Kimco Realty Corp. (KIM) - 29-Apr-2021
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29-Apr-2021
Kimco Realty Corp. (KIM)
Q1 2021 Earnings Call
Total Pages: 22
1-877-FACTSET www.callstreet.com Copyright © 2001-2021 FactSet CallStreet, LLCKimco Realty Corp. (KIM) Corrected Transcript
Q1 2021 Earnings Call 29-Apr-2021
CORPORATE PARTICIPANTS
David F. Bujnicki Glenn Gary Cohen
Senior Vice President-Investor Relations & Strategy, Kimco Realty Corp. Chief Financial Officer, Treasurer & Executive Vice President, Kimco
Realty Corp.
Conor C. Flynn
Chief Executive Officer & Director, Kimco Realty Corp. David Jamieson
Chief Operating Officer & Executive Vice President, Kimco Realty Corp.
Ross Cooper
President & Chief Investment Officer, Kimco Realty Corp.
......................................................................................................................................................................................................................................................
OTHER PARTICIPANTS
Richard Hill Ki Bin Kim
Analyst, Morgan Stanley & Co. LLC Analyst, Truist Securities, Inc.
Derek Johnston Floris van Dijkum
Analyst, Deutsche Bank Securities, Inc. Analyst, Compass Point Research & Trading LLC
Alexander Goldfarb Tamara Fique
Analyst, Piper Sandler & Co. Analyst, Wells Fargo Securities LLC
Craig Schmidt Linda Tsai
Analyst, BofA Securities, Inc. Analyst, Jefferies LLC
Lili Peng Greg McGinniss
Analyst, BMO Capital Markets Corp. Analyst, Scotia Capital (USA), Inc.
Caitlin Burrows
Analyst, Goldman Sachs & Co. LLC
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Q1 2021 Earnings Call 29-Apr-2021
MANAGEMENT DISCUSSION SECTION
Operator: Good morning and welcome to Kimco First Quarter 2021 Earnings Conference Call. All participants
will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask
questions. [Operator Instructions] Please note that this event is being recorded.
I would now like to turn the conference over to David Bujnicki. Please go ahead, sir.
......................................................................................................................................................................................................................................................
David F. Bujnicki
Senior Vice President-Investor Relations & Strategy, Kimco Realty Corp.
Good morning and thank you for joining Kimco's first quarter earnings call. The Kimco management team
participating on the call today include Conor Flynn, Kimco's CEO; Ross Cooper, President and Chief Investment
Officer; Glenn Cohen, our CFO; David Jamieson, Kimco's Chief Operating Officer; as well as other members of
our executive team that are also available to answer questions during the call.
It is important to note that we will need to keep this call focused on Kimco's first quarter earnings results and
outlook as a standalone company with more information forthcoming when the merger proxy statement is filed
with the SEC. As a reminder, statements made during the course of this call may be deemed forward-looking and
is important to note that the company's actual results could differ materially from those projected in such forward-
looking statements due to a variety of risks, uncertainties, and other factors. Please refer to the company's SEC
filings that address such factors.
During this presentation, management may make reference to certain non-GAAP financial measures that we
believe help investors better understand Kimco's operating results. Reconciliations of these non-GAAP financial
measures can be found in the Investor Relations area of our website. Also, in the event our call was to incur
technical difficulties, we will try to resolve as quickly as possible, and if the need arises, we'll post additional
information to our IR website.
And with that, I'll turn the call over to Conor.
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Conor C. Flynn
Chief Executive Officer & Director, Kimco Realty Corp.
Good morning, and thanks for joining us today. Today, I will focus my remarks on our leasing results, the supply
and demand dynamics surrounding those results and the exciting strategic direction we are taking the
organization. Ross will cover the transaction market, and Glenn will cover the quarterly numbers and our updated
guidance.
2021 is off to a refreshing and good start with robust demand for space in our last-mile, open-air, grocery-
anchored portfolio coming from both well capitalized omni-channel tenants seeking more market share as well as
some smaller businesses that have regrouped and are prepared to reinvest in their business model. The largest
leasing demand categories include restaurants, personal care, fitness, and dollar stores. We also see healthy
activity and have consummated multiple leases with grocery stores, off-price, and pet supply retailers.
Our leasing volume continued to build from the record setting trend last quarter. Our new lease count was 121,
totaling 586,000 square feet. This exceeds both last quarter and the prior year courters. Of particular note, the
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Q1 2021 Earnings Call 29-Apr-2021
586,000 square feet of volume surpassed our five-year first quarter average for new lease GLA of 506,000 square
feet. And new lease spreads finished at a positive 8.2% pro rata. We closed the quarter with 237 renewals and
options, totaling 2.2 million square feet with GLA exceeding the quarter sequentially and the prior year quarter.
Renewal and auction spreads finished at 6.4% pro rata. These spreads continue to reflect the recovery underway
and the pricing power inherent in the quality of our portfolio.
Conversely, our ability to have withstood the impact of the pandemic reflects the defensive nature and strength of
our recurring cash flows. From a supply and demand perspective, the reality is that due to the speed of the
recovery, pandemic-induced vacancies were short lived with limited new supply, market rents never adjusted
down in any meaningful way. So, when the demand snap back, we generated positive spreads. While our
occupancy dipped slightly from year end to 93.5%, it strengthened as we moved through the quarter. It is our
intent to continue expanding occupancy and we are encouraged by multiple demand factors playing to the
strength of our last-mile location.
Our job is clear, focus on the blocking and tackling of leasing, work with best-in-class retailers, enhance the
merchandising mix and let the numbers speak for themselves as we strengthen the resiliency of our cash flows.
Our first, second and third priorities are leasing, leasing, leasing. And we continue to believe we are in the early
innings of this reopening and recovery. In addition to leasing, we are prioritizing our smaller redevelopments that
average double-digit returns to create an additional organic growth driver. Long-term, we believe our entitlement
program will continue to create shareholder value as we unlock the highest and best use of our real estate.
The pandemic has both validated and strengthened our conviction and our strategic vision to concentrate our
open-air, grocery-anchored, and mixed-use portfolio in the top MSA across the country. Tenants no longer look at
the last-mile stores simply a retail destination rather its value to retailers is now viewed holistically providing
distribution, fulfillment, and retail. In valuing a location, retailers assess their ability to integrate e-commerce in
bricks-and-mortar to give the customer what they demand. Convenience, value, and a fulfilling experience
continues to point to the last-mile shopping center as mission critical for both consumers and retailers.
Our platform is well-positioned for growth and with that growth will come further debt reduction and other benefits
of scale. We are enthused about the opportunities ahead yet recognize the challenges involved. We remain
committed to prioritizing ESG initiatives and supporting our tenants and local communities as we continue to
navigate the pandemic and beyond.
I'd also like to touch on the exciting recent news regarding our highly strategic merger with Weingarten, a
transaction that we expect to unlock considerable value in some of the highest growth markets in the country. By
coming together, we will be the nation's preeminent open-air grocery-anchored shopping center in mixed-use real
estate platform. With our focus on these last-mile locations and increased scale in our targeted high growth
sunbelt markets, this transaction will significantly strengthen and enhance our portfolio quality to further gain
market share and to make Kimco even more valuable to all of our tenants.
In closing, Kimco's open-air and grocery-anchored portfolio, diverse tenant mix, targeted geographic presence in
the strongest growth markets in the country, and improving balance sheet provide us with a long runway for
growth as we move ahead. Needless to say, the entire organization is generally energized by our efforts to build
shareholder value.
With that, I'll turn the call over to Ross.
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Q1 2021 Earnings Call 29-Apr-2021
Ross Cooper
President & Chief Investment Officer, Kimco Realty Corp.
Thank you, Conor, and good morning. What a difference a quarter makes. With continued recovery from the
pandemic, vaccination rollout, and reduced capacity restrictions across the country, we have seen optimism
building from retailers, consumers, and real estate investors at the highest levels since the pandemic began
almost 14 months ago. Specific to the transaction [indiscernible] (00:07:42) industry volume while still off nearly
40% in the first quarter of 2021 compared to 2020 has seen a meaningful uptick from the back half of 2020. The
conviction and the stability of property rent rolls and by extension cash flows has grown beyond only the essential
retailers and now includes other categories that were much less clear previously. There is no doubt the grocery-
anchored shopping center is still the most in demand category of retail and continues to command the most
aggressive pricing and lowest cap rates. Furthermore, open-air is valued at an even higher premium. Recent
transactions with more specialty and lifestyle components in addition to traditional power centers have given
transparency to the value and stability that our approach provides.
Multiple grocery-anchored deals have transacted at sub 6% cap rates in Dallas, South Florida, California,
Philadelphia, and Seattle to name a few. There are also no signs of investor demand waning for that product type.
We anticipate bidding to become even more aggressive as the spread of cap rates to interest rates remains wide
for our asset class particularly when compared to industrial, multi-family, self-storage, and others. More recently,
aggressive bidding extending beyond the bread-and-butter neighborhood products is starting to emerge. Two
recent deals that have a grocery store but also a significant restaurant and entertainment component saw bidding
wars with multiple rounds of offers and pricing well beyond initial expectations. These properties located in Dallas
and Denver have the mix of grocery traffic, restaurants and entertainment, last-mile infill locations, and future
densification opportunities that investors are excited about.
On the financing side, an equally important observation is the re-emergence of the traditional lender in the space.
While the down the fairway grocery-anchored assets have been financeable throughout the pandemic, lenders
were requiring significant holdbacks and structure around deals with perceived risk. As positive trends continue to
emerge, that is having direct impact on the transaction market with more deals getting across the finish line at
superior pricing and terms. With renewed optimism and conviction comes a vibrant transactions market in which
we will remain a disciplined player and we expect to see deal velocity continue to accelerate which is a great sign
for the continued recovery of our industry.
Now, on to Glenn for the financial results for the quarter.
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Glenn Gary Cohen
Chief Financial Officer, Treasurer & Executive Vice President, Kimco Realty Corp.
Thanks, Ross, and good morning. The positive results we drove in the fourth quarter last year continued into the
first quarter of 2021. With the backdrop of an improving economy and strong leasing velocity, our solid
performance was highlighted by improved rent collections and lower credit loss relative to the fourth quarter last
year. Our balance sheet metrics also strengthened. We continue to benefit from all the capital markets activity we
undertook the past 24 months to enhance our financial structure.
Now, for some details on first quarter results. NAREIT FFO was $144.3 million with $0.33 per diluted share for the
first quarter 2021 as compared to $160.5 million or $0.37 per diluted share for the first quarter of the prior year.
The reduction was mainly driven by lower pro rata NOI of $13.6 million due to COVID-related rent abatements
and credit loss, as well as the impact of lower occupancy on net recovery income, below market rent recaptures,
and straight-line rent. These NOI reductions were offset by a $5.5 million onetime benefit from lease terminations.
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Q1 2021 Earnings Call 29-Apr-2021
Also impacting NAREIT FFO was $5.4 million of higher G&A and interest expense due to lower capitalization from
development and redevelopment projects that had been placed in service. Our operating portfolio is continuing to
perform effectively. All our shopping centers are open and over 98% of our tenants are operating. With the strong
leasing velocity as Conor discussed, our lease first economic spread has increased to 230 basis points,
representing a total of $27 million of pro rata ABR which is an excellent indicator of future cash flow growth. As
expected, same-site NOI decreased 5.7% for the first quarter as it comped against a largely pre-COVID first
quarter in 2020. It also marks significant progress from the prior sequential quarter which was down 10.5%. The
improvement was mainly attributable to lower credit loss.
We collected 94% of pro rata base rents billed during the first quarter of 2021 up from 92% for the fourth quarter
last year. Our cash basis tenants represent 8.9% of ABR and we collected 70% from these tenants during the first
quarter. In addition, our deferred rent payments had been strong as we collected 84% of deferred rents billed for
the first quarter with $34.1 million of deferred rent remaining to be billed.
Turning to the balance sheet. Our metrics continue to improve and our liquidity position is in excellent shape. At
the end of the first quarter, consolidated net debt to EBITDA was 6.7 times, and on a look-through basis including
pro rata share of JV debt and preferred stock outstanding, the level was 7.4 times. This represents further
progress from the year end 2020 levels of 7.1 times for consolidated net debt to EBITDA and 7.9 times on a look-
through basis. In addition, Moody's has affirmed our Baa1 unsecured debt rating with a stable outlook.
From a liquidity standpoint, we ended the first quarter with over $250 million of cash and the full availability on our
$2 billion revolving credit facility. In addition, our Albertsons marketable security investment is valued at over $750
million. Our debt maturities remain minimal as we have only $125 million of consolidated mortgages maturing this
year which will be repaid in the second quarter. As a result, we will be unencumbering an additional 23 properties.
Our weighted average debt maturity profile stands at 10.7 years, one of the longest in the entire REIT industry.
Based on the first quarter results and expectations for the remainder of the year that includes same-site NOI
turning positive in the second quarter along with further improvement in credit loss during the second half of the
year, we are raising our NAREIT FFO per share guidance range to $1.22 to $1.26 from $1.18 to $1.24 previously.
As a reminder, our increased guidance range is on a standalone basis and does not incorporate any impact from
the pending merger with Weingarten. In addition, the guidance range assumes no transactional income or
expense and no monetization of our Albertsons investment.
And with that, we are ready to take your questions.
......................................................................................................................................................................................................................................................
David F. Bujnicki
Senior Vice President-Investor Relations & Strategy, Kimco Realty Corp.
Before we start the Q&A, I just want to offer a reminder that this call will focus on our first quarter results and
request that you confine your questions and comments to these results and not the announced merger with
Weingarten. To maintain an efficient Q&A session, you may ask a question with an additional follow-up. If you
have additional questions, you're more than welcome to rejoin the queue. Operator, you may take our first caller.
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Q1 2021 Earnings Call 29-Apr-2021
QUESTION AND ANSWER SECTION
Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question comes
from Rich Hill from Morgan Stanley. Please go ahead, sir.
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Richard Hill
Analyst, Morgan Stanley & Co. LLC Q
Hey, Glenn. Thanks for the disclosure in the prepared remarks. I just wanted to make sure I was clear on the
percent of rent collections for the cash-based tenants, I know it's 8.9% of ABR, you collected 70% of those
tenants. Is there any way you could tell us what same-store NOI would be ex those collections, just so we could
get a better sense of the core portfolio?
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Glenn Gary Cohen
Chief Financial Officer, Treasurer & Executive Vice President, Kimco Realty Corp. A
So, just going back a little bit, the cash basis tenants, there was about $7 million collected that related to a prior
period from last year. So, those came in during the first quarter. So, if you added – if you didn't have those, that
would have an impact on same-site of about 320 basis points.
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Richard Hill
Analyst, Morgan Stanley & Co. LLC Q
Got it. That's really helpful. I appreciate that. Just a quick, maybe nuanced question, but I think it's important.
Could you maybe walk us through what percent of tenants are in bankruptcy and then what percent of rent you
collected on those bankruptcy tenants?
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A
Hey, Rich, it's [ph] Kathleen (00:17:32). I can actually help you out with that one. So, if you recall in the end of
2020, several of our tenants actually emerged from bankruptcy. So, we ended the year at about 70 basis points of
our ABR being related to [ph] BNK tenants (00:17:46). And actually as of Q1, it's down to 20 basis points, so it's a
small portion of what we have in our ABR at this point.
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Richard Hill
Analyst, Morgan Stanley & Co. LLC Q
Got it. Hey, Dave is that one question or two questions? Can I ask one more?
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David F. Bujnicki
Senior Vice President-Investor Relations & Strategy, Kimco Realty Corp. A
You got one more. [ph] That didn't seem like a follow-up (00:18:02).
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Richard Hill
Analyst, Morgan Stanley & Co. LLC Q
Just a quick question on the 2025 outlook in the same-store NOI. I guess the question I would have is why can't
you grow any fast – why can't you grow faster than the plus 2% that you referenced? It would seem like given the
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Q1 2021 Earnings Call 29-Apr-2021
tailwinds to the retail sector maybe some of the e-commerce trends that are emerging seems like maybe you
could grow above inflation. So any context there would be a little bit helpful.
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Conor C. Flynn
Chief Executive Officer & Director, Kimco Realty Corp. A
Yeah, hey, Rich, it's Conor. We definitely think that that's an achievable goal in the near-term. But again, this is a
long-term goal. So, the way we look at it is there's obviously going to be an uptick in terms of same-site NOI
through this pandemic field recovery. And then if you notice, we did put 2.5% plus. So, our goal is to beat that
metric. We clearly see a lot of levers for growth as we outlined in the call in the remarks. And our job is to beat
that number. And obviously, we think we're in a good spot to do that in the near-term.
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Richard Hill
Analyst, Morgan Stanley & Co. LLC Q
Great. Thanks, guys.
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Operator: The next question comes from Katy McConnell from Citi. Please go ahead.
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Q
Hey, this is [ph] Christian Curry (00:19:19) with Katy. Just on the grocery leasing front, how sustainable do you
view this elevated level of grocery demand? If there is more pent-up consumer demand to return to say
restaurants or other venues post pandemic?
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David Jamieson
Chief Operating Officer & Executive Vice President, Kimco Realty Corp. A
Yeah, hey, this is Dave Jamieson. Right now, we're seeing obviously very strong demand and we anticipate that
this – some level of demand will sustain longer-term. I think what you're seeing is people starting to adapt and
innovate to what the consumer needs and proximity to the end customer is critical. So that last-mile distribution
element, we don't really see changing in the future. Yes, there will be a reversion of some sort of new normal
where people will start to go back to restaurants and some of those dollars spent will be diverted to that category.
But when you listen to some of the grocers, public companies that are making – observing how their customers
reacting and responding as a new normal starts to take hold, they are still seeing a net-net gain to market share
and shopping at home. And I think people have adapted to not only going in-store but obviously utilization of
omni-channel vehicles for accessing those groceries. So, when you throw that all together, we still see the
demand drivers being very strong. And based on where we're located in those first ring suburbs where there's
been a lot of migration out through the pandemic starting to take hold, we still see the demand being strong in the
future.
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Conor C. Flynn
Chief Executive Officer & Director, Kimco Realty Corp. A
Yeah, the only thing I would to add is it's great to have a diversity of demand that's not sort of pigeonholed in one
square footage category. So, grocers right now spread from the bigger boxes to the junior boxes to even the mid-
sized boxes of like 10,000 to 12,000 square feet with Trader Joe's and others, so it's really remarkable to have a
growth driver that spans all the major categories in terms of square footage needs which is really I think again
why we're so confident that we can continue to drive that driver for us.
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Q
Yeah, got it. Helpful color. And a quick follow-up, could you comment on your strategy around some of the
Albertsons investments. Just comment on some of the lockup provisions and maybe your intentions to monetize
that investment?
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Glenn Gary Cohen
Chief Financial Officer, Treasurer & Executive Vice President, Kimco Realty Corp. A
Sure. It's Glenn. So, as it relates to Albertsons, the lockup burns off 25% each six months, so the first 25% did
burn off at the end of December, the next 25% would happen at the end of June. There still are other
requirements related to our partners around it. And as I mentioned in my prepared remarks, we're not anticipating
monetizing anything in Albertsons this year. As we've talked about, we do see real opportunity in 2022 to start
monetizing it and using it towards debt reduction or redemption of our perpetual preferreds that become callable
in 2022.
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Q
Got it. Thanks, guys.
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Operator: The next question comes from Derek Johnston from Deutsche Bank. Please go ahead.
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Derek Johnston
Analyst, Deutsche Bank Securities, Inc. Q
Hi, everybody. Good morning and thanks. On private markets, Ross, can you discuss how pricing and cap rates
are holding up in the Northeast versus the sunbelt or the markets you mentioned in Dallas and Denver or South
Florida. And look guys, I'm not asking for updated disposition guidance, right, but given the merger, there are
likely some non-core dispose that you may be able to take advantage of. So, any enhanced color by geography
would be helpful.
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Ross Cooper
President & Chief Investment Officer, Kimco Realty Corp. A
Sure. Happy to respond to that. We are seeing robust demand across the country. I mean there's no doubt that
there's significant demand in the Sunbelt, other parts of the country that have been open more so than others
throughout this pandemic. But when you look at the essential base retailers throughout the country, they have
been operating and doing well throughout. So, we are still seeing a significant amount of demand in the Northeast
whether it be the New York suburbs, Boston, Philadelphia, et cetera. And when you think about the migration
demographics, obviously, there is a lot of headlines about the Sunbelt in Florida and the Carolinas in Texas. So,
you're also seeing it here in the New York Metro area where we're based is that a lot of people that are leaving
the cities here are moving to the suburbs in Long Island, Westchester, Connecticut, et cetera. So, there is an
uptick still happening in those suburbs. And we think that there is something to take advantage of there and
investors are certainly doing that. As it relates to future dispositions for us, we'll continue to look at our portfolio.
We think that we're in great shape. We do have some non-income producing land parcels that you'll continue to
us chip away at. But again, when we think about the list that we've done over the last five to seven years and
where the portfolio stands today, we feel very good about those markets. Those opportunities that we have and
the go-forward portfolio that we'll be operating.
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Q1 2021 Earnings Call 29-Apr-2021
Derek Johnston
Analyst, Deutsche Bank Securities, Inc. Q
Okay. Okay. Great. So, given the pandemic washed out a lot of weaker retailers, how does your watch list stand
today as we hopefully move past the pandemic and are elevated bankruptcies possibly in the rearview mirror at
least for a while?
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David Jamieson
Chief Operating Officer & Executive Vice President, Kimco Realty Corp. A
Yeah, this is Dave. In terms of our watch list, it's obviously the categories are most greatly affected through the
pandemic, the theaters, the fitness, et cetera. We continue to watch and they stay there. There hasn't been much
change beyond that. Obviously, Q1 was a muted bankruptcy season. Historically, that's usually where it is a bit
elevated. And when you look at those that went into bankruptcy in 2020, a lot of those reemerged with better
balance sheets. They're able to recapitalize, come out, trim their portfolios, and start to take advantage of some of
this reopening trade. Now, we'll continue to closely watch and monitor the health of all of our tenants, really
looking two years' out as we start to get to a new normal and stabilize, and this surplus of cash that some did
receive throughout the pandemic, it's more a matter of where they made those investments and the operators that
really started to innovate through this and stay ahead of the curve, what the expectations are for consumers.
That's what we're really going to start to watch very closely. And you'll start to see sort of who the winners and
losers are downstream more so than they are today.
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Ross Cooper
President & Chief Investment Officer, Kimco Realty Corp. A
So, the only thing I would add to that is clearly some of the tenants that reorganized have not necessarily gotten
their footing underneath them quite yet. They are still maybe in those categories that have capacity constraints.
So, we're watching that closely as they obviously have done a debt for equity swap, but there's still some
opportunities I think there for us to upgrade tenancy in the long-term and we're watching those tenants closely.
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Derek Johnston
Analyst, Deutsche Bank Securities, Inc. Q
Thanks, guys.
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Operator: The next question comes from Alexander Goldfarb from Piper Sandler. Please go ahead.
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Alexander Goldfarb
Analyst, Piper Sandler & Co. Q
Hey, good morning. So, hey, sorry about that. So two questions here. First, on the ESG front and I'm not just
talking like solar panels on roofs, but it would seem like shopping centers are really well-positioned on the ESG
front, not only just supporting local economies, small business, et cetera, but also just from the benefit of
centralized procurement, right. People drive to the shopping center. They can return items rather than throwing
them out. You don't have individual boxes. You don't have individual trucks driving in neighborhoods. What are
you guys thinking around this either individually or collectively as an industry to really showcase the benefits that
physical retail has in promoting ESG?
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Conor C. Flynn
Chief Executive Officer & Director, Kimco Realty Corp. A
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Q1 2021 Earnings Call 29-Apr-2021
Yeah, so it's a great question. And you have to take into consideration all the different constituents that go into
making up a shopping center, it's obviously the end shopper, the customer, the retailers, and ourselves as a
landlord. For us as a landlord, we've always looked at ourselves as a conduit to bring all these retailers to the
customer and vice versa and try to find ways in which we can service everyone collectively. So, when you think of
curbside what we did in 2020, the intent there was to build a program and infrastructure that was agnostic to the
retailer so that everyone can take advantage of it to avoid having a separate approach for each individual retailer
that we saw as being very successful. That said, every retailer has their own defined strategy and which they're
trying to solve for their own unique problems. And there do become challenges when you try to consolidate them
all into one central vision and that's our job is to continue working with each of these retail partners to find the best
way forward. And as we look to continue to innovate within our common areas and the way we work with our
retailers, our goal is to try to find those uniform strategies that do work for all or at least solve for that 80%. And
then, with the customer, obviously, the closest we are to the home as you mentioned, it does provide that
opportunity for them to return or to revisit and to cut down the travel time and the shipping costs. Obviously, we
see that as a clear advantage for retailers with buy-online-pickup-in-store. More and more retailers are taking
advantage of that today. But this is going to be an evolving process. I think the pandemic did accelerate some of
those trends, i.e., with curbside that helped pull it forward a couple years, something that we've been talking about
for a while. But it's our job to continue to stay on top of that and to innovate where we can to provide those suite of
services.
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Alexander Goldfarb
Analyst, Piper Sandler & Co. Q
Yeah, but it would just seem like you guys have a benefit especially as more investor funds have ESG mandates
to really showcase the true impact rather than just [indiscernible] (00:29:37) like solar panels? It would just seem
there's a lot of [indiscernible] (00:29:41) data that you guys can provide to the investment community to really
highlight the benefits of [indiscernible] (00:29:48).
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Conor C. Flynn
Chief Executive Officer & Director, Kimco Realty Corp. A
Yeah, we agree. We agree by the way. The only thing I would add is that I think we're going to coordinate with
[ph] ICSC (00:29:54) and others to – I think the voice is louder when we can combine all of our efforts. And so, I
think there's a lot of public and private landlords that can come together and we can help facilitate that to really
make that point because I agree with you, Alex. The other piece of it that I was just going to mention is ESG
clearly is a benefit to our entitlement program, because Kimco has been so focused on this for decades. When we
come into a community and showcase that we're in it for the long-term and that we want to work alongside the
community to make sure that the asset or the downtown that we're providing evolves alongside the community,
we can showcase our ESG initiatives and all the accomplishments that we've been making to give ourselves the
opportunity to partner with those folks and it really does help when we look to try and focus on entitlements and
how to unlock the highest and best use of the real estate.
......................................................................................................................................................................................................................................................
Alexander Goldfarb
Analyst, Piper Sandler & Co. Q
Okay. The second question is just on rent collection. Almost all of your categories have really rebounded, but
fitness, personal services, and restaurants are still lagging. Restaurants are doing quite well actually, but still it
looks like there's some more room to go. Is your view by sort of end of summer that really fitness and personal
services will have fully rebounded to be something north of, call it, 85%? Or there are some issues that you can
see that's going to hinder the recovery of those two categories?
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Q1 2021 Earnings Call 29-Apr-2021
David Jamieson
Chief Operating Officer & Executive Vice President, Kimco Realty Corp. A
No, I think the biggest holdback is the capacity, right. I mean despite there being some great success stories,
parts of the country where capacity levels have increased substantially, there's other parts of the country that are
still a little bit behind and they're just trying to manage through the spikes of [ph] current buyer said (00:31:41) at a
local level. So, we envision as those capacity constraints continue to get lifted more broadly across the rest of the
country that will clearly be a big boost and a tailwind for those other service categories that have been hindered
by that. In the summer, the summer should show quite well for that hopefully. There's also been with those
operators and fitness, there's a number of operators that haven't reopened or won't plan to reopen. So, when you
think of the supply levels coming down a little bit, we do anticipate the demand side to build, people wanting to get
out of there at-home gym or the garage where ever they've been working out for the year and wanting to get back
into some sort of facility where there is some social engagement and community, so that should help as well.
......................................................................................................................................................................................................................................................
Alexander Goldfarb
Analyst, Piper Sandler & Co. Q
Thank you.
......................................................................................................................................................................................................................................................
Operator: The next question comes from Craig Schmidt from Bank of America. Please go ahead.
......................................................................................................................................................................................................................................................
Craig Schmidt
Analyst, BofA Securities, Inc. Q
Thank you. I wonder, and this maybe for Ross, where do you see Class A grocery-anchored shopping center cap
rates and how does that compare to the pre-COVID level?
......................................................................................................................................................................................................................................................
Ross Cooper
President & Chief Investment Officer, Kimco Realty Corp. A
Yeah, I mean they continue to be extremely aggressive, and frankly compared to pre-COVID and many cases,
the cap rates are even lower and more aggressive. We've seen lots of different examples in the low 5s, in some
cases sub 5%. And a lot of that just has to do with some of the other dynamics of the demographics obviously
which tenant is the anchored grocer there, what the lease looks like, where the rents are compared to market, and
frankly how much term is left where you can actually look at recasting that lease and pushing rents a little bit. But
as you've seen from the collections, there is a lot of conviction in the rent roll outside of just the grocer, the small
shops, and some of the other ancillary tenants are coming back in a big way. So, when you see the stability in the
rent rolls, you see the stability in the cash flow, and still a very healthy spread from interest rate to cap rate.
There's more and more conviction in our space today than what we've seen in a very long time.
......................................................................................................................................................................................................................................................
Craig Schmidt
Analyst, BofA Securities, Inc. Q
Yeah, my sense is just the resiliency the format showed during COVID increased its appetite to investors and with
so much capital on the sidelines, it seems like cap rates could in fact be lower.
......................................................................................................................................................................................................................................................
Ross Cooper
President & Chief Investment Officer, Kimco Realty Corp. A
Yeah, and it's not just your typical investors that we've seen in years past, we're seeing a lot of buyers and
bidders today that have historically been buying in other asset classes that they're just sick of getting priced out or
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Q1 2021 Earnings Call 29-Apr-2021
getting the cap rates compressed so low that there's not enough spread and they see the risk adjusted return in
our space.
......................................................................................................................................................................................................................................................
Craig Schmidt
Analyst, BofA Securities, Inc. Q
Great. And then just maybe for David, I know you've been touching on this a bit, but which tenants are not
participating in this reopening period?
......................................................................................................................................................................................................................................................
David Jamieson
Chief Operating Officer & Executive Vice President, Kimco Realty Corp. A
When you say not participating, meaning those that have still remain closed?
......................................................................................................................................................................................................................................................
Craig Schmidt
Analyst, BofA Securities, Inc. Q
Yeah, not only that, but they don't want to open. I mean we're hearing the FOMO in the restaurant category that
obviously had a rough time during COVID. But I'm just wondering if there are categories where meaning there are
people on the sidelines, I know that Conor mentioned some people who are still through some reorganization
trying to get their feet on the ground. But I'm just – not every category I assume is participating equally in the
reopening period and I just wonder if you had some insight on which ones aren't?
......................................................................................................................................................................................................................................................
David Jamieson
Chief Operating Officer & Executive Vice President, Kimco Realty Corp. A
Sure. All the industry sectors are reopening at some capacity. And even with some of the big flags, they're
focused on trying to get as many stores open as possible or fitness or theater locations. AMC is effectively all
open where there are constraints. It's either on a one-off basis, individual basis, where some locales and
municipalities are inhibiting that or rolling back restrictions again or it's kind of on a one-off basis. But generally
speaking, I think the reopening trade is starting to accelerate as the vaccine distribution does pick up. So, from an
industry standpoint, we are seeing reopenings across the board.
......................................................................................................................................................................................................................................................
Conor C. Flynn
Chief Executive Officer & Director, Kimco Realty Corp. A
Craig, the only one that I can think of that's probably tied a little bit to going back to work is the dry cleaners. They
obviously got hit very hard as people were working from home and they might be beneficiaries of going back to
work in the summer when offices reopen.
......................................................................................................................................................................................................................................................
Craig Schmidt
Analyst, BofA Securities, Inc. Q
Great. That makes a lot of sense. Thanks, guys, for the answers.
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Operator: The next question comes from Juan Sanabria from BMO Capital Markets. Please go ahead.
......................................................................................................................................................................................................................................................
Lili Peng
Analyst, BMO Capital Markets Corp. Q
Hi, this is Lili Peng with Juan Sanabria. Good morning, guys. I just have a question on inflation. Do you have any
focus on leasing discussions to put the company in a better position should inflation accelerate from here? Do you
plan to change release breakdown, [ph] what's fixed versus CPI based (0:36:44)?
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Q1 2021 Earnings Call 29-Apr-2021
Glenn Gary Cohen
Chief Financial Officer, Treasurer & Executive Vice President, Kimco Realty Corp. A
We continue to work on a percentage rent, percent increase basis versus a fixed dollar amount increase. So
typically, with those percent increases in base rent, that tends to trend well with inflation.
......................................................................................................................................................................................................................................................
Lili Peng
Analyst, BMO Capital Markets Corp. Q
Thank you. Just a quick follow-up, I think you mentioned abatements this quarter were partially offset by some
changes in reserves. Could you please recall these pieces? What's the amount reserve in fee rates?
......................................................................................................................................................................................................................................................
A
Sure. So, during that the quarter, we recognized $8.9 million in abatement and about half of that was related to
prior periods for which there was a significant reserve on those abatement.
......................................................................................................................................................................................................................................................
Lili Peng
Analyst, BMO Capital Markets Corp. Q
Thank you. Appreciate it.
......................................................................................................................................................................................................................................................
Operator: The next question comes from Caitlin Burrows from Goldman Sachs. Please go ahead.
......................................................................................................................................................................................................................................................
Caitlin Burrows
Analyst, Goldman Sachs & Co. LLC Q
Hi, good morning. Sorry, if I missed this. But I was wondering if could give some color on your outlook for
occupancy over the course of the year on the anchor and small shop side, I guess given the leasing that you've
done, the current watch list and upcoming maturities, lease maturities, do you think occupancy may have
troughed or do you think there is still more downside risk?
......................................................................................................................................................................................................................................................
Conor C. Flynn
Chief Executive Officer & Director, Kimco Realty Corp. A
Yeah, that's a great question. So, we've been messaging previously that we anticipate Q2 most likely to be the
trough of occupancy for 2021. We continue to make great progress and headway with our lease philosophy
obviously in Q1 and we started to see a net benefit of gaining back some of the some of the dip towards the end
of Q1, which was encouraging. We do have Dania that's going to be placed into service and to occupancy in Q2.
So, that is going to have a bit of an impact. But on the flip side, it also will start to expand our lease economic
occupancy, so it'll help continue to fuel cash flow growth through the back half of 2021 and into 2022. So, we're
continuing to be encouraged by the momentum that we're seeing on the lease side and hope to see it start to
level out shortly.
......................................................................................................................................................................................................................................................
Caitlin Burrows
Analyst, Goldman Sachs & Co. LLC Q
Okay. And then, separately but kind of related, Dania Pointe and The Boulevard are obviously two large
developments that you guys were working on for a while and they should be ramping up NOI. So, I was
wondering if you could give some detail on the amount of NOI currently being recognized by these properties
versus what's still to come and over what timeframe we should expect that to happen?
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