Kimco Realty Corporation (HC)

Good morning. Welcome to Kimco fourth quarter 2020 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to David Bushnicki, Senior VP, Investor Relations and Strategy. Go ahead.

Good morning, and thank you for joining Kimco's fourth quarter 2020 earnings call. The Kimco management team participating on the call today include Connor Flynn, Kimco's CEO, Ross Cooper, President and Chief Investment Officer, Glenn Cohen, our CFO, David Jameson, Kimco's Chief Operating Officer, as well as other members of our executive team that are also available to answer questions during the call. As a reminder, statements made during the course of this call may be deemed forward-looking. It 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 measures can be found in the investor relations area of our website. Also, in the event our call was to incur technical difficulties, we'll 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 Connor.

Thanks, Dave. Good morning, and thanks for joining us today. I will begin by giving a quick overview of our accomplishments in 2020 and our strategic focus for 2021 and beyond. Ross will follow with updates on transactions, and Glenn will close with our key metrics and guidance for 2021. For all of us, 2020 was a year that will not soon be forgotten. COVID, the political landscape, social unrest, and the responses to these events all converged in a way that will forever change our way of life. 2020 was also a year that demonstrated in volatile times the best companies are the ones that are able to withstand economic challenges, mitigate risk, and take advantage of opportunities. In the shopping center sector, this requires a strong balance sheet, a resilient, well-located portfolio, and a superior management team. I am happy to report that while we are not immune to the volatility of 2020, IMCO's open-air grocery-anchored shopping centers and mixed-use assets performed well, and we have stayed strong, confident, and positive about the opportunity in the coming years. Our portfolio withstood all that the pandemic threw at us as our 2020 vision strategy to reposition our portfolio was validated. Our grocery anchored essential services and mixed use assets concentrated in the strongest markets in the U.S. proved resilient. In 2020, we saw continued improvement in both the percentage of ABR coming from essential retailers and grocery anchored centers. Growing the portfolio from 77% of ABR from grocery anchored properties to 85% plus remains a strategic focus across the organization. We are encouraged by the progress and the increasing level of opportunities in the pipeline we are currently evaluating. As part of these efforts, we are pleased to share today the upcoming opening of Amazon Fresh at our Marketplace at Factorio in Bellevue, Washington. During the fourth quarter, we executed 92 new leases, totaling 406,000 square feet, which exceeded the amount achieved in the fourth quarter of 2019. The true test of a portfolio's quality and durability is leasing and the ability to drive rent. To that point, new leasing spreads remain positive, rising 6.8% during the fourth quarter. We anticipate that our range between economic and physical occupancy will continue to widen as a precursor to future cash flow growth. With the help of our nationwide network of relationships, tenants, brokers, and our in-house team, we are experiencing robust demand from our essential retailers. who continue to take advantage of the COVID surge that allows them to boost cash reserves, invest in existing stores, and expand their store portfolio to better serve their customers. We are also laser-focused on keeping our existing tenants and continue to do everything we can to help them overcome the pandemic and to be positioned to prosper. Our Tenant Assistance Program, or TAP, helps small businesses navigate the new round of PPP funding. After successfully helping our small shop tenants navigate the first round of PPP funding, we believe we have aligned with best-in-class partners to continue to aid our small business tenants in accessing capital at their most critical time of need. Our strong balance sheet, well-positioned portfolio, and tenant initiatives are all the result of our best-in-class team and approach. Specifically, our leasing team is proactive in its efforts to work with current and prospective tenants And our finance, planning, technology, investor relations, and legal teams effectively navigated numerous obstacles and kept us focused without skipping a beat. So where do we go from here? First, our highest priority is leasing, leasing, leasing. The good news is we have visible growth in the portfolio and meaningful free cash flow to fund our leasing strategy. This has provided us the confidence to provide an outlook for 2021. We anticipate the first half of the year to remain challenging. especially for those categories dramatically impacted by the pandemic-induced shutdowns. It is worth highlighting that our team pushed this portfolio to all-time high occupancies pre-pandemic, and we are determined to get back to that level and exceed it. While anticipating the speed at which we will recover NOI is challenging, we do expect rents to hold up, especially in our well-located boxes that are in high demand from categories that include grocery, off-price, home goods, home improvement, furniture, health, wellness, medical, and beauty. Interesting to note, we are starting to experience a rebound in both restaurant demand and value fitness retailers. Finally, on our long-term strategic focus, we continue to believe that streamlining the portfolio over the past five years will result in meaningful long-term value creation for our shareholders. We are focused on the highest and best use of our real estate and believe the 80-20 rule applies to our assets and gives us tremendous flexibility and adaptability to create value in the future through our entitlement initiative. Specifically, 80% of our real estate consists of parking lots that are not generating any revenue, and 20% is single-story buildings. With our focus on clustering our assets in dense areas with significant barriers to entry, our assets are in an ideal position for growth, as the surrounding areas have gone vertical. Our entitlement team is sharing our ESG accomplishments with all local municipalities as part of our efforts to show that we will be good stewards of their neighborhoods and that we want to work together to make sure our assets continue to evolve alongside the community. We believe it is important that our approach to real estate evolve with changing circumstances because that is exactly what our tenants are doing. The best-in-class tenants are looking at their real estate differently, and in many cases, Their real estate team is now integrated into the entire supply chain. Distribution, fulfillment, e-commerce, and store decisions are all integrated on how to best service the customer. The store, which is optimized for distribution and fulfillment, continues to shine as the most economic way to get goods and services into customers' hands. Best Buy CEO Corey Berry at the CES conference was very clear when she said, Physical stores are expected to play a massive role in the company's fulfillment efforts. Target also stated that more than 95% of sales are fulfilled by its stores. I continue to share the words from our largest tenant. The role of the physical store is poised to become broader than ever, with the location serving as fulfillment epicenters that quickly and easily get customers whatever they need. Put another way, the convergence of retail and industrial is accelerating. and we are positioning the Kimco portfolio to take advantage of this new utilization by partnering with our retailers to ensure that Kimco assets are optimized to gain market share and to make the stores of Kimco even more valuable. In closing, Kimco's open-air grocery-anchored portfolio provides consumers a safe and easily accessible destination for goods and services. Our diverse tenant mix and targeted geographic presence in the strongest growth markets Supported by our well-capitalized balance sheet and our entrepreneurial approach, positions us to unlock value for all stakeholders in the years to come. With that, I turn the call over to Ross.