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spk13: be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then 0 on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to David F. Bushnicki, Senior Vice President, Investor Relations and Strategy. Please go ahead.
spk19: 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's CEO, Ross Cooper, President and Chief Investment Officer, Glenn Cohen, our CFO, Dave 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. 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.
spk18: Good morning, and thanks for joining us. I will lead off today with a summary of our stellar Q4 leasing results, and then provide some strategic updates on our completed RPT acquisition. Ross will follow with an update on the transaction market, recent activity, and plans for 2024. Glenn will then cover our financial metrics and provide 2024 guidance. We concluded 2023 on a high note with record-setting leasing activity, and a deeper, broader, and more resilient tenant base for our grocery-anchored and mixed-use portfolio. We've built on this positive momentum, kicking off 2024 by closing our acquisition of RPT on the first business day of the year. I will provide additional perspective on RPT shortly. Let's start with our leasing accomplishments. For the quarter, overall occupancy finished up 70 basis points on a sequential basis to .2% on a pro-rata basis. Importantly, the 70 basis point gain is our highest -over-quarter uptick in occupancy, going back more than 15 years. Our -over-year overall occupancy increased 50 basis points. Anchor occupancy grew a record 80 basis points sequentially to 98% and finished flat -over-year. Small shop occupancy was up 60 basis points to 91.7%, surpassing our previous record high of 91.1%, and ended up 170 basis points -over-year. We signed over one million square feet of new lease GLA in the fourth quarter, the highest quarterly level in over 10 years. We also maintained our strong pricing power, as the spread on new leases was 24%, marking our ninth consecutive quarter of double-digit leasing spreads. Our retention levels were equally strong, as we signed 321 renewals and options totaling 1.7 million square feet, surpassing our five-year fourth quarter historical average. The fourth quarter renewal and option combined spread was 7.8%, with renewals ending at .5% and options at 7%. Overall, fourth quarter leasing volume totalled 480 deals for 2.7 million square feet, with a combined spread of 11.2%, a phenomenal effort and a tremendous team accomplishment. I'd be remiss to mention that what makes our leasing efforts in 2023 more impressive is that we've absorbed the vast majority of our Bed Bath & Beyond spaces at spreads that far exceeded our initial expectations. Just to recap, we started 2023 with 29 Bed Bath & Beyond locations, representing approximately 70 basis points of pro-rata, ABR exposure. During the year, we resolved 21 leases with a combined pro-rata spread of 43%. Of those 21 leases, four were signed in the fourth quarter at a combined spread of 57%, demonstrating the strong demand that remains for these high-quality locations. This includes our remaining eight boxes, which we're confident that we'll resolve as we move through the year and believe that our strong overall leasing success in 2023 will continue into 2024. Looking ahead, with the RPT deal closed, we are excited about our new team members who are fully engaged and seeking to add further value to the Kimco platform. Integration of the new portfolio is well underway, and we expect it to have a positive impact on our overall strategic plan throughout the year. Over time, we expect to benefit from the upside in the RPT portfolio as we mark to market leases and take advantage of the supply constraint environment using our -in-class platform to raise occupancy levels. Glenn will provide additional color on the financing of the transaction and how it has positively impacted our balance sheet. We also see redevelopment and mixed-use opportunities in the RPT portfolio that will complement our existing pipeline and further contribute to our long-term growth. One particular example of incremental value that can be created through redevelopment is Mary Brickle Village, a -a-kind mixed-use property located in Miami. As we look to the future on an asset such as this, we believe there's a lot of upside and opportunity to use our platform to unlock meaningful long-term value and expand Kimco's Signature Series portfolio. Ross will discuss our 2024 transaction strategy in more detail, but I did wanna highlight our plans to recycle lower growth centers, especially those with high capex loads and lower than acceptable returns. These anticipated dispositions have already been incorporated into our model and strategic plan, which is further supported by improvements in both the transaction and financing markets since we first announced the RPT transaction in the third quarter of 2023. We believe we are well positioned for 2024 with significant opportunities for both organic and targeted external growth. Our pipeline of leases that have been signed but not yet opened shows strength in the quality of our portfolio and visible cashflow growth. Additionally, history has shown that our platform is ideally suited to take advantage of market dislocations and generate growth. In the end, we pride ourselves as being one of the most efficient operators and are laser-focused on driving total shareholder return. That said, despite improved conditions, the macroeconomic environment remains temperamental. Inflation, interest rates, employment, credit card delinquencies, and the election cycle all have the potential to impact our sector over the course of the year and beyond. And that is why underlying our overall strategy is an emphasis on building a portfolio that is both resilient and able to generate steady and reliable growth. Ross.
spk07: Thank you, Connor, and good morning, all. I'd like to quickly reflect on 2023 before sharing some perspective on the year ahead. As Connor noted, the leasing environment for our asset class was very positive in 2023, but volatility in the capital markets significantly muted transaction activity. Through the first three quarters of 23, underwriting was difficult and lender financing was inconsistent at best. That said, Kimco successfully turned the sluggish environment into opportunity. Using our advantageous liquidity position and balance sheet, we were able to acquire several joint venture partnership interests, a new signature series asset in Stonebridge at Potomac Town Center, and an exciting portfolio via the acquisition of RPT Realty. In our view, these were timely deals that would price more aggressively in the current market. In the fourth quarter, sentiment began to improve with the 10-year treasury dropping more than 100 basis points and currently hovering in the 4% range. This created renewed optimism, a more vibrant financing market, additional deal flow before year end, and a further increase in activity at the start of 2024. We were able to take advantage of the more positive environment, selling three challenged joint venture sites in our portfolio in December. We also provided mezzanine financing for a new partner before year end, and now anticipate potentially pursuing additional structured investments with the same group. Turning to 2024, we are confident that the healthy fundamentals in open air retail, coupled with the more favorable macroeconomic backdrop, will present opportunities that we can leverage to enhance our performance and success. We will continue to primarily focus on sourcing off market and core grocery anchored shopping centers that become available. On the structured investment side, we expect additional investment opportunity for preferred equity and mezzanine financing for high quality real estate. The stabilizing of interest rates and improvements in the capital markets should lead to more opportunities stemming from acquisition financing of new deals and debt pay downs on maturing loans. We continue to maintain a disciplined approach with these investments, and as such, we expect them to be bespoke investments with unique attributes. On the RPT dispositions, as previously indicated, there are a select group of assets that do not align with Kimco's long-term geographic and or growth targets. We have initiated the strategic process of trimming these properties from our portfolio, and we are confident that we will successfully execute on this plan, predominantly in the first half of the year. To provide a bit more context, we aim to sell between 250 to 350 million of former RPT centers at a blended low to mid 8% cap rate in that timeframe. It's worth noting that the blended cap rate of the RPT properties being sold matches the cap rate for which we acquired the entire company, further cementing our belief that RPT is and will continue to be an extremely successful acquisition for Kimco. In 2024, we have already closed on our first RPT disposition in Carmel, Indiana, within this cap rate range. As part of the disposition structure, we retained a piece of the capital stack in the form of mezzanine financing. This not only helps to ensure a successful transaction, but also presents an opportunity for Kimco to earn an attractive yield at a safe basis in a passive structure while focusing our team's efforts on our core properties and markets. You will likely see us structure additional transactions in a similar manner. And to be clear, this is factored into the 2024 guidance that we've provided this morning. We are excited about the prospects for 2024 and look forward to keeping you apprised of our progress. Now off to Glenn for the financial results and full year outlook.
spk06: Thanks, Ross, and good morning. We finished 2023 with solid fourth quarter results, highlighted by very strong leasing activity, increased occupancy, and improved positive same site growth. In addition, we bolstered our liquidity position ahead of our upcoming 2024 maturities and the closing of the RPT transaction. Now for some details on our fourth quarter results, the financing of the RPT transaction and our 2024 outlook. FFO for the fourth quarter was 239.4 million, or 39 cents per diluted share. This compares favorably to last year's fourth quarter FFO of 234.9 million, or 38 cents per diluted share. The primary driver of the increase was higher pro rata NOI of 10 million generated by a high quality operating portfolio. Our pro rata interest expense was up eight million, resulting from the issuance of a 500 million unsecured bond to pre-fund our upcoming 24 maturities. We invested the proceeds in short term money market type funds earning seven million of interest income, which mitigated a large portion of the dilution. In addition, during the fourth quarter, we incurred one million of merger related expenses for the RPT transaction. Our operating portfolio continues to deliver positive results. Same site NOI growth was positive .2% and if we exclude our redevelopment sites would have been three and a half percent. For the full year 2023, same site NOI was positive 2.4%, exceeding the top end of our same site NOI range of 2.25%. Higher minimum rent was the primary driver of the growth. As a result of our strong leasing production, the spread between lease occupancy and economic occupancy grew to 350 basis points, an increase of 30 basis points sequentially and represents 57 million in future annual base rent. We anticipate approximately 70% of this rent to commence during 2024, providing approximately 15 to 20 million dollars. Turning to the balance sheet, we ended the fourth quarter with consolidated net debt to EBITDA of 5.6 times and on a look through basis, including pro rata JV debt and preferred stock outstanding of six times, maintaining the favorable end of our target range for this metric. As mentioned previously, at the beginning of the fourth quarter, we issued a new .4% $500 million unsecured bond, which matures in 2034. This issuance addressed our 2024 bond maturities comprised of 246 million at .45% with an effective interest rate of 1.1%, which was repaid on January 15th, 2024 and 400 million at .7% due March 1st, 2024. Our year end liquidity position remained very strong comprised of over 780 million of cash and the full availability of our $2 billion revolving credit facility. Subsequent to year end, we monetized our remaining 14.2 million shares of Albertsons, receiving nearly $300 million in proceeds. We will record a $75 million tax provision on the gain in the first quarter, which will enable us to retain 224 million for future investments and debt reduction. Similar to last year, our shareholders will be eligible for a pro rata credit of the federal income tax Kimco will pay. Now for some details of the financing for the $2.2 billion RPT transaction. We issued 53 million common shares to the RPT shareholders and an additional 953,000 OP units for an aggregate value of 1.2 billion. We also converted each share of RPT .25% convertible preferred shares into newly issued depository shares, representing one 1000th of a share of Kimco .25% class and convertible preferred stock. The class and convertible preferred stock has a liquidation preference of 92 and a half million and is publicly traded on the New York Stock Exchange. Each .25% class and depository share is currently convertible into 2.3071 Kimco shares. On the debt side, we paid off 130 million outstanding on RPT's revolver, we paid 514.4 million of RPT's outstanding private placement notes, including accrued interest and amended and assumed 310 million of RPT term loans. We funded the repayment of the revolver and private placement notes from cash on the balance sheet and a new $200 million term loan with a final maturity in 2029. The $200 million term loan was swapped to a fixed rate of 4.57%. The 310 million of amended and assumed term loans are comprised of four tranches, with 50 million maturing in 2026, 150 million in 2027, and 110 million in 2028. Each of the tranches has been swapped to a fixed rate with a blended weighted average rate of 4.77%. Overall, the total debt related to RPT added to our year-end balance sheet is 510 million, with us using 440 million of cash on hand. Now to our 2024 outlook. Notwithstanding some of the macro factors that Connor mentioned earlier, we remain confident about the growth prospects of our operating portfolio and are enthusiastic about unlocking the potential of the newly added RPT assets. Our initial 2024 FFO per share guidance range is $1.58 to $1.62 before any RPT merger related costs, which we expect will be in the $25 million range or 4 cents per diluted share. Our guidance range is based on the following assumptions. Same site NOI growth of positive 1.5 to 2.5%, inclusive of the RPT assets. Included in the same property NOI guidance range is a credit loss assumption of 75 basis points to 100 basis points. This is a similar level to our credit loss experience in 2023. Lease termination income between 1 million and 3 million. This is compared to 7 million in 2023. Interest income between 2 million and 4 million, as compared to 19 million in 2023, as we had significantly higher cash balances during 23. Acquisitions, including structure investments ranging from 300 million to 350 million, weighted toward the second half of the year. Dispositions ranging from 350 million to 450 million weighted toward the first half of the year, comprised primarily of select RPT assets. Corporate financing costs ranging from 319 million to 325 million, comprised of consolidated interest expense and preferred stock dividends. Annual GNA expense ranging from 133 million to 139 million. The GNA range is inclusive of the expected cost saving synergies from the RPT transaction, ranging from 30 million to 34 million. Our guidance range also assumes no material impact from RPT related non-cash gap accounting income, comprised of above and below market rent amortization, straight line rents and fair market value adjustments to debt. Lastly, the guidance range assumes no redemption charges or prepayment charges associated with callable preferred stock outstanding or early repayment of debt obligations and no planned issuance of additional common equity. I wanna thank all our associates whose tireless effort brought the RPT transaction to a successful closing and drove our strong results to end the year. We look forward to a successful 2024 together. And with that, we are now ready to take your questions.
spk13: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. Please limit yourself to one question. You can rejoin the queue if you wish. At this time, we will pause momentarily to assemble our roster. The first question comes from Michael Goldsmith with UBS. Please go ahead.
spk23: Good morning, thanks a lot for taking my questions. On the acquisitions and dispositions, one, do the dispositions that you have in your guidance, does that represent the entirety of the expected non-core properties that you're selling from RPT? And then two, are the cap rates of the acquisitions, is that indicative of where you see the market today? Thanks.
spk07: Sure, happy to take that. The dispositions that we've outlined in the first half of the year represent, I would say, the vast majority of the dispositions that we have planned. Like we always do, we'll continue to monitor the assets, see how they perform, see where there's growth, where there's risk, and we may look to prune additional assets in the future, as we would with any Kimco asset, but once we complete these, we'll feel like we've really taken care of the bulk of the immediate needs on that front.
spk00: As it relates to the acquisition cap
spk07: rates, I would say that really is a blend between the cap rates on true, sort of core grocery acquisitions, as well as our structured program. So when you put those two together, we're very confident that we'll be able to achieve turns that really minimize any sort of dilution and continue to enhance and grow our FFO accretion as we go forward.
spk13: The next question comes from Jeff Spector with Bank of America. Please go ahead.
spk10: Great, good morning. Mike, I don't know if there's a limit on questions, but my first question would be, can you break down the .5% to .5% same store NOI outlook? I don't know if you can provide some of the building blocks for that, please.
spk06: I'm sure. Again, like anything else, again, a good portion of it is really driven by increases in minimum rents. That's the primary driver. And then you'll have a small amount that's in there for credit loss. Credit loss for the most part should be pretty similar, as I mentioned, to 2023. And then there is some lease up that's built into it as well. Those are really the primary drivers.
spk13: The next question, once again, please limit yourself to one question. Again, you can rejoin the queue. The next question comes from Dori Keston with Wells Fargo. Please go ahead.
spk21: Thanks, good morning. We appreciate the detailed guidance. Excluding merger costs, it looks like the midpoint of your FFO guide implies around 2% growth. Can you just remind us what your long-term expectations are for your FFO or NOI growth for the company now with RPK?
spk18: Yeah, happy to take that one. And appreciate the question. That is the targeted FFO growth for the year ahead. Clearly that's below the longer-term growth rate that we're anticipating for the company, between 3% to 5%. And when you look at the components of the FFO growth for this year, we do have a few one-time headwind items impacting us this year. But overall, the strength of the portfolio, the strength of the platform continues to shine. I mean, obviously everyone's dealing with headwinds increased interest expense, but we've pre-funded and taken out all the maturities for this year and believe if the momentum continues, the growth rate should continue to accelerate. Obviously that growth rate for this year is above last year's and we think that that should continue to accelerate in this environment. That can just
spk06: add just a little bit in terms of some of those headwinds that Connor was mentioning. You know, we're still dealing a little bit with the fair market value amortization related to the wine garden bonds. That's about another $8 million difference for this year, so that's a little over a penny. So that's one thing that's certainly impacting us. Again, as I mentioned, if you look at the lease termination income, again, it's pretty modest in terms of what's built into the guidance versus the $7 million that we had last year. And again, we were benefiting also from pretty significant amount of interest income that's gonna come off. So if you put all this together, you have somewhere around two or three cents of headwind. But again, the portfolio's in great shape and we expect to be able to
spk08: grow here.
spk13: The next question comes from Floris Van Dykem with CompassPoint. Please go ahead. Thanks.
spk09: Good morning, guys. Thanks for taking my question. So you, obviously incredibly robust retailer leasing demand here. You talk about the best environment in 15 years or something like that. You've got this very significant S&O pipeline, 57 million. Call it 4% of NOI in that neighborhood. Your guidance only implies 2% growth. What is the timing, maybe if you can walk us through when that income is gonna come online and is that gonna be back and weighted for this year or is that gonna impact 25 going forward?
spk04: Yeah, great question, Floris, thanks. As Glenn mentioned, about 70% of that S&O pipeline we anticipate commencing this year. This representing about 15 to 20 million, so obviously less than that 70 on the total ABR. So it is back half weighted. And the team, based on master's performance, did an incredible job meeting, exceeding those targets and will continue to push the envelope and get those stores open as quickly as possible and get the cash flow going. So you will see it towards the back half and then as you alluded to, you will see that benefit come in 25 as well.
spk13: The next question comes from Alexander Goldfarb with Piper Sandler, please go ahead.
spk02: Hey, good morning out there. So a question on cap rates. In the guidance, you have dispo cap rates sort of in the mid-eight acquisitions, in the mid-sevenths. One of your peers has been quite active in selling, has been selling in the mid-sixes. So how should we interpret the different cap rates that we hear the different REITs talking about? And presumably the asset quality is all fairly similar, although maybe there's some debt or something specific. But how should we interpret the different cap rates we're seeing to understand sort of what the quote unquote real cap rate where shopping centers are trading today?
spk07: Yeah, sure, happy to take that. I think when you look at our disposition guidance for this year in the cap rates, it is not a very select portfolio of assets geographically as we've talked about it primarily in the Midwest. More boxy, lower growth, potentially higher capex in the future. So when you look at the specifics, I don't necessarily think it's indicative of where cap rates are trading for product across the board. It's clearly selective to geography, format type, whether or not there's a grocery component. So from that perspective, this is sort of a one-off unique year for us. And frankly, it was all baked into the plan and the underwriting with the RPT transaction. So this is very much on target and expectation for us.
spk13: The next question comes from Greg McGinnis of Scotiabank. Please go ahead.
spk26: Hey, good morning. Looking at the pretty substantial sequential lease improvement, could you just provide us some details in terms of the types of tenants that are taking that space, whether or not you expect that level of demand to continue into 2024, and if maybe that'll result in some wider lease spreads as occupancy continues to tick up.
spk04: Yeah, thanks for the question. We've continued to see activity across a really broad set of categories. Start with Grocery First, signed a lease of natural grocers this last quarter. Several other specialty grocers are extremely active on the mainstream side. Those grocers are pushing as well. Formats vary. You are starting to see a lot of flexibility with retailers willing to expand and contract the size of their square footage in which they operate. To penetrate the supply-constrained market. And so when you look at the forward-looking forecast, let's start with supply-demand imbalance. That continues at record-low supply development, so you'll have nothing new coming online. You'll have basically second-generation space to backfill. And as Connor mentioned earlier in his comments, our bed bath absorption was quite robust this last year, with 21 and 29 being occupied. Then you have the demand on the retailer side, appreciating the efficiencies, the margin improvements, and the gains that they're seeing by utilizing brick and mortar to service their customer, both on the last-mile side and as well as some form of distribution. So you have that demand side continuing to push through. And then you have the consumer side that obviously sees great utility in the brick and mortar format as well. So when you mix that all together and you look at the 24 forecasts, you're continuing to see that those demand factors work in our favor. And so we've been encouraged by the pipeline that we currently have and will continue to push as hard as we can as we move through this coming year.
spk13: The next question comes from Craig Mailman with Citi. Please go ahead.
spk11: Hey, good morning, guys. Just looking at the guidance, and Glenn, I appreciate the calling out to two, three sets of one-timers. But just as we look at that top end of the range, what gets you there? Is it just the timing on the capital recycling kind of maybe not happening so early in the year on the dispos? Do you have potential upside from leasing that you can actually get open in time for it to hit? Number, just trying to get a sense of, I know it's early in the year and there's some macro uncertainty out there. So just trying to see where there is some potential conservatism in the numbers or just math dilution that timing would kind of take care of.
spk06: Sure, Craig. I would say, again, things that can get you to the upper end of the range. We have a credit loss range that's 75 to 100 basis points. So if credit loss comes in better than that, that's definitely a help. That 75 to 100 basis point range is between 16 and $22 million. So again, improved credit loss is an opportunity to help get there. Clearly the timing of the acquisitions and dispositions plays into this as well. As we mentioned, the dispositions are more front-loaded where the redeployment of that capital is more back-end loaded. If the timing of that shifts, there's clearly an opportunity to further improve towards the upper end of the
spk19: guidance. The other aspect, Craig, is also the timing of getting leases to start cash flowing. As Dave Jamison said, there's about 15 to 20 million. That'll be coming in this year that we anticipate. But if we have better execution and we could see that some of those rents could start sooner, that'll also help us achieve the high end of the guidance range.
spk13: The next question comes from Hendel St. Just with Mzuhho. Please go ahead.
spk08: Hey, good morning. I wanted to ask a question on new lease rents here. Leasing spreads certainly been on a steady upward trajectory last couple of years, but new lease rents and new lease spreads this past quarter were down versus the prior quarter while TI's were up. So I'm curious, is there anything unique that's worth calling out here, or maybe if there's a broader read that perhaps rents could be at or close to peaking, and where you think new lease spreads can be over the near term? Thanks.
spk04: Yeah, I mean, as I mentioned, quarter over quarter, yes, spreads are really indicative of just the population of that given quarter and what qualifies as a comp spread. So it can be volatile at times, but when you look at the overall ABR growth, we continue to see us moving upwards in that trajectory from quarter over quarter, or it was year over year. So we're encouraged obviously by that direction. I think we're at $20.32 at this point. And in terms of the TI allocation, we look at the all in costs, so landlord and TI's collectively. The distribution between those two categories is dependent on the type of deal structure you cut. So when you combine those and you look at the trailing four, we're right in line there. There were a couple deals this quarter that were more as is structure. So higher TI allowances were given to those tenants. If you strip those out, you're around 26 bucks for a set 33 that we posted. So you're pretty much in line slightly better than what we've seen in the past. And as we look forward into 24, we do have 29 anchor boxes, I think that are naked with no options. They do have the highest rent per square foot at $18. We've executed six of those in the last quarter. And those were as is rents above that. And we still had a high double digit mark to market adjustment on that. So you're seeing room for opportunity to grow in the coming year as well.
spk13: The next question comes from Samir Canal with Evercore. Please go ahead.
spk05: Yes, hi, good morning, everyone. I guess Connor, you had a very strong four queue operationally and clearly occupancy continues to move up both on the anchor and shop side. I guess what's the potential upside from RPT as we think about maybe the shop space or even occupancy pickup in 24, thanks.
spk18: Yeah, happy to take that, thanks Samir. So the small shop I think is the real upside there on the RPT portfolio. There are about 30 basis points below the Kimco portfolio. And when you look at the momentum we're experiencing in the small shop side, we're very confident that we should bring that up to the Kimco portfolio relatively quickly over the next one to two years. We've done the same with the Winegarden portfolio. And we feel very confident in the team that we have on the ground and the leasing the momentum that we're continuing to experience today. You know, RPT has a number of upside opportunities. We're obviously digging in right now and getting very excited. You know, Mary Brickle Village is one that I mentioned earlier in the call. The mark to market spread there is significant on deals that roll to market as well as some leasing upside and some potential future redevelopment density plays. But it's not just that site. We have a number of assets in Florida and Boston and other great trade areas that have, you know, significant leasing momentum that we think that we can execute on. And if the dispositions, you know, come across the tape at the time, we think we're gonna be able to showcase RPT dispositions, you know, once you take those out of the combined portfolio, both the Kimco grocery percentage increases as well as the Kimco's mixed use percentage increases. So two strategic accomplishments very early on, hopefully this year. So we're excited obviously about that opportunity.
spk04: I'd also just add that their leased economic spread is currently 570 basis points relative to their portfolio, which is about $12 million of annualized based rent. So we'll get the benefit of some of that coming online this year as well to compliment what we currently have in our snow pipeline. And then the ABR per square foot relative to ours is a little bit lower. So I think there's room to run there and benefits to be had. And based on their spreads that they posted in their Q4 filings, you know, we're encouraged by the direction of the real estate.
spk13: The next question comes from RJ Milligan with Raymond James. Please go ahead.
spk17: Hey, good morning everybody. Two part question here on CapEx and I'll try and get it all in. First for the Bed Bath and Beyond spaces, you resolved 21 leases. It spreads much better I think than anyone expected, but I'm curious what the average TI package was per foot and how did that shake out relative to expectations? And then second part, more broadly, I think you're expecting an increase in CapEx spend in 2024. And I'm just curious what's driving that. Is that Bed Bath and Beyond and how much of that is RPT? Thank you.
spk04: Yeah, sure. On the Bed Bath, we've been pretty consistent around 55, 60 bucks a foot on the back fills dependent on the structure. You know, most of these have been single tenant back fills, but if you do look at some split boxes in the future or, you know, a different type of operator, it could be lower, it could be slightly higher, but it's been fairly consistent. Yeah, on the CapEx load for 24, obviously, you know, we have one of the largest snow pipelines in the sector and one of our largest that we've had. So it's primarily driven by ideal costs and execution there. It's our highest return on capital in terms of any investment we can really make. So we see it's a great use of funds and RPT will be, you know, with their snow pipeline, as I just mentioned, at 570 basis points and they're at least economic. Obviously, there'll be a contribution there as well.
spk13: The next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.
spk12: Hi, good morning, everyone. Maybe kind of on the watchlist side, Michael, Joanne and AMC are top 50 tenants of Kinco, each with a credit rating in the triple C range. So I was wondering if you could go through your outlook for the three companies, or if you don't wanna talk about specific names, just broadly, the lower credit quality tenants, kind of how they're performing in your portfolio and how that factored into the credit loss expectations and guidance,
spk04: thanks. Sure, yeah, we can start with Rite Aid. So last year we had 21 locations. At the end of the year, we ended with 16. We do anticipate another five coming back this quarter. The leasing activity and LOIs that we currently have on those locations are very encouraging. And we're seeing market markets in the double digits. So again, second generation inventory is really where the opportunity is to push rents today, and that's where retailers see it. And so that's, as to my earlier comments, you're starting to see retailers flex on their format to try to work themselves into some of these boxes. As it relates to Joanne's, that is another topic of the day. We had 21 locations. And currently they're looking at just Rite Sizing their operating business. They obviously had a great COVID run. Top line revenues are growing fairly significantly. And I think they're seeing a bit of a reset back to pre-COVID and trying to stabilize their business there. So it's something that we're closely watching. Limited rollover in 24, but again, we stay close with those operators as well. As it relates to the broader pipeline, it really hasn't expanded all that much. I think the general health of retailers has been fairly significant. We are active in the pre-leasing side of the equation to get out in front of any opportunities to recapture space. And in some cases, we're really pushing it to upgrade the quality of the tenancy. Because you do have on the other side of the spectrum, high quality investment grade tenants that are looking to grab space. So they're also becoming more aggressive in that regard. So right now we feel pretty good.
spk13: The next question comes from Wes Gulliday with Baird.
spk16: Please go ahead. Hey, good morning, everyone. I just want to maybe talk about Mary Brickle Village. I know RPT has some big plans there. They're already starting to do a lot of work there. Are you changing any of those plans?
spk04: Yeah, great question. Appreciate it. I know there's been a lot of focus in the first part of the year on Mary Brickle. We're just over a month of ownership. So we've been working on that for a while now. We've gone deep into the investigation of both short-term and long-term planning. And right now, the real focus is the upgrading of the quality of the tenancy. There's tremendous upside potential there. And some of the existing rents were in the 40s and 50s. And prior to closing, you're getting rents in the high 120 plus range. So you're seeing a huge market to market adjustment just on the retail side alone. As we look at forward-looking longer-term plans, we're still in the early stages of the investigation of what we want to do. But if you've been down there, you realize it's the hole in the donut, right at the heart of Brickle with 20 million visitors walking past that site on an annualized basis. So there is tremendous opportunity long-term at that site, and we're very excited about it.
spk13: The next question comes from Paulina Rojas with Green Street. Please go ahead.
spk01: Good morning. The lack of new supplies is a key driver of the positive background in the sector. And if the demand continues strong, rents should continue to rise. My question is how much rents would have to go up for developments to start to pancille for you? And I'm not sure if you have looked at this from this perspective, but I think it would be an interesting way to frame the risk of new supply coming. Thank you.
spk07: I'm happy to take that. I think when you look at the fundamentals of our business and why we're so bullish, it is because the challenges of penciling on new development are significant. We estimate based upon what we've seen in costs and land values that to develop a new shopping center today, you're well north of $400 a square foot, in many cases, 450 to 500 a square foot. So we think about the yields that any developer would reasonably require. Your AVRs really need to be $35 to $40 a foot on average to pencil a new development. When you think about the replacement cost of the shopping centers that we own and the rents that we have, in many cases, we could be half of where replacement cost is today. So from that perspective, it's hard to envision that there's gonna be any meaningful new development in the near term, and it makes you very comfortable with the rents that we have in place today and our opportunity to continue to push that.
spk13: The next question comes from Mike Mueller with J.T. Morgan. Please go ahead.
spk25: Yeah, hi. What are you expecting for overall redevelopment spend in 2024, and are you close to activating any major projects that could cause that number to accelerate materially in 25 and 26?
spk06: Hi, Michael. The redevelopment spend is somewhere between 100 and 150 million. It's pretty similar to where it's been running really for the last few years, and we continue to look for any place we can because it's really an area of great return for us. We wind up in five single digits, sometimes low double digits on those redevelopments, but that's the range right now.
spk18: Michael, I will add that we've been prioritizing the retail redevelopments because clearly the returns there are much stronger, and that's where we see significant returns and upside in the portfolio. So if we're gonna activate new projects going forward, that is still a priority for us and continue to mine the portfolio for upside.
spk13: The next question comes from Michael Gorman with BTIG. Please go ahead.
spk03: Yeah, thanks. Good morning. Just wanted to circle back to the growth potential within the RPT portfolio, and I just wanted to clarify, when we think about the .5% to .5% that's inclusive of RPT, what is the impact of the portfolio having on that? How does that break out between kind of legacy, Kimco, and RPT as we think about 2024? Thank you.
spk06: Yeah, I mean, it has a minor impact. Remember, the overall part of the portfolio, 92% of the portfolio is all the Kimco assets. So it doesn't have a major impact to it. Really, the bulk of the growth is really coming from the legacy Kimco assets today. It does have some impact, again, as Dave mentioned, the snow pipeline is 570 basis points. It's about $12 million. So there is some of that 12 million that we're expecting to come online during the year as well.
spk13: The next question comes from Linda Tsai with Jefferies. Please go ahead.
spk22: Hey, thank you. Any thoughts on where occupancy ends up your end between anchor and inline? And would you expect the remaining eight Bed Bath and Beyond boxes to be leased up by then?
spk04: Yeah, I mean, that's our goal is obviously to resolve the Bed Bath boxes in 2024. Based on the demand that we're seeing, we feel encouraged by that. I also want to note that we're inheriting three additional boxes as a result of RPT. So on a go-forward now, we'll have 11. And again, we're encouraged by the activity there. As it relates to occupancy, I'm always challenged to push the envelope higher and push the mark higher. I mean, exceeding 91.1 and getting to 91.7 on the small shop side was a great thing. It was a great milestone at the end of the year. And I do just want to put into context, this was all in the midst of merging another company into Kimco. So I can't thank our broader team enough on the execution that they've done in executing over a million square feet of leasing. So we'll continue to push as hard as we can on the anchor side. We're at 98%. Our all-time high was 98.9. And so we have room to run there too, which is encouraging. And then bringing on RPT, as Connor mentioned, there is additional upside to on relative basis from where our occupancy and theirs is. So we'll have a work cut out for us in 24, but we feel encouraged.
spk18: Linda, if you remember, Q1 typically obviously has the holiday hangover from some of the tenants that close after the holidays. So resetting the occupancy with RPT and the holiday impact and then growing the occupancy through the year is typically how the year commences. And obviously with the momentum we're experiencing, the diversity of demand, we're confident that we should be able to grow the occupancy throughout the year after Q1.
spk04: Yeah, and just one last note on that. It's not only just the new lease side, but it's also the retention side, which is so important in terms of preserving and then growing your occupancy. And right now, when you look at the first half of the year, we're tracking around 70% of our rollover right now getting resolved, so we feel pretty encouraged by the momentum as well.
spk13: Again, if you have a question, please press star then one. The next question comes from Anthony Powell with Barclays. Please go ahead.
spk20: Hi, good morning. I have a question on the rent bumps signed on your leases in the fourth quarter. Where were they and where do you think and when do you think this effort to increase your contractual rent bumps will start to have results in higher minimum rent growth for you in the future?
spk04: Yeah, we continue to push bumps obviously on the anchor and the small shop side. I think you're seeing different opportunities in different parts of the market. In some areas you can push north, so three are in the 4% range and other markets might be a little bit different. But we're challenged to grow them as much as we can on an annualized basis and we're seeing again, a good response because of the supply demand imbalance right now and the multiple bidders at the table.
spk18: I would say just that the small shop side continues to improve quarter over quarter. I think we've been tracking that diligently and pushing that hard. The anchor side is still where there's some friction and we're trying to improve that if we can. But again, there's still, I would say, some modest improvement there, but not as significant as the small shop side.
spk13: The next question comes from Ronald Camden with Morgan Stanley. Please go ahead.
spk19: Ron.
spk13: Mr. Camden, please go ahead with your question,
spk15: sir. Sure, sorry about that. Just two quick ones from me. The first is just on the dispositions guidance, is that all RPT, number one? And number two, is that, should we be expecting, is that everything that you wanted to sell or should we be expecting sort of more as you get through this first batch?
spk07: Yeah, the guidance is the vast majority of RPT dispositions. We always have some smaller land parcels and cleanup items, but it's primarily in a meaningful way, RPT. As I mentioned before, once we complete these dispositions in the first half of the year, we believe that we've successfully executed on the plan. And then on a go-forward basis, we'll just look at pruning as we do any Kimco asset that reaches the end of its life cycle.
spk13: We have a follow-up from Flores Van Dykem with CompassPoint. Please go ahead.
spk09: Hey, thanks. Just a quick follow-up question. Shop occupancy, Connor, you've talked about this, and this is one of your biggest opportunities here. And clearly there's upside you talked about in the RPT portfolio in particular. Maybe if you could also give a little bit of flavor on why your mixed use presents an opportunity for your shop. And is your shop occupancy higher in your mixed use assets versus your standalone retail assets?
spk18: Sure, happy to, Flores. I think when you look at the small shock occupancy upside, it's significant, because that's really where, if you look at sort of the anchor occupancy in reaching out, in essence, relatively full, that's where we see a lot of upside on the small shop side. I like the diversity of demand that we're experiencing as well right now in small shops. If you think about a percentages of small shops, restaurants and entertainment are still pretty sizable. They're about a third. Personal care services are up to about 15%. We're seeing the service industry really come back. Other services outside of personal care, that's another 12%. And then medical has really picked up as well at close to 6%. So when you look at like the components of really what's driving the occupancy on the small shop side, it's pretty diverse because each of those categories have a number of names that are outdoing hundreds of stores. And I think with our platform, we're able to actually give retailers the ability to hit their growth potential numbers, because right now they're challenged to find high quality retail, and you can come to Kimco and get it in spades. And so that's where I think we have a real opportunity with the platform to get more market share on these new growth small shop openings. On the spread between the grocery anchored portfolio and the mixed use portfolio, there's really not a sizable spread there between the two to say that one is significantly higher than the other. Right now, clearly the rents we're getting on the mixed use portfolio are higher, but most of those mixed use or apartment towers that have retail and the base of it are high dense areas, high growth markets with significant demand. And so we have been able to push rents and those rents are significantly higher than the grocery anchored portfolio. Hopefully that helps.
spk13: The next question comes from Tayo Okunsanya with Deutsche Bank, please go ahead.
spk24: I ask good morning everyone. Thanks for your earlier comments on Mary Brickell. Just curious in general around redevelopment, how you guys are kind of thinking about that as a potential use of capital. A lot of your peers seem to be ramping up that business and just kind of curious within your portfolio how you're kind of thinking about redevs.
spk04: Yeah, as we mentioned earlier, our big focus right now is more on the retail redevelopment side, which is leasing driven. You're looking to build a better mousetrap and work with high quality tenants to reposition parts of the center. So we'll continue to pursue that strategy as the yields and the returns on there are fairly accretive. More broadly speaking, when you look at multifamily opportunities that we have with all of our entitlements, those are lower yielding investments. So we're very selective and strategic about activating those. In our case, we're constantly watching the capital markets, the supply demand as there is known to be a lot of new supply that will be coming on the multifamily side. So we want to be very strategic and cautious about that. But we're always assessing what the best use of our capital is. There's great investment opportunities with Ross and what he's looking at right now as well. So we really look at the holistic plan and how we utilize our capital in any given year to make sure we're driving the most accretive returns.
spk13: The next question comes from Jamie Feldman with Wells Fargo. Please go ahead.
spk14: Great, thank you and good morning. I was hoping to get some more color on the acquisition and structured finance investment for structured investments guidance. Just, can you talk more about what you're seeing in the market today or is anything loosening up now maybe that you didn't see a couple months ago given what's going on with some of the banks and then kind of what gives you confidence on your numbers? You have first half, you've got 100 to 150. Is that something that's kind of in the bag and you're working on maybe just more color or what gives you confidence on those numbers? And do you think it could be higher or even lower by year end?
spk07: Sure, yeah, as I mentioned, there's definitely more optimism in the marketplace as the rate volatility has come down a little bit. There have been an uptick of assets that have been introduced to the market. We're seeing it each day and anecdotally, speaking with brokers, they're seeing more activity. They're doing a lot more VOVs, broker opinions and values. So it's indicative that there are a lot of groups that are out there that are contemplating bringing assets to the market if they haven't already. From our perspective, what we've seen that's interesting, there's several larger assets that are on the market that tend to have fewer viable all cash buyers. So anytime we're looking at making acquisitions or investments, we try to think about where is our strategic advantage? And there is a lot of capital that is bidding on grocery anchored neighborhood shopping centers. There are fewer buyers that are capable of taking down a larger asset like the Stonebridge deal that we bought last summer that the team is extremely excited about as long-term redevelopment opportunity but is a larger size that makes it more difficult for an all cash buyer. So that's a lot of what we're looking to do. It's a similar playbook that we've taken on in the last couple of years. As it relates to the structured investments, we have seen an increase in conversations. We have a couple of deals that are currently in the pipeline, hopefully a few more that are behind it. So we're very confident in the guidance that we put out and now it's our job to execute on that.
spk13: We have a follow-up from Alexander Goldfarb from Piper
spk02: Sandler.
spk13: Please go ahead.
spk02: Hey, thank you for taking the follow-up. Just, you know, Connor, big picture. You know, a lot of the questions on the call are clearly around guidance and trying to understand growth. As we think about this year, and I'm not asking for 25 guidance, so don't worry, Boosh. But as we think about the company this year, is the sort of slower growth, is that more a function of a lot of the puts and takes with RPT and a lot of, I want to call them one-timers, but benefits last year, you know, lower interest rates, et cetera, and therefore this year is really subpar relative to where the company is going? Or are those of us who are sort of bullish on retail a bit too optimistic about the growth potential and that, in fact, it will take longer for the leverage that you guys are getting, certainly in your releasing spreads, to manifest in earnings growth? I'm just trying to balance which this year is being more impacted by.
spk18: Sure. So if you think about this year specifically, we did try to outline some of the one-time items or the initial headwinds that we're facing that will not repeat going forward. Glenn outlined the amortization of the Weingarten bond that's just this year and will not repeat going forward after this year. We do have a lot of snow pipelines, you know, the sign but not opened, ABR coming online that's back half-weighted, so again, obviously, that will benefit the 25 and going forward from there. You know, there's a lot of, I think, embedded growth in the portfolio that has yet to be unlocked, and getting those tenants open and operating is sort of the significant fuel for the growth of the platform going forward. You know, obviously, interest expense headwinds have been significant for everyone in any commercial real estate sector. I think we've done a nice job in terms of pushing maturities out. You know, what will that look like going forward? I know a lot of people have different opinions on when the Fed might change and start to cut, but we're not running the business on banking on when they're going to do that. We're running a long-term business and trying to match funds, long-term debt with that. So I think we're well positioned to see an acceleration of growth going forward. Obviously, this year is an acceleration of growth from last year, and we continue to believe that if we execute, we should see the building blocks continue to improve going forward.
spk13: We have a follow-up from Linda Tsai with Jefferies. Please go ahead.
spk22: Thank you. What was the rationale behind selling that last bit of Albertson shares post-4Q, and then also the rationale in a provision for taxes rather than a special dividend?
spk06: Sure. I mean, it's always been part of our capital plan and our strategy to monetize Albertsons. It's part of our overall capital plan, and we feel we can obviously redeploy those proceeds better than what that current dividend is. So that's part of it. And really, for us, we'd rather retain the capital. We think we can make good use of 225 million, again, towards additional investment and a combination of additional investment and debt reduction.
spk13: And we have a follow-up from Caitlin Burrows from Goldman Sachs. Please go ahead.
spk12: Hi again. I feel like occupancy has been asked about a number of times, but just one other way to ask. You guys show that at year-end economic occupancy for your portfolio was 92.7%. And in an earlier question, when you were talking about the occupancy trend for this year, you pointed out how there could be post-Holiday fallout, and then there's also bringing in the RPT portfolio. So I was wondering, that .7% that you showed that's just Kimco, if you knew what that would have been, had the RPT properties been included, if that makes sense.
spk06: Yeah, it would have been lower by 10 basis points in total. When you include the RPT. When you include RPT. The overall impact of RPT on occupancy starting the year is about a negative 10 basis
spk18: points. Caitlin, as you know, Q1 is typically when you get the holiday hangover, you get some spaces back, and then you start to build occupancy back throughout the year. So we anticipate the seasonality to continue. Clearly, we're off to a good start here, and that's why we're cautiously optimistic about the year ahead, continuing to build on the momentum from Q4, because that was a record quarter for us, and obviously, if we can stack quarter on top of quarter like that, we'll be in very good shape to hopefully meet and exceed expectations for the year.
spk13: This concludes our question and answer session. I would like to turn the conference back over to David Bushnicki for any closing remarks.
spk19: We'd just like to thank everybody that participated on the call today. We hope you enjoy the rest of your day. Thanks so much.
spk13: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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