Operator:

Good day and welcome to the Kimco Realty Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to David Bushnicki, Senior Vice President and Investor Relations Strategy. Please go ahead.

Conor Flynn:

Thanks, Dave, and good morning. I will begin with an overview of the Kimco consumer, provide an update on the favorable supply and demand environment for our business, and then share some highlights on our strong operating results, all of which will underscore the resiliency of our high-quality, grocery-anchored, and mixed-use portfolio. We'll also cover the current transaction environment, and Glenn will provide additional financial metrics, report on our balance sheet position, and provide our updated outlook. We continue to navigate an economy that gives off mixed signals. A recent Bloomberg report noted that the American consumer savings have declined with the excess savings cushions that have been built up during the pandemic and used to offset rising prices that are no longer available. On the other hand, the labor market remains strong, reflecting both job growth and wage growth in the areas of our portfolio as situated. This has led the consumer to remain resilient, as they've tempered spending but not retrenched. As JP Morgan recently reported, the consumer is now rotating towards staples and seeking value at Walmart, Costco, and off-price retailers who are gaining market share. As such, we've benefited from the needs-oriented nature of our portfolio, as over 83% of our annual base rents come from grocery-anchored, open-air shopping centers. It is also why traffic at our properties has increased both sequentially and year-over-year. This has translated positively to our operating fundamentals, as our leasing team is firing on all cylinders. Demand for our well-located product remains strong, as tenants seek to retain existing space or add new locations. Our retention levels are near all-time highs, with heavy competition for any vacancies, generating increasing rents, better credit, and higher valuations. Nationally, store openings are outpacing closings, and the lack of quality retail is having a positive impact in tenant bankruptcy auctions, as leases are being acquired by healthy tenants striving to meet their expansion goals. In terms of new retail supply, the outlet remains in our favor. It has been well-documented that shopping center development, which currently stands at approximately 0.2% of existing inventory, remains exceedingly low. The shopping center sector has been sub-1% since 2010, and has provided the retail sector a meaningful tailwind to drive record-low vacancies across the country. More importantly, we don't see this dynamic changing anytime soon. As we have previously noted, rents would need to increase upwards of 35% to make new development investment worthwhile. This assertion was recently validated by a notable equity research firm, which calculated that the range of rent increases required to stimulate a creative development in the top 50 markets needed to be between 35% to 55%. All of this highlights the strength and unique position of our portfolio. As I noted, with our focus on grocery-anchored necessity-based off-price retail, we are able to generate solid results in all kinds of economic weather. This includes uncertainty of national elections and potential policy shifts, predictions of hard or soft landings, and the like. Our company, which features a resilient, well-located portfolio and strong demographic trade areas, solid balance sheet, and best-in-class team, stands out. To further illustrate this point, now let me touch on a few operating highlights. During the second quarter, we signed 144 new leases, totaling 669,000 square feet of pro-routed GLA with rent spreads of 26.3%, our 11th consecutive quarter of double-digit new leasing spreads. Renewals and options continued their positive trend, with 338 renewals and options completed at a spread of 9%. Overall deal volume totaled 2.3 million square feet, with combined rent spreads of 11.7%. Leasing velocity and retention drove pro-routed occupancy higher by 20 basis points sequentially to 96.2%. Pro-routed anchored occupancy increased 30 basis points from last quarter to 98.1% and was up 40 basis points year-over-year. Small shop occupancy increased 20 basis points sequentially to 91.7%, matching our all-time high set in Q4 of 2023 and representing an increase of 70 basis points year-over-year. Of note, we continue to derive meaningful outperformance from the RPT portfolio, which further validates our acquisition thesis. We executed 9 new leases in Q2, with comp rent spreads of 146%, driven by a grocery anchor replacing a furniture store and a strong fitness operator replacing a weaker fitness credit. We also executed 24 renewals and options during Q2, at a 17% average spread. Year-to-date, we have executed 19 new leases at former RPT sites with spreads of 87% and 46 renewals and options with spreads of 14%. The former RPT portfolio also produced same-site NOI of 4.5% for the quarter and 3.7% year-to-date, meaningfully outperforming our underwriting. We also increased our cost savings synergies to be realized this year as well as additional future revenue opportunities, stemming from increasing the RPT small shop portfolio, which currently sits at over 400 basis points below Kimco's. Additional growth in ancillary income will also be generated by our specialty leasing program. In closing, we are enthused by the performance of our team and our portfolio, resulting in increases to our FFO and same-site NOI outlook. The growth profile of our portfolio continues to trend up, and our team continues to look across the investment spectrum for new growth opportunities, all while remaining vigilant on costs. Ross?

Glenn Cohen:

Thanks, Ross, and good morning. Our high-quality operating portfolio generated strong second quarter results as we maintained a strong balance sheet and enhanced our liquidity position. Highlights for the second quarter include continued positive leasing activity, producing increased occupancy, another quarter of double-digit leasing spreads, and solid same-site NOI growth. Now for some details on our second quarter results. FFO was $276 million, or $0.41 per diluted share, as compared to last year's second quarter results of $243.9 million, or $0.39 per diluted share, representing per share growth of 5.1%. We produced $387.9 million of total pro rata NOI in the second quarter, an increase of $45.8 million over the same period in the prior year. This growth was driven by $38.3 million of pro rata NOI from the RPT acquisition, $12.8 million from higher minimum rents, and $1.6 million from higher net recoveries from the balance of the consolidated portfolio. These consolidated NOI increases were impacted by lower percentage rent and other income of $3.5 million, which was mostly due to timing, and higher credit loss of $1.4 million. Our credit loss for the first half of the year was 86 basis points, the midpoint of our bad debt assumption. The net NOI increase was offset by greater pro rata interest expense of $14 million due to the higher interest rate on the $500 million bond issued in the fourth quarter last year related to the refinancing lower coupon debt, $510 million of additional debt in connection with the RPT acquisition, and lower fair market value amortization related to the payoff of a Weingarten bond. The operating portfolio continues to produce strong results as Conor outlined. Same site NOI growth was positive 3% for the second quarter. The primary driver was higher minimum rents contributing positive 3.4%, driven by quicker rent commencements from the signed not open pipeline, which compressed 10 basis points from last quarter to 320 basis points. At the end of June, the signed not opened pipeline represents 426 leases and $63 million of ABR, of which $30 million is expected to commence in the second half of the year, generating $8 million for the remainder of the year. For the six months of 2024, same site NOI growth was positive 3.4%. These results demonstrate the continued strength of our well-located portfolio. Turning to the balance sheet, we ended the second quarter 2024 with consolidated net debt to EBITDA of 5.5 times. On a look-through basis, including pro rata JV debt and perpetual preferred stock outstanding, net debt to EBITDA was 5.8 times. These metrics would have been one tick better if we included the full quarter of income from the $146 million structured investment in The RIM Shopping Center made in late June. Subsequent to quarter end, we increased the size of our $200 million term loan by an additional $300 million. The term loan has a final maturity date in 2029, and we swapped the $300 million to a fixed rate of 4.78%, including our credit spread for the full term. We used the proceeds to repay $220 million outstanding on our $2 billion revolving credit facility, which had a borrowing coupon of 6.19%. The balance of the funds was invested in an interest-bearing account earning in the mid fives pending use for investment. Separately, we achieved the high end of our sustainability goals by surpassing our required scope one and scope two greenhouse gas emission reduction targets. As a result, the borrowing spread on our $2 billion revolving credit facility and our $310 million term loan is reduced under the green pricing feature. The reduction is 4 basis points from the stated credit spread for both facilities, and we get a one basis point reduction in our facility fee on our revolving credit facility. Now for an update on our outlook. Based on our strong first half results and our expectations for the balance of the year, we are again raising our FFO per diluted share range from $1.56 to $1.60 to a new range of $1.60 to $1.62. Our increased FFO per share guidance range incorporates the following updates to our full year assumptions. Same site NOI growth of 2.75% to 3.25% from the previous level of 2.25% to 3% and is inclusive of the RPT assets and a credit loss assumption of 75 basis points to 100 basis points. Full year cost saving synergies from the RPT acquisition improving to $35 million to $36 million. Interest income expected to be between $13 million to $15 million and lower disposition guidance of $300 million to $350 million. Our other full year guidance assumptions remain intact. I want to thank all our associates whose efforts significantly contributed to our outstanding results. We are well positioned to deliver growth. And with that, we're ready to take your questions.

Michael Goldsmith:

Good morning. Thanks a lot for taking my question. My question is on the guidance. And you took the FFO guidance higher to $1.60 to $1.62. And that was supported by both the higher same property NOI expectations as well as some other moving pieces. Can you just walk through how much of a contribution of the FFO guidance is driven by the same property NOI? And then what are the other pieces that are driving the forecast higher?

Conor Flynn:

Yeah, I would also say, Michael, that as we talked about, it's also the RPT. We've had better execution than planned. So that's doing well for us as well from the guidance increase.

Glenn Cohen:

We've increased the guidance range of same site now twice during the year. Again, the portfolio is performing very well. We do have a tougher comp in the third quarter of last year based on some one-time things that were in there that has a little bit of an impact. But overall, we feel very comfortable with the revised guidance range that we've put out.

Michael Goldsmith:

Got it. Thank you very much. Good luck in the back half.

Samir Khanal:

Good morning, everybody. Hey, Conor, you spoke about the RPT portfolio, the 400 basis point spread and shop occupancy. I was just trying to understand kind of the ability to close this gap. I mean, what's the timing on this? Considering that I would imagine some of that is probably harder to leave space, right? You need some capital spend on that for anchor repositioning. So help us walk through kind of how to think about that closure of the gap over the next several years. Thanks.

Operator:

The next question comes from Dori Kesten with Wells Fargo. Please go ahead.

Conor Flynn:

Thanks, Dori. We've been pretty consistent this year that capital formations continue to accelerate for open-air shopping centers. I think when you look at the recent transactions that have been announced, Cohen & Steers obviously coming in in a joint venture to buy a grocery-anchored shopping center. When you look at the amount of capital formations from the institutional investors, private equity, it's very clear the supply and demand that we've been talking about is starting to come into focus because it's showing up in the numbers and it's really producing significant growth. And I think the other big piece of it is the cap rates for the product are still relatively attractive when you look at other sectors. And I think that is really driving a lot of interest because of the lack of new supply on the horizon. I feel like that really opens people's eyes back up to the shopping center sector.

Operator:

And the next question comes from Juan Sanabria with BMO Capital Markets. Please go ahead.

Ross Cooper:

Absolutely. The structured investment is a unique product that every deal is a little bit different. I indicated three of the transactions that we closed on in the second quarter, it was a combination of a recap of an existing owner. One was acquisition financing. And then, of course, The RIM was an exciting, unique opportunity where we have the ability to further strengthen our position in a dominant asset that has a tremendous amount of equity embedded in it and ultimately could become an acquisitions target. So whatever the outcome of that asset investment is, is going to be a positive for Kimco. I think that on a go forward basis, as we look at the third and the fourth quarters, our expectation is that our investment activity will be more heavily weighted toward core acquisitions as some of the structured investments have been completed. And again, they're sort of one off and unique in nature. But there's definitely a place for our capital within the stack, whether it be repositioning, financing, new acquisitions, as we've seen volumes starting to increase and a lot more optimism. As the rate environment, there's an expectation that the cuts might be coming and there just seems to be a bit more stability and optimism in the environment. I think that the back half of the year is going to be positive for Kimco.

Greg McGinniss:

Hey, good morning. Ross, just to better understand on that acquisition guidance, the 7.5% blended cap for the year on midpoint $325 million of investment seems to imply a 0% cap rate on the remaining $80 million. It sounds like you're talking about core assets, but are we missing something on the map there or is there a plan to buy land?

Greg McGinniss:

Okay. And on the development side, Coulter Place seems to have pretty limited investment this quarter. Is there a slowdown to development happening there? Any color would be appreciated.

Glenn Cohen:

As a matter of fact, I'll just add that our capital is actually fully in, so you won't see any increase going forward.

Craig Mailman:

Hey, guys. Just to go back to maybe The RIMs a bit, you guys are about $200 million of the capital stack now. Could you give us a sense of maybe what the LTV of that overall property is, given the 9% rate, it seems like, and versus what others are getting for high-quality kind of Strip and open air that seems kind of a high coupon it is? I know you alluded to you guys always look from loan to own, but is this something in the near-term you guys could get an equity stake in? How should we kind of think about this particular investment?

Operator:

The next question comes from Alexandra Goldfarb with Piper Sandler. Please go ahead.

Ross Cooper:

Yeah, great question, Alex. Doing the math quickly, so you have about 25 million square feet of small shop space. If you take 100 basis points of that, it's about 250,000. Average rent for our small shops is around $32 a foot. So multiply the two, you get around $8 million of AVR from that and that excludes obviously any recovery benefit you would get from that as well. So if you take that, quantify it into the FFO gain, there's obviously significant upside. And when you look at how we've been trending, obviously on the small shop activity for Kimco, and what we anticipate, what we could potentially do on the RPT side, we see real benefits going forward. On the snow pipeline, that's $63 million. On the non-anchor side, it represents about 47% of that total $63 million. So you're starting to see real meaningful contribution from the small shop growth.

Operator:

And the next question comes from Floris van Dijkum with Compass Point. Please go ahead.

Conor Flynn:

It's a good question, Flores. I think we are laser focused on driving that small shop occupancy. Obviously we're in uncharted territories, because if you think about the drag that the RPT portfolio had on Kimco's small shop occupancy, we're setting records this quarter. So we have the ability to continue to push. We don't see any hurdles in front of us that should sort of derail the momentum that we're seeing. And trying to generate as much growth from the small shop side is really the focus. The occupancy on the anchors is over 98%. There's still a lot of demand there, as I mentioned earlier. A lot of leases that are in bankruptcy auctions are being acquired because they can't find good quality retail space. So they're acquiring it out of the bankruptcy process. But I think when you look at the small shop occupancy side, we're not sure how high we can push it, but we're going to push it as hard as we can to all-time highs.

Jeff Spector:

Good morning. Conor, just based on your opening remarks around the economy, mixed signals, the consumer, what are the marching orders to the leasing team at this point? Are you changing your leasing strategy or staying at the pace? Thank you.

Operator:

And the next question comes from Ronald Kamdem with Morgan Stanley. Please go ahead.

Conor Flynn:

On the Mary Brickell side, you're right. I mean, there is a tremendous amount of opportunity there. Right now, near term, the reinvention of the merchandising plan and the releasing opportunities are significant. You're seeing rents go from the 40s up into the triple digits. And so our focus right now is near-term opportunities to re-merchandise, reposition healthy portions of that asset. And that will be the focus in the near term. As it relates to your other question.

Ross Cooper:

The only other thing I would add on Mary Brickell Village is you've probably seen a lot of the news headlines of all the development going up around Mary Brickell Village. And the demand there from the retailers continues to accelerate. Market rents continue to accelerate. And Mary Brickell Village was obviously part of the RPT portfolio. And that price per square foot for the whole portfolio was $165 a foot, which included Mary Brickell Village.

Caitlin Burrows:

Hi, good morning. Maybe just a little bit more on the leasing side. It feels like the environment's been pretty good for a while. What are some of the key steps you guys use to gauge leasing interest and activity, like the size of the pipeline, number of lease proposals, et cetera? How are they trending? And has there been any change to who the active tenants are?

Operator:

And the next question comes from Linda Tsai with Jefferies. Please go ahead.

Conor Flynn:

Sure. In the first part of this year, we anticipated our SNO contribution at $25 million to $30 million. We're now at the upper end of that range, so $30-plus million for the year, as Glenn mentioned in his prepared remarks, about $8 million coming online for the second half of this year. And then when you look ahead in terms of what's going to be contributed as it relates to that $63 million, between ‘24 and ‘25, about $30-plus million will start to come online in ‘24, and then another $20-plus million will come online in 2025. So that's almost 85-90% of that SNO pipeline starting to flow over the next 12 months. How we're doing this is just exhaustive work. It's simply put that the tenant coordination, the construction team, leasing team, property management are all exhausting all of their efforts to help solve problems in the field challenges, and develop opportunities to open them sooner. That's the only way you can get it done.

Conor Flynn:

I think in the first half of the year, it's been fairly consistent. As we talked about, transaction volumes have been lower this year compared to 2023, but the deals that are getting done continue to be at fairly aggressive rates. So, we haven't seen much movement or comparable product in terms of the cap rates that they're trading at. That being said, there is a fair amount of optimism that the back half of the year and into 2025 with the amount of capital that's been on the sidelines that's ready to invest, and with the expectation that the rate environment is stable, if not moving lower. The anticipation is that there's going to be more capital, which inherently should push cap rates down gradually over time.

Wes Golladay:

Hey, good morning, everyone. It looks like just under 30% of the anchor leases expiring through 2025 have no option. It looks like their older leases, about a 40% mark to market. Ho should we think about retention here? Do you look to force move-outs to get more relevant tenants in?

Operator:

And the next question comes from Paulina Rojas with Green Street Capital. Please go ahead.

Conor Flynn:

I think what you've seen is the trajectory of the same site NOI growth continues to improve. When you look at the components of that, as you know, a lot of it has to do with retention because we're so highly occupied. So as retention rates remain high and we're getting the incremental growth from new leasing, you're seeing 3% plus over the past three quarters that we've been able to produce. So, when you look out, it's hard to extract exactly what the new glide path looks like. Historically, our sector has produced around a 2% same site NOI growth profile. Obviously, we're treading towards higher than that. But we like just executing on where we are today and continuing to look at the opportunities that are going forward. Clearly, we've talked a lot today about the small shop opportunity we have. We think that will continue to manifest in our numbers. And then on the anchor side?

Operator:

The next question comes from Haendel St. Juste with Mizuho. Please go ahead.

Ross Cooper:

Sure. It's just looking at the outlook of where we are right now. The First of August, we completed the vast majority of the dispositions that we had planned. We were really excited with the execution on the RPT dispose. And when we look at the performance of the portfolio that we have right now, there really isn't a need to further dispose. We have the availability of our full credit facility, so liquidity is in the best shape that it's been in, so it's not a capital need per se. We do have several assets that are within our joint ventures that are currently in the market. We're not certain if a few of those or any of those may or may not transact, but if they do, they'll certainly be at significantly lower cap rates than where we've been, which is sort of what prompted the decision to drop the upper end of the cap rate range on the dispositions. So, it really is just a combination of the entirety of our capital plan and our outlook and the performance of our portfolio that we feel really good about where we are. And we'll revisit where things shake out when we go through the budgets for 2025, but at least through the end of 2024, that's where we feel most comfortable.

Mike Mueller:

Hi. Just a quick one on bad debts. For the 86 basis points that you had in the first quarter or the first half of the year, you talked a little bit about the makeup of that how concentrated or diverse was it, types of tenants, anything notable there?

Conor Flynn:

Next question.

Michael Gorman:

Sorry if I missed it, but can you just talk for a minute about the occupancy cost ratio that you're seeing as you're out there doing the new leasing? And I guess specifically the reason I'm thinking about this is obviously from the traditional real estate supply-demand perspective, there's a lot of strength there. I'm just wondering how much continued strength and rent growth the tenant environment can support here and has there been any shift in the tenant thought process in terms of how much of their cost structure can go towards rent and towards real estate?

Ross Cooper:

Yeah, Mike, don't forget that now most of brick-and-mortar retail is used as a distribution and fulfillment point. So the occupancy cost of the old days of just the four walls has changed dramatically. And I think honestly, we're just scratching the surface in terms of value proposition of the store and the true occupancy cost, because the margin gets enhanced if you can run the e-commerce sale through the store and most retailers have that as their business model, which continue to show why they're putting a lot of capital towards expansion goals today.

Operator:

This concludes our question-and-answer session. I would like to turn the conference back over to David Bujnicki for any closing remarks.

Operator:

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator:

Good day, and welcome to the Kimco Realty First Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

David Bujnicki:

Good morning, and thank you for joining Kimco's quarterly earnings call. The Kimco management team participating on the call today include Conor Flynn, Kimco's CEO; Ross Cooper, President and Chief Investment Officer; Glenn Cohen, our CFO; Dave Jamieson, Kimco's Chief Operating Officer; as well as other members of our executive team that are also available to answer questions during the call.

Conor Flynn:

Good morning, and thanks for joining us. I will lead off today with an update on the RPT integration, a summary of our significant first quarter leasing accomplishments and a brief review of our strategic direction and goals. Ross will follow with an update on the transaction market, and Glenn will close with a summary of our financial results, major metrics and the specifics behind our increase to guidance.

Kimco's operating platform is delivering efficiencies due to the clustering of additional assets in our core trade areas as well as the strategic investments we've made over the past 5 years:

technology, talent and other areas.

Our increased FFO per share guidance range incorporates the following updates to our full year assumptions:

higher same-site NOI growth of 2.25% to 3% and from the previous level of 1.5% to 2.5% and is inclusive of the RPT assets and a credit loss assumption of 75 basis points to 100 basis points; interest income of $10 million to $12 million based on the interest income earned during the first quarter and RPT related noncash GAAP accounting income comprised of straight-line rents; and above and below fair market value rent amortization of $4 million to $5 million.

Dori Kesten:

You left your credit loss guide unchanged, but had a relatively low Q1. Can you just remind us of your [ 10 ] exposures that are built up to the annual assumption?

Operator:

The next question comes from Michael Goldsmith of UBS.

Conor Flynn:

Sure. Thanks, Michael. Obviously, we're off to a great start with the integration. Clearly, we have a great blueprint and the muscle memory from Weingarten certainly helps. I'll have Will Teichman comment a little bit about the G&A synergies and what's helped there.

David Jamieson:

Thanks, Will. I also just comment that with the execution of the 10 dispositions, the grocery percentage of the RPT portfolio is up to 85.5%. So it's obviously enhancing to the Kimco portfolio as well. We even have activity on a few of the 9 remaining sites that don't have grocery anchors to potentially convert those to grocery anchors as well. So Will, do you want to comment a little bit on ancillary income as well?

Operator:

The next question comes from Alexander Goldfarb of Piper Sandler.

David Jamieson:

Yes. I'd also mention when we took over the portfolio, there is always a risk in transition, especially on the construction side when you hand off projects from one company to the other. And despite the handoff period, these projects still need to get done. There's still targets that need to be met. There's still lease obligations to fulfill.

Floris Gerbrand van Dijkum:

Nice positive results, I guess. A couple of questions, but I guess I'm going to focus my question to Ross. I know you mentioned, Ross, that the cap rates for grocery-anchored are pretty tight in particular.

Ross Cooper:

Yes. Thanks, Floris. It's a good question. I think one of the benefits when you look at Kimco is that we do own and have operational expertise in sort of all formats of open-air retail. We do love the grocery-anchored and with lifestyle as well. many of those assets have a grocery component that you get the benefit of.

Operator:

Our next question comes from Juan Sanabria of BMO Capital Markets.

David Jamieson:

Sure. I think each of those have their own story. And as we know with Rite Aid and having to settle a lawsuit was a big disruptor for them, but it's no secret. Obviously, there is disruption, and I think a shifting landscape in the pharmacy business and how it services the customer.

Conor Flynn:

Juan, I think from a merchandising mix standpoint, the pharmacy has evolved almost like become a mini mart in so many ways. So when you go into a pharmacy, the script business is always in the back and then you walk through all the aisles of higher-margin items. And I think what happened there is the script business got disrupted and then their pricing on the, call it, traditional grocery items, were elevated versus other options that the consumer had.

Samir Khanal:

Conor, just looking at the shop occupancy for the RPT portfolio, I think sequentially, was down 40 basis points here. Is there something to read into that, considering that we've seen sort of sequential increases for a while now? Or is that sort of you being more proactive as you sort of de-lease space for greater opportunities?

Operator:

The next question comes from Haendel St. Juste of Mizuho.

Craig Mailman:

I just want to go back to kind of the small shop commentary, maybe ask a quick 2-parter here. But you clearly have some good commentary around the progress at the RPT assets. I'm just kind of curious, as you'd mentioned some grocery anchors coming on and maybe timing-wise, is helping.

Operator:

The next question comes from Caitlin Burrows of Goldman Sachs.

David Jamieson:

Yes. I mean, right now, it's obviously -- our occupancy is also at 96% or all-time high 96.4%. So you're obviously looking at the opportunity set does change as well with that. As it relates to the volume, it's still pretty much in line with prior years, and it's also Q1.

Greg McGinniss:

Sorry, a little thrown by the bank there. Looking at the guidance update, it's just under $0.02 from interest income, non-GAAP income and around $0.015 from higher same-store NOI growth, at least based on our math. What are the offsetting factors on the $0.02 guidance range. Is that just earlier dispositions than initial plan? Or any color would be appreciated there.

Greg McGinniss:

Okay. And then on the 10 RPT dispositions, how important was providing the seller mortgage financing on those transactions to getting them done at the 8.5% cap rate? I mean if the buyer had to go elsewhere for financing, where do you think those cap rates might have trended?

Operator:

The next question comes from Mike Mueller of JPMorgan.

Ross Cooper:

Sure. We frankly don't have anything specifically identified for that. We've executed, as we talked about on the 10 that we really wanted to get done, and we got done with it quickly. So on a go-forward basis, our goal is really to improve the quality portfolio and the growth profile. And frankly, it doesn't matter if that's a Kimco legacy asset, RPT, Weingarten JV, wholly owned.

Anthony Powell:

You mentioned you saw a lower, I guess, landlord expenses than you expected and we noticed that, too. Maybe talk about what drove those lower and your opportunity to continue to control expenses going forward.

Wesley Golladay:

I'm just looking at the presentation, and you have about 6,500 multifamily units entitled. Do you have any interest in starting developments this year to deliver to the -- like a low supply market a few years from now?

Linda Yu Tsai:

As you look at the SNO pipeline, you have good lease-up opportunity you had still. Do you expect the SNO pipeline to be higher or lower by year-end versus now?

Linda Yu Tsai:

And I think you mentioned...

Operator:

Our next question comes from Ronald Kamdem of Morgan Stanley.

Glenn Cohen:

Sure. So as it looks to the rest of the year, we're still comping against some of the Bed, Baths in the second quarter. So that's going to have some impact as we go there. The guide increase really is we have further commencements that came online quicker, as Dave alluded to.

Ross Cooper:

And related to your acquisition question, we're always hesitant to talk about deals before they're really firmed up and closed. But what I can tell you is on the core acquisitions, we do not have anything under contract today.

Omotayo Okusanya:

I wanted to go back to Wes' question, but rather I talk about multifamily, talk a little bit more about just the retail redevelopment. You do have in your supp, a fairly expansive list of potential new retailers you could start. I'm just kind of curious about potentially starting those up, just kind of given the overall development pipeline, is probably not as large as some of your peers, but everyone is getting really good yields on that.

Operator:

The next question comes from Paulina Rojas of Green Street.

Operator:

The next question comes from Jeff Spector of Bank of America.

Ross Cooper:

Yes. I don't know that I would identify the last few weeks, just any different than sort of the volatility that we've seen in the first 4 months of the year. There was a lot of hope going into the year that there would be some more stability.

Alexander Goldfarb:

Just a quick follow-up on the heels of Linda Tsai's question. Do you think that we're being lulled into complacency on the strength of the retail market, the fact that JOANN basically had no downtime. Bed, Bath was almost a nonissue.

Conor Flynn:

A lot of it, Alex, I think, ties back to supply and demand. I mean if you look at the lack of new supply for the last decade plus, and then the evolution of the omnichannel approach by retailers and how important the last mile is with their store located close to where people live, work and play, I think that model has won out.

David Bujnicki:

I'd just like to thank everybody for joining today's call. We look forward to seeing a number of you at the upcoming NAREIT conference in June. Please enjoy the rest of your week. Thank you.

Operator:

Good morning and welcome to Kimco Realty's Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to David F. Bujnicki, Senior Vice President, Investor Relations and Strategy. Please go ahead.

Conor Flynn:

Good morning and thanks for joining us. I will lead off today with a summary of our stellar Q4 leasing results and then provide some strategic updates on our completed RPT acquisition. Ross will follow with an update on the transaction market, recent activity and plans for 2024. Glenn will then cover our financial metrics and provide 2024 guidance. We concluded 2023 on a high note with record-setting leasing activity and a deeper, broader and more resilient tenant base for our grocery-anchored and mixed-use portfolio. We've built on this positive momentum kicking off 2024 by closing our acquisition of RPT on the first business day of the year. I will provide additional perspective on RPT shortly. Let's start with our leasing accomplishments. For the quarter, overall occupancy finished up 70 basis points on a sequential basis to 96.2% on a pro rata basis. Importantly, the 70 basis point gain is our highest quarter-over-quarter uptick in occupancy going back more than 15 years. Our year-over-year overall occupancy increased 50 basis points. Anchor occupancy grew a record 80 basis points sequentially to 98% and finished flat year-over-year. Smaller shop occupancy was up 60 basis points to 91.7%, surpassing our previous record high of 91.1% and ended up 170 basis points year-over-year. We signed over 1 million square feet of new lease GLA in the fourth quarter, the highest quarterly level in over 10 years. We also maintained our strong pricing power as the spread on new leases was 24%, marking our ninth consecutive quarter of double-digit leasing spreads. Our retention levels were equally strong as we signed 321 renewals and options totaling 1.7 million square feet, surpassing our 5-year fourth quarter historical average. The fourth quarter renewal and option combined spread was 7.8%, with renewals ending at 8.5% and options at 7%. Overall, fourth quarter leasing volume totaled 480 deals for 2.7 million square feet with a combined spread of 11.2%, a phenomenal effort and a tremendous team accomplishment. I'd be remiss to mention that what makes our leasing efforts in 2023 more impressive is that we've absorbed the vast majority of our Bed Bath & Beyond spaces at spreads that far exceeded our initial expectations. Just to recap, we started 2023 with 29 Bed Bath & Beyond locations, representing approximately 70 basis points of pro rata ABR exposure. During the year, we resolved 21 leases with a combined pro rata spread of 43%. Of those 21 leases, 4 were signed in the fourth quarter at a combined spread of 57%, demonstrating the strong demand that remains for these high-quality locations. This includes our remaining 8 boxes which we're confident that will resolve as we move through the year and believe that our strong overall leasing success in 2023 will continue into 2024. Looking ahead, with the RPT deal closed, we are excited about our new team members who are fully engaged and seeking to add further value to the Kimco platform. Integration of the new portfolio is well underway and we expect it to have a positive impact on our overall strategic plan throughout the year. Over time, we expect to benefit from the upside in the RPT portfolio as we mark-to-market leases and take advantage of the supply constrained environment using our best-in-class platform to raise occupancy levels. Glenn will provide additional color on the financing of the transaction and how it has positively impacted our balance sheet. We also see redevelopment and mixed-use opportunities in the RPT portfolio that will complement our existing pipeline and further contribute to our long-term growth. One particular example of incremental value that can be created through redevelopment is Mary Brickell Village, a one-of-a-kind mixed-use property located in Miami. As we look to the future on an asset such as this, we believe there's a lot of upside and opportunity to use our platform to unlock meaningful long-term value and expand Kimco's Signature Series portfolio. Ross will discuss our 2024 transaction strategy in more detail. But I did want to highlight our plans to recycle lower growth centers, especially those with high CapEx loads and lower-than-acceptable returns. These anticipated dispositions have already been incorporated into our model and strategic plan which is further supported by improvements in both the transaction and financing markets since we first announced the RPT transaction in the third quarter of 2023. We believe we are well positioned for 2024 with significant opportunities for both organic and targeted external growth. Our pipeline of leases that have been signed but not yet open shows strength in the quality of our portfolio and visible cash flow growth. Additionally, history has shown that our platform is ideally suited to take advantage of market dislocations and generate growth. In the end, we pride ourselves as being one of the most efficient operators and are laser-focused on driving total shareholder return. That said, despite improved conditions, the macroeconomic environment remains temperamental. Inflation, interest rates, employment, credit card delinquencies and the election cycle all have the potential to impact our sector over the course of the year and beyond and that is why underlying our overall strategy is an emphasis on building a portfolio that is both resilient and able to generate steady and reliable growth. Ross?

Glenn Cohen:

Thanks, Ross and good morning. We finished 2023 with solid fourth quarter results, highlighted by very strong leasing activity, increased occupancy and improved positive same-site growth. In addition, we bolstered our liquidity position ahead of our upcoming 2024 maturities and the closing of the RPT transaction. Now for some details on our fourth quarter results, the financing of the RPT transaction and our 2024 outlook. FFO for the fourth quarter was $239.4 million or $0.39 per diluted share. This compares favorably to last year's fourth quarter FFO of $234.9 million or $0.38 per diluted share. The primary driver of the increase was higher pro rata NOI of $10 million generated by a high-quality operating portfolio. Our pro rata interest expense was up $8 million, resulting from the issuance of a $500 million unsecured bond to prefund our upcoming '24 maturities. We invested the proceeds in short-term money market-type funds earning $7 million of interest income which mitigated a large portion of the dilution. In addition, during the fourth quarter, we incurred $1 million of merger-related expenses for the RPT transaction. Our operating portfolio continues to deliver positive results. Same-site NOI growth was positive 3.2%. And if we exclude our redevelopment sites, would have been 3.5%. For the full year 2023, same-site NOI was positive 2.4%, exceeding the top end of our same-site NOI range of 2.25%. Higher minimum rent was the primary driver of the growth. As a result of our strong leasing production, the spread between leased occupancy and economic occupancy grew to 350 basis points, an increase of 30 basis points sequentially and represents $57 million in future annual base rent. We anticipate approximately 70% of this rent to commence during 2024 providing approximately $15 million to $20 million. Turning to the balance sheet; we ended the fourth quarter with consolidated net debt-to-EBITDA of 5.6x. And on a look-through basis, including pro rata JV debt and preferred stock outstanding of 6x, maintaining the favorable end of our target range for this metric. As mentioned previously, at the beginning of the fourth quarter, we issued a new 6.4% $500 million unsecured bond which matures in 2034. This issuance addressed our 2024 bond maturities comprised of $246 million at 4.45% with an effective interest rate of 1.1% which was repaid on January 15, 2024 and $400 million at 2.7% due March 1, 2024. Our year-end liquidity position remained very strong, comprised of over $780 million of cash and the full availability of our $2 billion revolving credit facility. Subsequent to year-end, we monetized our remaining 14.2 million shares of Albertsons, receiving nearly $300 million in proceeds. We will record a $75 million tax provision on the gain in the first quarter which will enable us to retain $224 million for future investments and debt reduction. Similar to last year, our shareholders will be eligible for a pro rata credit of the federal income tax Kimco will pay. Now for some details of the financing for the $2.2 billion RPT transaction. We issued 53 million common shares to the RPT shareholders and an additional 953,000 OP units for an aggregate value of $1.2 billion. We also converted each share of RPT's 7.25% convertible preferred shares into newly issued depositary shares representing 1/1,000th of a share of Kimco 7.25% class and convertible preferred stock. The class and convertible preferred stock has a liquidation preference of 92.5 million and is publicly traded on the New York Stock Exchange. Each 7.25% class and depositary share is currently convertible into 2.3071 Kimco shares. On the debt side, we paid off $130 million outstanding on RPT's revolver, repaid $514.4 million of RPT's outstanding private placement notes, including accrued interest and amended and assumed $310 million of RPT term loans. We funded the repayment of the revolver and private placement notes from cash on the balance sheet and a new $200 million term loan with a final maturity in 2029. The $200 million term loan was swapped to a fixed rate of 4.57%. The $310 million of amended and assumed term loans are comprised of 4 tranches with $50 million maturing in 2026, $150 million in 2027 and $110 million in 2028. Each of the tranches has been swapped to a fixed rate with a blended weighted average rate of 4.77%. Overall, the total debt related to RPT added to our year-end balance sheet is $510 million, with us using $440 million of cash on hand. Now to our 2024 outlook. Notwithstanding some of the macro factors that Conor mentioned earlier, we remain confident about the growth prospects of our operating portfolio and are enthusiastic about unlocking the potential of the newly added RPT assets. Our initial 2024 FFO per share guidance range is $1.58 to $1.62 before any RPT merger-related costs which we expect will be in the $25 million range or $0.04 per diluted share. Our guidance range is based on the following assumptions

Michael Goldsmith:

On the acquisitions and dispositions. One, do the dispositions that you have in your guidance, does that represent the entirety of the expected noncore properties that you're selling from RPT? And then two, are the cap rates of the acquisitions, is that indicative of where you see the market today?

Operator:

The next question comes from Jeff Spector with Bank of America.

Glenn Cohen:

Sure. Again, like anything else, again, a good portion of it is really driven by increases in minimum rents, that's the primary driver. And then you'll have a small amount that's in there for credit loss. Credit loss for the most part should be pretty similar, as I mentioned, to 2023. And then there is some lease-up that's built into it as well. So those are really the primary drivers.

Dori Kesten:

We appreciate the detailed guidance. Excluding merger costs, it looks like the midpoint of your FFO guide implies around 2% growth. Can you just remind us what your long-term expectations are for either FFO or NOI growth for the company now with RPT?

Glenn Cohen:

I can just add just a little bit in terms of some of those headwinds that Conor was mentioning. We're still dealing a little bit with the fair market value amortization related to the Weingarten bonds. That's about another $8 million difference for this year. So that's a little over $0.01. So that's 1 thing that's certainly impacting us. Again, as I mentioned, if you look at the lease termination income, again, it's pretty modest in terms of what's built into the guidance versus the $7 million that we had last year. And again, we were benefiting also from a pretty significant amount of interest income, that's going to come off. So if you put all together, you have somewhere around $0.02 or $0.03 of headwind. But again, the portfolio is in great shape and we expect to be able to grow here.

Floris van Dijkum:

So you -- obviously, incredibly robust retailer leasing demand here. You talk about the best environment in 15 years or something like that. You've got this very significant SNO pipeline, $57 million. It's, call it, 4% of NOI in that neighborhood. Your guidance only implies 2% growth. What is the timing? Maybe if you can walk us through when that income is going to come online? And is that going to be back and weighted for this year or is that going to impact '25 going forward?

Operator:

The next question comes from Alexander Goldfarb with Piper Sandler.

Ross Cooper:

Yes, sure. Happy to take that. I think when you look at our disposition guidance for this year in the cap rate, it is on a very select portfolio of assets geographically as we've talked about, are primarily in the Midwest. More boxy, lower growth, potentially higher CapEx in the future. So when you look at the specifics, I don't necessarily think it's indicative of where cap rates are trading for a product across the board. It's clearly selective to geography, format type, whether or not there's a grocery component. So from that perspective, this is sort of a one-off unique year for us. And frankly, it was all baked into the plan and the underwriting with the RPT transaction. So this is very much on target and expectation for us.

Greg McGinniss:

I'm looking at the pretty substantial sequential lease improvement, could you just provide us some details in terms of the types of tenants that are taking that space, whether or not you expect that level of demand to continue into 2024 and if maybe that will result in some wider lease spreads as occupancy continues to tick up?

Operator:

The next question comes from Craig Mailman with Citi.

Glenn Cohen:

Sure, Craig. I would say, again, things that can get you to the upper end of the range, we have a credit loss range, that 75 to 100 basis points. So if credit loss comes in better than that, that's definitely a help. That 75 to 100 basis point range is between $16 million and $22 million. So again, improved credit loss is an opportunity to help get there. Clearly, the timing of the acquisitions and dispositions plays into this as well. As we mentioned, the dispositions are more front loaded where the redeployment of that capital is more back-end loaded. If the timing of that shift is clearly an opportunity to further improve towards the upper end of the guidance.

Operator:

The next question comes from Haendel St. Juste with Mizuho.

David Jamieson:

Yes. I mean as I mentioned, quarter-over-quarter, spreads are really indicative of just the population of that given quarter and what qualifies as a comp spreads, so it can be volatile at times. But when you look at the overall ABR growth, we continue to see us moving upwards in that trajectory from quarter-over-quarter where it was year-over-year. So we're encouraged, obviously, by that direction, I think we're at $20.32 at this point. And in terms of the TI allocation, we look at the all-in cost, so landlord and TIs collectively. The distribution between those 2 categories is dependent on the type of deal structure you cut. So when you combine those and you look at the trailing 4, we're right in line there. And there were a couple of deals this quarter that were more as-is structure, so higher TI allowances were given to those tenants. If you strip those out, you're around $26 versus that $33 that we posted. So you're pretty much in line, slightly better than what we've seen in the past. And as we look forward into '24, we do have 29 anchor boxes, I think, that are naked with no options. They do have the highest rent per square foot at $18. We've executed 6 of those in the last quarter and those were as-is rents above that and we still had a high double-digit mark-to-market adjustment on that. So you're seeing room for opportunity to grow in the coming year as well.

Samir Khanal:

I guess, Conor, you had a very strong 4Q operationally. And clearly, occupancy continues to move up, both on the anchor and shop side. I guess what's the potential upside from RPT as we think about maybe the shop space or even occupancy pickup in '24?

David Jamieson:

I'd also just add that their lease economic spread is currently 570 basis points relative to their portfolio which is about $12 million of annualized base rent. So we'll get the benefit of some of that coming online this year as well to complement what we currently have in our SNO pipeline. And then the ABR per square foot relative to ours is a little bit lower. So I think there's room to run there and benefits to be had. And based on their the spreads that they posted in their Q4 filings, we're encouraged by the direction of the real estate.

R.J. Milligan:

Two-part question here on CapEx and I'll try and get it all in. First, for the Bed Bath & Beyond spaces, you resolved 21 leases. Spreads much better, I think, than anyone expected but I'm curious what the average TI package was per foot and how did that shake out relative to expectations? And then second part, more broadly, I think you're expecting an increase in CapEx spend in 2024 and I'm just curious what's driving that? Is that Bed Bath & Beyond? And how much of that is RPT?

Operator:

The next question comes from Caitlin Burrows with Goldman Sachs.

David Jamieson:

Sure. Yes. We can start with Rite Aid. So last year, we had 21 locations. At the end of the year, we ended with 16. We do anticipate another 5 coming back this quarter. The leasing activity and LOIs that we currently have on those locations are very encouraging and we're seeing mark-to-markets in the double digits. So again, second-generation inventory is really where the opportunity is to push rents today and that's what retailers see it. And so that's -- to my earlier comments, you're starting to see retailers flex on their format to try to work themselves into some of these boxes. As it relates to Jo-Ann's, that has been another topic of the day. We have 21 locations. And currently, they're looking at just rightsizing their operating business. They obviously had a great COVID run. Top line revenues were growing fairly significantly and I think they're seeing a bit of a reset back to pre-COVID and trying to stabilize their business there. So it's something that we're closely watching. Limited rollover in '24. But again, when we stay close with those operators as well. As it relates to the broader pipeline, it really hasn't expanded all that much. I think the general health of retailers has been fairly significant. We are active in the pre-leasing side of that equation to get out in front of any opportunities to recapture space. And in some cases, we're really pushing it to upgrade the quality of the tenancy. Because you do have on the other side of the spectrum, high-quality investment-grade tenants that are looking to grab space. So they're also becoming more aggressive in that regard. So right now, we feel pretty good.

Wes Golladay:

I just want to maybe talk about Mary Brickell Village. I know RPT has some big plans there, they're already starting to do a lot of work there. Are you changing any of those plans?

Operator:

The next question comes from Paulina Rojas with Green Street.

Ross Cooper:

Yes, I'm happy to take that. I think when you look at the fundamentals of our business and why we're so bullish, it is because the challenges of penciling on new development are significant. We estimate, based upon what we've seen in costs and land values, that to develop a new shopping center today, you're well north of $400 a square foot. In many cases, $450 to $500 square foot. So when you think about the yields that any developer would reasonably require, your ABRs really need to be $35 to $40 a foot on average to pencil a new development. When you think about the replacement cost of the shopping centers that we own and the rents that we have, in many cases, we could be half of where replacement cost is today. So from that perspective, it's hard to envision that there's going to be any meaningful new development in the near term and it makes you very comfortable with the rents that we have in place today and our opportunity to continue to push that.

Mike Mueller:

What are you expecting for overall redevelopment spend in 2024? And are you close to activating any major projects that could cause that number to accelerate materially in '25 and '26?

Conor Flynn:

Michael, I will add that we've been prioritizing the retail redevelopments because clearly, the returns there are much stronger and that's where we see significant returns and upside in the portfolio. So if we're going to activate new projects going forward, that is still a priority for us and continue to mine the portfolio for upside.

Michael Gorman:

Just wanted to circle back to the growth potential within the RPT portfolio. And I just wanted to clarify, when we think about the 1.5% to 2.5% that's inclusive of RPT, what is the impact of the portfolio you're having on that? And how does that break out between kind of legacy Kimco and RPT as we think about 2024?

Operator:

The next question comes from Linda Tsai with Jefferies.

David Jamieson:

Yes. I mean that's our goal is obviously to resolve the Bed Bath boxes in '24 based on the demand that we're seeing, we feel encouraged by that. I also want to note that we're inheriting 3 additional boxes a result of RPT, so on a go-forward now, we'll have 11. And again, we're encouraged by the activity there. As it relates to occupancy, I'm always challenged to push the envelope higher and push the mark higher. I mean, exceeding 91.1 and getting to 91.7 on the small shop side was a great milestone at the end of the year. And I do just want to like put into context, this was all in the midst of merging another company into Kimco. So I can't thank our broader team enough on the execution that they've done in executing over 1 million square feet of leasing. So we'll continue to push as hard as we can on the anchor side. We're at 98%. Our all-time high was 98.9%. And so we have room to run there, too which is encouraging. And then bringing on RPT, as Conor mentioned, there is additional upside to on a relative basis from where our occupancy in theirs is. So we'll have our work cut out for us in '24 but we feel encouraged.

David Jamieson:

Yes. And just one last note on that. It's not only just the new lease side but it's also the retention side which is so important in terms of preserving and then growing your occupancy. And right now, when you look at the first half of the year, we're tracking around 70% of our rollover right now getting resolved. So we feel pretty encouraged by the momentum as well.

Anthony Powell:

Just a question on the rent bumps signed on your leases in the fourth quarter. Where were they? And where do you think -- and when do you think this effort to increase your contractual rent bumps will start to have results in higher minimum rent growth for you in the future?

Conor Flynn:

I would say just the small shop side continues to improve quarter-over-quarter. I think we've been tracking that diligently and pushing that hard. The anchor side is still aware there's some friction and we're trying to improve that if we can. But again, there's still, I would say, some modest improvement there but not as significant as the small shop side.

Ronald Kamdem:

Just two quick ones for me. The first is just on the dispositions guidance, is that all RPT, number one? And number two, is that -- should we be expect -- is that everything that you wanted to sell? Or should we be expecting sort of more as you get through this first batch?

Operator:

We have a follow-up from Floris Van Dijkum with Compass Point.

Conor Flynn:

Sure. Happy to, Floris. I think when you look at the small shop occupancy upside, it's significant because that's really where if you look at sort of the anchor occupancy reaching like, in essence, relatively full, that's where we see a lot of upside on the small shop side. I like the diversity of demand that we're experiencing as well right now in small shops. If you think about our percentages of small shops, restaurants and entertainment are still pretty sizable. They're about 1/3. Personal care services are up to about 15%. We're seeing the service industry really come back. Other services outside of personal care, that's another 12%. And then medical has really picked up as well at close to 6%. So when you look at like the components of really what's driving the occupancy on the small shop side, it's pretty diverse because each of those categories have a number of names that are out doing hundreds of stores. And I think with our platform, we're able to actually give retailers the ability to hit their growth potential numbers because right now, they're challenged to find high-quality retail and you can come to Kimco and get it in space. And so that's where I think we have a real opportunity with the platform to get more market share on these new growth small shop openings. On the spread between the grocery-anchor portfolio and the mixed-use portfolio, there's really not a sizable spread there between the 2 to say that one is significantly higher than the other. Right now, clearly, the rents we're getting on the mixed-use portfolio are higher but most of those mixed use or apartment towers that have retail and the base of it are high-dense areas, high-growth markets with significant demand. And so we have been able to push rents and those rents are significantly higher than the grocery-anchored portfolio. Hopefully, that helps.

Tayo Okusanya:

Thanks for your earlier comments on Mary Brickell. Just curious in general around redevelopment. How you guys are kind of thinking about that as a potential use of capital. A lot of your peers seem to be ramping up that business. And I'm just kind of curious within your portfolio, how you're kind of thinking about redev.

Operator:

The next question comes from Jamie Feldman with Wells Fargo.

Glenn Cohen:

Sure. Yes. As I mentioned, there's definitely more optimism in the marketplace as the rate volatility has come down a little bit. There have been an uptick of assets that have been introduced to the market. We're seeing it each day. And anecdotally, speaking with brokers, they're seeing more activity. They're doing a lot more ELVs, broker opinions of value. So it's indicative that there are a lot of groups that are out there that are contemplating, bringing assets to the market if they haven't already. From our perspective, what we've seen that's interesting. There are several larger assets that are on the market that tend to have fewer viable all-cash buyers. So any time we're looking at making acquisitions or investments, we try to think about where is our strategic advantage. And there is a lot of capital that is bidding on grocery-anchored neighborhood shopping centers. There are fewer buyers that are capable of taking down a larger asset like the Stonebridge deal that we bought last summer that the team is extremely excited about as long-term redevelopment opportunity but it's a larger size that makes it more difficult for an all-cash buyer. So that's a lot of what we're looking to do. It's a similar playbook that we've taken on in the last couple of years. As it relates to the structured investments, we have seen an increase in conversations. We have a couple of deals that are currently in the pipeline, hopefully, a few more that are behind it. So we're very confident in the guidance that we put out and now it's our job to execute on that.

Alexander Goldfarb:

Just Conor, big picture, a lot of the questions on the call are clearly around guidance and trying to understand growth. As we think about this year and I'm not asking for '25 guidance, so don't worry. But as we think about the company this year is the sort of slower growth, is that more a function of a lot of the puts and takes with RPT and a lot of, I don't want to call them one-timers but benefits last year, lower interest rates, et cetera. And therefore, this year is really subpar relative to where the company is going? Or are those of us who are sort of bullish on retail a bit too optimistic about the growth potential and that, in fact, it will take longer for the leverage that you guys are getting certainly in your re-leasing spreads to manifest in earnings growth? I'm just trying to balance which this year is being more impacted by?

Operator:

We have a follow-up from Linda Tsai with Jefferies.

Glenn Cohen:

Sure. I mean it's always been part of our capital plan and our strategy to monetize Albertsons. It's part of our overall capital plan and we feel we can obviously redeploy those proceeds better than what that current dividend is. So that's part of it. And really, for us, we'd rather retain the capital. We think we can make good use of $225 million, again towards additional investment and a combination of additional investment and debt reduction.

Caitlin Burrows:

Again, I feel like occupancy has been asked about a number of times but just 1 other way to ask. You guys show that at year-end economic occupancy for your portfolio was 92.7%. And in an earlier question, when you were talking about the occupancy trend for this year, you pointed out there could be post-holiday fallout and then there's also bringing in RPT portfolio. So I was wondering that 92.7 that you showed that just Kimco, if you knew what that would have been had the RPT properties been included, if that makes sense?

Conor Flynn:

Caitlin, as you know, Q1 is typically when you get the holiday hangover, you get some spaces back and then you start to build occupancy back throughout the year. So we anticipate the seasonality to continue. Clearly, we're off to a good start here and that's why we're cautiously optimistic about the year ahead, continuing to build on the momentum from Q4 because that was a record quarter for us. And obviously, if we can stack quarter on top of quarter like that, we'll be in very good shape to hopefully meet and exceed expectations for the year.

David Bujnicki:

We'd just like to thank everybody that participated on the call today. We hope you enjoy the rest of your day. Thanks so much.

Operator:

Good day and welcome to the Kimco Realty Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to David Bujnicki, Senior Vice President of Investor Relations and Strategy. Please go ahead.

Conor Flynn:

Thanks, Dave, and thanks everyone for joining us this morning. I'm going to lead off today with an overview of the macro environment, summarize our operating performance for the quarter, and provide an update and some color on our strategy for navigating through these uncertain economic times. Ross will cover the transaction markets and Glenn will close with our financial metrics and updated guidance. Despite the headwinds of high interest rates, some high profile tenant bankruptcies, shaky debt and equity markets, and the on-again, off-again predictions of an impending recession, underlying shopping center sector fundamentals remain robust. More importantly, our portfolio continues to produce strong operating results, as we have been able to nearly overcome, from an FFO perspective, over $0.06 of non-cash accounting related headwinds relative to last year. In an environment marked by virtually no new supply, strong demand from new, recurring, traditional, and non-traditional anchor and small shop tenants, along with the resilient consumer, we continue to produce strong operating results. Indeed, our third quarter results were stronger than anticipated, enabling us to raise our outlook for same site NOI, while raising the bottom end of our FFO guidance for the remainder of the year. A few more third quarter highlights. We signed 457 leases totaling 2.1 million square feet during the third quarter. Our small shop occupancy reached an all-time high of 91.1% as demand for our portfolio continues. Our strong positive leasing spread was 34.9% for new leases and 8.8% for renewal and options reflects the pricing power of our high quality portfolio. Of note, our combined spread of 13.4% is the highest in six years. As anticipated, our anchor occupancy dipped 50 basis points, quarter-over-quarter to 97.2% due to the recapture of the remaining Bed Bath & Beyond boxes. We released seen Bed Bath boxes this quarter at a positive spread of 54%. Our remaining 12 Bed Bath boxes are all in negotiation and continue to benefit from the favorable supply and demand dynamic for well-located retail. Our overall occupancy is off only 30 basis points to 95.5%, notwithstanding the headwinds described. We are encouraged by the continued push by tenants to secure the right real estate with the right landlord. This continued strong demand is perhaps best evidenced by our signed, but not open spread, which actually widened out this quarter to 320 basis points, representing about $52.2 million of rent that is not yet cash flowing. It is these operating dynamics in our own portfolio that continue to build our team's enthusiasm for the pending RPT transaction. While we remain excited about our portfolio, the headwinds I noted earlier cannot be ignored. As a result of the dramatic rise in the 10-year treasury due to persistent inflation in all likelihood, we will remain in a higher-per-longer interest rate environment for the foreseeable future. To mitigate balance sheet uncertainty and maintain a stance of de-risking our exposure to market forces, we do not [Technical Difficulty] continue to prioritize generating free cash flow. We are laser focused on expediting store openings and rent commencing dates, while reducing expenses that are not income producing. Free cash flow growth will allow us to be self-funding and help produce strong organic internal NOI growth as we move ahead. In summary, we continue to build a company, team, and portfolio that is resilient and able to drive growth in challenging times. We believe we are well positioned to execute and take advantage of the additional opportunities that will inevitably arise as we continue to work to optimize shareholder value. Ross?

Glenn Cohen:

Thanks Ross and good morning. Our third quarter results continue to demonstrate the strength of our high quality operating portfolio, highlighted by robust leasing spreads and positive same-site NOI growth. Importantly, our strong liquidity position and leverage metrics position us to effectively handle the macroeconomic headwinds resulting from stubborn inflation and the higher interest rate environment. Now for some details on our third quarter results. FFO was $248.6 million, or $0.40 per diluted share, as compared to last year's third quarter results of $254.5 million, or $0.41 per diluted share. Our third quarter results produced an increase in pro rata NOI of $3.3 million. The key components of the increase were higher consolidated minimum rent of $12.6 million offset by lower LTA income and straight-line rent of $4.7 million. In addition, bad debt expense was higher by $2.8 million as the current period had a more normalized credit loss level, compared to last year, which benefited from $600,000 of credit loss income due to reversals of reserves. Overall, credit loss was at 71 basis points as a percent of revenues for the nine months at the favorable end of our 75 basis point to 125 basis point credit loss guidance assumption. Pro rata interest expense was also higher by $10 million comprised of $8 million from the consolidated portfolio and $2 million from our joint ventures. This was due to lower fair market value amortization resulting from the early repayment of Weingarten bonds in the third quarter of last year and higher interest rates on the floating rate debt in our joint ventures. Also included in FFO for the third quarter 2023 are $3.8 million of costs incurred in connection with the announced RPT merger and a net benefit of $4.8 million associated with the final liquidation of the Weingarten pension plan. Moving to the operating portfolio, leasing activity remained brisk throughout the quarter as Conor mentioned. Same-site NOI growth was positive 2.6% for the third quarter. And if we excluded the impact of prior period collections it would have increased to 3.1%. The primary drivers of the same-site NOI growth are higher minimum rents contributing 290 basis points and other rental revenues adding 40 basis points. These increases were offset by a more normalized level of credit loss impacting same-site NOI growth by 90 basis points. Overall, these results demonstrated the continued strength of our well-located portfolio and brings our year-to-date same-site NOI growth to 2%. Turning to the balance sheet, we ended the third quarter with consolidated net debt to EBITDA of 5.5 times. On a look through basis, including prorata JV debt and perpetual preferred stock outstanding, net debt to EBITDA was 5.9 times, the same as last quarter and 0.4 times better than a year ago. Our liquidity position remains very strong at over $2.4 billion at quarter end. This was comprised of more than $400 million in cash and full availability of our $2 billion revolving credit facility. In addition, we have our remaining Albertsons shares which have a value of over $320 million. Subsequent to quarter end, we issued a new $500 million long 10-year unsecured bond which is scheduled to mature in 2034 at a fixed coupon of 6.4%. As we are all aware, interest rates have risen dramatically over the past year and further rate increases are not off the table. As such, we felt it was prudent to address our upcoming 2024 unsecured bond maturities which come due in the first quarter of next year. Tending the maturity, we have invested the proceeds in high-quality instruments to mitigate a large portion of the dilution. Now for our outlook for the remainder of 2023. As Conor noted earlier, we began the year facing a non-cash headwind of $0.06 per share totaling $36 million, compared to 2022, stemming from the anticipated lower fair market value amortization from the early repayment of the Weingarten bond and the normalization of credit loss. In addition, we reduced our 2023 lease termination income assumption by $10 million or $0.02 per diluted share in the first quarter. As a result of the strong performance from the operating portfolio, we have clawed most of this back. Our ability to overcome these headwinds speaks to the stability and strength of our operating portfolio. Based on our year-to-date results and our expectations for the fourth quarter, we are again tightening our 2023 FFO per share guidance range to $1.56 to $1.57 from the previous range of $1.55 to $1.57. This includes improving our full-year credit loss assumption to a range of 75 basis points to 100 basis points from the previous range of 75 basis points to 125 basis points and increasing our same-site NOI assumption to 1.75% to 2.25% from the previous level of 1% to 2%. In addition, based on our full year expectations, our board has elected to increase the fourth quarter common dividend to $0.24 per share, representing an increase of 4.3%. As a reminder, we received a $194 million special dividend from Albertsons earlier this year, which is considered ordinary income for tax purposes, but not included in FFO. We continue to evaluate the amount of special dividend needed to satisfy our redistribution requirements. The Board is expected to declare the amount of special dividend in November and we expect to pay it by year-end. Looking ahead, we plan to provide our 2024 outlook when we report our fourth quarter results. We anticipate it will be inclusive of the RPT merger being completed early in the year. And with that, we are ready to take your questions.

Operator:

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Michael Goldsmith with UBS. Please go ahead.

Ross Cooper:

Sure, happy to address that. So, yes, you're right, we had a very active quarter, as I mentioned. We were very excited about the acquisition of Stonebridge Center. It's going to be a long-term hold where we can create some significant value. The dispositions on the Kimco side were fairly limited. There's one transaction which I would note that we sold out of one of our joint ventures, a grocery anchored shopping center in Southern California at a very low cap rate and the low-5s, which I think showcases still the strength of the market and that there is significant capital, particularly for core grocery centers. That being said, we're being I think very cautious in this market in terms of the fourth quarter and our expectations. There's essentially nothing in the pipeline on the acquisition side between now and year-end and on the disposition they continue to be limited to a couple of select land parcels and a few smaller joint venture assets that we're exploring. So I would tell you that the market is still active, although transaction volumes are down plus or minus 70% year-to-date. There is still is capital that is being put to work. Just recently there were transactions that very aggressive sub-6 cap rates in Southern California aside from the one I mentioned that we sold as well as in Miami. We've seen grocery anchored-centers as well as power centers in Chicago and other parts of the Midwest that are trading in the 6s and the 7s and in some cases low-8s. The financing is still available albeit at higher rates than what we've seen in the last 12-months or so which is obvious given where the rate environment has gone, but LTVs can still be obtained from private owners or investors in the 50% to 60% range. So there's still activity out there. We're encouraged by what we see in the fundamentals of the business, as we've talked about. And we believe that we can selectively execute it at the appropriate time.

Juan Sanabria:

Hi. Thank you. Good morning. Just hoping to pack up on the back of Michael's question with regards to targeted RPT dispositions, presumably that would be focused in the lower growth Midwest markets. Just how committed are you to trying to prune that part of the portfolio, if at all? And how should we think about cap rate spreads or differences between, kind of, typical primary gateway markets versus more secondary, maybe Midwest or rest Belt type markets?

Operator:

The next question comes from Jeff Spector with Bank of America. Please go ahead.

Conor Flynn:

Jeff I'm happy to take that one so I think when you see in our results and that the numbers speak for themselves clearly we are very focused on executing our strategy and having that result in strong operating results, strong FFO, we raised our dividend, we raised our guidance, we raised our same-site NOI guidance, the all-time high occupancy for small shops is reflected there, six-year high on leasing spreads. So we believe we're executing and we're showcasing it and letting the numbers speak for themselves. Clearly we're in an opportune time, you know, with the dislocation in the financing market, we try and be, you know, opportunistic. And I think that's what Kimco is known for. And so obviously it's a show me story and we believe we've executed in the past and we know we're only as good as our last deal and so we're going to make sure that we continue to put up the numbers that speak for themselves. And when you look -- and I know we've been very vocal about the health of our industry, but when you look at the supply and demand side of the shopping center sector, with the demand, the store openings of what we track over 6,900 new store openings for this year, the supply of 0.5% of existing stock of new construction, which is the lowest amongst all commercial real estate categories, and the vacancy levels for the whole entire open air sector. Depending if you look at Cushman and Wakefield or CBRE, it's the lowest sense of ever been tracking. So between 16-years at Cushman, 18 years at CBRE, this is the lowest vacancy rate the country has ever experienced. And so we're in a good spot. We see that opportunity. We think that the RPT transaction is exactly that. It's a high quality portfolio with all the wind at its back. So we can crystallize the GNA synergies very quickly. And what gets us most excited, obviously, is the OpEx margin that we can believe we can execute on quickly and bring it up to a Kimco level and block and tackle and showcase what the platform can do.

Operator:

The next question comes from Craig Mailman with Citi. Please go ahead.

Glenn Cohen:

Yes, hi, Craig, it's Glenn. Again, rates obviously have moved a little bit, but we do have a full mix and we have a fair amount of optionality. We have cash, obviously, that is on our balance sheet. We also have our Albertsons investment that we would expect to be able to monetize in the beginning part of the year. So between that, our access to capital, the revolver, we feel pretty comfortable with taking, you know, refinancing the debt at prices relatively close to where we targeted. Rates are up a little bit, but I think from a full standpoint, we still expect the transaction to be FFO-accretive in the first year. We have, again, the revolver is fully available. We're sitting with the significant amount of cash on the balance sheet, and Albertsons I think those give us the flexibility to take down what we need to do.

Haendel St. Juste:

Hey there. Good morning. I will not ask a question on RPT, I wanted to ask about leasing spreads. My question for you is on leasing spreads, the Bed Bath spread in particular, which were stronger I think than many of us expected. So maybe can you shed some more color here? Are you perhaps offering a bit more TIs? Are you cutting up boxes? And maybe some color on how the conversations are going to backfill the remaining boxes and expectations for spreads on those? Thanks.

Operator:

The next question comes from Samir Khanal with Evercore ISI. Please go ahead.

Dave Jamieson:

Yes, sure, absolutely. So we have 14 boxes that were executed three of which were assigned those 14 boxes are accounted for currently in our snow pipeline, which you spend a 320 basis points, $52 million in total. For some perspective on timing, we do actually have our first two Bed Bath boxes that were backfilled starting to flow this quarter, and so that was under a 12-month window. Obviously, timing will vary box-to-box on what needs to be done. The balance of that is baked into our snow pipeline, of which we anticipate seeing about 50% to 60% of that flow through the course of 2024.

Operator:

The next question comes from Dori Kesten with Wells Fargo. Please go ahead.

Glenn Cohen:

Yes it's market driven obviously you know we'd say the Sun Belt markets have been you know areas of opportunity where we can push further north on the increases, but it's really a case-by-case conversation with all the retailers. Obviously, everything's in negotiation, so there's a lot of discussion on the table, but we felt we have been confident in our abilities to push it northward, and right now it seems to be holding pretty well. With the small shop occupancy at 91.1, obviously matching our all-time high, again, that supply-demand balance is still working very much in our favor.

Operator:

The next question comes from Connor Mitchell with Piper Sandler. Please go ahead.

Conor Flynn:

Sure. Yes, I mean, outside of the economics, you're looking at, you know, co-tenancy provisions, exclusive provisions, all of which you can start to rebalance, loosen up, create more flexibility for us. Obviously, repositioning and redeveloping our centers has been a core principle of ours, so having that flexibility to do so. I also think we continue to grow into a data-driven market where you have a better sense of the impacts and you see tendencies or understandings change. Former principles about the impact of fitness long ago was sort of dispelled by the reality that people go to the gym, and then they actually go and shop elsewhere afterwards. And so retailers have come to appreciate that. So I think today, more than ever, it's very much a partnership, looking to build the best community for the shopper and the customer. And our retailer partnerships are very, very strong. And they're willing to explore new opportunities that work for both sides.

Operator:

The next question comes from Floris van Dijkum with Compass Point. Please go ahead.

Conor Flynn:

Sure. Happy to start, Floris, and we can pass the mic around, but you're spot-on. We're obviously encouraged by the supply and demand dynamic that we're experiencing in our portfolio. We're using a lot of data analytics to understand that there's virtually no new supply on the horizon and that we feel like our portfolio is well positioned for growth as the signed, but not open pipeline continues to build, as you saw expand further this quarter, which indicates future NOI growth. And we're trying to maintain a portfolio and strategy that allows us to grow regardless of the environment that we're facing. And so keeping leverage levels at all-time lows for us is important. You saw us be proactive and really sort of push out any near-term maturities with our recent bond offering. We continue to think that the small shop occupancy is going to be a bright spot for us as we've just reached all-time highs and we're continuing to think there's more to push there. The demand drivers are multiple, and they're more, as I mentioned earlier, there's traditional and there's non-traditional. And you continue to see the use cases for shopping centers evolve, because it's all about value and convenience. And almost everything you can think of benefits from value and convenience. And so that's why the shopping center continues to evolve to be, I think, the place of choice for whether it's a service use, whether it's a medical use, whether it's a pure retail use, you name it, it continues to evolve as the spot where people want to start businesses. And that's why I think it gives us a lot of encouragement, as well as the fact that we have all of this underutilized parking that we think has future outside in the long-term. So we always want to think long-term. We entitled over 800 units this quarter alone in the portfolio. We continue to think that the shopping center will evolve to include multiple uses, primarily multifamily for us. But we position the portfolio for long-term growth. We've been on a roller coaster of retail. As you know, there's been retail apocalypse. There's been the COVID pandemic. There's been all things we've faced in terms of challenges. And we feel right now we're in a really good spot, hopefully be the bright spot of commercial real estate, because Kimco is well positioned, I think, to be opportunistic and showcase that when times when people are nervous, if you have the capability to execute, you should be able to make generational deals. And we feel like that's what we're intending to do at Kimco going forward and into the future.

Greg McGinniss:

Hey, good morning. I'm just curious how you're thinking about spending on acquisitions versus redevelopments at this point, where you see the bigger opportunity? Given the size of and growing size of the portfolio, whether or not you expect to see some increase in the redevelopment opportunities or whether the accretion yields there due to the cost or whatever it might be are just not worth the squeeze?

Operator:

The next question comes from Anthony Powell with Barclays. Please go ahead.

Ross Cooper:

I think it's a similar conversation. I think every investment opportunity that we look at is judged based upon our cost of capital and what is accreted to that. I think that we talked a little bit about our leverage being at the lowest levels historically that it's ever been, which gives us a lot more optionality to consider anything that's on the table. So we'll look at every single investment opportunity, acquisition, leasing, redevelopment, structure investment, stock buybacks, whatever the case may be, and prioritize it based upon, you know, through that lens. So that's where we sit and that's how we consider it.

Caitlin Burrows:

Hi, good morning everyone. Conor, you talked about small shop occupancy as a bright spot. Could you talk about what types of tenants you're seeing that interest from, like local versus national, what industry? And also the timing, I feel like we hear that macro uncertainty is lengthening the time it takes to sign leases and other property types. So I'm wondering if you're seeing that at all in your property type?

Operator:

The next question comes from Alec Feygin with Baird. Please go ahead.

Ross Cooper:

Sure. Yes, the conversations are picking up and we do anticipate there's going to be more optionality with that program as we enter 2024, continuing with the theme of cost of capital. As our hurdle rates increase, the quotes that we're providing to potential borrowers of our capital have increased as well. So what was previously 8% to 9% with some back-end participation potentially is now double-digit as a starting point. So the blended average of our structure right now in terms of the rates that we're obtaining in the current position are in the mid to high-9s. And we expect that anything going forward will certainly start in the double-digits. But we think that will ramp up. We have just under $200 million outstanding on the book right now within the program. So we'll continue to be mindful of that, but we think that there's room to run there.

Linda Tsai:

Hi. You reduced your credit loss outlook as you're trending at the low-end. Given the record low supply environment you're operating in and your improved portfolio quality in terms of better credit tenants, do you think it's premature to say credit loss will be a step function lower in the coming years?

Operator:

The next question comes from Mike Mueller with JPMorgan. Please go ahead.

Ross Cooper:

Yes. I mean the core program is looking at operating real estate in our core markets with strong demographics, the tenancy that we're looking for, high-quality sponsors, and as we've talked about in the past, having that right of first offer, a right of first refusal is a critical component of that program. Now that being said, we do have our Plus business that has been active historically. And as there are retailers that are real estate rich that have capital needs, we believe that we're typically 1 of their, if not their first phone call. So those conversations will continue and where we can be opportunistic and helpful with retailers that have a significant amount of owned real estate, we'll always look at those opportunities as well.

Paulina Rojas:

Good morning. Price of interest rates, of course, has been unprecedented and introduces the question of how will retail our balance sheet and look after a company starts facing that maturity. So when you think about the future, how do you feel about potential tenant fallout? Do you think it will be -- or that it's reasonable perhaps to think about above average tenant failure given everything that is happening with interest rates?

Operator:

The next question comes from Ki Bin Kim with Truist. Please go ahead.

Dave Jamieson:

Yes. Kevin, great for questions. So with the first one, we maintain a very close dialogue with our big retail partners, and they're looking through, I think, the short term impacts and continuing to try to grab market share where they can appreciate in that, that inventory is limited. And if they don't get it today, there might not be new inventory available tomorrow. That said, every retailer has a different capital strategy, and that probably evolves most likely as ours evolves as well. So something that we stay very, very close to them. But as I can say right now, it doesn't seem to be slowing the pace of growth the majority of those retailers. And as it relates to the mixed-use pipeline, yes, I appreciate the question. So what you see there is you see four projects, three of which are ground leases and the fourth one being Colter which is the 1 that we identified as our preferred equity structure. That was the first of its kind that we're doing. So this quarter, we felt it was appropriate to actually show what the real returns are related to the Kimco invested capital and the preferred returns related to those projects. Obviously, that yields a higher or accretive growth profile than if you're just to invest all the capital yourself. So that's what it's reflecting, that's the change.

Ki Bin Kim:

Thank you.

Juan Sanabria:

Hi, thanks for the second shot here. Just a couple of questions. One, just on -- going back to the RPT merger where we started. So what are you guys assuming in terms of the debt that needs to be refinanced. So that's part one. And then part two, if you could just give us an update on the Rite Aid exposure and what you're seeing or expecting there for the space that they've deemed that they're going to get back in one form or another.

Dave Jamieson:

Yes. And as it relates to the Rite Aid exposure, right now, we know that three of our leases have been rejected in day one. That's about 5 basis points of occupancy right now. So a de minimis impact, there are another two that we expect to close this quarter. So in total, that's about 8 basis points of total occupancy on the impact. And right now, we have good activity in terms of hitting our retailer list and box size is appropriate for a lot of the mid-box users, and so the larger, sort of, small shop operators as well. So we're very encouraged by the activity. We have one that has drive-through locations. So again, there's good attributes, good components here that we feel pretty confident we can backfill those quickly.

Operator:

The next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.

Dave Jamieson:

Yes. It really -- it hasn't changed. Not anything related to the macro environment. We're tied for negotiating certain deal points that may add some time, but that's normal course of business. If anything, people are looking to get leases signed quickly so they can get open sooner and they can start booking that growth within their portfolio. So there's been no real material change in terms of time of execution.

Operator:

Next question comes from Libby Bakken with Bank of America. Please go ahead.

Conor Flynn:

Yes. Again, we have a couple of onetime things that are in the third quarter. As we mentioned, there's some of this impact from the Wingard pension plan that was liquidated during the quarter. And there's a few other onetime things. But again, we feel very comfortable with the guidance range and we're at the upper end of the range that we set out for the year. Again, coming back, we made up a lot of headwind that we had going into the year, driving towards that high end of the range today. So that's really the driver.

Libby Bakken:

Got it. Thanks.

Anthony Powell:

Hi, thanks for the follow-up. I saw the lease summary that landlord worked first square foot went up to close to $8 in the quarter. I'm assuming that's related to the Bed-Bath Beyond lease, but I wanted to confirm that and maybe talk about TIs and landing work trends going forward?

Operator:

This concludes our question-and-answer session. I'd like to turn the conference back over to David Bujnicki for any closing remarks.

Operator:

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator:

Good morning and welcome to the Kimco Realty Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to David Bujnicki, Senior Vice President of Investor Relations and Strategy. Please go ahead.

Conor Flynn:

Good morning and thanks for joining us today. I will begin with an overview of the leasing environment, highlight a few of notable accomplishments during the quarter, and provide an updated on our longer term strategy. Ross will then cover the transaction market and Glenn will close with our financial metrics and updated guidance. Easing inflation and robust labor market have bolstered consumer sentiment. Demand for space remains strong, as retailers continue to peruse their expansion plan, resulting in a favorable leasing environment for the Kimco portfolio. We closed the second quarter with 153 new leases, totaling over 650,000 square feet. With strong demand from our high quality, first-ring suburban locations and limited new supply, rents are up across all of our regions. Our strong leasing spreads continue to validate our portfolio quality and embedded pricing power. Our new leasing spread was 25.3% and included new leases on four of the Bed Bath & Beyond spaces, two of which we recaptured during the quarter. Overall, we closed 485 deals during the quarter, totaling 2.7 million square feet, with a combined spread of 9.9%. Our second quarter renewal and option spread was 7.6%, with renewals ending at 6.5% and options at 9.3%. As a result of healthy consumer spending in desirable locations, the majority of our tenant base, including small shops and anchors, are electing to renew, retain and reinvest in their stores. We ended the quarter with 332 renewals and options, totaling 2.1 million square feet, exceeding the previous five-year average for second quarter renewal and option volume, and kept our retention rate near all-time highs. Small businesses grew throughout our portfolio with sequential occupancy gains of 30 basis points to 91%, only 10 basis points shy of our all-time high, and we executed 26 anchor leases this quarter, the most substantial anchor activity we have generated in over five years. Overall occupancy for the second quarter finished flat at 95.8%. This includes the recapturing of eight Bed Bath & Beyond boxes in the second quarter. These vacates, plus 11 from Tuesday morning, resulted in an anchor occupancy reduction of only 10 basis points sequentially to 97.7%, while still up 10 basis points year-over-year. This leasing activity bodes well for the absorption of our remaining Bed Bath & Beyond boxes and has also widened our spread between the signed, but not open retailer pipeline to 300 basis points, another good indicator of future growth embedded in the portfolio. While we are not immune to retailer bankruptcies, the overall quality and diversity of our tenant mix, high demand locations, and best-in-class leasing team enable us to withstand, and in some cases take advantage of the short-term vicissitudes of tenant failures. In terms of Bed Bath & Beyond, we've released seven locations through the end of the second quarter, including the four new leases executed during the second quarter with a pro-rata mark-to-market spread of 31%. In addition, three of our leases were purchased by the retailers as part of the Bed Bath & Beyond auction. Currently we have activity on the 19 remaining Bed Bath spaces with a mark-to-market opportunity of over 20%. While we anticipate a dip in occupancy during the third quarter due to the vacating of the remaining 19 Bed Bath leases at the end of July, we have seven locations at lease and activity on the 12 remaining. Overall, we are encouraged by the brisk lease-up of these boxes, which further demonstrates the quality of the portfolio and the strength of the retail market, and ultimately we believe will benefit from backfilling these boxes with stronger credit tenants. With respect to our long-term strategic goals, we continue to make good progress. First, we added a new Sprouts grocery store to an asset in Virginia, increasing our percentage of grocery-anchored assets in the portfolio to 82%. In addition, our mixed-use portfolio continues to shine. We have now reached 2,471 apartments in operations across the Kimco portfolio, with over 1,000 apartments under construction and 5,300 entitled, offering a significant pipeline of future densification opportunities. The residential densification both compliments and enhances our retail sites, resulting in higher asking rents and leasing activity. A perfect example of this is our Pentagon project in Virginia, a newly-completed 253-unit apartment complex affectionately named The Milton, which is already 49% leased and ahead on rental rate and absorption assumptions. The addition of the Milton will have positive long-term impact on the economics for the rest of the site. In closing, we are pleased with the performance of our operating platform and proud of our team's strong execution that allowed us to quickly and accretively backfill our vacancies at meaningful rental spreads, a true testament to the quality of our portfolio and leasing team. We have also made significant progress in our ongoing efforts to maintain a strong balance sheet and related metrics. Glenn will provide the details shortly. That said, we continue to challenge ourselves to do better. We are tracking our deal costs and our build-out time from lease execution to rent commencement to ultimately enhance efficiency. We continue to focus on growing net effective rent and have reduced the timeline for building out space year-over-year for the past two years. In addition, we are proud to be recognized by Forbes as a net zero leader, the only shopping center REIT to make the top 100 list as we strive to be a leader in sustainability. All these accomplishments are reflective of an enormous team effort at Kimco. While we are positioned to withstand headwind that will inevitably emerge, we are also ready to take advantage of opportunities as they present themselves, in our ongoing effort to maximize results for all of our stakeholders. Ross?

Glenn Cohen :

Thanks Ross and good morning. Our high quality operating portfolio continues to deliver favorable results, highlighted by another quarter of positive same-side NOI growth and strong leasing spreads. Furthermore, with additional proceeds received from our Albertsons investment, we continue to enhance our liquidity position and leverage metrics. Now, for some details on our second quarter results. FFO was $243.9 million or $0.39 per diluted share as compared to last year's second quarter results of $246.4 million or $0.40 per diluted share. Our second quarter results were driven by increased pro-rata NOI growth of $7.4 million, largely due to higher consolidated minimum rent of $12.5 million and higher percentage rent of $2.5 million. These increases were offset by higher bad debt expense of $3.8 million as the current period had a more normalized credit loss level compared to last year, which benefited from $800,000 of credit loss income due to reversals of reserves. In addition, the increase in rental property expenses which includes greater insurance costs eclipsed the increase in recovery income by $3.5 million. Other factors related to the change in second quarter results were higher G&A expense of $4.8 million and pro-rata interest expense of $5.9 million. We also benefited from higher interest income earned on our invested cash that was partially offset by lower dividend income, resulting from the sale of Albertsons shares during the past 12 months. Similar to last quarter, the uptick in G&A expenses was largely due to the anticipated staffing levels following the Weingarten merger, as well as greater non-cash expense related to the higher valuation of equity awards. The increase in interest expense relates to lower fair market value amortization, linked to the previously retained above market Weingarten bonds, as well as higher interest rates associated with floating rate debt in our joint ventures. Moving to NOI. Same side NOI growth was positive 2.3% for the second quarter and would have been even better at 3.2% if we excluded the impact of prior period collections. Looking at the components of the same side NOI growth, we are encouraged by the 310 basis point increase from minimum rents and 70 basis point boosts from higher percentage rents. These improvements were offset by a rise in credit loss of 120 basis points. Overall, these results demonstrate the continued strength of our well-located portfolio. As it relates to our Albertsons investment, during the second quarter we sold 7 million shares of ACI stock and received net proceeds of almost 145 million. It is our intention to pay the tax on the capital gain from the sale and have recorded a $31 million tax provision. Both the gain on sale and the related tax are excluded from FFO. Year-to-date, we have monetized $282.3 million of ACI stock and expect to retain approximately $220 million for opportunistic investments and debt reduction. We currently hold 14.2 million shares of Albertsons which has a value of over $310 million. As a reminder, during the first quarter of 2023, we received the $194.1 million special dividend from Albertsons, which was included in net income, but not FFO. The Albertsons special dividend is considered ordinary income for tax purposes. As such, the team and Board continue to evaluate the amount of the special dividend to our stockholders needed to maintain our compliance with redistribution requirements, which will be paid by year-end. Turning to the balance sheet, we ended the second quarter 2023 with consolidated net debt to EBITDA of 5.5x. On a look-through basis, including pro-rata JV debt and perpetual preferred stock outstanding, net debt to EBITDA was 5.9x. The best level since we began reporting this metric and the first time it's been less than 6x. Our sector-leading liquidity position remains very strong with over $2.5 billion of immediate liquidity, comprise of over 500 million of cash on hand and the full availability of our $2 billion involved in credit facility. In addition, we have the remaining Albertsons shares value in over $310 million. Based on our solid first half results, the monetization of our Albertsons shares and expectations for the balance of the year, we are again tightening our FFO per share range to $1.55 to $1.57 from the previous range of $1.54 to $1.57, we've all previously disclosed guidance assumptions remaining the same. And with that, we are ready to take your questions.

Samir Khanal:

Good morning, everyone. Hey Conor, you mentioned the mark-to-market opportunities for Bed Bath. I think the balance, and you said it was like 20% was the number you gave. I guess how are you thinking about the capital required or the CapEx involvement that will be required to get to that return? Thanks.

David Jamieson:

Yes, on the deal cost side for the ones that we've executed and the ones we're currently tracking at least, it's falling right in line with what we've seen historically with our anchor repositioning with boxes around 20.000 to 40,000 square feet. That range is around $60, $70 bucks of foot. So we have another 19 to go. Obviously there'll be highs and lows related to that, but I think there'll be more or less in mind with what we've been seeing so far.

Jeff Spector :

Great. Good morning. Conor, you talked about retailers continuing to pursue expansion plans. Can you talk a little bit more about what you are seeing since we saw you at ICSC and NERI, maybe categories, regions, you know – and these expansion plans that we are talking about, ‘24 and ‘25? Can you provide a bit more color?

Operator:

The next question comes from Michael Goldsmith of UBS. Please go ahead.

Ross Cooper :

Sure. I'm happy to address that. Yes, to your point, as I mentioned we are seeing additional activity in the market. Now, it is still somewhat hit or miss in terms of the assets that are in the market, where they are pricing and which ones are trading, but there's been more quality grocery that has hit the market, that is still demanding some six caps in many cases and getting them. We're starting to see some larger assets hit the market that maybe have a little bit of a higher spread where you can get a bit more yield, but still pretty strong quality. I do want to address the cash that you were talking about and the uses for that. We're still fully committed to the net acquisition spread of about $100 million sort of positive, but we do have certain uses for that cash already allocated as well. We talked a bit about some of the redevelopment spend that we have, taxes on the ACI sales, and the special dividends. So while we do have some capital that is already sort of earmarked for that spend, we do think that given our cash position we're in a pretty unique position to be aggressive on the acquisition side, but still maintain a strong level of discipline.

Craig Mailman:

Thanks. Maybe Ross, to follow-up on that prior question, on the acquisition market, and maybe just some incremental color on where you're seeing better opportunities in the structured finance side of things, in the equity side of things. You guys were reported to be buying like a $170 million acquisition in Northern Virginia. Is that something that could close here in the near term? I know you said $100 million net acquisitions, but is there an opportunity to go above that? And do you have enough dispos teed up to fund that or do you maybe just ramp leverage a little bit back up above 6x in the near term and then have that kind of drift back down?

Operator:

The next question comes from Juan Sanabria of BMO Capital Markets. Please go ahead.

A - Conor Flynn:

Yes. So on the same side NOI guidance, again, we left our guidance the same at 1% to 2%. For the second quarter as I mentioned in my prepared remarks, we were at 2.3%. We will obviously have a little bit of headwind with the Bed Bath bankruptcies and the leases that we got back in the third quarter. But overall we feel very comfortable with the guidance range that we put out for the year.

Operator:

Our next question will come from Caitlin Burrows of GS. Please go ahead.

Glenn Cohen:

Sure, I'll take that. We have just under $650 million of bonds maturing in the first part of 2024. Again, we have cash on the balance sheet today. We have lots of liquidity obviously with our revolver, but our intent would be to take those bonds out before the end of the year. In terms of pricing, again pricing moved around quite a bit, you know base rates have moved around. But I would say today, we are probably about 175 over on tenure, but with where it is, you keep refinancing somewhere in the 5.6 range, 5.7 range, relative to the bonds that are coming off that are at 2.7%, and have the other bonds have an effective yield of about 1%.

Alexander Goldfarb :

Hey. Good morning out there, and a nice touch on naming the tower The Milton. Connor assumed one day we'll see The Conor in apartment land. So question for you; on insurance, not necessarily for you guys per se, but for your tenants. And Conor specifically you spoke about the strength of the small tenant, small shop opening. Given all the property insurance headlines we've been reading about, not sure how this affects business insurance. But is there a way that you know tenants can avail themselves of Kimco's wrapper that they pay into you and as a result get lower insurance rates or business interruption and the type of insurance that smaller tenants would avail themselves of, is not something that you guys want to play in. Just trying to think about ways that you can help your tenants given your size and scale.

Conor Flynn:

Yes, I think your spot on in trying to figure out how to use that as a strategic advantage, because we've talked about that a lot. Obviously the residential insurance market has gone through a whirlwind of pain. The commercial side of it, you know we've benefited from our portfolio diversity, and I think that sometimes goes unnoticed, where you know if you look at our portfolio and how we really continue to evolve it, we've got the benefit of having tremendous diversity of geographic spread that allows us to price extremely well in the insurance market. Even though individual insurers are obviously feeling the pain or one-off commercial properties are feeling the pain, we do have a big benefit there as Glenn said that we pass on to our tenant base.

Haendel St. Juste:

Hey, good morning out there. I wanted to go back to the transaction line of questioning a bit and kind of rough. I understand the sensitivity in not wanting to discuss this Stone Bridge asset too specifically, but the press is reporting it to be a 7% cap rate. So can you talk a bit about where the market is today in terms of cap rates for the quality of assets you would be interested in buying. And if you're starting to see some moving of cap rates from the 6% you discussed last quarter, and perhaps if there's something more specific here, perhaps the larger size, maybe a motivated seller that would be leading to the higher cap rate for this transaction. And then perhaps just how sellers are thinking about selling in this environment now facing higher interest rates versus perhaps the expectation of lower interest rate in the back half of the year. Thanks.

Operator:

The next question comes from Floris van Dijkum of Compass Point, please go ahead.

A - Conor Flynn:

Sure, happy to take that one Floris. I think when you look at the demand drivers we have today, we're in sort of a new paradigm of retail, where we haven't had this breadth of demand for multiple different size categories. We've had it before in certain specific sizes of square footage boxes, but we haven't had it across the board in terms of you know large anchors, junior anchors, mid-size box and small shops, and that's where I get really excited about the future potential that we have, because we've really started to enter into a phase of retail, where for the last 12 years we've been at virtually no new supply. Tenant demand continues to grow and we're starting to get the net benefit as well as new demand drivers, whether it's medical, health and wellness coming into the shopping center space, it's all about convenience and value, and mall tenants are starting to anticipate that as well. So you're seeing now that snowball effect starting to occur as well. Because originally it started with just a handful, but they are starting to gain traction as multiple mall retailers are looking to locate closer to where their consumer lives and works and plays. And so when you think about the all-time high occupancy of Kimco in the past, I do feel like that's a look back and we're looking forward. The nice part about I think where we sit is, yes, we will get some Bed Bath inventory back in the third quarter. But we've got tremendous activity on those spaces. And as I mentioned before, the small shops are really encouraging. But I think that's where you're going to see significant upside versus our all-time high and I continue to see that breadth and depth of demand evolving. The shopping center is a multi-use, multi-category and you add mix use to that component and all of a sudden you've got this dynamic where the amenity base that the shopping center is providing, is driving significant upside and rents to the apartment and vice versa. The apartments, your built-in consumer base are driving sales to the retail. And so there is this harmonious effect that we're experiencing. And that was our original thesis when we started the mixed use program just a few years ago, and it continues to bear fruit. And obviously mixed use for us is focused on apartments. We have no percentage of NOI coming from office. We really like the combination of the apartments and the retail thriving off of each other.

Greg McGinniss:

Hey, good morning. So regarding the Bed Bath and Tuesday morning boxes, how long do you expect it will take to fully lease all those boxes? What types of tenants are taking over those units and how are you thinking about bad debt expense guidance given the level of tenant credit events to-date and expectations through year end?

Glenn Cohen:

As it relates to the credit loss component to it, again, our guidance is 75 to 125 basis points. Through the six months we're around 80 basis points, so it’s towards the lower end of the range. It is though important to just keep in mind that our range, it really does account for some potential lost rent from unbudgeted vacancies. So we've kind of built that into the guidance and again, we remain comfortable with the guidance range that we've put out for the current year.

Anthony Powell:

Hi, good morning. I have a question on the lease, but not I guess commence the rent pipeline, which is now 300 basis points. What's the optimal number for that? I'm guessing it's going to go up in a few quarters as you sign new Bed Bath leases and whatnot. But when should these start coming back down and how have store opening trends evolved from signing to opening in the past few quarters?

Anthony Powell:

When will it come down and what's the optimal?

Conor Flynn:

I would just add, historically prior to the pandemic, that snow gap was running in the high 100 low 200 range. So again, as we continue to lease up further and the openings continue to catch up, you'll start to see it come down at that point.

Operator:

The next question comes from Dori Kesten of Wells Fargo. Please go ahead.

Glenn Cohen:

Yes. I mean the leverage, I think it's obviously been in favor of landlords over the last several years because of the limited supply. Very low new development has been a theme for years now and it's the – it was originally the COVID inventory. Now it's some Bed Bath inventory that are creating opportunities for tenants. Again as Conor alluded to you earlier, you're seeing a lot of tenants expand their market share, wanting to grow into new markets, penetrate shopping centers that otherwise were not reachable before because the occupancy was so high. So given those opportunities, you're seeing a lot of those demand forces come into play, which obviously enables us to negotiate favorable terms. At the end of the day we do a deal that works for both parties. It is a long-term partnership which is really important. So outside of rents it's obviously cost. The capability of our team to open a tenant, I think it's really important. That was a theme that came out of COVID. Whereas some other landlords may not have had the resources available that we do, that ensure the opening components for retail tenants which is so important for them to hit their growth numbers. So I think that's where you're seeing a lot of the strength and the growth and these longer-term partnerships that we have with our major retailers.

Operator:

The next question comes from Ronald Kamdem of Morgan Stanley. Please go ahead.

Glenn Cohen:

Yes, on the same side NOI question, again, I would say that bad debt expense now is back at a more normalized level. So I think when we look at 2023 versus what will probably occur in 2024, that the bad debt expense should not have a dramatic impact on what happens within the same side NOI growth. I think we have to watch for the lease up activity, the baseof the lease up activity and then if there's potential other bankruptcy situations that would have an impact on it.

Conor Flynn:

And then on the capitalized interest side of it, there really should be modest changes in that, because we have The Milton coming into service this year and then we have the Suburban Square mixed-use apartment project coming in to the south as a redevelopment program.

Paulina Rojas :

Good morning. You mentioned seeing good interest for open-air shopping centers from institutional investors. Can you please provide incremental color on the topic? In particular, what segments within this bucket you are seeing more active in the transaction market? And I'm sure it's difficult to say, but if you're sensing any interest in increasing their exposure to retail versus other asset classes?

Operator:

The next question comes from Wes Golladay of Baird. Please go ahead.

Glenn Cohen:

So we're still evaluating a variety of cash strategies to try to reduce the amount that would be required. It's still in flux today. I would say that by the end of the third quarter we'll have a much better handle on where we think that level will be. Again, we look at overall taxable income, the $194 million special dividend received from Albertsons goes into the total mix. I don't think that the special dividend will be that large. We've already been able to mitigate it somewhat. But I think as we get towards the end of the third quarter before the next conference call, we'll have a good handle on it and the payment will be made by year end.

Steven Kim :

Hey, thanks. Good morning. Just a couple of questions on expenses. First, on taxes, it looks like the growth is pretty minimal. I'm just curious if, is there a timing element to this? What your views are on real-estate taxes going to next year. And on your recovery margins and when you compare the year-to-date numbers to last year, you're running at about 120 basis points lower recovery ratio. I'm not sure if there's a timing element with Bed Bath that's happening, but just kind of your overall thoughts on that recovery ratio going back up. Thank you.

Operator:

The next question comes from Linda Tsai of Jefferies. Please go ahead.

Conor Flynn:

I mean, occupancy, we anticipate you know probably having a slight dip in Q3. It's a 50-basis point headwind due to Bed Bath, but as we mentioned throughout the call, we're very encouraged by the activity that we've seen, not only through the Bed Bath, but all of the other box activity and small shop activity. So our job is to push as hard as we can to maintain the levels we have, and that's what we'll continue to do. In terms of CapEx allocation, I mean we signed 26 anchor leases this quarter, which is the highest since 2017, and then you have to go all the way back to 2013 with that size volume. So obviously, there is a sizable allocation more towards the anchor boxes that you would see on a go-forward basis relative to say Tuesday morning.

Mike Mueller :

Thanks. I was wondering, can you just give us a little bit of color on the types of Structured Investments you're looking at and how we should be thinking about economics?

Conor Flynn:

The other nice component too is the preferred equity investments we make have a right-of-first refusal on it, which allow us again to have almost like a future acquisition pipeline. So it's building the Structured Investment Program to allow us to acquire those assets that we would love to own 100% of in the future as well.

David Bujnicki :

I'd just like to thank everybody for joining us today. I hope you enjoy the rest of your day. Thanks so much.

Operator:

Greetings, and welcome to the Kimco Realty Corporation's First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Mr. David Bujnicki, Senior Vice President of Investor Relations and Strategy. Thank you, Mr. Bujnicki, you may begin.

Conor Flynn:

Good morning, and thank you for joining us today. I will begin with an overview of the leasing environment and share how we are strategically well-positioned for long-term growth. Ross will then cover the transaction market, and Glenn will close with our key performance metrics and updated guidance. We are off to a great start to the year with solid first quarter results, including over 4.5 million square feet of leasing as we benefited from our combination of high-quality grocery-anchored assets emphasizing off-price retail and everyday essentials in first-ring suburbs, that makes us uniquely positioned to benefit from what we believe to be longer-term trends relating to consumers and retail strategies. We accomplished this leasing in the face of high interest rates, bank failures, signs of a weakening economy and troubled retailers. Our dedicated team and resilient portfolio not only withstood these pressures but outperformed. First, the consumer. While inflation remains stubborn, the Kimco shopper remains sturdy, as we continue to see healthy traffic reported across our portfolio. According to our large national retailers, the demand for essential goods, services and groceries, continues to be strong. In addition, the flexible hybrid work environment is creating more opportunity for shoppers to frequent our centers. Finally, omnichannel shopping continues to outperform pure online shopping, as optionality is the winning formula by providing consumers the convenience of shopping online and picking-up or returning at the local store. Request to expand our nationally-recognized curbside pickup program continue to grow from our entire stable of national, regional and small-shop tenants. In addition to the resilient consumer, leasing demand and the ability to push rents continues at a robust pace due to the lack of new supply and high barriers-to-entry at our highly desirable locations. The demand for new space is well diversified, for the mix of new deals this quarter, spread among off-price, grocery, sporting goods, fitness, health and wellness, medical and fast casual dining. As part of our focus on obtaining the highest and best use of our properties, we also secured two new entrants to the Kimco portfolio this quarter. A Tesla dealership in Austin, Texas, and a market by Macy's in San Diego, strong leasing supported by this robust well rounded demand is reflected in our new leasing spreads of 44%, a five-year high. Occupancy bust the seasonality trend of dipping after the holidays and gained 10 basis points. Thanks to our team's stellar efforts and our small shop leasing initiatives. During the first quarter, we anticipated some space coming back from underperforming retailers, including Bed Bath & Beyond, who just filed for bankruptcy this past week. This has been widely expected, and we've been well-prepared for this outcome, as we have actively marketed all of our Bed Bath basis for some time. To highlight our successful efforts, we started the year with 30 Bed Bath leases. During the first quarter, we sold one location and released three boxes, including two we recaptured with a mark-to-market spread of 24%. Regarding the remaining 26 Bed Bath leases, we are either in lease or LOI negotiations on 22 locations with the mark-to-market spreads similar to what we have executed to date, which exemplifies the strong activity from a diverse pool of retailers looking to expand. The remaining four locations are either being marketed for lease or of potential redevelopment candidate. The lack of supply and inability to meet new store target is a constant refrain from our retailers during our portfolio reviews and remains key catalysts for the lease up of these locations. It is also why our retention rates for the portfolio continue to remain well above historical levels, at 90% this quarter. With this pace of retention and the strong leasing demand, we believe that over the long-term, we should see an improved underlying growth rate for our business. Further enhancing the value of our first-ring suburbs locations, is the increased demand for industrial and residential assets. This competition for land or conversions makes the cost of new retail development even more prohibited, which will further reduce supply for potential new retail. And when you combine the rising rents in the residential sectors with the competitive redevelopment advantages at our existing locations in the first-ring suburbs, the opportunity to add more mixed use density provides us the long-term opportunity to drive further growth and value creation. In the end, strategically, we are well-positioned for what could be a choppy second half of the year and beyond. With our open-air high-quality grocery-anchored portfolio producing record results, our leverage metrics at all-time lows, along with our significant cash position, we are positioned for growth and we'll look to be opportunistic when others cannot in our quest to outperform on a sustained basis. Ross?

Glenn Cohen:

Thanks, Ross, and good morning. Our solid first quarter results demonstrate the strength of our high-quality operating portfolio as evidenced by increased occupancy, robust leasing spreads and positive same site NOI growth. Furthermore, we bolstered our sector-leading liquidity position and improved our leverage metrics with additional proceeds received from our Albertsons investment. Now for some details on our first quarter results. FFO was $238.1 million or $0.39 per diluted share as compared to last year's first quarter results of $240.6 million or $0.39 per diluted share. Notably, last year's figures include a charge of $7.2 million or $0.01 per diluted share for early repayment of debt. Our first quarter results were driven by strong NOI growth, largely due to higher consolidated minimum rent of $14.5 million. This increase was offset by higher bad debt expense of $7.1 million as the current period had a more normalized credit loss level as compared to last year, which benefited from credit loss income due to reversals of reserves. In addition, pro-rata NOI from our joint ventures was lower by $3 million, mostly attributable to asset sales and higher bad debt expense. Other factors related to the change in first quarter results were higher G&A expense of $4.8 million and pro-rata interest expense of $6.6 million. Although interest expense was higher in the current period, last year included a $7.2 million charge for early repayment of debt. The uptick in G&A expenses was largely driven by higher staffing levels following the Weingarten merger, as well as greater expenses related to the value of restricted stock and performance units awarded. The increase in interest expense stem from lower fair market value amortization, linked to the previously repaid above market Weingarten bonds as well as higher interest rates associated with floating rate debt in our joint ventures. Turning to the operating portfolio which continues to produce positive metrics fueled by the increase in occupancy and strong leasing spreads mentioned earlier. Same-site NOI growth was positive 1.4% for the first quarter. However, it's worth noting that this figure would have been even stronger at 4.2%, if we excluded the impact of $4.6 million of credit loss income from the previous year, compared to $4.3 million of credit loss expense for the current period. Nonetheless, we are encouraged by the composition of the same-site NOI growth which reflects a 430 basis-point increase from minimum rents and reduced abatements as well as a 100 basis-points boost from higher percentage rent and other rental property income, offset by lower recoveries of operating expenses of 110 basis-points. Overall, these results demonstrate our continued focus on driving strong revenue growth across our portfolio. As it relates to our Albertsons investment, during the first quarter, we received a special dividend of $194.1 million, which is included in net income, but not FFO. The Albertsons' special dividend is considered ordinary income for tax purposes, thus we are evaluating the need to make a special dividend to our stockholders at some point this year to maintain our compliance with REIT distribution requirements. In addition, we sold 7.1 million shares of Albertsons stock, generating net proceeds of $137.4 million. It is our intention to pay the tax on the capital gain from the sale and have recorded a $30 million tax provision, which is also excluded from FFO. This strategic move will allow us to retain approximately $107 million for debt reduction and/or accretive investments. Subsequent to quarter-end, we sold an additional 7 million shares of Albertsons stock and received net proceeds of $144.9 million. In the second quarter, we recorded a tax provision of approximately $32.7 million for the capital gain component. While it's great that we have significantly monetized this investment, it's worth noting that we also benefited by approximately $0.01 per share of FFO per quarter from the ACI common dividends paid. Going-forward, we will no longer benefit from the same amount each quarter, given the significant monetization today. Currently we hold 14.2 million shares of Albertsons, which has a value of approximately $300 million. We ended the first quarter with over $2.3 billion of immediate liquidity comprised of over $300 million in cash and full availability of our recently renewed $2 billion revolving credit facility. Our leverage metrics continue to improve with consolidated net debt to EBITDA of 5.8x, and 6.2x on a look through basis, including our pro-rata share of joint venture debt and perpetual preferred stock outstanding. The look through metric of 6.2x represents the best level since we began reporting this metric in 2009. As I just touched on, during the first quarter, we renewed our $2 billion revolving credit facility with 20 banks. The facility now has an initial maturity date in March 2027 with two six-month extension options, bringing the final maturity date to 2028. This is a green facility, initially priced at adjusted SOFR plus 77.5 basis points. The borrowing spreads can increase or decrease up to 4 basis points, based upon our success in reducing Scope 1 and Scope 2 greenhouse gas emissions. Based on our current progress, the borrowings spread has already been reduced by 2 basis points to 75.5 basis points. Turning to our outlook. Based on our first quarter results, the monetization of Albertsons shares and expectations for the balance of the year, we are tightening our FFO per share range to $1.54 to $1.57 from the previous range of $1.53 to $1.57. We are lowering our lease termination income assumption by $10 million to a range of $4 million to $6 million with more than half already received in the first quarter. Initially, we believe the transaction in the first quarter would result in lease termination income. However, when we reviewed it in more detail, given the complex accounting treatment, we arrived at a different conclusion. Our previous assumptions remain intact regarding same-site NOI growth of 1% to 2%, which includes credit loss of 75 to 125 basis points. And now we are ready to take your questions.

Michael Goldsmith:

Good morning, thanks for taking my question. My first question is on Bed Bath & Beyond and just kind of the shape of how these closures and then potentially coming back online, how that's going to affect the financials? So this does mean that we should expect kind of 60 basis points of rent coming off and 100 basis points of occupancy coming off and then over-time, we get that back kind of next year and the $8.5 million of rent kind of comes back and they are kind of $10.5 million, say like, does that and what would be the timing of when that would kind of comeback online?

Glenn Cohen:

Yes, Michael, we're a bit ahead of where we thought we'd be. As you saw, we raised the lower end of our guidance even with -- without the termination income that we anticipated and a lot of that is attributed to the environment that we're in today for high quality locations like Bed Bath & Beyond have. So, as you can see the diversity of demand is quite strong. We're in a good spot to really -- by June we'll really have a better understanding of which ones are coming back to us. But we're not waiting for that. We're being proactive is lining up replacements with very strong leasing spreads.

Craig Mailman:

Hi, good morning, everyone. Conor or Glenn, maybe, I want to follow-up on that last point you guys effectively raised guidance a half penny at the midpoint despite having a drag in lease term fees. It looks like effectively a $0.02 raise. Can you just walk through exactly what's driving that, because the operating assumptions didn't look like they changed all that much?

Conor Flynn:

Yes. And I think one of the big drivers too for us to get comfortable with raising the bottom-end is the retention rate. As I mentioned earlier, that's really driving a significant amount of cash-flow growth for us. And when you look at where we thought we'd be versus where we are today, we are ahead of schedule there.

Floris van Dijkum:

Great, guys, I've got a question, I guess in two-parts. Number one, I would like maybe if you can walk us through the lower NOI margin and expense recovery for the quarter and what was behind that and how does that impact your views towards maybe fixed CAM or having pure just on a inflation-adjusted basis your recoveries struck. And then the second part is, in terms of Philadelphia, I noticed there was -- your Philadelphia portfolio is lagging quite a bit. I think something like 480 basis points in terms of occupancy relative to the rest of the portfolio. If you can give us maybe some more details behind that and if that's specific to maybe potential redevelopments or some other opportunities or is that just market has been less good than some of the other ones?

Glenn Cohen:

The rest of the Philadelphia portfolio is quite strong and actually trending at or above when you look at it from the whole portfolio.

Operator:

Thank you. And the next question comes from Juan Sanabria with BMO Capital Markets.

Ross Cooper:

Sure, as I mentioned in the remarks I made, it is a little bit of a stalemate right now. So the transaction volumes are way down. You are seeing certain deals get done in the first quarter. We did see some transactions occur in the 5s, similar to pricing from last year, but they are fewer and farther between. When you look at sort of the bid-ask spread, it's very deal specific. So as I mentioned, there are a buyer that are still looking for higher cap rates and sellers that are holding firm because there's really not any sort of forced situation with lenders who are cash flow situation or challenges. So from that perspective, we were successful in acquiring three shopping centers from our joint venture partner that was looking for some liquidity. So it's really just about staying opportunistic and ready with the capital which we have. As it relates to the mezz financing and our structured investment program, that is also something that we're obviously very focused on, hitting one transaction in the first quarter, but again because there really hasn't been any forced sales or distress situation as it relates to the lending community, they are a little bit more challenging in terms of sourcing right now. But having lots of conversations hang around the group and we're ready to move as soon as those opportunities present themselves.

Operator:

Thank you. And the next question comes from Alexander Goldfarb with Piper Sandler.

David Jamieson:

Sure. Good question, Alex. So I'd say we're seeing pretty consistent demand across the square footage at this time. Historically, sort of that, a tweener, 68,000, 69,000 square feet has historically been a little bit lighter than the smaller shops or -- we're from 1,000 or 5,000 and then the anchor boxes 10,000 over. But even in that category, we've seen great demand. A lot of people coming out of the malls, whether it'd be Sephora. And others that are looking to backfill that particular box category has really been a benefit. So we'll continue to push that. As it relates to the anchor activity, flash out the Kohl's impact for anchor boxes this quarter. We would have been up another 20 basis points from last quarter. So we would have been at 90 instead of 98, we would have been 98.2. As we continue to see that and goes back to earlier point that there's just no new development supply that's coming online here in the coming years. And so these rare opportunities where you get availability and good locations, you are going to jump on those and stretch a little bit to make sure this is secure, because they don't see anything else on the horizon. And they have to have that growth profile in their book.

Operator:

Thank you. And the next question comes from Samir Khanal with Evercore.

Conor Flynn:

The shop space, as you've seen it with our occupancy growth continue to be the bright spot. I mean, it's really interesting, if you think about the diversity of demand and what's driving that, it's pretty remarkable. I think we're at a point in the retail evolution, where the last mile or closest retail destinations where you live and where you work, has really adopted, I would say, a hybrid retail environment where it's medical, it's services, it's essential goods and services, it's grocery, it's health and wellness, it's physical. It really is interesting to see the diversity of demand driving that small shop growth opportunity for us. And I think when you look at the ingredients of where we see the demand drivers, I think it gives us a lot of confidence to say that with this portfolio, we can drive a higher small-shop occupancy rate than we've ever experienced before. And again, it's because of that diversity of demand. Now, it's going to be interesting if the economy really does get worse and there is a pullback. Some of the small shops that didn't make it through COVID, I would say we're still in a position where we're backfilling those locations with higher credit, better operators. And so we -- I think we're starting from a higher-quality, higher credit portfolio of small shops today.

Haendel St. Juste:

Hi, good morning. So, Conor, I guess, we understand the timing of bad debt is one of the factors that can play a key role, a swing factor in how core growth plays out here in the next year or two. But I was hoping you guys could talk a little bit about the cadence for same-store NOI growth this year? And then, as you look ahead given the snow-related occupancy visibility and the demand that you're seeing, what type of ballpark the same-store NOI growth, is that -- could that get you to for next year. I think most of us see this as a long-term 2% to 2.5% same-store NOI business. Curious if you think you can tap the long-term average next year? Thanks.

Glenn Cohen:

Yes. I mean, I think, if you look at bad debt component to it, again, we're comping against bad debt income from last year - for the current year. So when you look forward, we really have a more normalized what we expect to be a more normalized bad debt level. So I think that that part at least should keep us in good shape to be able to grow the same-site NOI growth, really organically from the rent bumps that Conor was saying.

Anthony Powell:

Hi, good morning. I guess, question on percentage rent. I saw that ticked up to close to $6 million in the quarter. Can I get a run-rate, and what's really driving the growth in that segment?

Operator:

Thank you. And the next question comes from Caitlin Burrows with Goldman Sachs.

Ross Cooper:

Yes, it's a great question and it's something that we're very closely monitoring, because we would anticipate that there would be the one that would be most impacted by the pullback of local and regional banks and their ability to lend. Right now we haven't seen a material impact on, obviously, on the deal velocity. Hence, our Q1 numbers and those businesses ability to operate. But it's something that we're closely watching and monitoring through the course of this year to anticipate -- see if there's any cracks in the system. But right now, things are holding up pretty well.

Operator:

[Operator Instructions] And our next question comes from Ki Bin Kim with Truist.

Ross Cooper:

Yes, I'll take the first one on Coulter. So yes, the Coulter project is our first multifamily activation in our preferred equity structure. As for this up, you'll see that the gross cost yield for that investment will be approximately 5% to 6%, which is consistent with what you'd see historically as multifamily projects developing towards. As a result of our preferred equity structure though, we are able to contribute the land as well as our pursue cost in a preferred yield. And blended together with some additional contribution to common equity, we're able to achieve a yield that exceeds our current cost of capital, which makes it accretive to us and hit that low-double-digit return that we're looking for. So right now we're excited. Bozzuto is one of our partner, very-very qualified and established player in the business. And it's a great property. So it's a good first effort on this structure.

Operator:

Thank you. And our next question comes from Greg McGinniss with Scotiabank.

Ross Cooper:

Sure. I didn't mention that, but I'm happy to address that. The acquisition cap rate on the grocery-anchored centers that we acquired in Southern California were lending right to around 6%. And when you look at the spread on the dispositions, it was about 150 basis point spread. So that's really the year one cap rate. What we're most focused on is what the growth profile of those assets are. You find them up compared to each other. So we see outsized growth. From the grocery-anchored center that we acquired, whereas the power centers that we sold would either be flat or even potentially moving negative. So that's really the focus, thinking about recycling into -- high-quality grocery-anchored centers versus the power centers that we sold. In terms of the low cost of capital from the Albertsons, I mean, it's a great position to be in. Obviously the hurdles are a little bit lower from the Albertsons capital that was achieving around a 2% dividend yield. Now that being said, it really is a balance for us between trying to move aggressively and put the capital work and being patient for opportunities that we expect will present themselves here in the back half of the year. So we're not looking to necessarily overpay or set the market just to get people off the sidelines. But we can move very aggressively and quickly if opportunities present themselves that we would really like. So it gives us a lot of flexibility with liquidity position that we have.

Ronald Kamdem:

Hi, just one quick question and a follow-up. So the first is just on capital allocation priorities. Can you just remind me how you guys are thinking about stack ranking? Is it sort of acquisitions in the fixed range? Is that some of the structured investments given tightening lending conditions? What sort of makes the most sense right now? If you could sort of flip though on, what would you ramp-up on? And then the follow-up question is sort of a related Bed Bath & Beyond question, but it seems like you guys are sort of ahead of that 15% and 20% mark-to-market, really interesting. But as we think about sort of what's coming down the line, what's coming next, Party City and things like that, you just compare contrast how you guys are thinking about that box size, mark-to-market demand, anything would be sort of helpful, so we can get a sense what that potentially could look like?

Operator:

Thank you.

Conor Flynn:

It was related to the other tenants coming down Party City and their box size.

Operator:

Thank you. And the next question comes from Linda Tsai with Jefferies.

Conor Flynn:

So the credit loss for the first quarter was around 95 basis points. Again, in-line with where guidance is. And it accounts for the impact of the bad debts that we had Party City's and some of David's Bridal.

Craig Schmidt:

Thank you. Looking at the operating goals for mixed-use, I guess I was surprised that wasn't going to grow a little bit more from the 13% to 15%, given the added multifamily resi units you're projecting. And then as you get past that 2025 goal, may you accelerate the mixed-use redevelopment? I mean, you have a pretty extensive list of things you have that you're pursuing entitlements and future projects.

Operator:

Thank you. And the next question comes from Alex Barron with Baird.

Conor Flynn:

Yes, so the plan is really to be opportunistic. And again, we're going to be patient, if the opportunity doesn't present itself and we're very comfortable maintaining the cash position until it does, but in the interim, we're having lots of conversations with all of our JV partners, talking to a lot of brokers and owners that may need capital as the year progresses. So to the extent that we can utilize that capital accretively. We're very comfortable doing so. Otherwise, but just we for the right opportunities.

Mike Mueller:

Yes, hi, two quick ones here. First how diversified is the pool of tenants that you're talking to you for the Bed Bath releases and then is it safe to say that you're largely finished with the Albertsons monetization this year?

Glenn Cohen:

Yes, in terms of the diversity, it is a healthy and diverse pool. You have your usual suspects, obviously in the off-price category, rose your interest, furniture, fitness, entertainment uses. And then within each of those categories, you're getting a variety of names as well. So it's nice to see that type of diversity for these boxes.

Operator:

Thank you. And the next question is a follow-up from Linda Tsai with Jefferies.

Conor Flynn:

Yes. I mean, when you have more than one bidder at the table that creates a competitive environment. So obviously - and as a result of that, you can see some price increases on rent for boxes.

Conor Flynn:

Thank you very much for joining the call today. Enjoy the rest of your day.

Operator:

Greetings, and welcome to the Kimco Realty Corporation's Fourth Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Bujnicki, Senior Vice President of Investor Relations and Strategy. Thank you. Mr. Bujnicki, you may begin.

Conor Flynn:

Thanks, Dave. Good morning, everyone, and thanks for joining us. Today, I will provide a quick recap of our major accomplishments for 2022 and share some of the progress we have made on our longer-term strategic goals. Ross will follow with an update on the transaction market and Glenn will report on our earnings results for Q4 and our guidance for 2023. At Kimco, we believe a winning strategy is one that can be successful in any economic environment. It needs to be opportunistic, have multiple growth drivers, and be resilient during downturns. A winning strategy also needs to be easy to understand and be supported by a best-in-class team to implement and execute on it. The Kimco strategic plan meets all these criteria and that is why we are so proud of our 2022 results and excited about our longer-term prospects. If the ultimate measure of evaluating a strategic plan is results then it is abundantly clear that we are on the right track. 2022 was a banner year and the fourth quarter was again outstanding from a leasing perspective as our team achieved some recent and all-time highs across many of our key metrics. This includes strong overall occupancy that finished up 40 basis points pro rata to 95.7%. This represents a recovery of nearly 90% of the COVID inventory we experienced and only 70 basis points below our all-time high. Year-over-year, overall occupancy was up 130 basis points, which is one of the highest year-over-year gains we've experienced. Contributing to our strong results was a 20 basis point sequential and a 90 basis point year-over-year rise in anchor occupancy to 98%. Small shop occupancy increased 80 basis points sequentially to 90% and was up 230 basis points year-over-year. In 2022, we leased over 11.5 million square feet, which is the highest level on record. Specifically, we ended the quarter with 152 new leases totaling 795,000 square feet, exceeding the five-year average new lease GLA for the fourth quarter. Our new lease spread was very strong, 30.4% and includes new grocery leases with Whole Foods and Albertsons. We closed the quarter with 340 renewals and options totaling 1.7 million square feet exceeding the five-year average for renewals and options GLA for fourth quarter. The spread on renewals and options was 4.6% during the quarter with options ending at 8.5% and renewals at 2.7%. Total fourth quarter 2022 leasing volume was 492 deals, totaling 2.5 million square feet at a combined spread of 8.7%. We experienced only 99 vacates, totaling just 305,000 square feet in the fourth quarter, which is 37% lower than the prior five-year historical average for the fourth quarter. Our mixed-use entitlement initiatives reached new highs in 2022 as we continue to unlock the highest and best use of our real estate. We set another Kimco record by entitling 2,805 apartment units in 2022, bringing our current total entitlements to 5,461 units. Combined with the 2,218 apartment units we have already built and 1,139 units that are under construction, this brings our overall total to 8,818 units and we are well on our way to our upsized target of 12,000 by the end of 2025. Our percent of ABR for mixed-use assets is now up to 13% and we continue to use a CapEx-light strategy to activate projects by either ground leasing or joint venturing with best-in-class apartment developers. Turning to 2023 and beyond, we believe our platform advantage is just beginning to demonstrate its potential. Efficiencies of scale often take time in multiple cycles to play out, but thus far, it is clear from our performance throughout the pandemic and during 2022 that both our strategy and efforts are being validated. Our unmatched diversification, our access to capital, our internal and external growth profile, our large-scale M&A experience, our CapEx-light mixed-use redevelopment strategy and our opportunistic investment record are just some of the differentiators that characterize Kimco. That said, we can't rest on our 2022 accomplishments. We know 2023 will require a full team effort to produce another year of sector-leading results. We are also encouraged by the fundamental strength of our operating business, limited new supply, high retention levels and robust retailer demand for quality space such as ours makes for a healthy leasing environment. While we anticipate leasing velocity and retention rates to continue at elevated levels, we can't ignore the macro environment and the potential for credit defaults to revert to the mean, that is why our 2023 priorities include additional focus on controlling expenses, upgrading the credit and merchandize mix of our tenant base, and attracting recurring customers. One of the keys for Kimco in 2023 will be to expedite tenant openings and compress the least economic occupancy spread of 260 basis points that represents approximately $43 million of annual base rent that is not yet contributing to cash flow. While our size and diversification have significantly reduced our exposure to weaker credit tenants, we still need to be vigilant and proactive. We need to closely monitor our tenant watch list, anticipate changes and turn them into opportunities. Bed Bath & Beyond is a case in point. Subsequent to year-end, we sold a shopping center with 1 Bed Bath, reducing our exposure to 25 Bed Bath, one Cost Plus sublease and four buybuy Baby locations. At this point, we know that Bed Bath is planning to close six stores. Of those locations, we already have two leases executed, two ready for execution and two with active LOI negotiations with a combined potential spread of over 12%. We are also in active negotiations with retailers on the balance of the portfolio, representing 60 basis points of Kim's share ABR, of which 10 basis points relates to buybuy Baby. This level of activity proves we continue to see strong demand from a diverse set of retailers for the vast majority of these well-located boxes, which are primarily in desirable demographic areas where there is virtually no new supply. Leasing, leasing, leasing will continue to be our mantra in 2023 and together with a solid balance sheet, strong free cash flow and ample liquidity including further potential monetization of our Albertsons stake, we are poised to take advantage of any dislocation and ready to pounce as opportunities present themselves. We have made meaningful progress towards our stated 2025 goals, both on the operating and earnings front, along with further strengthening our balance sheet. Specifically, we have improved our debt maturity profile and increased our portfolio of unencumbered assets while minimizing exposure to floating rate debt. At Kimco, we are never satisfied with the status quo and our entrepreneurial team is laser-focused on building upon our past achievements and advancing what we believe to be as our best-in-class platform and portfolio. You will see the continued evolution of our portfolio composition through a mix of our unique leasing strategies, including adding grocery anchors where feasible, entitlements, redevelopments and data analytics and tools that give our platform a unique advantage. With our focus on owning and operating the last mile open-air grocery-anchored shopping centers, along with a growing portfolio of mixed-use assets, Kimco has come a long way in a short period of time and we all collectively believe that the best is yet to come in our efforts to maximize long-term shareholder value. Ross?

Glenn Cohen:

Thanks, Ross, and good morning. We finished 2022 with solid fourth quarter results highlighted by strong leasing activity, which produced an increase in occupancy, positive leasing spreads and same-site NOI growth. In addition, we further enhanced our liquidity position with the partial monetization of our Albertsons investment. Now for some details on our fourth quarter results. FFO was $234.9 million or $0.38 per diluted share. This compares to fourth quarter 2021 of $240.1 million or $0.39 per diluted share, which includes about $0.01 per diluted share related to the valuation adjustment of the Weingarten pension plan. Worth noting, this is the first quarter with the full impact of the Weingarten merger included in the year ago comparison. The key reasons for the $0.01 per share decrease are higher consolidated NOI of $6.5 million, offset by higher pro rata interest expense of $5.6 million. Other items included higher G&A expense of $2.9 million from the increased personnel levels as part of the Weingarten merger and cost associated with the UPREIT conversion and a $3.2 million change in the Weingarten pension valuation I just mentioned. The growth in consolidated NOI is comprised of higher minimum rent of $12.1 million, higher lease termination income, percentage rent income and other rental property income totaling $2.5 million offset by higher credit loss of $10 million, with $3 million of credit loss in the fourth quarter 2022, as compared to $7 million of credit loss income in the comparable quarter. Our operating portfolio continues to deliver positive results. Same-site NOI growth was 1.9% for the fourth quarter 2022, comping against 12.9% for the fourth quarter last year, bringing full year 2022 same-site NOI growth to 4.4%. During the fourth quarter, same-site NOI benefited from higher minimum rents and lower abatements of $13.7 million as well as higher percentage rent of $0.8 million compared to the same quarter last year. These increases were offset by higher credit loss of $9.5 million, primarily related to reversals of reserves in the prior year quarter and a normalized level of credit loss for the current period. The minimum rent component contributed 3.9% to the same-site NOI growth, while credit loss was negative 3%. Turning to the balance sheet. During the fourth quarter, we monetized 11.5 million shares of our Albertsons stock, receiving proceeds of $301 million. This sale generated a capital gain for tax purposes of about $250 million. In order to maximize the amount of proceeds we were able to retain from the sale for future investment and debt reduction, we elected to pay the income tax on the capital gain of approximately $57 million allowing us to retain $244 million. Further, our shareholders are eligible for a pro rata credit of the federal income tax we paid. We've added an FAQ on our Investor Relations website that provides further detail on this. We ended 2022 with a very strong liquidity position comprised of $150 million in cash and full availability from our $2 billion revolving credit facility. Additionally, after year-end, we received a $194 million special dividend from our Albertsons investment, and continue to own 28.3 million shares currently valued at over $600 million. As of year-end 2022, our look through net debt to EBITDA, which includes our pro rata share of joint venture debt and preferred stock outstanding was 6.4x and represents an improvement of 0.2x from the 6.6x level at the end of 2021. Our weighted average debt maturity profile is 9.5 years and we have only $50 million of mortgage debt maturing in 2023. Now for our 2023 outlook. We remain confident about the growth prospects of our operating portfolio. But as we mentioned on our last call, we anticipate earnings headwinds due to higher levels of credit loss more consistent with pre-pandemic levels, as well as higher interest expense compared to last year. Also, as I touched on, in 2022, we benefited from credit loss income of $7.4 million, which amounted to about $0.01 per share for the year. Our initial 2023 FFO per share guidance range is $1.53 to $1.57. The guidance range is based on the following assumptions

Mike Goldsmith:

Good morning. Thanks for taking my question. Last quarter, you talked about reverting to an initial credit loss expectation of 75 to 100 basis points kind of in line with the historical levels. Your guidance is 75 to 125 basis points, so a little bit higher at the top end. So, what are you seeing in the market? What is the scenario reflected by the high end of the range? And do your concerns extend beyond the usual suspects that we've been talking about? Thanks

Operator:

Our next question comes from Samir Khanal from Evercore ISI. Please go ahead.

Conor Flynn:

Yeah, happy to. Thanks, Samir, for the question. Look, we think that the capital coming from the Albertsons investment is a big differentiator for Kimco. We've already received a special dividend as we talked about in our opening remarks. We do have the opportunity to monetize another portion of our Albertsons shares similar to what we did last year and the same type of range of value. The expiration of the lockout is end of May. So that really sort of showcases when we have full potential to take advantage of that and then we have a – Ross can talk a little bit about the menu of options we have to reinvest those proceeds. It's a real opportunistic investment that is going to actually really reward our shareholders because when you think about it, you don't have to issue any equity this year. We have this investment that's really coming back to us now to redeploy into our core business, which should generate significant earnings growth, not necessarily in this year, but obviously, in the out years, that's where the long-term value creation is really going to shine.

Operator:

The next question comes from Juan Sanabria from BMO Capital Markets. Please go ahead.

Glenn Cohen:

Yeah, so as far as the credit loss, again, we know that there are several bankruptcies. Party City, obviously, filed already. Bed Bath & Beyond, obviously, seems to have found the lifeline for the moment. But we have taken into account really all the scenarios around Bed Bath & Beyond in our overall guidance. And again, as I mentioned, as it relates to the credit loss, again, we did widen the range a little bit to just deal with what we're seeing in the current marketplace today.

Glenn Cohen:

We do anticipate a little bit of Q1 normalcy of potential, what we call jingle mail, of tenants closing after the holidays and seeing a little bit of a dip in occupancy in Q1, which is traditional seasonality for us. So we think that, that's, again, reverting back to the pre-pandemic ways of the historical averages.

Operator:

Our next question comes from Greg McGinniss from Scotiabank. Please go ahead.

Glenn Cohen:

Right, so that's a great question. So the corporate financing line that you see is really the consolidated portfolio, that's our interest expense and the cost of our preferred. Included in the portfolio contribution above is the pro rata share of the joint venture interest expense and that's about $9 million to $10 million higher than it was last year and again, that's attributable to the rise in rates. There was more floating rate there, debt in the joint ventures. We have actually swapped out about $0.5 billion of debt in the mid – top of 5% range. So we fixed it, a good portion of it, but that's what's causing the $9 million to $10 million increase over last year.

Floris van Dijkum:

Morning guys. Thanks for taking my question. I had a question on your small shop. Obviously, the – very nice pickup in occupancy there. Maybe if you can talk about the spread between occupied and leased and also maybe where your peak small shop occupancy was previously and where do you think you can get it to this cycle?

Operator:

Our next question comes from Craig Mailman from Citi. Please go ahead.

Conor Flynn:

Yeah, a great set of questions. All rolled into one. So I think you first start with the fundamentals, right? And the fundamentals here on – there is no new development supply on the horizon in the coming years. The COVID inventory that we've talked about in past quarters and continue to talk about now is really the inventory that's available. Some of that inventory may increase as a result of any bankruptcies, Party City, Bed Bath being the two obvious ones right now as potential to get some space back. But that still is representing a very limited amount of inventory to actually backfill. When you look at us, we're at 98% on the anchor is 90% on the small shops. For high-quality retail, it's really, really hard to find. So the retailers, I think what they're doing is they're seeing through this and saying, hey, where do I find growth, not just next year, but years two, three, four and five. If there's no new supply, I really have to take advantage of what opportunities I see today to set myself up for growth potential going forward to hit my own targets and so I think you continue to see that. And some lessons learned from past cycles that it's really hard to ramp up a program to find new stores and to grow and to open them and then to shut it down and then try to reramp it again. You're always kind of playing a game of catch-up and you tend to miss the better opportunities early. So I think for some of those well-capitalized retailers, they've sort of seen through that and said, let's continue on our plan. Let's continue to source and find new opportunities, knowing that if we sign a lease say, midyear'23, we can be looking at a '24, maybe in some cases, a little bit further out as that opening. And as you've seen these market cycles compressed in terms of cycle through the program of dipping and then recovering. It's the time of recovery seems to be compressing much quicker. So by the time you get these stores open, the intent, hopefully, is that you're if we do go through a bit of a dip that you're on the backside of that and already you're opening during a growth cycle again. So those are a lot of the conversations that we continue to see. On the small shop side, you're seeing service-based tenants, restaurants, et cetera, continue to open and find opportunities. There's still some of that COVID inventory out there that had fully fixturize units that operators can go in and start to operate quickly. We will continue to watch that closely. Obviously, the discretionary side maybe the full-service restaurants and some entertainment see how that plays out in this coming year, if there's any disruption in terms of the broader markets, but people are really kind of looking through it right now.

Haendel St. Juste:

Sorry about that. So, just wanted to follow-up, if I could, Ross, on the transactional market comments. You made things, obviously, a bit stalled out there. Retail volumes transactions were down 60%, I think, in the fourth quarter, and we're still here with a pretty wide bid-ask spread out there. So I guess, I am curious what you're seeing in terms of maybe cap rates for the quality of open air centers you'd like to own? And given your cost of capital, what's your hurdle rate or maybe where would asset price need to be for you to get more active? Thanks.

Operator:

Our next question comes from Craig Schmidt from Bank of America. Please go ahead.

Conor Flynn:

Hey Craig, great question. So we're off to a good start in 2023. The traffic that we've experienced thus far has been above 2022 levels. I think the consumer continues to gravitate towards the shopping center towards the grocery anchors that we have, towards the off-price users that are getting great value and convenience. So that continues to show well. The future is still a little unclear. That's why I think from a guidance standpoint and from what we're talking about, we're not necessarily sure what the second half of the year looks like. And so as we've all been talking about so far, so good, the retailer demand is robust. The consumer continues to gravitate towards our product, and we see virtually no new supply on the horizon. So as we continue to monitor the situation, we feel like the business is on very strong footing allows us to really see into the consumer and their habits. And so far, it looks like we're really delivering on what the consumer is looking for.

Ki Bin Kim:

Thanks. Good morning. So you guys have done a great job increasing your entitlements across all of your different sites. Can you just provide a kind of high-level path for the next couple of years of how you are thinking about monetizing it? And second, when I look at your supplemental on the development section for some of these ground leases, multi-family ground leases. Can you just help me understand that a little better because if I look at the value that is contributing at and the yield is – it doesn't seem to make sense because the land contribution value should be much higher even after taking account for the higher yield. So just if you can help me understand that a little better.

Operator:

Our next question comes from Ronald Kamdem from Morgan Stanley. Please go ahead.

Conor Flynn:

I'll take the first part, for sure. Yes, the free cash flow expectation is around $150 million for 2024. And again, kind of hit on all the – I am sorry, for 2023. You've kind of hit on all the points, right? We have really the free cash flow after dividends, FX, TIs and leasing commissions. And then that's based on the current dividend level at $0.23 a quarter or $0.92 a share for the common. You're right on track with that.

Operator:

The next question comes from Alexander Goldfarb from Piper Sandler. Please go ahead.

Conor Flynn:

Alex. So on the first question on the 12%, that's on the six that we have visibility where we are lining up leases to backfill all of those individual users to take the entire box. On the entire Bed Bath portfolio, you're right, it's a bit higher. We have a 15% to 20% type of range and again, some of those might be opportunistic and we can reposition those boxes.

Operator:

The next question comes from Wes Golladay from Baird. Please go ahead.

Glenn Cohen:

No, not right now. There's no box splits on those. Spreads are productive like the vintage of the box, right, maybe some of the older boxes that we have in the balance of the portfolio. Our older leases started at lower rents. Some of them are slightly newer. So it does range. So I think you have to take a broader view on spreads, in general on where you see opportunities. And I think referring back to Conor's comment about that 15% to 20% over the entire portfolio. This is just a small subset of that.

Anthony Powell:

Hi, good morning. Question on your 2025, I guess, goal of 2.5% same-site NOI growth, given minimum rent growth of 4% and higher given kind of the strong lease spreads and whatnot. What gets you from that 4 plus to 2.5%? It seems a bit conservative now given the strength of the business?

Operator:

Our next question comes from Mike Mueller from JPMorgan. Please go ahead.

Conor Flynn:

Yes, so in terms of the UPREIT conversion, it really is intended to be an additional tool in our toolbox. So it's a bit early in terms of finding opportunities to utilize it as we just recently converted. But as you saw with the Long Island portfolio that we acquired last year, we have utilized tax strategy and tax deferred units as a way to differentiate ourselves in a competitive marketplace. So, we do anticipate that there will be opportunity to utilize it. We'll be selective with it because it is still a form of capital that needs to be accretive when we utilize it. It is something that we've considered for quite some time now. It was previously a bit cost prohibitive, but things have changed in terms of some of the transferred taxes in certain states and so it was – we felt the appropriate time to do it now versus in years past.

Paulina Rojas Schmidt:

Good morning. Can you please remind us where the CapEx per square foot of tenant box stands today? I understand that every situation is different, but if you could provide some ranges, maybe framing it at either a single tenant replacement or a box split, it will be very helpful. Thank you.

Operator:

Our next question comes from Tayo Okusanya from Credit Suisse. Please go ahead.

Conor Flynn:

Sure. Yes, the $100 million net acquisitions, it's a baseline number that we're starting the year with. As I mentioned in the response to Haendel's question, we feel that we're in a wonderful position where we're not forced to do anything. We are waiting for the market to really come to us and when you have a motivated seller, we can move ahead on that transaction. So we started with a modest guidance that we think that we can certainly achieve and as we see further opportunity as the year progresses, as we showcase our ability to monetize the Albertsons investment and reap the benefits of that additional cash, we're confident that we'll be able to use it. But for now, we've kept a relatively modest guidance range that we'll look to update as things progress over the course of the year.

Linda Tsai:

Hi, thanks for taking my question. Ross, can you give us color or anecdotal data regarding private REITs opportunity funds and pensions being redemption requests and withdrawals are opportunities coming to market and from past cycles, is there a tipping point where you start to see a wave of opportunities?

Operator:

That is all the time we have for today's question-and-answer session. I would like to turn the floor back over to David Bujnicki for closing remarks.

Operator:

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator:

Greetings, and welcome to the Kimco Realty Corporation’s Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, the conference is being recorded. It is now my pleasure to introduce your host, Mr. David Bujnicki, Senior Vice President of Investor Relations and Strategy. Thank you. Mr. Bujnicki, you may begin.

Conor Flynn:

Thanks Dave. Today I’ll kick things off with a brief update on our strong operating fundamentals and our strategic plan as we navigate what appears to be an uncertain and challenging macroeconomic environment. We’ll also follow with an update on the transaction market, then Glenn will close with our financial metrics and update guidance. First our results. Another strong quarter continues to validate the quality of our portfolio and our talented team that each continue to shine. These two constants will continue to serve us regardless of the ever changing external environment. The current supply and demand landscape continues to benefit Kimco as retailers prioritize our portfolio of open air, high quality grocery and good shopping centers and mixed use assets, positioned in first ring, last mile suburbs and major metro markets. Sequentially, total occupancy finished up 20 basis points pro rata to 95.3% and year-over-year occupancy was up 120 basis points due to positive net absorption. Anchor occupancy increased 20 basis points quarter-over-quarter to 97.8% and was up 90 basis points year-over-year. Small shop occupancy ended flat sequentially at 89.2% and was up 190 basis points year-over-year. It is worth noting that small shop occupancy would have been up 10 basis points this quarter, but for some vacancies associated with our recent acquisition of two grocery anchored centers in Fishtown, Philadelphia and Massapequa, Long Island, which had a 10 basis point impact on our overall small shop vacancy. We view these vacancies as future upside and have leasing activity on all 10 of the small shops at these properties. During the quarter we signed 146 new leases totaling 620,000 square feet. Our new lease rent spreads were 16.5% with Burlington replacing a vacating Bed Bath & Beyond in the Southwest, a notable driver. This is indicative of the embedded value in many of our older leases, including that former Bed Bath and Beyond boxes which have a mark-to-market upside ranging from 15% to 20%. In the event we are able to recapture these Bed Bath and Beyond spaces, we have a variety of backfill candidates such as grocers, dominant omni-channel players or off price retailers, many of which have already showed interest in those boxes. With virtually no new supply in over a decade, our strong credit tenants are finding it difficult to meet their new store opening targets and have been aggressively pursuing opportunities. Nothing accentuates the supply and demand and balance more than the heightened attention levels we continue to experience. During the quarter we closed 315 renewals and options totaling 1.5 million square feet. Third quarter renewals and options spread were 6.2% with options ending at 7.9% and renewals at 5.2%. We reported only 111 vacates totaling 430,000 square feet this quarter which is almost 20% lower than the five-year historical average for third quarter vacates. Overall third quarter deal volume was a record at 461 deals totaling 2.1 million square feet with a combined spread of 7.5%. Notwithstanding the favorable demand, we continue to monitor the quality of our tenant base and remain confident that the tenants who have endured the pandemic with Kimco are battle tested and have a higher credit quality. We are mindful of the current inflationary environment and the potential shift in consumer behavior. With that in mind, I want to highlight our strategic priorities that has already put us in a strong position and which we believe will enable us to continue to outperform. At Kimco we always focus on creating long-term value. Building a business for multiple cycles, multiple Black Swan events, is not easy. In the last five years it seems we have experienced more frequent once in a lifetime events than in previous decades combined. And a critical component of our success in navigating these occurrences all starts with our team and our culture. We are fortunate to have a seasoned, energetic and diverse team and Board Directors that understand it takes resolve and patience to allow our strategic plan to be executed. We prioritize integrity. We’re doing the right thing as embedded in the culture and working together through adversity can be highly rewarding. Having the right people is unequivocally essential for weathering economic cycles and we are laser focused on building out the best team. Our team building efforts have not gone unnoticed. We are proud to be the only public company to receive a great place to work in real estate award as voted by our employees. We take sincere pride in continuing to elevate and nurture the Kimco culture and serve as a leader in the industry. Another priority is liquidity, which always needs to be a top priority in real estate. When a company like Kimco has financial strength relative to others, it provides a unique advantage enabling us to seek out opportunities in moments of distress and find those generational opportunities. In addition, we benefit from a long-dated debt maturity profile that is predominantly fixed rate, a diverse lender base, a large line of credit, ample amounts of free cash flow, and an investment grade credit rating which sets Kimco apart. A recent partial Albertsons monetization has already boosted our unique liquidity position. As we move forward, we’ll have the opportunity to monetize additional ACI shares and reinvest in growth opportunities. We also plan to continue focusing on our core competency, which is owning open-air grocery-anchored shopping centers located in high barriered entry markets with below market leases. Importantly, our grocery-anchored necessity based portfolio offers proven defensive characteristics while simultaneously offering ample opportunity to execute our re-merchandising plans. These include further improvement in traffic, sales and cash flow at the asset level. This is how we anticipate being able to continue to outperform with the ever changing economic environment notwithstanding. And finally, we are patient and able to wait for unique opportunities for which Kimco can use its platform to continue to create long-term shareholder value. We are well positioned to look at the broad landscape of investment opportunities and make sure we invest at a spread to our weighted average cost of capital that will help Kimco outperform over the long-term. And with that, I will turn it over to Ross.

Glenn Cohen:

Thanks Ross and good morning. We had another very productive quarter highlighted by the strong leasing activity that kind of walked through as well as positive same site NOI growth. In addition, we have further improved our leverage metrics and extended our debt maturity profile while maintaining a high level of liquidity. While we can’t predict the future as it relates to stubborn inflation and continuing rising interest rates, so far consumers and our retailers are weathering the impact. Now for some details on our third quarter results. FFO was $254.5 million or $0.41 per diluted share for the third quarter 2022. This compares favorably to the $173.7 million or $0.32 per diluted share in the third quarter 2021, which included $47 million or $0.08 per diluted share related to Weingarten merger expenses. The increase in FFO, excluding the Weingarten merger related costs was primarily driven by higher pro rata NOI of $42.4 million with $32.4 million contributed from the Weingarten acquisition. The NOI increase also included $13.7 million from core portfolio growth, $4 million from other net acquisition disposition activity, and $2 million from lease termination fees. The NOI increase was offset by the $9.1 million change in credit loss due to the significant level of credit loss reversals recorded in 2021. It is important to call out through the first three quarters of 2022 we have recognized $7.4 million of credit loss income from reversals of prior year reserves. In terms of interest expense, although it was only $700,000 higher, it includes a one-time $7 million benefit from the acceleration of the fair market debt amortization from the early repayment of two Weingarten bonds during the quarter. Altogether, we derived approximately $0.02 of FFO benefit in the third quarter that will not carry forward. Our operating portfolio delivered positive same site and NOI growth of 3.1%, which includes a 10 basis point benefit from our redevelopment projects. If we excluded the impact of credit loss and abatements, the same site NOI growth would have been 5.7% for the third quarter. This is an excellent result as we were comping against a 12.1% level last year. The minimum rent component contributed 480 basis points. Lower abatements added 90 basis points and higher percentage rent added another 60 basis points. These increases were offset by the significant level of credit loss reversals recorded in the prior year quarter. Turning to the balance sheet, during the quarter, we issued a new $650 million or 4.6% unsecured bond, which is scheduled to mature in 2033. The proceeds along with cash on hand were used to repay all our remaining unsecured debt due in 2022 and 2023, totaling y $902 million with coupons ranging from 3.125% to 3.5%. We also paid off $46 million of mortgage debt during the quarter. These actions enabled us to proactively address all our near-term refinancing risks. Importantly, our weighted average debt maturity profile now stands at 9.7 years. We finished the third quarter with look through net debt-to-EBITDA of 6.3 times, which includes our pro rata share of joint venture debt and our perpetual preferred issuances. This is the lowest leverage level we have ever reported since we began disclosing this metric over a decade ago. Further, this ratio does not include any benefit from our Albertsons investment, which had a value of just under $1 billion at quarter end. Our liquidity was approximately $2 billion at the end of the quarter, comprised of nearly $1.9 billion available on our revolving credit facility and $124 million in cash. Subsequent to quarter end, we sold 11.5 million shares of our Albertsons stock receiving $301 million in proceeds. Based on the capital gain of approximately $250 million, we expect to pay approximately $61 million in capital gains tax [ph], which would net Kimco approximately $240 million, which can be used for accretive investments and further debt reduction. As a side note, to the extent the company pays federal tax on this capital gain, our shareholders will have an opportunity to receive a credit for their pro rata share of the tax the company has paid. We will provide more details on this as we approach year end. Based on our strong year-to-date results and our expectations for the fourth quarter, we are again increasing our 2022 FFO per share guidance range to $1.57 to $1.59 from the previous range of $1.54 to $1.57. This new guidance range takes into account the one time benefits we derived during the year, higher interest expense from our debt refinancing completed during the third quarter, and the reduction in debt fair market value amortization, credit loss for the fourth quarter of zero to $1 million, positive same site NOI growth and the impact of the Albertsons monetization discussed earlier. As we have in the past, we plan to provide our 2023 outlook when we report our fourth quarter results. That said, given the ever-changing global economic landscape, we want to provide some perspective for the coming year. Based on our current total debt stack, we expect interest expense to be $24 million higher in 2023. This is the result of the reduction in the fair market value adjustment associated with the Weingarten bonds recently paid off, higher interest rates from the refinancing we have completed, and higher [indiscernible] rate. We recognized $7.4 million of income from credit loss reversals this year, which we do not expect to continue in 2023. Instead, we will likely revert towards historic norms with an initial credit loss expectation of 75 to 100 basis points to revenues given the uncertain macro environment. In 2022, we had about $0.03 per deluded share of one-time items that we don’t expect to repeat in 2023. Moving on to our dividend, based on our strong third quarter results and increased guidance range, our Board of Directors has again raised the quarterly cash dividend for the fourth consecutive quarter to a new level of $0.23 per common share. This represents an increase of 4.5% from the previous level of $0.22 per common share and 35.3% over the $0.17 per common share paid a year ago. We continue to maintain a dividend distribution level in line with estimated taxable income from recurring operations and retain over $200 million of free cash flow annually after dividends and CapEx. These amounts do not include the benefits from our partial monetization of Albertsons stock or dividend proceeds we expect to receive from the announced Albertsons special dividend, which we are scheduled to receive on November 7th, totaling $194 million. Upon receipt, we expect to declare a special dividend comprised of either cash or a combination of cash and common stock before year end to satisfy the redistribution requirements and retain as much cash as possible for future investment and debt reductions. Lastly, I would like to again acknowledge the efforts and commitments from the entire Kimco team and all they do to create shareholder value. And now we are ready to take your questions.

Michael Goldsmith:

Good morning. Thanks a lot for taking my question. Conor, last quarter you qualified the results with cautious optimism. This quarter the market was described as uncertain and challenging. Can you talk about what you’re seeing in your seat on the overall market and how it’s evolving? And presumably tenants are starting to have conversations about 2023 store openings. Has there been any change in posture to their thought process? And I recognize you have a lot of different tenant types, so I’m just trying to understand the change in tone and how that may translate to tenant demand kind of in the upcoming years? Thanks.

Operator:

Next question comes from Samir Khanal with Evercore. Please go ahead.

Conor Flynn:

We’re happy to, and Ross you can chime in as well. Clearly we’ve got a nice landscape of opportunities when we look forward. With our liquidity positioning it’s pretty unique to come into a point where banks are already pulling back. You’re not seeing a lot of bond deals getting done. You’re seeing a lot of floating rates that’s coming to maturity. You’re seeing a lot of CMBS maturity coming up. That typically signals distress or some type of dislocation where if you’ve got dry powder, you can pretty much take advantage of it. So when we look at our unique set of opportunities, clearly we’d love to buy core acquisitions with growth embedded in the cash flow. Those have been hard to come by in our markets where we continue to mine for those unique opportunities. What we have found a little bit more on the opportunity side is on the preferred med structure. We continue to think that that capital with the higher return is a nice opportunity for us to get a foot in the door with a [indiscernible] to have a future acquisition opportunity on that asset. And that may be something that again may come into focus next year as capital starts to get tightened up.

Operator:

Our next question comes from Greg McGinniss [ph] with Deutsche Bank. Please go ahead.

Glenn Cohen:

I’m sorry, can you repeat just the last part? I didn’t hear it.

Glenn Cohen:

Yes, so we haven’t finalized it yet. It’s something that we still need to go over with the Board. There’s a requirement to do a minimum of 20% in cash. So we’re going -- we will finalize it over time, but I mean, ideally we’re going to try and retain as much cash as we can. And again, it’s -- the shareholders role may fall relative to any stock dividend that we would issue since it’s pro rata amongst the full range of shareholders.

Juan Sanabria:

Hi good morning and thanks for the time. Just may be a question for Glenn on the guidance. I think you walked through it and apologies if I missed it, what the driver is from an FFO perspective on the implied fourth quarter the sell for FFO? And then just curious if you can give more comments as part of that on the same-store NOI guidance, I believe you’re 5% year-to-date, but you’re kind of holding the commentary about just being positive. So maybe you could just give a little bit more context around some of the puts and takes for same-store NOI.

Operator:

Your next question comes from Haendel E. St. Juste with Mizuho. Please go ahead.

Ross Cooper:

Sure. Yes, I mean cap rates are certainly a bit of a moving target in this environment. While they don’t go necessarily basis point to basis point with interest rates there has been a little bit of a lag as rates have risen pretty dramatically. So it is a little bit difficult to peg exactly where deals are today, particularly because, as I mentioned, deals that are not previously committed as of the last 45 to 60 days plus, you’re really seeing a bit of a pause in the marketplace today where I think buyers are still comfortable moving forward on core acquisitions are not necessarily where sellers are willing to sell today. Now that might start to change if you see a little bit more distress and forced selling, which I think will start to mark where cap rates will transact that, but right now you’re seeing a pretty wide bid asset spread. But clearly, the sub five cap grocery-anchored shopping center transactions that we saw through the first half of the year are not penciling for investors today. The deals that we did close in the quarter were all based upon an in-place cap rate that were in the mid to high 5s. Again, as we talked about in previous quarters, for us in looking at cap rates, it really is just a spot check and a point in time. I think in the prepared remarks, we talked a little bit about some of the vacancy and the assets that we acquired, which will really be able to fuel our growth and get our CAGR and our IRRs to an acceptable level. So while cap rate is something that we do factor in, it’s not the end of the metric that we look at. So we’ll be watching very closely. The good position that we’re in enables us to move once the capitulation with sellers starts to occur. But clearly we’re waiting for a little bit more clarity on where sellers are willing to transact before we see a whole lot of closings occurring, certainly by the end of this year and as we get into the beginning of next year.

Alexander Goldfarb:

Hey good morning, morning out there. It sounds like it’s one question. So I’m going to focus on the Albertsons and the tax and the dividends and capital gains and all that fun stuff. Can you just provide to the extent that you can disclose how much of Albertsons sits in the TRS, how much is in the REIT, abilities to either manage the taxable gain? And it doesn’t sound it sounds like you’re already paying out sort of your taxable income, but maybe there’s some stuff coming up next year, but just give some perspective? And then also more color on what do you mean tax credit that shareholders get? In REIT land we don’t normally hear about that, so maybe just a little bit more color on that aspect as well?

Conor Flynn:

So we plan to provide pretty significant detail on that on our website as well as outreach to our shareholder base so that they understand the roadmap that they need to take. I think it’s a, as you said, it’s a unique situation and we’ll make sure we allocate time and effort to have everybody understand what they need to do to get that tax credit.

Operator:

Our next question comes from Craig Mailman with Citi. Please go ahead.

Conor Flynn:

Sure. yes, I mean look, our policy has really been not to comment on transactions until they close. We do anticipate that there will be additional closings this year in the next 60 days on both the acquisition and the disposition side. So we’ll certainly provide more detail as soon as any of those transactions do close. You know, the one thing that I would comment on the life cycle of some of these deals is that they all have their own nuances and they all have significantly different timeframes. You know, our bread and butter are all cash transaction can close very quickly. Other larger portfolio transactions oftentimes have different nuances that may include loan assumptions or very significant creative tax structuring. So to that point certain deals do take quite a while to get from the initial conversations to the closing line. So as soon as we have more detail to provide on any of these deals as they close, we’ll be happy to provide that.

Floris van Dijkum:

Good morning. Thanks guys for taking my question. I wanted to actually follow up a little bit on Haendel’s question, but not necessarily talk about yields and yield expectations, because as you rightly point out, that can be a moving target Ross. But maybe if you could talk about what has happened to your IR expectations since the beginning of the year and how do you see that evolving over the next 12 months as well?

Operator:

The next question comes from Craig Schmidt with Bank of America. Please go ahead.

Conor Flynn:

Craig, it’s a good question. I think we’re going to have to get back to you on the detail on that breakdown. I think the operating expenses may have some one-time items in there to create that type of jump, but we’ll unpack that and give you the detail and follow up with you. I don’t think you’ll see that continue. I think we’ve done a pretty good job of making sure we manage our operating expenses and don’t see any sort of spikes that we can’t control. So we’ll get back to you on that one.

Ki Bin Kim:

Thanks, good morning. Just want to go back to your earlier comments about 2023, and I think you mentioned that you’re expecting a credit loss reserve of 75 to 100 basis points. I was wondering if you could just split, if you can frame that for us what is, what that looks like in a typical normal year? I realized we haven’t had a normal year in a while. And how much of that reserve accounts for tenants that are pretty much identified versus just a buffer for things that might come from like [indiscernible] yield?

Ki Bin Kim:

Okay, great.

Ronald Kamdem:

Great. Just a quick one from me on just the financing markets. Just number one, can you remind us where you could sort of issue debt today? I recognize you may not need to and so forth, that would be helpful. And then the second piece of it is, if I just take a step back and I think about the 2025 target that the team has put out, clearly we’re in a different sort of interest rate environment, financing environment for retailers, for REITs. Maybe can you just comment on what you think changes potentially in this new environment? Thanks.

Conor Flynn:

Your question about the 2025 goals, I think that we’re consistent in trying to make sure that we set goals that we want to try and achieve that might be somewhat aspirational, but we want to push out each other to try and reach those goals. Clearly, financing market has changed pretty dramatically. You see the cash flow growth continuing. That’s the exciting part about our business. The fundamentals are quite strong. When you look at the leasing demand and the lack of supply and the stickiness factor that we’re seeing with our retention rates, we continue to think the business is on very solid footing and so we’ll continue to monitor that situation. But we’ve got a lot of future entitlement goals that we plan to hit as well. We’ve secured 1,500 units this year. We’d like to get that up to maybe 1,800 to 2,000 by the end of the year. So we’re stretching to hit that and continue to think that when times get tough, typically municipalities sometimes loosen up on entitlements, because that’s usually when they’re trying to find ways to increase their tax base and find ways to increase the operations of their municipalities. So hopefully, we can secure even more entitlements if things do get tough.

Operator:

Thank you. The next question comes from Wes Golladay with Baird. Please go ahead.

Glenn Cohen:

Great questions. So let me take the Albertsons first, and then I’ll talk about the JV part. So if you look at where our current dividend is, we are very, very close to where taxable income and the dividend are really in line, but just from the recurring operations. It does not include what was a capital gain from the remainder of Albertsons. So it’s going to require additional tax strategies, deductions that we can find along the way to shelter some of that. If not, we would be in the same position actually this year where we would have to either pay the tax to retain as much capital. Those are our options. I mean, because we are keeping the dividend, it’s really important for us to keep the dividend based on the recurring operations to keep that FAD number in that low 70s percent range and leave lots of pushing for us. So the specials, we just have to deal with them as they come along and look for whatever shelter we can find. As it relates to the JVs, again some of it is because again, they’re somewhat sometimes viewed as a little bit more transitional. We’ve had, as you’ve seen, we’ve brought a lot of properties out of the joint ventures over time. So it’s been -- it’s kind of an agreement between the partners how they want to do it. In the care portfolio, we actually have almost fully -- an unencumbered pool of properties that’s financed with unsecured bank debt. So there it’s been done as floating rate, and it’s been fine because the leverage is so low to just keep it floating for now. But you are right; we do use more floating rate debt within the JVs than anything in the parent and it’s a combination of working with the partners.

Operator:

The next question comes from Mike Mueller with JPMorgan. Please go ahead.

David Jamieson:

Thanks Mike, I appreciate the question. I was getting mad, getting quiet over here, so glad I could jump in at the end. We’re very opportunistic with our redevelopment pipeline. As you know, the extent of our entitlement program is pretty exhaustive with thousands of units that are entitled, ready to go when the market’s warranted and when our cost of capital is such, and we can find a structure that makes sense. And we’re looking at multiple projects in the near-term that could potentially activate while considering all those other variables I just mentioned. The good thing about our program is the markets in which we operate in, there’s still clear demand for the product, especially on the multifamily side. You hear a lot of headlines; you read a lot of headlines related to the undersupply in the residential market. So there is housing demand that’s very much a driver of the opportunity as well in California, Florida, et cetera. So we continue to look at that. In terms of our core redevelopment pipeline that we continue to activate, it is driven by leasing, right, and the opportunities there. As Conor mentioned in his earlier remarks, the leasing demand is such that we really have the COVID inventory that’s getting into quickly. Retailers are very much out there trying to hit their open-to-buy targets to achieve their growth goals. And our core redevelopment program fits right into that to help solve for their needs and our needs and build a better mousetrap. So we continue to see a nice healthy cadence and pace in the coming year. And again, far more in the coming quarters about the rest of the program.

David Bujnicki:

We appreciate everybody taking the time to join us today for the earnings call. We hope you enjoy the rest of your day.

Operator:

Greetings, and welcome to the Kimco Realty Corporation's Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Bujnicki, Senior Vice President of Investor Relations and Strategy. Thank you, Mr. Bujnicki. You may begin your presentation at this time.

Conor Flynn :

Good morning, and thanks for joining us. I will lead off today's call with an update on our strategic initiatives and a review of our Q2 leasing highlights. Ross will cover the transaction market and our recent activity and Glenn will follow with our financial metrics and our updated guidance. We had another solid quarter. Thanks to the efforts of our outstanding team. The high-quality nature of our portfolio and our disciplined strategy. The initiatives we put in place more than 5 years ago to upgrade the quality of our portfolio, streamline our organization and enhance our platform continue to drive exceptional results. Our investments in leasing and property management, human capital, ESG, community outreach, technology, data analytics and entitlements have generated solid positive returns and created value for all of our stakeholders. We remain focused on executing our plan and putting up numbers that help to further differentiate Kimco and our approach. It is with cautious optimism that we highlight our considerable accomplishment this past quarter, while remaining cognizant of the macro issues impacting our country, our economy, our retailers and our consumers. While our strong second quarter numbers are reflective, our leasing team continues to report that demand for space across our portfolio remains robust and should continue to grow for the right space, in the right location, pricing power remains strong even in this period of economic uncertainty. One of the key drivers is our focus on last mile locations, which are seeing positive traffic patterns at 101.3% relative to the same period last year. The Kimco consumer lives in the first ring suburb of the top major metro markets where employment and spending power remains strong. While we can't ignore the impact of inflation, the consumer remains resilient for now, and more importantly, our portfolio focus on essential goods and services puts us in a sound position to better withstand the ever-changing environment. On the leasing front, pro rata occupancy finished up 40 basis points reaching 95.1% due to positive net absorption. Year-over-year, pro rata occupancy is up 120 basis points. Anchor occupancy is up 30 basis points quarter-over-quarter to 97.6% and up 70 basis points year-over-year. Small shop occupancy is up 80 basis points quarter-over-quarter to 89.2% and up 370 basis points year-over-year. That is our largest year-over-year increase in small shop occupancy in over 10 years. During the quarter, we signed 150 new leases totaling 711,000 square feet. Our new lease spread was 16.6% and with notable positive drivers coming from medical, off-price, beauty and salon services. We completed the quarter with 348 renewals and options totaling 1.6 million square feet. The second quarter renewals and options spread was 5.6%, with options ending at 6.4% and renewals is 5%. Total second quarter deal volume was 498 deals totaling 2.3 million square feet with the combined leasing spread of 7.1%. We executed 2 new gross releases this quarter, which helped us cross the milestone of 80% of annual base rent coming from grocery-anchored properties ahead of schedule. And we continue on the path to hit our goal of 85% by 2025. The benefits of our portfolio transformation to a dominant grocery-anchored portfolio in the top metro markets are numerous, most notably craft with a robust small shop leasing activity driven by the Halo Effect of our strong grocery anchors, which helps drive cross-shopping and more leasing demand and pricing power. An important takeaway this quarter is that our portfolio retention rates continue to shine. Our portfolio GLA retention rate during the second quarter was 93% with anchors and small shops both 10% above their respective 5-year average retention rate. The high retention rate is why we only had 91 total vacates for 223,000 square feet this quarter, making it the lowest GLA vacated during a quarter over the past 10 years. Further, we're maintaining pricing power as 96% of all renewals and options were at a positive rent spread. We believe these high retention rates are directly related to our efforts to optimize our last mile locations for our retailers and further highlight the value proposition of our portfolio. We also believe that if we continue to make the last mile store more valuable, over the long term, our retention rates will continue to improve. Occupancy will rise and tenant churn and CapEx will decrease, all of which will result in a higher long-term growth rate for the portfolio. In closing, our strategy remains straightforward, focused on leasing, work to expedite our tenant openings, entitle our assets for future density opportunities, maintain a strong balance sheet liquidity position and be patient, identifying investment opportunities in which Kimco is uniquely positioned to add value. We believe these initiatives will lead us to sector outperformance and reinforce the Kimco differentiator that drives total shareholder return. Ross?

Glenn Cohen :

Thanks, Ross, and good morning. We are pleased to report another strong quarter, highlighted by brisk leasing volume, higher occupancy, positive same-site NOI growth and a healthy increase in leasing spreads. These operational achievements led to double-digit FFO per share growth. NAREIT FFO was $246.4 million or $0.40 per diluted share for the second quarter 2022. This compares favorably to second quarter 2021 NAREIT FFO of $148.8 million or $0.34 per diluted share, which included a $3.2 million charge or $0.01 per diluted share in connection with the Weingarten merger. FFO per diluted share grew by 17.6% compared to a year ago and 14.3% if you exclude the merger-related costs. The strong increase in FFO was primarily driven by higher consolidated NOI of $97.1 million, including $87.3 million from the Weingarten acquisition, $4.7 million from other property acquisitions and $6.6 million from core portfolio growth. FFO contribution from our joint ventures was $9.3 million higher than the same quarter last year, comprised of $8.2 million from the newly acquired Weingarten JVs and improved credit loss from our other joint ventures. This growth was offset by higher interest expense of $9.7 million and G&A of $3.2 million primarily due to the 150 property Weingarten acquisition. Our operating portfolio delivered positive same-site NOI growth of 3.4%, which included a 30 basis point benefit from our redevelopment projects. This is a strong result as we were comping against a 16.7% level last year. An additional encouraging sign from the same-site NOI growth was the contribution from the minimum rent component of 470 basis points and lower abatements of 70 basis points. This was offset by the change in credit loss due to the significant level of credit loss reversals recorded in the prior year quarter. Certainly, our same-site NOI for the next 2 quarters will also be challenging given our prior year comps of 12.1% for the third quarter and 12.9% for the fourth quarter, which resulted from large reversals and credit loss in 2021. Furthermore, our outlook for the remainder of 2022 doesn't anticipate additional reversals of bad debt or collections from cash basis tenants for prior periods. Notwithstanding, we expect same-site NOI growth to be positive for the full year. In terms of our ABR from cash basis tenants, it is now down to pre-pandemic level of 4.3% in which we collected over 76% that was due during the second quarter of 2022. Turning to the balance sheet. Our look through net debt to EBITDA, which includes our pro rata share of joint venture debt and NOI and our perpetual preferred issuances stands at 6.4x, which remains the best level achieved since we began disclosing this metric over a decade ago. This level does not include any potential benefit from monetizing our Albertsons investment, which has a current market value of over $1 billion. As mentioned earlier, our liquidity position remains strong with $2.3 billion of immediate availability comprised of $300 million in cash and our $2 billion revolving credit facility as well as our Albertsons investment. With respect to capital activity, during the second quarter 2022, we judiciously utilized our ATM program to issue 450,000 shares of common stock at a weighted average price per share of $25.3 raising $11.3 million. In addition, we repurchased $36.1 million of our 3-38 notes due in June of 2023, and $11 million of our 3-3/8 notes due in October 2022. We also repurchased $3.6 million of our outstanding preferred stock. Lastly, we repaid $30 million of consolidated mortgage debt during the quarter and have a $290 million bond as our only remaining consolidated debt maturity for 2022. Also worth noting, over 99% of our outstanding consolidated debt is at a fixed rate having a weighted average maturity of nearly 9 years. Based on the strong results for the first half of 2022 and our expectations for the remainder of the year, we are again increasing our 2022 NAREIT FFO per share guidance range to $1.54 to $1.57 from the previous range of $1.50 to $1.53. The new range is based on the following assumptions

Craig Schmidt :

I'm just wondering the maintenance of the strong new demand and pricing power. Is this strength from your grocery/essential-based shopping centers? Or is it just a reflection of a positive run rate on leasing completed and put to bed for '22?

Operator:

Our next question comes from the line of Adam Kramer with Morgan Stanley.