The operator welcomes participants to the Kimco Realty First Quarter 2024 Earnings Conference Call and introduces the members of the Kimco management team. The management team includes the CEO, President and Chief Investment Officer, CFO, Chief Operating Officer, and other executives. The operator reminds participants that statements made during the call may be forward-looking and the company's actual results may differ due to various factors. The management team may also refer to non-GAAP financial measures and reconciliations can be found on the company's Investor Relations website. The CEO, Conor Flynn, then greets the participants.

The RPT integration has been completed successfully, with the new portfolio performing well and exceeding expectations in terms of timing and performance. Cost synergies are also ahead of expectations, thanks to planned dispositions and lessons learned from previous acquisitions. Kimco's operating platform is delivering efficiencies due to strategic investments in technology and talent.

In the first quarter, the portfolio saw a 3.9% increase in same-site NOI, with 2.8% growth from higher minimum rents and improved landlord expenses, credit loss, and net recoveries. Pro rata occupancy was at 96%, a slight decrease from last quarter due to the RPT merger and vacated locations, but still an improvement from a year ago. Small shop occupancy was down due to the merger, but would have increased without its impact. The company leased over 4 million square feet, with positive leasing spreads. They also completed over 400 renewals and options with a positive spread. The lease to economic occupancy spread decreased slightly, but still represents a significant amount of annual base rent. The company has raised their full year guidance for both FFO and same-site NOI and is focused on trimming expenses and strategically positioning their portfolio in first ring suburbs of major metropolitan areas.

In the first quarter, Kimco successfully completed the sale of 10 former RPT centers, meeting their previously provided guidance ranges. They also negotiated to retain a slice of the capital stack on eight of the sold assets, allowing them to continue earning a double-digit yield. This puts them ahead of schedule on their disposition targets for the year and allows them to focus on new investment activity. They have also closed on two structured investments that align with their strategy and have a right of first offer or refusal in their position.

In the first quarter of 2024, Kimco made a modest investment of $17 million in two properties, which are now valued at over $175 million. They are actively seeking more investment opportunities and have maintained a disciplined approach to investing. Asset pricing remains strong, but it has been challenging to find accretive opportunities. The company remains confident in their ability to source properties that align with their return thresholds. In terms of financial results, the first quarter saw solid leasing activity, double-digit leasing spreads, and robust same-site NOI growth, leading to strong FFO per share growth. The results also include the $2.3 billion RPT acquisition, which was completed at the beginning of the year. However, the company does not plan to continue breaking out the RPT performance as operations are now fully integrated.

The acquisition of RPT has significantly contributed to the company's improved performance, with higher pro rata NOI and FFO. The increase in NOI is mainly due to RPT sites, higher minimum rents, and lower credit loss. FFO also benefited from higher interest income, but was offset by higher interest expense and lower fair market value amortization. The first quarter FFO also includes non-recurring income items, such as below market rents and other income.

The company had an active quarter from a balance sheet perspective due to the RPT acquisition. They issued shares and OP units, replaced RPT preferred stock, repaid debt, and amended and assumed loans. They also monetized their remaining shares in Albertsons and recorded a tax provision. The company's liquidity position remained strong and their leverage metrics improved. They are raising their FFO per share outlook for the year.

The company has increased its FFO per share guidance by 3.2% annually, excluding merger costs. This is due to higher same-site NOI growth and a credit loss assumption of 75-100 basis points. Interest income and non-cash GAAP accounting income are also expected to contribute to FFO. The company's other guidance assumptions remain unchanged. The company thanks its associates for their efforts in completing the integration of the RPT transaction. During the Q&A session, the company is asked about its credit loss guide and explains that it is based on the entire portfolio and is currently at 62 basis points, lower than the annual assumption of 75-100 basis points.

The company is maintaining its current guidance despite potential bankruptcies, but has been able to increase its same-site NOI guidance. During a conference call, analysts asked about the integration of RPT and the company's initial G&A synergies. The CEO and CFO discussed the positive impact of the integration, including early deal flow and strong leasing spreads. They also mentioned the company's strategy of buying at an 8.5% cap rate and selling off the lowest tranche to retain a high-quality portfolio. The CFO also commented on the G&A synergies, attributing them to the successful integration of portfolio operations systems and human capital.

The company was able to complete a recent transaction in a matter of weeks, saving time and expenses. This was due to a playbook put in place after a previous transaction. The company has exceeded their underwriting assumptions for permanent associates and has successfully filled all incremental positions. Additionally, they have been able to quickly exit over 100 service agreements, resulting in faster accretion in professional services and subscriptions. The company has also seen an increase in grocery anchors in their portfolio and potential plans to convert more sites to grocery anchors. The company's ancillary income has also been positively impacted.

The company has been working on building a specialty leasing team to increase ancillary income, which has been successful with double-digit growth in the first quarter of 2023. The RPT portfolio has a higher vacancy rate, which provides opportunities for temporary leasing. The company is seeing operational synergies and cost savings, and there is potential for NOI improvement, although the exact magnitude is not specified. The company gave itself a good amount of time to execute and has been ahead of their assumptions.

The first year of transitioning the RPT portfolio to Kimco has been successful, with a quick lease-up of space and retention of tenants at higher rents. The original underwriting had a 6 to 12-month ramp-up period, but the transition has exceeded expectations. There were also some unexpected positive developments, such as transitioning some assets to grocery-anchored properties. Despite the challenges of transitioning projects and tenants, the team was well-prepared and able to meet and exceed targets, resulting in a compression of the pipeline and early openings for key tenants.

The team at Kimco is focused on integrating their business and executing fundamentals with laser-like precision. Ross, speaking on behalf of the company, discusses their interest in both grocery-anchored and lifestyle centers. They see the benefits of owning and operating all types of open-air retail and are actively looking for opportunities in the current market, especially in the neighborhood grocery anchor and unanchored strip center segments.

The speaker discusses the company's strategy of focusing on more complex and difficult operational assets to create value that others cannot. They also mention their joint venture partnerships as a way to enhance yield. Another speaker adds that the lines between different retail formats are blurring and the company's success lies in their ability to enhance their Rolodex and extract value from all formats.

The speaker discusses the changing landscape in the pharmacy and health and wellness business, mentioning specific companies like Rite Aid, BK, Walgreens, and Walmart. They mention the disruption and shifting trends in the pharmacy business, but also highlight the growing focus on health and wellness among consumers. They mention various new concepts and opportunities in the health and wellness sector, but also acknowledge that individual businesses may have different models and see different levels of disruption. The speaker also mentions the evolution of pharmacies into mini marts in terms of merchandising mix.

The speaker discusses the disruption of the script business in pharmacies and how it has affected their pricing on traditional grocery items. They mention the opportunity to recapture valuable real estate from these pharmacies, as they are often located in prime locations within shopping centers. The occupancy for RPT portfolio was down slightly, but the speaker sees potential for small shop momentum and leasing opportunities.

The speaker discusses the positive effects of a recent deal on leasing momentum in small shops. They mention the acquisition of a portfolio with lower small shop occupancy and the impact on overall occupancy. They also mention the challenge of finding suitable properties to reinvest capital into and the potential role of JV capital.

The company has a variety of ways to invest capital, including traditional acquisitions, structured deals, leasing, and redevelopments. They have been patient in making traditional core acquisitions due to high pricing, but hope for a change in the market. They are not interested in commodity power assets and are instead looking at lifestyle assets, which have a wide range of pricing and cap rates. The company is able to be more aggressive on larger deals and prioritize a strong growth rate.

The company is focused on increasing cash flow and utilizing their team to do so. They are confident in their ability to put out capital at accretive rates, even if acquisition opportunities remain tight. They have seen progress at their RPT assets, with grocery-anchors coming on and a strong tenant relationship. They have launched programs to drive demand for small shop tenants, targeting fast expanding retailers and F&B operators.

The company regularly meets with retail tenants to showcase opportunities within the portfolio and grow market share. They also work closely with franchisors and develop form leases to make the experience seamless for tenants. The company believes that the landlord's role is important, especially during market changes, and they invest in their sites to provide essential services for small shop operators to succeed. The company has seen growth in the food and beverage and dollar store concepts, as well as personal care services. The company is seeing broad growth across various retail verticals.

The speaker discusses the decrease in leasing volume for the first quarter and explains that it is due to high occupancy and timing of deal execution. They also mention the continued interest in space from retailers and the growth in various markets. A question is then asked about guidance.

The guidance update for the company includes a slight increase in income and NOI growth, with some non-recurring factors offsetting this. The 10 RPT dispositions were not impacted by the seller mortgage financing, and the company was able to sell the tail of the portfolio at the same cap rate as the initial acquisition. The remaining assets in the portfolio are in desirable locations.

The speaker is pleased with the recent sale of 10 assets and believes it was mutually beneficial for both the company and the buyer. There are still plans to sell more assets, but they do not have any specific properties identified yet. The goal is to improve the overall quality and growth profile of the portfolio by selling assets that do not align with their objectives. They anticipate selling at the lower end of the cap rate range and may include joint venture assets at tighter cap rates.

The company has kept their portfolio intact because they are uncertain about its exact makeup, but they plan to sell below the current range in the future. They saw lower expenses than expected due to their team's efforts to manage the business more efficiently. The company has 6,500 entitled multi-family units, but they are not planning to start any developments this year due to the current cost of capital. They see future value creation in their portfolio and may consider starting developments in the future when market conditions are more favorable.

The company plans to contribute entitled land and preferred equity into joint ventures to avoid significant capital outlays. They have various ways of approaching development for each asset and will continue to be selective. The SNO pipeline is expected to remain slightly elevated due to ongoing lease-up activity.

In the first quarter, the company contributed over $2 million in new cash flows and expects to contribute an additional $15 million for the rest of the year. They are targeting a total of $25 million to $30 million in contributions for the entire year. The company is seeing benefits from these contributions in their bottom line, but they expect the elevated level to remain in the short-term due to opportunities in lease-up. The SNO pipeline may fluctuate depending on events, but with no new development in the sector and high demand, existing leases are worth more and there is unlikely to be a spike in boxes coming back. The company is focused on filling remaining vacancies and small shops, with good activity on the anchor side.

During a recent conference call, Ronald Kamdem asked two questions regarding the company's same-store NOI and acquisition guidance. Conor Flynn responded by stating that the guide increase was due to earlier commencements and the impact of bad debts in the second quarter. Ross Cooper added that there were no core acquisitions under contract at the moment, but they were pursuing opportunities. He also mentioned that they were seeing a lot of demand for their capital in structured investments. Tayo Okusanya then asked a question, but it is not mentioned in this paragraph.

Conor Flynn, CEO of Kimco Realty, discusses the company's approach to multi-family entitlement programs and retail redevelopments. He mentions that they have a list of potential redevs that they can activate opportunistically, based on the best use of capital at any given time. While they are currently seeing good returns on retail repositioning and leasing, they will activate the multi-family entitlement program when the timing is right. In response to a question about potential opportunities in the market, Flynn notes that certain geographies may offer less crowded opportunities for investments.

Conor Flynn, CEO of Kimco Realty, discusses the potential for new markets in regions like the Midwest and the Southeast, as well as the company's structured investment program. Ross Cooper, President and CIO, comments on the current transaction market and states that there has been volatility in the first four months of the year.

The speaker discusses the hope for stability in the market and an increase in transactions in the second half of the year, but acknowledges the uncertainty that currently exists. They also mention the strength of the retail market and the impact of supply and demand on it.

The speaker discusses the resurgence of brick-and-mortar stores due to the integration of e-commerce platforms, and how this has led to a new model where both can coexist. They also mention the impact of higher interest rates on commercial real estate and predict that only certain categories will be able to outgrow this expense. The speaker thanks the listeners and invites them to attend an upcoming conference.

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