RPT Merger

6 Months Ended

Jun. 30, 2024

3. RPT Merger

Overview

On January 2, 2024, the Company completed the Merger with RPT, under which RPT merged with and into the Company, with the Company continuing as the surviving public company. The RPT Merger added 56 open-air shopping centers, 43 of which are wholly owned and 13 of which are owned through a joint venture, comprising 13.3 million square feet of GLA. In addition, pursuant to the RPT Merger, the Company obtained RPT’s 6% stake in a 49-property net lease joint venture.

Under the terms of the Merger Agreement, each RPT common share was converted into 0.6049 of a newly issued share of the Company’s common stock, together with cash in lieu of fractional shares and each 7.25% Series D Cumulative Convertible Perpetual Preferred Share of RPT was converted into the right to receive one depositary share representing one one-thousandth of a share of Class N Preferred Stock of the Company having the rights, preferences and privileges substantially as set forth in the Merger Agreement, in each case, without interest, and subject to any withholding required under applicable law, upon the terms and subject to the conditions set forth in the Merger Agreement.

The number of RPT shares/units outstanding as of January 2, 2024, converted to shares of the Company’s shares/units were determined as follows (amounts presented in thousands, except per share data):


	Common Shares (1)		OP Units		Cumulative Convertible Perpetual Preferred Shares
RPT shares/units outstanding as of January 2, 2024		87,675		1,576		1,849
Exchange ratio		0.6049		0.6049		1.0000
Kimco shares/units issued		53,034		953		1,849

Value of Kimco stock per share/unit	$	22.0005	$	22.0005	$	57.13
Equity consideration given from Kimco shares/units issued	$	1,166,775	$	20,975	$	105,607

(1)

The Company paid cash in lieu of issuing fractional Kimco common shares, which is included in “Cash Consideration” caption in the table below.

The following table presents the total value of consideration paid by Kimco at the close of the RPT Merger (in thousands):


	Calculated Value of RPT Consideration		Cash Consideration*		Total Value of Consideration
As of January 2, 2024	$	1,293,357	$	149,103	$	1,442,460

* Amount includes $130.0 million to pay off the outstanding balance on RPT’s credit facility at closing, additional consideration of approximately $19.1 million relating to transaction costs incurred by RPT and $0.1 million of cash paid in lieu of issuing fractional Kimco common shares.

Provisional Purchase Price Allocation

In accordance with ASC 805-10, Business Combinations, the Company accounted for the RPT Merger as a business combination using the acquisition method of accounting. Based on the total value of the consideration, the total fair value of the assets acquired and liabilities assumed in the RPT Merger was $1.4 billion. The following table summarizes the provisional purchase price allocation based on the Company's initial valuation and subsequent adjustments, including estimates and assumptions of the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed (in thousands):


	Provisional Allocation as of March 31, 2024			Adjustments			Provisional Allocation as of June 30, 2024
Land	$	312,663		$	(320	)	$	312,343
Building and improvements		1,340,164			2,992			1,343,156
In-place leases		220,607			(376	)		220,231
Above-market leases		12,872			(11	)		12,861
Real estate assets		1,886,306			2,285			1,888,591
Investments in and advances to real estate joint ventures		433,345			-			433,345
Investments in and advances to other investments		12,672			-			12,672
Operating lease right-of-use assets, net		6,128			-			6,128
Accounts receivable and other assets		57,529			-			57,529
Total assets acquired		2,395,980			2,285			2,398,265

Notes payable		(821,500	)		-			(821,500	)
Accounts payable and other liabilities		(50,713	)		(2,500	)		(53,213	)
Operating lease liabilities		(13,506	)		-			(13,506	)
Below-market leases		(67,801	)		215			(67,586	)
Total liabilities assumed		(953,520	)		(2,285	)		(955,805	)

Total purchase price	$	1,442,460		$	-		$	1,442,460

The provisional fair market value of the acquired properties is based upon a valuation prepared by the Company with assistance of a third-party valuation specialist. The Company and valuation specialist are in the process of reviewing the assumptions and inputs used by the third-party specialist to ensure reasonableness and that the procedures are performed in accordance with management's policy. Therefore, the final acquisition accounting adjustments, including the purchase price and its allocation, are not yet complete as of this filing. Once the purchase price and allocation are complete, an adjustment to the provisional purchase price or allocation may occur. Additionally, any excess purchase price, which could differ materially, may result in the recognition of goodwill, the amount of which may be significant.

The following table details the provisional weighted average useful lives, in years, of the purchase price provisionally allocated to real estate and related intangible assets and liabilities acquired arising from the RPT Merger:


	Weighted Average Useful Life (in Years)
Land	n/a
Building		50.0
Building improvements		45.0
Tenant improvements		3.9
In-place leases		3.1
Above-market leases		3.7
Below-market leases		22.1
Operating right-of-use assets		81.3

Since the date of the Merger through June 30, 2024, the revenue and earnings from RPT included in the Company’s Condensed Consolidated Statements of Income are $89.3 million and $5.7 million (excluding $25.2 million of merger-related charges), respectively.

Pro forma Information

The pro forma financial information set forth below is based upon the Company’s historical Condensed Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023, adjusted to give effect to these properties acquired as of January 1, 2023. The pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of income would have been, nor does it purport to represent the results of income for future periods. Amounts are presented in millions, except per share figures.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues from rental properties, net	$	496.2	$	483.6	$	995.1	$	966.7
Net income (1)	$	122.1	$	113.6	$	138.3	$	383.5
Net income available to the Company’s common shareholders (1)	$	111.8	$	102.9	$	118.1	$	360.9

(1)

The pro forma earnings for the six months ended June 30, 2024 was adjusted to exclude $25.2 million of merger-related charges, while the pro forma earnings for the six months ended June 30, 2023 was adjusted to include $25.2 million of merger-related charges incurred.