Kimco Realty Corporation — 2024 Q1

Overall, we look at just the entire portfolio when we're doing the assumptions. And again, the 75 to 100 basis point credit assumption is really back to more historic levels. And the first quarter is clearly lower at 62 basis points. But there are some potential bankruptcies potentially during the year that could impact it. And we think it's more prudent to just leave the current guidance assumption, even though we still have been able to increase the same-site NOI guidance pretty significantly.

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.

Sure. Thanks, Conor. As Conor said, we concluded the integration of portfolio operations, systems and human capital. We did it within a matter of weeks, saving about 2 months off the time line versus our prior transaction with Weingarten. And as Conor mentioned, the playbook that we established post Weingarten has really been key to that developing an integration governance model, tools and processes that are repeatable for future transactions.

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?

Sure. With respect to ancillary income, it's one of the areas where, as a company, we've been working to build out a national specialty leasing team that's exclusively dedicated to this important area. That's not the case with all of our peers, and it wasn't the case with RPT where they had only recently established a focus around ancillary revenues.

Sure. Happy to, Alex. And again, I gave you some stats there on the RPT portfolio. But we gave ourselves, I think, a nice runway to execute and we've obviously been ahead of that assumption. So for the first year, we had -- we thought there would be a ramp-up in terms of leasing, and they thought there might be, again, a transition period where we wouldn't have similar Kimco velocity on the RPT portfolio.

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.

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.

Floris, the only thing I would add to that is you've seen for a while the lines are blurring across all different retail formats. And what I mean by that is really the merchandising mix. And so you've seen sort of the best-in-class mall tenants gravitate towards open-air shopping centers.

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.

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.

That was the upside of the deal for us. We actually think that, that's really sort of the juice to be squeezed because we see the small shop momentum continuing. If you look at the Kimco portfolio and the sequential gain we had there, and some of the -- obviously, the leasing we had on the RPT portfolio out of the gates was way ahead of our anticipation.

Yes. I would just add that when we acquired RPT, their small shop occupancy was over 200 basis points lower than ours. So when you blended it all together, again, because it's obviously a much smaller portfolio, the impact at the end is only about 40 basis points.

Sure. Yes. I mean the JV capital can certainly play a role. But to answer your question, we're fortunate that we have a variety of ways to put out capital. So the acquisition, the core acquisitions, we continue to be very disciplined. You saw last year a very modest amount of traditional core acquisitions because when the market is not where our cost of capital is, we stay patient, we lean into structured, we lean into leasing, we're leaning to redevelopments, and we have other ways to place capital.

Yes, great question. So with -- obviously, the broader market is doing quite well. But for us specifically, we've launched a variety of programs to really activate our small shop effort and to drive demand and drive demand into our portfolio.

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.

Yes. I mean, again, it was a very strong quarter. There is, as I mentioned, just under $0.01 of I'll call nonrecurring or onetime things that are in there. But the balance of the year is shaping up very well. So we increased the guidance by the $0.02 that we saw so far and feel good that we're in good shape to reach towards the upper end of that range.

Yes. I mean I really don't think that it impacted the pricing or the execution at all to be completely transparent. That was a structure that we were excited about and pushing on to the buyer because we really wanted to retain a slice of those assets at yields that are really attractive for us.

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.

Yes. I mean, our team has done an exceptional job just really looking at every expense line item and finding opportunities to either do it more efficiently, find ways to save and just make adjustments in terms of our operating strategy. And so I have to commend the team and just really digging deep line by line and really finding a better way to manage the business and manage the sites locally. As a result of that, that helped drive our expenses down for the quarter.

It's a good question, Wes. I mean, we've always looked at optionality as being a benefit to us on the entitlement program. We do believe that future value creation is embedded in our portfolio. Unlocking that is a good way to sort of set up different levers for growth when supply and demand and cost of capital is in your favor.

Yes. Good question. Obviously, this quarter, we did compress at 20 basis points. We also absorbed the RPT portfolio. We compressed that pipeline actually significantly. As I mentioned earlier in the call, a couple of big deals started to cash flow in Q1, which was driving that benefit there.

Linda, a lot of it is event driven as well. So when you get a number of spaces back at once, and then you have a lot of leasing activity backfill those, you can elevate the SNO pipeline. But if you don't have an event that gives you back a lot of space that you can release quickly, it should compress.

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.

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.

Yes. I mean we always look at it as opportunistic in nature. Those are entitlements that we have in our back pocket that we can pull off the shelf when the timing is right. And honestly, when we look at all of our use-of-fund opportunities and determining where the best use of capital is at any given point in time.

You talked about tight pricing in the transaction market for certain assets. And I'm thinking more about geographies. Are there any markets or regions standing out for being less crowded, but that, in your opinion, could offer some opportunities? And I'm basically thinking that regions such as the Southeast being so hard.

Yes, it's a good question. And we always do look at new markets that might make sense for us. As you know, San Antonio is a relatively new market for us that we continue to lean into. Nashville is a market that we really weren't in before that we have acquired a few assets via the RPT transaction. So we're open-minded as it relates to new markets. even in the Midwest, which over the last decade, you've seen a lot of institutional capital sort of outflowing.

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.

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.

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.