,955,788       4,932,480  
Total liabilities and equity
  $ 10,061,835     $ 9,751,234  

The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
3

 

 KIMCO REALTY CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
 (in thousands, except per share data)
 
   
Three Months Ended March 31,
 
   
2013
   
2012
 
             
Revenues
           
Revenues from rental properties   $ 232,785     $ 214,564  
Management and other fee income     8,393       9,425  
                 
Total revenues     241,178       223,989  
                 
Operating expenses
               
Rent     3,325       3,263  
Real estate taxes     29,855       28,152  
Operating and maintenance     28,849       26,415  
General and administrative expenses     34,119       34,414  
Provision for doubtful accounts     1,960       3,097  
Impairment charges     3,198       233  
Depreciation and amortization     62,738       59,556  
Total operating expenses     164,044       155,130  
                 
Operating income
    77,134       68,859  
                 
Other income/(expense)
               
Mortgage financing income     986       2,007  
Interest, dividends and other investment income     2,663       164  
Other expense, net     (3,485 )     (3,597 )
Interest expense     (53,624 )     (57,283 )
Income from other real estate investments     403       727  
                 
Income from continuing operations before income taxes, equity in income of joint ventures, gains on change in control of interests and equity in income from other real estate investments
    24,077       10,877  
                 
Provision for income taxes, net     (15,133 )     (4,054 )
Equity in income of joint ventures, net     24,111       34,738  
Gains on change in control of interests     23,170       2,008  
Equity in income of other real estate investments, net     11,163       11,027  
                 
Income from continuing operations     67,388       54,596  
                 
Discontinued operations
               
Income from discontinued operating properties, net of tax     115       1,497  
Impairment/loss on operating properties sold, net of tax     (31 )     (8,924 )
Gain on disposition of operating properties     2,496       11,979  
Income from discontinued operations     2,580       4,552  
                 
Gain on sale of operating properties, net of tax     540       -  
                 
Net income     70,508       59,148  
                 
Net income attributable to noncontrolling interests     (2,738 )     (5,510 )
                 
Net income attributable to the Company     67,770       53,638  
                 
Preferred stock dividends     (14,573 )     (15,574 )
                 
Net income available to the Company's common shareholders   $ 53,197     $ 38,064  
                 
Per common share:
               
Income from continuing operations:                
-Basic   $ 0.12     $ 0.09  
-Diluted   $ 0.12     $ 0.09  
Net income attributable to the Company:                
-Basic   $ 0.13     $ 0.09  
-Diluted   $ 0.13     $ 0.09  
                 
Weighted average shares:
               
-Basic     406,662       406,272  
-Diluted     407,666       407,279  
                 
Amounts attributable to the Company's common shareholders:
               
Income from continuing operations   $ 50,605     $ 35,754  
Income from discontinued operations     2,592       2,310  
Net income   $ 53,197     $ 38,064  

The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
4

 
 
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
 
   
Three Months Ended March 31,
 
   
2013
   
2012
 
             
Net income
  $ 70,508     $ 59,148  
Other comprehensive income:
               
Change in unrealized gain on marketable securities, net
    6,767       1,159  
Change in unrealized gain on interest rate swaps, net
    -       193  
Change in foreign currency translation adjustment, net
    33,010       54,178  
Other comprehensive income
    39,777       55,530  
                 
Comprehensive income
    110,285       114,678  
                 
Comprehensive income attributable to noncontrolling interests
    (4,011 )     (8,777 )
                 
Comprehensive income attributable to the Company
  $ 106,274     $ 105,901  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
5

 
 
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2013 and 2012
(in thousands)
 
   
Cumulative
Distributions in Excessof Net
   
Accumulated
Other
Comprehensive
   
Preferred Stock
   
Common Stock
   
Paid-in
   
Total
Stockholders'
   
Noncontrolling
   
Total
 
   
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
    -       -       -       -       -       -       -       -       822       822  
                                                                                 
Comprehensive income:
                                                                               
Net income
    53,638       -       -       -       -       -       -       53,638       5,510       59,148  
Other comprehensive income:
                                                                               
Change in unrealized gain on marketable securities
    -       1,159       -       -       -       -       -       1,159       -       1,159  
Change in unrealized gain on interest rate swaps
    -       193       -       -       -       -       -       193       -       193  
Change in foreign currency translation adjustment
    -       50,911       -       -       -       -       -       50,911       3,267       54,178  
                                                                                 
Redeemable noncontrolling interests
    -       -       -       -       -       -       -       -       (1,582 )     (1,582 )
Dividends ($0.19 per common share; $0.4156 per Class F Depositary Share, $0.4844 per Class G Depositary Share, $0.4313 per Class H Depositary Share and $0.0458 per Class I Depositary Share, respectively)
    (92,887 )     -       -       -       -       -       -       (92,887 )     -       (92,887 )
Distributions to noncontrolling interests
    -       -       -       -       -       -       -       -       (5,362 )     (5,362 )
Issuance of common stock
    -       -       -       -       1,093       11       18,055       18,066       -       18,066  
Surrender of common stock
    -       -       -       -       (53 )     -       (1,023 )     (1,023 )     -       (1,023 )
Repurchase of common stock
    -       -       -       -       (1,385 )     (14 )     (26,082 )     (26,096 )     -       (26,096 )
Issuance of preferred stock
    -       -       16       16       -       -       387,214       387,230       -       387,230  
Exercise of common stock options
    -       -       -       -       320       3       4,767       4,770       -       4,770  
Amortization of equity awards
    -       -       -       -       -       -       4,815       4,815       -       4,815  
Balance, March 31, 2012
  $ (742,248 )   $ (55,397 )     970     $ 970       406,913     $ 4,069     $ 5,879,768     $ 5,087,162     $ 196,412     $ 5,283,574  
                                                                                 
                                                                                 
Balance, January 1, 2013
  $ (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
    -       -       -       -       -       -       -       -       49       49  
                                                                                 
Comprehensive income:
                                                                               
Net income
    67,770       -       -       -       -       -       -       67,770       2,738       70,508  
Other comprehensive income, net of tax:
                                                                               
Change in unrealized gain on marketable securities
    -       6,767       -       -       -       -       -       6,767       -       6,767  
Change in unrealized gain on interest rate swaps
    -       -       -       -       -       -       -       -       -       -  
Change in foreign currency translation adjustment
    -       31,737       -       -       -       -       -       31,737       1,273       33,010  
                                                                                 
Redeemable noncontrolling interests
    -       -               -       -       -       -       -       (1,415 )     (1,415 )
Dividends ($0.21 per common share; $0.4313 per Class H Depositary Share and $0.3750 per Class I Depositary Share, and $0.3438 per Class J Depositary Share. and $0.3516 per) Class K Depositary Share, respectively)
    (100,382 )     -       -       -       -       -       -       (100,382 )     -       (100,382 )
Distributions to noncontrolling interests
    -       -       -       -       -       -       -       -       (1,912 )     (1,912 )
Issuance of common stock
    -       -       -       -       555       5       9,078       9,083       -       9,083  
Surrender of restricted stock
    -       -       -       -       (90 )     (1 )     (1,948 )     (1,949 )     -       (1,949 )
Exercise of common stock options
    -       -       -       -       376       4       5,768       5,772       -       5,772  
Amortization of equity awards
    -       -       -       -       -       -       3,777       3,777       -       3,777  
Balance, March 31, 2013
  $ (856,620 )   $ (27,678 )     102     $ 102       408,623     $ 4,086     $ 5,667,845     $ 4,787,735     $ 168,053     $ 4,955,788  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
6

 
 
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
 
Three Months Ended March 31,
 
   
2013
   
2012
 
Cash flow from operating activities:
           
Net income
  $ 70,508     $ 59,148  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    62,773       64,885  
Impairment charges
    3,229       9,563  
Gain on sale of operating properties
    (3,577 )     (11,979 )
Equity in income of joint ventures, net
    (24,111 )     (34,738 )
Gains on change in control of interests
    (23,170 )     (2,008 )
Equity in income from other real estate investments, net
    (11,163 )     (11,027 )
Distributions from joint ventures and other real estate investments
    43,321       60,453  
Change in accounts and notes receivable
    7,030       13,563  
Change in accounts payable and accrued expenses
    18,277       17,215  
Change in other operating assets and liabilities
    6,768       (8,201 )
Net cash flow provided by operating activities
    149,885       156,874  
                 
Cash flow from investing activities:
               
Acquisition of and improvements to operating real estate
    (83,276 )     (142,187 )
Acquisition of and improvements to real estate under development
    (110 )     (47 )
Investment in marketable securities
    (33,588 )     -  
Proceeds from sale/repayments of marketable securities
    164       84  
Investments and advances to real estate joint ventures
    (41,153 )     (40,090 )
Reimbursements of investments and advances to real estate joint ventures
    20,958       42,267  
Investment in other real estate investments
    (22,818 )     (2,553 )
Reimbursements of investments and advances to other real estate investments
    1,050       6,024  
Investment in mortgage loans receivable
    (5,057 )     -  
Collection of mortgage loans receivable
    6,022       1,635  
Investment in other investments
    (21,366 )     (436 )
Reimbursements of other investments
    463       8,235  
Proceeds from sale of operating properties
    17,114       94,589  
Net cash flow used for investing activities
    (161,597 )     (32,479 )
                 
Cash flow from financing activities:
               
Principal payments on debt, excluding normal amortization of rental property debt
    (16,538 )     (81,048 )
Principal payments on rental property debt
    (6,281 )     (6,312 )
Proceeds from mortgage/construction loan financings
    5,374       6,276  
Borrowings/(repayments) under unsecured revolving credit facility, net
    250,000       (185,570 )
Borrowings under unsecured term loan
    78,118       -  
Repayments under unsecured term loan/notes
    (178,309 )     -  
Financing origination costs
    (1,159 )     (158 )
Redemption of/distribution to noncontrolling interests
    (2,502 )     (1,912 )
Dividends paid
    (97,744 )     (92,158 )
Proceeds from issuance of stock
    5,772       392,001  
Repurchase of common stock
    -       (26,096 )
Net cash flow provided by financing activities
    36,731       5,023  
                 
Change in cash and cash equivalents
    25,019       129,418  
                 
Cash and cash equivalents, beginning of year
    141,875       112,882  
Cash and cash equivalents, end of year
  $ 166,894     $ 242,300  
                 
Interest paid during the year (net of capitalized interest of $219 and $627, respectively)
  $ 37,425     $ 36,611  
                 
Income taxes paid during the year
  $ 111     $ 626  

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

 
7

 
 
KIMCO REALTY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
 

1. Interim Financial Statements

Principles of Consolidation -

The accompanying Condensed Consolidated Financial Statements include the accounts of Kimco Realty Corporation and Subsidiaries, (the “Company”). The Company’s Subsidiaries includes subsidiaries which are wholly-owned, and all entities in which the Company has a controlling financial interest, including where the Company has been determined to be a primary beneficiary of a variable interest entity (“VIE”) 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.  The information furnished in the accompanying Condensed Consolidated Financial Statements is unaudited and reflects all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature.  These Condensed Consolidated Financial Statements should be read in conjunction with the Company's 2012 Annual Report on Form 10-K for the year ended December 31, 2012 ("10-K"), as certain disclosures in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 that would duplicate those included in the 10-K are not included in these Condensed Consolidated Financial Statements.

Subsequent Events -

The Company has evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements.

Income Taxes -

The Company elected status as a Real Estate Investment Trust (a “REIT”) for federal income tax purposes beginning in its taxable year ended December 31, 1991 and operates in a manner that enables the Company to maintain its status as a REIT.  As a REIT, the Company must distribute at least 90 percent of its taxable income and will not pay federal income taxes on the amount distributed to its shareholders.  Therefore, the Company is not subject to federal income taxes if it distributes 100 percent of its taxable income.   Most states, where the Company holds investments in real estate, conform to the federal rules recognizing REITs.  Certain subsidiaries have made a joint election with the Company to be treated as taxable REIT subsidiaries (“TRS”), which permit the Company to engage in certain business activities in which the REIT may not conduct directly.  A TRS is subject to federal and state income taxes on the income from these activities and the Company includes a provision for taxes in its condensed consolidated financial statements.  The Company is subject to and also includes in its tax provision non-U.S. income taxes on certain investments located in jurisdictions outside the U.S.
 
 
8

 

Earnings Per Share -

The following table sets forth the reconciliation of earnings and the weighted average number of shares used in the calculation of basic and diluted earnings per share (amounts presented in thousands except per share data):
 
   
Three Months Ended
March 31,
 
   
2013
   
2012
 
Computation of Basic Earnings Per Share:
           
             
Income from continuing operations
  $ 67,388     $ 54,596  
Gain on sale of operating properties, net of tax
    540       -  
Net income attributable to noncontrolling interests
    (2,738 )     (5,510 )
Discontinued operations attributable to noncontrolling interests
    (12 )     2,242  
Preferred stock dividends
    (14,573 )     (15,574 )
Income from continuing operations available to the common shareholders
    50,605       35,754  
Earnings attributable to unvested restricted shares
    (390 )     (338 )
Income from continuing operations attributable to common shareholders
    50,215       35,416  
Income from discontinued operations attributable to the Company
    2,592       2,310  
Net income attributable to the Company’s common shareholders for basic earnings per share
  $ 52,807     $ 37,726  
                 
Weighted average common shares outstanding
    406,662       406,272  
                 
Basic Earnings Per Share Attributable to the Company’s Common Shareholders:
               
Income from continuing operations
  $ 0.12     $ 0.09  
Income from discontinued operations
    0.01       -  
Net income
  $ 0.13     $ 0.09  
                 
Computation of Diluted Earnings Per Share:
               
Income from continuing operations attributable to common shareholders
  $ 50,215     $ 35,416  
Income from discontinued operations attributable to the Company
    2,592       2,310  
Net income attributable to the Company’s common shareholders for diluted earnings per share
  $ 52,807     $ 37,726  
                 
Weighted average common shares outstanding – basic
    406,662       406,272  
Effect of dilutive securities (a):
               
Equity awards
    1,004       1,007  
Shares for diluted earnings per common share
    407,666       407,279  
                 
Diluted Earnings Per Share Attributable to the Company’s Common Shareholders:
               
Income from continuing operations
  $ 0.12     $ 0.09  
Income from discontinued operations
    0.01       -  
Net income
  $ 0.13     $ 0.09  
 
(a)   For the three months ended March 31, 2013 and 2012, the effect of certain convertible units would have an anti-dilutive effect upon the calculation of Income from continuing operations per share.  Accordingly, the impact of such conversion has not been included in the determination of diluted earnings per share calculations.  Additionally, there were 12,295,607 and 14,520,258 stock options that were not dilutive at March 31, 2013 and 2012, respectively.
 
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.

New Accounting Pronouncements -

In February 2013, the FASB issued new guidance regarding liabilities, Accounting Standards Update ("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 Company is currently assessing the impact that the adoption of ASU 2013-04 will have on the Company’s financial position and/or results of operations.
 
 
9

 

In January 2013, the FASB released ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). This guidance is the culmination of the board’s redeliberation on reporting reclassification adjustments from accumulated other comprehensive income. The standard requires that companies present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source (e.g., the release due to cash flow hedges from interest rate contracts) and the income statement line items affected by the reclassification (e.g., interest income or interest expense). If a component is not required to be reclassified to net income in its entirety (e.g., the net periodic pension cost), companies would instead cross reference to the related footnote for additional information (e.g., the pension footnote).  The new requirements were effective for public companies in interim and annual reporting periods beginning after December 15, 2012.  The adoption of ASU 2013-02 did not have a material impact on the Company’s financial statement presentation or disclosures.

In December 2011, the FASB released ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). ASU 2011-11 requires companies to provide new disclosures about offsetting and related arrangements for financial instruments and derivatives. The provisions of ASU 2011-11 are effective for reporting periods beginning on or after January 1, 2013, and are required to be applied retrospectively. The adoption of ASU 2011-11 did not have a material impact on the Company’s financial statement disclosures.

Reclassifications –

Certain reclassifications have been made to previously recorded amounts to conform to the current year presentation. Specifically, the Company is presenting on its Condensed Consolidated Statements of Income its provision for doubtful accounts as a separate line item included in Operating expenses, which during 2012 was included in Revenues from rental properties.  Additionally, the Company made certain other immaterial reclassifications to the Company’s Condensed Consolidated Balance Sheets as of December 31, 2012 to conform to the current presentation.
 
2. Operating Property Activities

Acquisitions -

During the three months ended March 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(1)
Santee, CA
Jan-13
  $ 26,863     $ 48,456     $ 22,681     $ 98,000       311  
Shops at Kildeer (2)
Kildeer, IL
Jan-13
    -       32,724       -       32,724       168  
Village Commons S.C.
Tallahassee, FL
Jan-13
    7,100       -       -       7,100       125  
Putty Hill Plaza (3)
Baltimore, MD
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 (Parcel)
Roseville, MN
Jan-13
    5,143               -       5,143       80  
Wilton River Park (4)
Wilton, CT
Mar-13
    777       36,000       5,223       42,000       187  
        $ 66,275     $ 126,295     $ 28,393     $ 220,963       1,063  
* Gross leasable area ("GLA")
 
(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.
 
 
10

 
 
The aggregate purchase price of the properties acquired during the three months ended March 31, 2013 has been allocated as follows (in thousands):
 
Land
 
$
71,797
 
Buildings
   
106,554
 
Above Market Rents
   
6,300
 
Below Market Rents
   
(7,134
)
In-Place Leases
   
11,309
 
Building Improvements
   
28,161
 
Tenant Improvements
   
5,892
 
Mortgage Fair Value Adjustment
   
(2,237
)
Other Assets
   
1,054
 
Other Liabilities
   
(733)
 
   
$
220,963
 
 
Dispositions –

During the three months ended March 31, 2013, the Company disposed of two operating properties, in separate transactions, for an aggregate sales price of $10.3 million. These transactions, which are included in Discontinued Operations, resulted in an aggregate gain of $2.5 million.

Impairment Charges -

During the three months ended March 31, 2013, the Company recognized an aggregate impairment charge of $2.8 million relating to its investment in two operating properties, which is included in Impairment charges under Operating expenses on the Company’s Condensed Consolidated Statements of Income.  The aggregate book value of these properties was $17.5 million. The estimated fair value of these properties is based upon purchase price offers aggregating $14.7 million.  These 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 (see Footnote 12).
 
3. Discontinued Operations

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

The components of income and expense relating to discontinued operations for the three months ended March 31, 2013 and 2012 are shown below. These include the results of operations through the date of each respective sale for properties sold during 2013 and 2012 and the operations for the applicable period for those assets classified as held-for-sale as of March 31, 2013 (in thousands):

   
Three Months Ended
March 31,
 
   
2013
   
2012
 
Discontinued operations:
           
Revenues from rental property
  $ 378     $ 12,057  
Rental property expenses
    (18 )     (4,725 )
Depreciation and amortization
    (35 )     (5,330 )
Provision for doubtful accounts
    (256 )     (331 )
Interest expense
    -       (210 )
Other expense, net
    (3 )     (97 )
Income from discontinued operating properties, before income taxes
    66       1,364  
Impairment of property carrying value, before income taxes
    (31 )     (9,330 )
Gain on disposition of operating properties
    2,496       11,979  
Benefit for income taxes, net
    49       539  
Income from discontinued operating properties
    2,580       4,552  
Net loss/(income) attributable to noncontrolling interests
    12       (2,242 )
Income from discontinued operations attributable to the Company
  $ 2,592     $ 2,310  

During the three months ended March 31, 2013, the Company classified as held-for-sale one operating property, comprising 14,600 square feet of GLA.  The book value of this property was $0.2 million, net of accumulated depreciation of $0.9 million, which is included in Other assets on the Company’s Condensed Consolidated Balance Sheets.   The book value of this property did not exceed its estimated fair value, less costs to sell, and as such no impairment charge was recognized.  The Company’s determination of the fair value of this property of $0.2 million was based upon an executed contract of sale with a third party.   In addition, the Company completed the sale of one operating property during the three months ended March 31, 2013 which was classified as held-for-sale during 2012 (this disposition is included in Footnote 2 above). 
 
 
11

 
 
4. Investments and Advances in Real Estate Joint Ventures

The Company and its subsidiaries have investments in and advances to various real estate joint ventures.  These joint ventures are engaged primarily in the operation of shopping centers which are either owned or held under long-term operating leases. The Company and the joint venture partners have joint approval rights for major decisions, including those regarding property operations.  As such, the Company holds noncontrolling interests in these joint ventures and accounts for them under the equity method of accounting.  The table below presents joint venture investments for which the Company held an ownership interest at March 31, 2013 and December 31, 2012 (in millions, except number of properties):

   
As of March 31, 2013
   
As of December 31, 2012
 
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 %     61       10.7     $ 2,733.0     $ 170.2       15.0 %     61       10.7     $ 2,744.9     $ 170.1  
Kimco Income Opportunity Portfolio (“KIR”) (2)
    45.0 %     58       12.4       1,544.3       140.5       45.0 %     58       12.4       1,543.2       140.3  
UBS Programs (“UBS”) (2)(7)*
    17.9 %     39       5.6       1,260.1       58.0       17.9 %     40       5.7       1,260.1       58.4  
BIG Shopping Centers (2)*
    37.9 %     21       3.4       518.4       32.4       37.7 %     22       3.6       547.7       31.3  
The Canada Pension Plan Investment Board
    (“CPP”) (2)
    55.0 %     6       2.4       436.0       148.7       55.0 %     6       2.4       436.1       149.5  
Kimco Income Fund (2)(6)
    29.8 %     12       1.5       287.3       32.2       15.2 %     12       1.5       287.0       12.3  
SEB Immobilien (2)
    15.0 %     13       1.8       361.4       1.3       15.0 %     13       1.8       361.2       1.5  
Other Institutional Programs (2) (8)
 
Various
      57       2.5       451.6       16.9    
Various
      58       2.6       499.2       21.3  
RioCan
    50.0 %     45       9.3       1,349.3       103.5       50.0 %     45       9.3       1,379.3       111.0  
Intown (3)
    -       138       N/A       844.1       83.1       -       138       N/A       841.0       86.9  
Latin America
 
Various
      131       18.0       1,192.2       342.6    
Various
      131       18.0       1,198.1       334.2  
Other Joint Venture Programs (4) (5)
 
Various
      86       13.1       1,819.4       312.8    
Various
      87       13.2       1,846.7       311.4  
Total
            667       80.7     $ 12,797.1     $ 1,442.2               671       81.2     $ 12,944.5     $ 1,428.2  
Ownership % is a blended rate

The table below presents the Company’s share of net income/(loss) for the above investments which is included in the Company’s Consolidated Statements of Income in Equity in income of joint ventures, net for the three months ended March 31, 2013 and 2012 (in millions):
 
   
Three months ended
March 31,
 
   
2013
   
2012
 
KimPru and KimPru II (12)
  $ 2.0     $ 2.0  
KIR
    7.1       6.0  
UBS Programs
    0.9       (0.2 )
BIG Shopping Centers (9)
    2.0       (0.7 )
CPP
    1.5       1.3  
Kimco Income Fund
    0.7       0.8  
SEB Immobilien
    0.3       0.1  
Other Institutional Programs
    0.3       3.0  
RioCan
    6.2       5.2  
Intown
    (0.2 )     0.5  
Latin America (14)
    1.6       2.7  
Other Joint Venture Programs (5) (8) (10) (11) (13)
    1.7       14.0  
Total
  $ 24.1     $ 34.7  

(1)   This venture represents four separate joint ventures, with four separate accounts managed by Prudential Real Estate Investors (“PREI”), three of these ventures are collectively referred to as KimPru and the remaining venture is referred to as KimPru II.
(2)   The Company manages these joint venture investments and, where applicable, earns acquisition fees, leasing commissions, property management fees, asset management fees and construction management fees.
(3)   The Company’s share of this investment is subject to fluctuation and is dependent upon property cash flows.
 
 
12

 
 
(4)   During the three months ended March 31, 2013, the Company amended one of its Canadian preferred equity investment agreements to restructure the investment as a pari passu joint venture in which the Company holds a noncontrolling interest.  As a result of this transaction, the Company continues to account for its investment in this joint venture under the equity method of accounting and includes this investment in Investments and advances to real estate joint ventures within the Company’s Condensed Consolidated Balance Sheets.
(5)   During the three months ended March 31, 2013, a joint venture in which the Company held a noncontrolling interest sold an operating property to the Company for a sales price of $98.0 million.  The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance.  As such, the Company recognized a gain of $22.7 million, before income tax, from the fair value adjustment associated with its original ownership due to a change in control and now consolidates this operating property.
(6)   During the three months ended March 31, 2013, the Company purchased an additional 14.49% interest in Kimco Income Fund for $19.9 million.
(7)   During the three months ended March 31, 2013, UBS sold an operating property to the Company for a sales price of $32.7 million, which was equal to the remaining debt balance.  The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance.  As such the Company recognized no gain or loss from the fair value adjustment associated with it’s the Company’s original ownership due to a change in control and now consolidates this operating property.
(8)  During the three months ended March 31, 2013, a joint venture in which the Company held a noncontrolling interest sold an operating property to the Company for a sales price of $14.2 million.  The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance.  As such the Company 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 and now consolidates this operating property.
(9)   During the three months ended March 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.
(10) During the three months ended March 31, 2012, three joint ventures in which the Company holds noncontrolling interests sold three properties, in separate transactions, for an aggregate sales price of $180.0 million.  The Company’s share of income related to these transactions was an aggregate gain of  $8.3 million.
(11) During the three months ended March 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, the Company evaluated these transactions pursuant to the FASB’s Consolidation guidance.  As such, the Company recognized a gain of $2.0 million from the fair value adjustment associated with its original ownership due to a change in control and now consolidates these operating properties.
(12) During the three months ended March 31, 2013, KimPru recognized an impairment charge of $3.7 million related to the pending sale of a property to the Company, based on the estimated sales price.  The Company’s share of this impairment charge for the three months ended March 31, 2013 was $0.5 million.
(13) During the three months ended March 31, 2013, a joint venture in which the Company has a noncontrolling interest recognized an impairment charge of $1.8 million related to the pending sale of one property.  The Company’s share of this impairment charge was $0.9 million.
(14) During April 2013, the Company entered into an agreement to sell nine operating properties located throughout Mexico which are held in unconsolidated joint ventures in which the Company has noncontrolling interests.  This transaction is expected to result in a net gain of approximately $53.2 million, after tax, of which the Company’s share is estimated to be approximately $26.6 million.  However, based upon the allocation of the purchase price to the individual properties, three of these properties are expected to result in losses aggregating $4.6 million, of which the Company’s share is estimated to be $2.3 million.  As such, the Company has recorded impairment charges equal to its share of these estimated losses during the three months ended March 31, 2013.
 
The table below presents debt balances within the Company’s unconsolidated joint venture investments for which the Company held noncontrolling ownership interests at March 31, 2013 and December 31, 2012 (dollars in millions):

   
As of March 31, 2013
   
As of December 31, 2012
 
Venture
 
Mortgages
and
Notes
Payable
   
Weighted
Average
Interest Rate
   
Weighted
Average
Remaining
Term
(months)**
   
Mortgages
and
Notes
Payable
   
Weighted
Average
Interest Rate
   
Weighted
Average
Remaining
Term
(months)**
 
KimPru and KimPru II
 
$
         1,009.2
     
5.54
%
   
41.6
   
$
$1,010.2
     
5.54%
     
44.5
 
KIR
   
              927.5
     
5.11
%
   
80.0
     
914.6
     
5.22%
     
78.6
 
UBS Programs
   
              656.0
     
5.40
%
   
35.7
     
691.9
     
5.40%
     
39.1
 
BIG Shopping Centers
   
              406.3
     
5.52
%
   
42.5
     
443.8
     
5.52%
     
45.5
 
CPP
   
              140.8
     
5.18
%
   
28.0
     
141.5
     
5.19%
     
31.0
 
Kimco Income Fund
   
160.6
     
5.45
%
   
17.8
     
161.4
     
5.45%
     
20.7
 
SEB Immobilien
   
              243.8
     
5.11
%
   
52.3
     
243.8
     
5.11%
     
55.3
 
RioCan
   
              904.0
     
5.06
%
   
41.9
     
923.2
     
5.16%
     
41.2
 
Intown
   
              612.1
     
4.48
%
   
43.2
     
614.4
     
4.46%
     
46.1
 
Other Institutional Programs
   
              300.7
     
5.25
%
   
36.5
     
310.5
     
5.24%
     
39.0
 
Other Joint Venture Programs
   
1,577.9
     
5.73
%
   
59.4
     
1,612.2
     
5.70%
     
57.8
 
Total
 
$
6,938.9
                 
 
7,067.5
                 
** Average Remaining Term includes extension options
 
 
13

 
 
5. Other Real Estate Investments

Preferred Equity Capital -

The Company has provided capital to owners and developers of real estate properties through its Preferred Equity program. As of March 31, 2013, the Company’s net investment under the Preferred Equity program was $281.8 million relating to 497 properties, including 392 net leased properties.  During the three months ended March 31, 2013, the Company earned $9.9 million from its preferred equity investments, including $4.3 million in profit participation earned from one capital transaction.  During the three months ended March 31, 2012, the Company earned $10.2 million from its preferred equity investments, including $3.7 million in profit participation earned from eight capital transactions.

During the three months ended March 31, 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 Condensed Consolidated Balance Sheets.

Other –

During the three months ended March 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.  This investment includes a contribution of $22.3 million to acquire 414 Albertsons locations from SVU through the Company’s current joint venture in Albertsons which the Company now holds a 15.2% noncontrolling ownership interest.  The Company recorded this additional investment in Other real estate investments on the Company’s Condensed Consolidated Balance Sheets and will continue to account for its investment in this joint venture under the equity method of accounting.  Also included in this 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 Condensed Consolidated Balance Sheets and will account for its 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 Condensed Consolidated Balance Sheets.
 
6. Variable Interest Entities

Consolidated Operating Properties

Included within the Company’s consolidated operating properties at March 31, 2013, are two consolidated entities that are VIEs, for which the Company is the primary beneficiary.   All of these entities have been established to own and operate real estate property. The Company’s involvement with these entities is through its majority ownership and management of the properties. These entities were deemed VIEs primarily based on the fact that the voting rights of the equity investors is not proportional to their obligation to absorb expected losses or receive the expected residual returns of the entity and substantially all of the entity's activities are conducted on behalf of the investor which has disproportionately fewer voting rights. The Company determined that it was the primary beneficiary of these VIEs as a result of its controlling financial interest.
 
At March 31, 2013, total assets of these VIEs were $10.7 million and total liabilities were $0.1 million.  The classification of these assets is primarily within real estate and the classification of liabilities are primarily within accounts payable and accrued expenses, which is included in Other liabilities in the Company’s Condensed Consolidated Balance Sheets.
 
The majority of the operations of these VIEs are funded with cash flows generated from the properties.  The Company has not provided financial support to any of these VIEs that it was not previously contractually required to provide, which consists primarily of funding any capital expenditures, including tenant improvements, which are deemed necessary to continue to operate the entity and any operating cash shortfalls that the entity may experience.

Consolidated Ground-Up Development Projects

Included within the Company’s ground-up development projects at March 31, 2013, are two entities that are VIEs, for which the Company is the primary beneficiary. These entities were established to develop real estate property to hold as long-term investments.  The Company’s involvement with these entities is through its majority ownership and management of the properties. These entities were deemed VIEs 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 these entities 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 these VIEs as a result of its controlling financial interest.  
 
 
14

 

           At March 31, 2013, total assets of these ground-up development VIEs were $87.9 million and total liabilities were $0.2 million. The classification of these assets is primarily within Real estate under development and the classification of liabilities are primarily within accounts payable and accrued expenses, which is included in Other liabilities in the Company’s Condensed Consolidated Balance Sheets.

Substantially all of the projected development costs to be funded for these ground-up development VIEs, aggregating $33.2 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 these VIEs that it was not previously contractually required to provide.

Unconsolidated Ground-Up Development

Also included within the Company’s ground-up development projects at March 31, 2013, is an unconsolidated joint venture, which is a VIE for which the Company is not the primary beneficiary. This joint venture is 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 Company has shared control of this entity along with the entity’s partners and therefore does not have a controlling financial interest.

The Company’s investment in this VIE was $17.8 million as of March 31, 2013, which is included in Real estate under development in the Company’s Condensed Consolidated Balance Sheets. The Company’s maximum exposure to loss as a result of its involvement with this VIE is estimated to be $36.2 million, which primarily represents the Company’s current investment and estimated future funding commitments of $18.4 million.  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 March 31, 2013, 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 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 partners and therefore does not have a controlling financial interest.

As of March 31, 2013, the Company’s investment in this VIE was a negative $11.8 million, due to the fact that the Company had a remaining capital commitment obligation, which is included in Other liabilities in the Company’s Condensed Consolidated Balance Sheets. The Company’s maximum exposure to loss as a result of its involvement with this VIE is estimated to be $11.8 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 development will be funded with capital contributions from the Company and the outside partner in accordance with their respective ownership percentages.
 
 
15

 
 
7. 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.  The Company reviews payment status to identify performing versus non-performing loans.  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 against through current income. Interest income on non-performing loans is generally recognized on a cash basis.  The following table presents performing and non-performing loans as of March 31, 2013 (in thousands):

   
Number of Loans
   
Amount
 
Performing Loans
    25     $ 53,158  
Non-Performing Loans
    3       19,203  
Total
    28     $ 72,361  


As of March 31, 2013, the Company had three loans aggregating $19.2 million which were in default for nonpayment of interest only or principal and interest. The Company has placed all of these loans on non-accrual status with respect to the recognition of interest income starting from each loan’s nonperformance date. Nonperformance dates for these loans range from seven months to seven years.  The Company assessed each of these three loans and determined that the estimated fair value of the underlying collateral exceeded the respective carrying values as of March 31, 2013.
 
8. Marketable Securities and Other Investments

At March 31, 2013, the Company’s investment in marketable securities was $76.8 million which includes an aggregate unrealized gain of $26.0 million relating to marketable equity security investments.
 
9. Notes Payable

During March 2008, the Company obtained a Mexican peso (“MXN”) 1.0 billion term loan, which bore interest at a fixed rate of 8.58%, subject to change in accordance with the Company’s senior debt ratings, and was scheduled to mature in March 2013.  During March 2013, the Company repaid this term loan and entered into a new five year 1.0 billion MXN term loan which matures in March 2018.  This term loan bears interest at a rate equal to TIIE (Equilibrium Interbank Interest Rate) plus 1.35% (6.13% as of March 31, 2013).  The Company has the option to swap this rate to a fixed rate at any time during the term of the loan.  As of March 31, 2013, the outstanding balance on this new term loan was MXN 1.0 billion (USD $80.9 million). 

During January 2013, the Company repaid the $100.0 million outstanding on its 6.125% senior unsecured notes, which matured in January 2013.
 
10. Mortgages Payable

During the three months ended March 31, 2013, the Company (i) assumed $128.5 million of individual non-recourse mortgage debt relating to the acquisition of four operating properties, including an increase of $2.2 million associated with fair value debt adjustments and (ii) paid off $16.5 million of mortgage debt that encumbered four properties.
 
11. 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 financial interest in accordance with the provisions of the FASB’s Consolidation guidance.  

The Company identifies its noncontrolling interests separately within the equity section on the Company’s Condensed Consolidated Balance Sheets. Noncontrolling interests also includes amounts related to partnership units issued by consolidated subsidiaries of the Company in connection with certain property acquisitions.  Partnership units which embody an unconditional obligation requiring the Company to redeem the units for cash at a specified or determinable date (or dates) or upon an event that is certain to occur are determined to be mandatorily redeemable under the FASB’s Distinguishing Liabilities from Equity guidance and are classified as Redeemable noncontrolling interests and presented in the mezzanine section between Total liabilities and Stockholder’s equity on the Company’s Condensed Consolidated Balance Sheets. The amounts of consolidated net income attributable to the Company and to the noncontrolling interests are presented on the Company’s Condensed Consolidated Statements of Income.

The following table presents the change in the redemption value of the Redeemable noncontrolling interests for the three months ended March 31, 2013 and March 31, 2012 (amounts in thousands):

   
2013
   
2012
 
Balance at January 1,
 
$
81,076
   
$
95,074
 
Issuance of redeemable units
   
5,223
     
-
 
Other
   
25
     
-
 
Balance at March 31,
 
$
86,324
   
$
95,074
 
 
 
16

 
 
12. Fair Value Measurements

All financial instruments of the Company are reflected in the accompanying Condensed Consolidated Balance Sheets at amounts which, in management’s estimation based upon an interpretation of available market information and valuation methodologies, reasonably approximate their fair values except those listed below, for which fair values are reflected.  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, securities dealers’ estimated market values or comparable market sales.  Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition.

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

The following are financial instruments for which the Company’s estimate of fair value differs from the carrying amounts (in thousands):
   
March 31, 2013
   
December 31, 2012
 
   
Carrying
Amounts
   
Estimated
Fair Value
   
Carrying
Amounts
   
Estimated
Fair Value
 
Marketable securities (1)
 
$
76,786
 
 
$
77,082
   
$
36,541
   
$
36,825
 
                                 
Notes payable (2)
 
$
3,337,420
   
$
3,561,819
   
$
3,192,127
   
$
3,408,632
 
                                 
Mortgages payable (3)
 
$
1,113,653
 
 
$
1,197,711
   
$
1,003,190
   
$
1,068,616
 
 
(1)   As of March 31, 2013 and December 31, 2012, the Company determined that $73.8 million and $33.4 million, respectively, of the marketable securities estimated fair value were classified within Level 1 of the fair value hierarchy and the remaining $3.3 million and $3.4 million, respectively, were classified within Level 3 of the fair value hierarchy.
(2)   The Company determined that its valuation of Notes payable was classified within Level 2 of the fair value hierarchy.
(3)   The Company determined that its valuation of Mortgages payable was classified within Level 3 of the fair value hierarchy.
 
The Company has certain financial instruments that must be measured under the FASB’s Fair Value Measurements and Disclosures guidance, including available for sale securities and derivatives. The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.

The table below presents the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2013 and December 31, 2012, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

   
Balance at
March 31, 2013
   
Level 1
   
Level 2
   
Level 3
 
                         
Marketable equity securities
  $ 73,783     $ 73,783     $ -     $ -  
 
 
 
Balance at
December 31, 2012
   
Level 1
   
Level 2
   
Level 3
 
                         
Marketable equity securities
 
$
33,428
   
$
33,428
   
$
-
   
$
-
 

 Assets measured at fair value on a non-recurring basis at March 31, 2013 and December 31, 2012 are as follows (in thousands):
 
   
Balance at
March 31, 2013
   
Level 1
   
Level 2
   
Level 3
 
                         
Real estate
 
$
14,706
   
$
-
   
$
-
   
$
14,706
 

 
17

 

   
Balance at
December 31, 2012
   
Level 1
   
Level 2
   
Level 3
 
 
                       
Real estate
  $ 52,505     $ -     $ -     $ 52,505  


During the three months ended March 31, 2013, the Company recognized impairment charges of $3.2 million relating to adjustments to property carrying values. During the three months ended March 31, 2012, the Company recognized impairment charges of $9.6 million ($9.3 million of which is included in discontinued operations) relating to adjustments to property carrying values. The Company’s estimated fair values relating to these impairment assessments were primarily based upon estimated sales prices from third party offers. The Company does not have access to the unobservable inputs used by these third parties to determine these estimated fair values.  Based on these inputs the Company determined that its valuation of these investments was classified within Level 3 of the fair value hierarchy.
 
13. Preferred Stock

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

As of March 31, 2013 and December 31, 2012
 
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                          
 
14. Supplemental Schedule of Non-Cash Investing / Financing Activities

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

   
2013
   
2012
 
Acquisition of real estate interests by assumption of mortgage debt
  $ 36,715     $ 59,110  
Acquisition of real estate interests by issuance of redeemable units
  $ 5,223     $ -  
Issuance of restricted common stock
  $ 9,083     $ 18,066  
Surrender of restricted common stock
  $ (1,949 )   $ (1,023 )
Disposition of real estate interests by assignment of debt
  $ -     $ 13,655  
Disposition of real estate through the issuance of an unsecured obligation
  $ 3,513     $ 1,750  
Declaration of dividends paid in succeeding period
  $ 99,156     $ 92,887  
Consolidation of Joint Ventures:
               
Increase in real estate and other assets
  $ 114,986     $ -  
Increase in mortgages payable
  $ 91,816     $ -  
 
15. Incentive Plans

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 stock options and restricted stock grants.  Effective May 1, 2012, 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 stock options 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, stock 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 may provide a right 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 stock 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.
 
 
18

 

The Company recognized expenses associated with its equity awards of $6.9 million and $7.1 million for the three months ended March 31, 2013 and 2012, respectively.  As of March 31, 2013, the Company had $44.8 million of total unrecognized compensation cost related to unvested stock compensation granted under the Plans.  That cost is expected to be recognized over a weighted average period of approximately 4.0 years.
 
16. Taxable REIT Subsidiaries (“TRS”)

The Company is subject to federal, state and local income taxes on the income from its TRS activities, which include Kimco Realty Services ("KRS"), a wholly owned subsidiary of the Company, the consolidated entities of FNC Realty Corporation (“FNC”) and Blue Ridge Real Estate Company/Big Boulder Corporation.  The Company is also subject to local non-U.S. taxes on certain investments located outside the U.S.

Income taxes have been provided for on the asset and liability method as required by the FASB’s Income Taxes 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 the taxable assets and liabilities.

The Company’s deferred tax assets and liabilities, which are included in the caption Other assets and Other liabilities on the accompanying Condensed Consolidated Balance Sheets, at March 31, 2013 and December 31, 2012, were as follows (in thousands):

   
March 31,
2013
   
December 31,
2012
 
Deferred tax assets:
           
Tax/GAAP basis differences
 
$
69,838
   
$
68,623
 
Net operating losses
   
39,531
     
43,483
 
Related party deferred loss
   
6,214
     
6,214
 
Tax credit carryforwards
   
3,815
     
3,815
 
Capital loss carryforwards
   
647
     
647
 
Charitable contribution carryforward
   
3
     
3
 
Non-U.S. tax/GAAP basis differences
   
63,733
     
62,548
 
Valuation allowance – U.S.
   
(33,783
)
   
(33,783
)
Valuation allowance – Non-U.S.
   
(37,091
)
   
(38,129
)
Total deferred tax assets
   
112,907
     
113,421
 
Deferred tax liabilities – U.S.
   
(19,089
)
   
(9,933
)
Deferred tax liabilities – Non-U.S.
   
(15,345
)
   
(13,263
)
Net deferred tax assets
 
$
78,473
   
$
90,225
 

As of March 31, 2013, the Company had net deferred tax assets of $78.5 million comprised of (i) $59.6 million primarily related to KRS, (ii) $11.3 million related to its foreign investments and (iii) $7.6 million related to FNC. The Company determined that no additional valuation allowance was needed against this net deferred tax asset as future earnings are anticipated to be sufficient to more likely than not realize these net deferred tax assets.  The Company based its determination on an analysis of both positive and negative evidence.  If future income projections do not occur as forecasted and there is not sufficient future taxable earnings, the Company will reevaluate the need for an additional valuation allowance.

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 may assert a 100 percent “penalty” tax pursuant to Section 857(b)(7) of the Code in lieu of disallowing 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 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, which has yet to be scheduled.  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.
 
 
19

 
 
17. Accumulated Other Comprehensive Income (“AOCI”)

The following table displays the change in the components of accumulated other comprehensive income:

   
Foreign Currency Translation Adjustments
   
Unrealized Gains on Available-for-Sale Investments
   
 
 
Total
 
Balance as of December 31, 2012
  $ (85,404 )   $ 19,222     $ (66,182 )
Other comprehensive income before reclassifications
    31,737       6,767       38,504  
Amounts reclassified from AOCI
    -       -       -  
Other comprehensive income
    31,737       6,767       38,504  
Balance as of March 31, 2013
  $ (53,667 )   $ 25,989     $ (27,678 )

 
18. Pro Forma Financial Information

As discussed in Note 2, the Company and certain of its affiliates acquired and disposed of interests in certain operating properties during the three months ended March 31, 2013.  The pro forma financial information set forth below is based upon the Company’s historical Condensed Consolidated Statements of Income for the three months ended March 31, 2013 and 2012, adjusted to give effect to these transactions at the beginning of 2012.

The pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of each year, nor does it purport to represent the results of future operations (amounts presented in millions, except per share figures). 
 
   
Three Months
Ended March 31,
 
   
2013
   
2012
 
             
Revenues from rental property
  $ 233.2     $ 215.8  
Net income
  $ 68.3     $ 55.7  
Net income available to the Company’s common shareholders
  $ 51.0     $ 34.6  
                 
                 
Net income available to the Company’s common shareholders per common share:
               
Basic
  $ 0.13     $ 0.09  
Diluted
  $ 0.13     $ 0.08  
 
 
20

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q, together with other statements and information publicly disseminated by 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” 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 for 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, (vii) risks related to our international operations, (viii) the availability of suitable acquisition and disposition opportunities, (ix) valuation and risks related to our 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 and (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 the risk factors discussed in Part II, Item 1A. included in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2012, Accordingly, there is no assurance that the Company’s expectations will be realized.

The following discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes thereto.  These unaudited financial statements include all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature.

Executive Summary

Kimco Realty Corporation is one of the nation’s largest publicly-traded owners and operators of neighborhood and community shopping centers.  As of March 31, 2013, the Company had interests in 895 shopping center properties (the “Combined Shopping Center Portfolio”) aggregating 131.4 million square feet of gross leasable area (“GLA”) and 824 other property interests, primarily through the Company’s preferred equity investments, other real estate investments and non-retail properties, totaling 26.6 million square feet of GLA, for a grand total of 1,719 properties aggregating 156.6 million square feet of GLA, located in 44 states, Puerto Rico, Canada, Mexico, Chile, Brazil and Peru.

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 vision is to be the premier owner and operator of shopping centers with its core business operations focusing on owning and operating neighborhood and community shopping centers through investments in North America.  This vision has entailed a shift away from non-retail assets that the Company currently holds. These investments include non-retail preferred equity investments, marketable securities, mortgages on non-retail properties and several urban mixed-use properties.  The Company has been actively selling its non-retail assets and investments.  As of March 31, 2013, these investments had a book value of $382.9 million, which represents less than 3.3% of the Company’s total assets, before depreciation.  In addition, the Company has an active capital recycling program of selling retail assets deemed non-strategic.  If the Company accepts sales prices for these non-retail and/or non-strategic assets that are less than their net carrying values, the Company would be required to take impairment charges.  In order to execute the Company’s vision, the Company’s strategy is 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 addition, the Company has an institutional management business with domestic and foreign institutional partners for the purpose of investing in neighborhood and community shopping centers.

 
21

 



 
Results of Operations

Comparison of the three months ended March 31, 2013 to 2012

   
Three Months Ended
       
   
March 31,
       
   
(amounts in millions)
       
   
2013
   
2012
   
Increase
   
% change
 
             
Revenues from rental property (1)
 
$
232.8
   
$
214.6
   
$
18.2
     
8.5
%
                                 
Rental property expenses: (2)
                               
Rent
 
$
3.3
   
$
3.3
   
$
-
     
-
%
Real estate taxes
   
29.9
     
28.2
     
1.7
     
6.0
%
Operating and maintenance
   
28.8
     
26.4
     
2.4
     
9.1
%
   
$
62.0
   
$
57.9
   
$
4.1
     
7.1
%
                                 
Depreciation and amortization (3)
 
$
62.7
   
$
59.6
   
$
3.1
     
5.2
%


 
(1) 
Revenues from rental property increased primarily from the combined effect of (i) the acquisition of operating properties during 2013 and 2012, providing incremental revenues for the three months ended March 31, 2013 of $15.2 million, as compared to the corresponding period in 2012, (ii) an overall increase in the consolidated shopping center portfolio occupancy to 93.2% at March 31, 2013, as compared to 92.4% at March 31, 2012, (iii) the completion of certain development and redevelopment projects, tenant buyouts and net growth in the current portfolio, providing incremental revenues for the three months ended March 31, 2013 of $1.1 million, as compared to the corresponding period in 2012, and (iv) an increase in revenues relating to the Company’s Latin America portfolio of $2.0 million, for the three months ended March 31, 2013, partially offset by (v) a decrease in revenues of $0.1 million, for the three months ended March 31, 2013, primarily resulting from the sale of certain properties during 2013 and 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 three months ended March 31, 2013, as compared to the corresponding period in 2012, primarily due to (i) an increase in real estate taxes of $1.7 million, primarily due to acquisitions of properties during 2013 and 2012, (ii) an increase in repairs and maintenance costs of $1.2 million, primarily due to acquisitions of properties during 2013 and 2012, (iii) an increase in snow removal costs of $0.8 million and (iv) an increase in utilities expense of $0.2 million.
 
(3) 
Depreciation and amortization increased for the three months ended March 31, 2013, as compared to the corresponding period in 2012, primarily due to (i) operating property acquisitions during 2013 and 2012 and (ii) tenant vacancies, partially offset by (iii) certain operating property dispositions during 2013 and 2012.
 
During the three months ended March 31, 2013, the Company recognized impairment charges of $3.2 million relating to adjustments to property carrying values based on their respective estimated sales prices.  During the three months ended March 31, 2012, the Company recognized impairment charges of $9.6 million ($9.3 million of which is included in discontinued operations) relating to adjustments to property carrying values based on their respective estimated sales prices.  Based on the usage of estimated sales prices as inputs to determine fair value the Company determined that its valuation of these investments was classified within Level 3 of the FASB’s fair value hierarchy. These 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.

Interest, dividends and other investment income increased $2.5 million for the three months ended March 31, 2013, as compared to the corresponding period in 2012.  This increase is primarily due to an increase in other investment income of $2.1 million relating to the receipt of cash distributions during 2013 related to a cost method investment.

Interest expense decreased $3.7 million for the three months ended March 31, 2013, as compared to the corresponding period in 2012.  This decrease is primarily related to lower interest rates on borrowing during the three months ended March 31, 2013, as compared to the corresponding period in 2012.
 
 
22

 

Provision for income taxes, net increased $11.1 million for the three months ended March 31, 2013, as compared to the corresponding period in 2012.  This increase is primarily due to (i) 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 interest in an unconsolidated joint venture, (ii) an increase in tax provision of $1.0 million for the three months ended March 31, 2013, as compared to the corresponding period in 2012, resulting from incremental earnings due to increased profitability from properties within the Company’s taxable REIT subsidiaries, (iii) an increase in tax expense resulting from the receipt of a cash distribution in a cost method investment of $0.9 million and (iv) a decrease in income tax benefit of $0.6 million related to impairments taken during the three months ended March 31, 2012.

Equity in income of joint ventures, net decreased $10.6 million for the three months ended March 31, 2013, as compared to the corresponding period in 2012. This decrease is primarily the result of (i) a decrease in gains of $8.8 million resulting from the sale two properties from a joint venture investment in 2012 and (ii) the recognition of $2.6 million in income resulting from cash distributions received in excess of the Company’s carrying value of its investment in an unconsolidated joint venture during 2012, partially offset by (iii) incremental earnings due to increased profitability from properties within the Company’s joint venture program.

During the three months ended March 31, 2013, the Company acquired two properties from joint ventures in which the Company had noncontrolling interests.  The Company recorded an aggregate gain on change in control of interests of $23.2 million related to the fair value adjustment associated with its original ownership of these properties.

During the three months ended March 31, 2012, the Company acquired two properties from a joint venture in which the Company had a noncontrolling interest.  The Company recorded an aggregate gain on change in control of interests of $2.0 million related to the fair value adjustment associated with its original ownership of these properties.

During the three months ended March 31, 2013, the Company disposed of two operating properties, in separate transactions, for an aggregate sales price of $10.3 million. These transactions, which are included in Discontinued Operations, resulted in an aggregate gain of $2.5 million.

During the three months ended March 31, 2012, the Company (i) disposed of 15 operating properties and two outparcels for an aggregate sales price of $100.2 million and (ii) classified one operating property as held for sale. These transactions, which are included in Discontinued Operations on the Company’s Condensed Consolidated Statements of Income, resulted in an aggregate gain of $11.8 million and impairment charges of $5.5 million.

Net income attributable to the Company was $67.8 million and $53.6 million for the three months ended March 31, 2013 and 2012, respectively.  On a diluted per share basis, net income was $0.13 for the three month period ended March 31, 2013, as compared to $0.09 for the three month period ended March 31, 2012.  These changes are primarily attributable to (i) 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 gains on change in control of interests, and (iii) a decrease in interest expense partially offset by, (iv) an increase in provision from income taxes, net, and (v) a decrease in equity in income of joint ventures, due to decreased gains on sale of properties.

 Tenant Concentration

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 March 31, 2013, the Company’s five largest tenants were The Home Depot, TJX Companies, Wal-Mart, Sears Holdings and Bed Bath & Beyond, which represented 2.9%, 2.9%, 2.5%, 1.9% 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.

Liquidity and Capital Resources

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

The Company’s cash flow activities are summarized as follows (in millions):
   
Three Months Ended
March 31,
 
   
2013
   
2012
 
Net cash flow provided by operating activities
 
$
149.9
   
$
156.9
 
Net cash flow used for investing activities
 
$
(161.6
)
 
$
              (32.5)
 
Net cash flow provided by financing activities
 
$
36.7
   
$
5.0
 
 
 
23

 

Operating Activities

The Company anticipates that cash on hand, borrowings under its revolving credi