The operator welcomes participants to the Kimco Realty Second Quarter 2024 Earnings Conference Call and provides instructions for the call. The Kimco management team introduces themselves and reminds listeners that statements made during the call may be forward-looking. They also mention the use of non-GAAP financial measures and provide instructions in case of technical difficulties. CEO Conor Flynn then takes over the call.

The paragraph discusses the current state of the Kimco consumer, the supply and demand environment for their business, and their strong operating results. It also mentions the current transaction environment and provides financial metrics and an updated outlook. The economy is giving off mixed signals, but the labor market remains strong and the consumer is resilient. The company's portfolio is mostly made up of grocery-anchored properties, which has led to increased traffic and positive operating fundamentals. Demand for their properties remains strong and retention levels are high, leading to increasing rents and better credit.

Despite a lack of quality retail, store openings are surpassing closings nationally and retail development remains low. Rents would need to increase significantly to make new development worthwhile. The company's focus on grocery-anchored, necessity-based retail allows for strong performance regardless of economic conditions. In the second quarter, the company signed 144 new leases with rent spreads of 26.3%, and renewals and options also saw positive results.

In the second quarter, the overall deal volume for the company was 2.3 million square feet with rent spreads of 11.7%. Leasing and retention contributed to a 20 basis point increase in occupancy to 96.2%. The company saw strong performance from its RPT portfolio, with 9 new leases and 24 renewals and options executed in the quarter. The former RPT portfolio also outperformed expectations in terms of same-site NOI. The company expects to see further growth opportunities and increased revenue from its specialty leasing program. The company has also increased its FFO and same-site NOI outlook.

The company is taking advantage of market volatility to invest in high-quality real estate through structured investments and targeted acquisitions. They have recently provided financing for several properties, including a grocery-anchored center in Virginia, a Sprouts grocery-anchored center in Georgia, and a senior loan for a popular property in Texas. They have also converted their preferred equity position in the Texas property to mezzanine financing. The company is encouraged by the deal flow and sees potential in larger format assets with strong demographics and densification opportunities. While neighborhood grocery-anchored centers are still highly priced, larger format assets in similar areas are trading at higher cap rates.

The unique attributes of Kimco's platform align well with their strategy and provide a better risk-adjusted return for shareholders. They remain confident in achieving their 2024 acquisitions goal and have substantially completed their 2024 disposition plan. Second quarter results show strong performance, with increased occupancy, double-digit leasing spreads, and solid same-site NOI growth. FFO and total pro rata NOI have also increased compared to the previous year.

The consolidated NOI increases for the second quarter were impacted by lower percentage rent and other income, as well as higher credit loss. The net NOI increase was offset by greater pro rata interest expense due to a bond issuance and additional debt in connection with an acquisition. Same site NOI growth was positive, driven by higher minimum rents and a strong portfolio. The company ended the quarter with a consolidated net debt to EBITDA ratio of 5.5 times and subsequently increased the size of their term loan.

The company has a term loan with a final maturity date in 2029 and has swapped $300 million to a fixed rate of 4.78%. The proceeds were used to repay $220 million on a revolving credit facility and the rest was invested in an interest-bearing account. The company has achieved its sustainability goals and as a result, the borrowing spread on their facilities has been reduced. The company has raised their FFO per share guidance range based on strong first half results and expects same site NOI growth, cost saving synergies, interest income, and lower disposition guidance for the full year. The company thanks its associates for their efforts and is well positioned for growth. The Q&A session will now begin.

During a conference call, an analyst asks a question about the company's guidance for FFO (funds from operations). The company's CFO and CEO explain that the guidance was increased due to higher rent commencements and expense control. They also mention that the RPT (retail property trust) has had better execution than planned. The analyst asks about the expected deceleration in same property NOI (net operating income) in the second half of the year, and the executives explain that it is due to a tougher comparison from the previous year. They reiterate their confidence in the revised guidance range.

Conor Flynn explains that the 400 basis point spread in shop occupancy between the RPT portfolio and the rest of the portfolio is a significant opportunity for growth. This gap will be closed as the signed but not opened pipeline of the former RPT portfolio starts to come online, allowing for easier small shop leasing around the operating anchor stores. The company is focused on driving small shop occupancy in this portfolio to capture this upside potential.

The company is focused on investing in key areas and has seen an increase in interest from private equity firms. This is reflected in recent transactions and the attractiveness of shopping center cap rates. The company's joint venture partners have also shifted from being curious about retail to actively investing in it, which is expected to drive future growth and investment.

Ross Cooper, speaking on structured investments, stated that every deal is unique and the second quarter saw three transactions with different purposes. He also mentioned that the third and fourth quarters will have more core acquisitions as structured investments are completed. There is a positive outlook for the back half of the year for Kimco, with more stability and optimism in the market. The acquisition guidance for the year is a 7.5% blended cap on a midpoint investment of $325 million, which implies a 0% cap rate on the remaining $80 million.

The speaker asks about the company's plans for land acquisition and development, and the CEO responds by discussing their current investments and plans for the future. They mention a project called Coulter Place and clarify that their capital investment is limited. Another analyst asks about a specific property and the company's current investment in it, to which the CEO responds by discussing the loan-to-value ratio and their potential for obtaining an equity stake in the property.

Alexandra Goldfarb from Piper Sandler asks about the impact of small shop leases on FFO and NOI margin. Kimco's small shop occupancy is 400 basis points lower than RPT's, but they have achieved a record lease rate of 91.7%. She asks for a framework of the earnings benefit for every 100 basis points of small shop occupancy versus larger boxes.

The speaker is responding to a question about the impact of small shop space on earnings. They estimate that there is potential for significant earnings gain from the small shop space, and that there is a focus on increasing the occupancy of these spaces. They believe that there are no obstacles that could hinder their progress in this area.

The focus for the company is on generating growth from small shops and maintaining high occupancy rates for anchor tenants. The leasing strategy remains consistent, with a proactive approach to working with retailers and targeting areas for future growth. The company has had success with grocery-anchored leases and plans to continue utilizing their platform to add more groceries to their portfolio. The team is focused on executing their strategy and has various tools at their disposal.

The company has launched a new interactive site plan that links to all of their data, which will help generate more leasing opportunities. The company is excited about their current momentum and future prospects. The analyst asks about the progress of the Mary Brickell Village redevelopment and the company's same-store growth potential. The company is focusing on near-term opportunities to reposition and re-merchandise the asset. They are comfortable with their guidance range for same-store growth.

The company is focused on driving same site growth and generating leases quickly. The team is dedicated to helping tenants open their stores and get rent commencement as soon as possible. The demand for existing tenants to renew their leases is at an all-time high, and there has been an acceleration of both anchor and small shop activity. This indicates a strong demand for the company's properties.

The company is retaining and growing its portfolio, with a focus on ethnic grocers who are planning for the future. There is no new development supply, so the company is working with retailers to be proactive and flexible in utilizing space. The SNO contribution for the year is expected to be $30 million.

The speaker discusses how $63 million will be contributed to the SNO pipeline in the next few years, with the majority of it coming in 2024 and 2025. They credit this progress to the exhaustive efforts of the tenant coordination, construction, leasing, and property management teams. The speaker also mentions that cap rates have been fairly consistent in the first half of the year, but there is optimism for lower rates in the future. The next question asks about anchor leases with no option to renew and the potential for forcing out tenants to bring in more relevant ones.

Conor Flynn discusses the current state of the sector and the company's plans for the future. They have already resolved half of the 52 leases that are set to expire in 2025 and are focusing on finding new opportunities to backfill space at higher rents and retaining existing tenants. They are also looking ahead to 2025 and feel confident about the outlook. When asked about rent growth, Flynn notes that the sector has historically produced around a 2% same site NOI growth, but they are currently seeing 3% growth due to high retention rates and new leasing. They will continue to focus on executing their current plans and exploring future opportunities.

The speaker discusses the company's small shop opportunity and their plans for growth on the anchor side. They mention pushing for rent escalations and being flexible with space to attract tenants. They also mention working with retail partners and anchors to plan for the future. The next question is about the reduction in dispositions, and the speaker explains that they are not in a position needing to sell assets and may be holding onto them due to increased buyer interest and potential scarcity premiums.

The company has completed most of its planned dispositions and is pleased with the execution of the RPT dispose. They have good liquidity and do not have a need to dispose further. They have some assets in joint ventures that may be sold at lower cap rates. The company is confident in their capital plan and portfolio performance. The bad debts for the year have been 86 basis points and there are no major concerns with current tenants. The credit loss guidance remains at 75 to 100 basis points. The quarter's credit loss is impacted by timing.

The company bills most of its CAM bills and some real estate tax bills during the second quarter, which requires a 100% reserve for cash basis tenants. However, there has been no significant change in the accounts receivable levels compared to last year. The occupancy cost ratio varies among different sectors and retailers, but there is still strong rent growth and negotiations are ongoing.

Ross Cooper and Conor Flynn discuss the changing landscape of brick-and-mortar retail, which is now used primarily as a distribution and fulfillment point. This has led to a shift in the way retailers view their stores, focusing on their trade area and market share. The call concludes with David Bujnicki thanking participants and wishing them a good day.

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