Kimco Realty Corporation (HC)

Good day and welcome to the Kimco Realty third quarter 2023 earnings conference call. All participants will be in a 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. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two Please note, this event is being recorded. I would now like to turn the conference over to David Bushnicki, Senior Vice President, Investor Relations and Strategy. Please go ahead.

Good morning, and thank you for joining Kimco's quarterly earnings call. The Kimco management team participating on the call today include Connor Flynn, Kimco CEO, Ross Cooper, President and Chief Investment Officer, Glenn Cohen, our CFO, Dave Jameson, 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 AND 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 SCC 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 our quarterly supplemental financial information on the Kimco Investor Relations 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. With that, I'll turn the call over to Connor.

Thanks, Dave, and thanks, everyone, for joining us this morning. I'm going to lead off today with an overview of the macro environment, summarize our operating performance for the quarter, and provide an update in some color on our strategy for navigating through these uncertain economic times. Ross will cover the transaction markets, and Glenn will close with our financial metrics and updated guidance. Despite the headwinds of high interest rates, some high-profile tenant bankruptcies, shaky debt and equity markets, and the on-again, off-again predictions of an impending recession, underlying shopping center sector fundamentals remain robust. More importantly, our portfolio continues to produce strong operating results, as we have been able to nearly overcome, from an FFO perspective, over six cents of non-cash accounting-related headwinds relative to last year. In an environment marked by virtually no new supply, strong demand from new, recurring, traditional, and non-traditional anchor and small shop tenants, along with the resilient consumer, we continue to produce strong operating results. Indeed, our third quarter results were stronger than anticipated, enabling us to raise our outlook for same-site NOI while raising the bottom end of our FFO guidance for the remainder of the year. A few more third quarter highlights. We signed 457 leases totaling 2.1 million square feet during the third quarter. our small shop occupancy reached an all-time high of 91.1% as demand for our portfolio continues. Our strong positive leasing spreads at 34.9% for new leases and 8.8% for renewal and options reflects the pricing power of our high-quality portfolio. Of note, our combined spread of 13.4% is the highest in six years. As anticipated, our anchor occupancy dipped 50 basis points quarter over quarter to 97.2%, due to the recapture of the remaining Bed Bath & Beyond boxes. We released seven Bed Bath boxes this quarter at a positive spread of 54%. Our remaining 12 Bed Bath boxes are all in negotiation and continue to benefit from the favorable supply and demand dynamic for well-located retail. Our overall occupancy is off only 30 basis points to 95.5%, notwithstanding the headwinds described. We are encouraged by the continued push by tenants to secure the right real estate with the right landlord. This continued strong demand is perhaps best evidenced by our signed but not open spread, which actually widened out this quarter to 320 basis points, representing about 52.2 million of rent that is not yet cash flowing. It is these operating dynamics in our own portfolio that continue to build our team's enthusiasm for the pending RPT transaction. While we remain excited about our portfolio, The headwinds I noted earlier cannot be ignored. As a result of the dramatic rise in the 10-year treasury due to persistent inflation, in all likelihood, we will remain in a higher-for-longer interest rate environment for the foreseeable future. To mitigate balance sheet uncertainty and maintain a stance of de-risking our exposure to market forces we do not control, we proactively address our near-term debt maturities. Glenn will provide more detail on how we plan to maintain optionality and flexibility. We also continue to prioritize generating free cash flow. We are laser focused on expediting store openings and rent commencement dates while reducing expenses that are not income producing. Free cash flow growth will allow us to be self-funding and help produce strong organic internal NOI growth as we move ahead. In summary, we continue to build a company, team, and portfolio that is resilient and able to drive growth in challenging times. We believe we are well positioned to execute and take advantage of the additional opportunities that will inevitably arise as we continue to work to optimize shareholder value. Ross?