The operator welcomes listeners to Kimco Realty's Fourth Quarter 2023 Earnings Conference Call and introduces the management team. David Bujnicki, Senior Vice President of Investor Relations and Strategy, provides a disclaimer about forward-looking statements and non-GAAP financial measures. CEO Conor Flynn discusses the company's strong Q4 leasing results and updates on the RPT acquisition. President and Chief Investment Officer Ross Cooper follows with updates on the transaction market and plans for 2024.

In the second paragraph, the speaker discusses their financial metrics and provides guidance for 2024. They highlight their record-setting leasing activity and a stronger tenant base for their portfolio. They also mention their recent acquisition of RPT and their leasing accomplishments, including a 70 basis point increase in occupancy, record-high leasing volume, and strong pricing power. The speaker also mentions their retention levels and the successful absorption of Bed Bath & Beyond spaces at higher than expected spreads.

In 2023, we resolved 21 leases with a combined pro rata spread of 43%, including 4 signed in the fourth quarter with a spread of 57%. We are confident in resolving the remaining 8 boxes and expect our strong leasing success to continue in 2024. With the RPT deal closed, we are excited about the new team members and the positive impact on our strategic plan. We expect to benefit from the upside in the RPT portfolio through mark-to-market leases and redevelopment opportunities. One example is Mary Brickell Village in Miami, which we believe has a lot of potential for long-term value. We also plan to recycle lower growth centers and focus on those with high CapEx loads and lower returns.

The company's model and strategic plan have been adjusted to accommodate anticipated dispositions, and market conditions have improved since the announcement of the RPT transaction. The company is well positioned for growth in 2024 and has a strong pipeline of leases. However, the macroeconomic environment remains uncertain, and the company's strategy focuses on building a resilient portfolio. In 2023, the capital markets were volatile, but the company was able to take advantage of opportunities through its liquidity and balance sheet. This included acquiring joint venture partnerships, a new asset, and a portfolio through the RPT Realty acquisition.

The company took advantage of a more positive market environment in the fourth quarter of 2023, selling joint venture sites and providing mezzanine financing for a new partner. They are confident that the healthy fundamentals in open-air retail and a more favorable macroeconomic backdrop will present opportunities for success in 2024. They will focus on sourcing off-market and core grocery-anchored shopping centers, as well as structured investments in preferred equity and mezzanine financing. They also plan to dispose of assets that do not align with their long-term goals in the first half of 2024.

In the fourth quarter, Kimco had strong results, including high leasing activity, increased occupancy, and improved same-site growth. They also improved their liquidity position and announced plans to sell RPT centers at a blended cap rate. FFO for the quarter was $239.4 million, compared to $234.9 million in the previous year. The increase was primarily due to higher pro rata NOI from their operating portfolio.

In the fourth quarter, the company's pro rata interest expense increased by $8 million due to the issuance of a $500 million bond. This was partially offset by $7 million in interest income from short-term investments. The company incurred $1 million in merger-related expenses. Same-site NOI grew by 3.2% and would have been 3.5% if redevelopment sites were excluded. Same-site NOI for the full year exceeded expectations at 2.4%. The company's leased occupancy and economic occupancy grew by 350 basis points, representing $57 million in future annual base rent. The company has a strong balance sheet with a net debt-to-EBITDA ratio of 5.6x. A new $500 million bond was issued to address upcoming bond maturities. The company has over $780 million in cash and full availability of a $2 billion credit facility.

In the first quarter, we received $300 million from the monetization of our shares in Albertsons and will record a $75 million tax provision. We also completed the $2.2 billion RPT transaction, issuing common shares and converting RPT's preferred shares into depositary shares. We paid off RPT's outstanding debt and assumed new term loans, with a total debt of $510 million added to our balance sheet. Our outlook for 2024 includes these transactions.

The company remains optimistic about the growth potential of its operating portfolio, including the newly acquired RPT assets. They have provided a 2024 FFO per share guidance range, which takes into account factors such as same-site NOI growth, credit loss assumptions, lease termination income, interest income, acquisitions and dispositions, corporate financing costs, and G&A expenses. The guidance also includes expected cost savings from the RPT transaction and assumes no significant impact from noncash GAAP accounting income related to RPT.

The guidance range for the company assumes no redemption or prepayment charges related to preferred stock or debt, and no planned issuance of common equity. The company thanks its associates for their efforts in closing a successful transaction and driving strong results. The company expects to have a successful year in 2024. In regards to acquisitions and dispositions, the company plans to sell the majority of its noncore properties and will continue to monitor and potentially sell additional assets in the future. The acquisition cap rates are a blend of core grocery acquisitions and a structured program, and the company is confident in achieving FFO accretion. The next question is from Jeff Spector with Bank of America.

Glenn Cohen and Conor Flynn of RPT Realty discuss the company's 1.5% to 2.5% same-store NOI outlook and FFO growth for the year ahead. The primary drivers of the NOI outlook are increases in minimum rents, credit loss, and lease-up. The midpoint of the FFO guide implies around 2% growth, which is below the company's longer-term growth rate of 3% to 5%. This is due to some one-time headwinds, but the strength of the portfolio and platform should continue to drive growth in the future. The company has prefunded and taken out all maturities for this year to help mitigate the impact of increased interest expense.

The company is facing some challenges with fair market value amortization and lease termination income, which will have a negative impact on earnings per share. However, the retailer leasing demand is strong and the company has a significant SNO pipeline that is expected to contribute to growth in the back half of the year and in 2025. The team is working to get these stores open as quickly as possible to generate cash flow.

The speaker answers a question about cap rates, explaining that their guidance is based on a select portfolio of assets and is not indicative of where cap rates are trading across the board. They also discuss a substantial sequential lease improvement and mention that they have seen activity across a broad set of categories, including grocery.

The company is seeing a lot of flexibility from retailers who are willing to expand or shrink their store sizes to penetrate the supply-constrained market. The supply-demand imbalance continues with record low supply development, and retailers are appreciating the efficiencies and gains of utilizing brick-and-mortar stores. The company is encouraged by their pipeline and will continue to push hard. In terms of guidance, there may be potential upside from leasing and timing on capital recycling, but it is still early in the year and there is macro uncertainty.

The speaker discusses potential factors that could lead to higher earnings, including better credit loss, timing of acquisitions and dispositions, and the timing of leases starting to generate cash flow. A question is then asked about new lease rents, which have been on a steady upward trend but were down in the last quarter. The speaker suggests that this may be due to an increase in tenant improvement costs and questions whether this could indicate that rents are reaching their peak.

The speaker discusses the volatility of quarter-over-quarter spreads and the overall ABR growth in the company. They mention that the TI allocation is dependent on deal structure and that the company has 29 anchor boxes with no options in 2024. The speaker also mentions the potential upside for RPT in terms of small shop occupancy and overall portfolio performance.

The company is confident in their ability to bring small shops into the Kimco portfolio within the next 1-2 years. They have seen success with this strategy in the past and have identified potential opportunities for growth in Florida and Boston. The company also expects to benefit from the lease economic spread and ABR per square foot of RPT's portfolio. They are excited about the potential for strategic accomplishments this year.

The speaker is asked about the CapEx and Bed Bath & Beyond leases. They state that the average TI package was around $55-$60 per foot and that the increase in CapEx spend in 2024 is driven by deal cost and execution. They also mention RPT and their SNO pipeline as a contributor to the CapEx load. The next question is about the outlook for Michaels, Jo-Ann's, and AMC, which are top 50 tenants of Kimco with a credit rating in the CCC range. The speaker discusses the performance of these lower credit quality tenants in the portfolio and how it factors into the credit loss expectation in guidance. They mention that Rite Aid had 21 locations last year, but ended with 16 at the end of the year.

The company anticipates 5 locations coming back this quarter and has seen encouraging leasing activity and mark-to-markets in the double digits. Retailers are flexing on their format to work into second-generation inventory. Jo-Ann's is looking to rightsize their business, but there is limited rollover in 2024. The company is actively pre-leasing to upgrade the quality of tenancy and feels good about the pipeline. Plans for Mary Brickell Village are still in progress despite the recent ownership change.

The company is focused on upgrading the quality of their tenancy and there is a lot of potential for rent increases in their retail properties. They are still in the early stages of planning for the future, but the location of their properties in Brickell makes them very attractive. The lack of new supply in the sector is driving positive market conditions, and it would take rents of $35 to $40 per square foot for a new development to be profitable.

The speaker discusses the replacement cost and rents of the shopping centers they own, stating that they are currently at a comfortable level and unlikely to see much new development in the near future. They also mention their expected redevelopment spend for 2024 and prioritize retail redevelopments for strong returns. The impact of the RPT portfolio on growth potential is minor, as the majority of the portfolio is made up of Kimco assets.

The bulk of growth for Kimco is coming from their legacy assets, with some impact from their SNO pipeline. The goal is to resolve the remaining Bed Bath & Beyond boxes by 2024, and occupancy is expected to continue to increase, with a current goal of reaching 91.7%. The team is encouraged by the execution of over 1 million square feet of leasing, and there is room for further growth on the anchor side. The recent merger with RPT also provides additional upside potential for occupancy. Q1 typically has a holiday hangover from tenants closing after the holidays.

The company is resetting occupancy with RPT and holiday impact at the beginning of the year, and they are confident in their ability to grow occupancy throughout the year. They are also focused on retention and have resolved around 70% of their rollover. Rent bumps have been signed in the fourth quarter, with different opportunities in different markets, and they are seeing a good response due to the supply-demand imbalance. The small shop side continues to improve, while there is still some friction on the anchor side.

The operator introduces a question from Ronald Kamdem about dispositions guidance. Ross Cooper confirms that the majority of dispositions will be RPT and that once completed, they will continue to prune assets at the end of their life cycle. Floris Van Dijkum asks about shop occupancy and Conor Flynn explains that there is significant upside in small shops due to the diversity of demand, with a focus on restaurants, entertainment, and service industries.

The company has seen growth in medical and other small shop categories, and believes their platform can help retailers reach their potential. There is not a significant difference in rent between grocery-anchored and mixed-use properties. The focus for redevelopment is on retail and working with high-quality tenants to improve centers.

The company is cautious about investing in multifamily developments due to the oversupply in the market. They are constantly assessing the best use of their capital and have opportunities with Ross. The company is seeing more activity and assets being introduced to the market, which gives them confidence in their acquisition and structured investments guidance for the first half of the year. They are also seeing an uptick in ELVs, indicating that more assets may be brought to the market in the future.

The speaker discusses their company's strategy for acquisitions and investments, focusing on assets that have fewer viable all-cash buyers. They also mention an increase in conversations about structured investments and express confidence in their guidance for the year. The speaker is asked about the company's slower growth this year and whether it is due to one-time benefits from the previous year or if there is potential for more significant growth in the future.

Conor Flynn and Glenn Cohen discuss the impact on the company's growth this year, including one-time expenses and headwinds that will not repeat in the future. They also mention the potential for growth through signed but not opened ABR and interest expense management. They touch on the decision to sell Albertsons shares and the choice to allocate funds for taxes rather than a special dividend.

Kimco Realty Corp's capital plan includes redeploying proceeds from dividends towards additional investments and debt reduction. The company anticipates a negative impact of 10 basis points on occupancy due to the inclusion of RPT properties. Q1 is typically a seasonally slow period, but the company is off to a good start and is cautiously optimistic about the year ahead. The call concludes with thanks from David Bujnicki.

The operator concludes the conference by thanking the attendees and wishing them a good day. They also remind them that they can now disconnect from the call.

This summary was generated with AI and may contain some inaccuracies.