Yahoo Finance Kimco Realty Corp (KIM) Q1 2024 Earnings Call Transcript Highlights: Strategic Moves and Robust ...
Same-Site NOI Growth: 3.9% increase, driven by higher minimum rents and lower credit loss.
Pro Rata Occupancy: 96%, a slight decrease from last quarter but an improvement year-over-year.
Leasing Activity: Over 4 million square feet leased, including 143 new leases with positive leasing spreads of 35.5%.
FFO (Funds from Operations): $261.8 million or $0.39 per diluted share, including merger charges; $0.43 per diluted share excluding merger charges.
Guidance Increase: Full year FFO per diluted share guidance raised from $1.54-$1.58 to $1.56-$1.60.
Acquisition and Dispositions: Completed the acquisition of RPT and sold 10 former RPT centers; disposition target for 2024 mostly achieved in Q1.
Investment Activity: Closed on two structured investments totaling $17 million, aligning with strategic goals.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Successful integration of RPT acquisition, exceeding underwriting expectations in terms of timing, performance, and monetization of assets.
Achieved significant cost synergies early in the year, anticipating reaching the high end of the projected $34 million range for 2024.
Reported strong first quarter leasing results with same-site NOI growth of 3.9%, driven by higher minimum rents and lower credit loss.
Raised full-year guidance for both FFO and same-site NOI based on robust quarterly results and successful RPT integration.
Maintained a strong liquidity position with over $2 billion of immediate availability and no significant debt maturities for the remainder of the year.
Negative Points
Pro rata occupancy slightly decreased by 20 basis points from the previous quarter due to the RPT merger and vacating of four Rite Aid locations.
Inflation remains high, impacting the transaction market and dampening the prospect of interest rate cuts.
Small shop occupancy decreased by 20 basis points from last quarter due to the RPT merger.
Encountered greater pro rata interest expense of $14.6 million, resulting from higher interest rates on refinanced bonds and floating rate debt in joint ventures.
Challenges in finding accretive acquisition opportunities due to tight asset pricing and strong market competition.
Q & A Highlights
Q: 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? A: Conor C. Flynn, CEO & Director of Kimco Realty Corporation, explained that the 75 to 100 basis point credit assumption returns to more historic levels despite a lower first quarter at 62 basis points. He mentioned potential bankruptcies during the year that could impact it, deeming it prudent to maintain the current guidance assumption.
Q: On the integration of RPT, you said initial G&A synergies of $30 million to $34 million, you took it up to $34 million to $35 million. What's driving the upside to your initial guidance? A: Conor C. Flynn, CEO & Director, highlighted the successful start to the integration, with significant contributions from the Weingarten blueprint. Will Teichman, SVP of Strategic Operations, added that speeding up integration activities saved unnecessary expenses and detailed the quick execution of asset sales and rapid integration pace as key drivers of G&A synergies.
Q: So Connor, clearly, RPT, it sounds like whether very conservative or sandbagging, you guys were pretty cautious on how you underwrote it. Could you outline a bit more on the NOI side, what the upside is? A: Conor C. Flynn discussed exceeding initial leasing velocity assumptions for the RPT portfolio, with significant early deal flow and transitions of some assets to grocery-anchored assets ahead of expectations. David Jamieson, Executive VP & COO, also noted the strategic execution of dispositions enhancing the grocery percentage of the RPT portfolio.
Q: Can you talk a bit about the range of cap rates you're seeing out there for the quality you want to buy versus what you need to see to be more active? A: Ross Cooper, President & CIO, explained that neighborhood grocery-anchored shopping centers are trading at around 6% cap rates, which does not fit Kimco's current strategy due to their cost of capital. He mentioned focusing on more complex assets that require operational expertise, which allows Kimco to create value and achieve attractive yields.
Q: Just wanted to switch tack here. Just wanted to get your strategic views or sense of the pharmacy and kind of health and wellness business trends and credit there. A: David Jamieson, Executive VP & COO, acknowledged the disruption in the pharmacy business and emphasized the consumer focus on health and wellness. He discussed the evolution of pharmacy spaces and the potential real estate opportunities if spaces are returned, which Conor C. Flynn noted could be valuable for repurposing.
Q: Looking at the full year planned dispositions, it looks like another maybe $100 million to $200 million. Just curious what's making up that remaining disposition bucket? A: Ross Cooper mentioned that there isn't anything specifically identified for disposition yet, emphasizing the goal to improve the quality and growth profile of the portfolio. He highlighted the strategy of identifying assets that do not align with the portfolio's direction and removing them proactively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
