Workflow
Kimco Realty(KIM) - 2022 Q4 - Earnings Call Transcript
KIMKimco Realty(KIM)2023-02-09 18:13
Filings
Slide

Financial Data and Key Metrics - Overall occupancy increased by 40 basis points to 95.7%, recovering nearly 90% of COVID-related inventory [8] - Anchor occupancy rose by 20 basis points sequentially and 90 basis points year-over-year to 98% [8] - Small shop occupancy increased by 80 basis points sequentially and 230 basis points year-over-year to 90% [8] - Leased over 11.5 million square feet in 2022, the highest level on record [8] - FFO for Q4 2022 was 234.9millionor234.9 million or 0.38 per diluted share, compared to 240.1millionor240.1 million or 0.39 per diluted share in Q4 2021 [23] - Same-site NOI growth was 1.9% for Q4 2022, bringing full-year 2022 same-site NOI growth to 4.4% [24] - Monetized 11.5 million shares of Albertsons stock, receiving proceeds of 301million,withacapitalgainof301 million, with a capital gain of 250 million [25] Business Line Data and Key Metrics - Mixed-use entitlement initiatives reached new highs, with 2,805 apartment units entitled in 2022, bringing total entitlements to 5,461 units [10] - Combined with 2,218 built units and 1,139 under construction, the total is 8,818 units, aiming for 12,000 by the end of 2025 [10] - Mixed-use assets now account for 13% of ABR [10] - Closed on a 375.8millionacquisitionofeightopen−airretailcentersinLongIsland,NewYork,withfivegrocery−anchored[16]−Structuredinvestmentprogramyieldeda76375.8 million acquisition of eight open-air retail centers in Long Island, New York, with five grocery-anchored [16] - Structured investment program yielded a 76% IRR on a 22 million participating loan [17] Market Data and Key Metrics - The company's portfolio is concentrated in high-barrier-to-entry markets, with strong demographic profiles [18] - The transaction market is marked by uncertainty and inefficiency, with access to capital tightening and elevated borrowing costs [19] - The company has over 2.1billioninliquidity,includingcashonhandandalineofcredit[20]CompanyStrategyandIndustryCompetition−Thecompany′sstrategyfocusesonowningandoperatinglast−mile,open−air,grocery−anchoredshoppingcentersandmixed−useassets[15]−Thecompanyisleveragingitsscale,accesstocapital,andCapEx−lightmixed−useredevelopmentstrategytocreatelong−termvalue[11]−Thecompanyisfocusedoncontrollingexpenses,upgradingtenantcreditquality,andattractingrecurringcustomersin2023[12]−Thecompanyiswell−positionedtotakeadvantageofmarketdislocationsandopportunitiesin2023[20]ManagementCommentaryonOperatingEnvironmentandFutureOutlook−Managementisencouragedbythefundamentalstrengthoftheoperatingbusiness,limitednewsupply,androbustretailerdemand[12]−Thecompanyanticipatesleasingvelocityandretentionratestoremainelevatedbutiscautiousaboutpotentialcreditdefaults[12]−ThecompanyexpectstocontinuemonetizingitsAlbertsonsstakeandreinvestingproceedsintocorebusinessopportunities[14]−Thecompany′s2023FFOpershareguidancerangeis2.1 billion in liquidity, including cash on hand and a line of credit [20] Company Strategy and Industry Competition - The company's strategy focuses on owning and operating last-mile, open-air, grocery-anchored shopping centers and mixed-use assets [15] - The company is leveraging its scale, access to capital, and CapEx-light mixed-use redevelopment strategy to create long-term value [11] - The company is focused on controlling expenses, upgrading tenant credit quality, and attracting recurring customers in 2023 [12] - The company is well-positioned to take advantage of market dislocations and opportunities in 2023 [20] Management Commentary on Operating Environment and Future Outlook - Management is encouraged by the fundamental strength of the operating business, limited new supply, and robust retailer demand [12] - The company anticipates leasing velocity and retention rates to remain elevated but is cautious about potential credit defaults [12] - The company expects to continue monetizing its Albertsons stake and reinvesting proceeds into core business opportunities [14] - The company's 2023 FFO per share guidance range is 1.53 to 1.57,withsame−siteNOIgrowthof11.57, with same-site NOI growth of 1% to 2% [27] Other Important Information - The company has a strong liquidity position, with 150 million in cash and full availability from a 2billionrevolvingcreditfacility[26]−Thecompany′sweightedaveragedebtmaturityprofileis9.5years,withonly2 billion revolving credit facility [26] - The company's weighted average debt maturity profile is 9.5 years, with only 50 million of mortgage debt maturing in 2023 [26] - The company expects to generate free cash flow of around 150 million in 2023 after dividends, FX, TIs, and leasing commissions [71] Q&A Session Summary Question: Credit Loss Expectations [30] - The company widened its credit loss guidance range to 75-125 basis points due to increased bankruptcy risks in the market [31] Question: Monetization of Albertsons Shares [33] - The company plans to monetize 300 million of Albertsons shares, with the lockout period expiring at the end of May [34] - Proceeds will be reinvested into core business opportunities, including acquisitions, partnership buyouts, and structured investments [36] Question: Bed Bath & Beyond and Party City Impact [38] - The company has accounted for potential bankruptcies of Bed Bath & Beyond and Party City in its credit loss guidance [39] - Lease termination income in Q1 2023 is primarily related to a deal structure with Kohl's [40] Question: Small Shop Occupancy and Leasing Spreads [47] - Small shop occupancy reached 90%, with a lease economic spread of 340 basis points, representing 23millioninpotentialrevenue[48]−Thecompanyaimstoexceeditsprevioushighwatermarkof91.123 million in potential revenue [48] - The company aims to exceed its previous high watermark of 91.1% small shop occupancy [49] Question: Transaction Market and Cap Rates [58] - The company is seeing cap rates in the low sixes for quality open-air centers, with sellers still seeking low fives [59] - The company is patient and will only pursue deals that meet its hurdle rates [60] Question: Consumer Sales and Traffic Expectations [62] - Traffic in 2023 has been above 2022 levels, with strong consumer demand for grocery-anchored shopping centers [63] Question: Mixed-Use Entitlements and Ground Leases [64] - The company is using a CapEx-light strategy to activate mixed-use entitlements, with a focus on long-term value creation [66] - Ground leases provide flexibility to activate projects without significant capital risk [67] Question: Free Cash Flow and Albertsons-Kroger Merger [70] - The company expects 150 million in free cash flow for 2023 after dividends and CapEx [71] - The company is monitoring the Albertsons-Kroger merger, which could be a net positive if it goes through [72] Question: Bed Bath & Beyond Rent Spreads [74] - Rent spreads on Bed Bath & Beyond locations range from 12% to 20%, depending on the vintage and location of the boxes [75] Question: Same-Site NOI Growth Target [81] - The company has been exceeding its 2.5% same-site NOI growth target, driven by strong lease spreads and portfolio transformation [82] Question: UPREIT Opportunities [85] - The company recently converted to an UPREIT structure and expects to use it selectively for accretive transactions [86] Question: CapEx per Square Foot [88] - CapEx per square foot varies widely depending on the type of tenant improvement or box conversion, but inflationary pressures have added to costs [90] Question: Net Investment Guidance [92] - The $100 million net investment guidance is a baseline, with potential for increased activity as market opportunities arise [93] Question: Private REITs and Opportunity Funds [95] - The company expects some assets to come to market as private REITs and opportunity funds seek liquidity, but the process is nuanced and varies by asset class [96] [97]