Kimco Realty Corporation (HC)

Hello, everyone. Thank you for joining us and welcome to Kimco Realty's first quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. I will now hand the conference over to David Bushnicki, Senior Vice President of Investor Relations and Strategy. David, 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's CEO, Ross Cooper, President and Chief Investment Officer, Glenn Cohen, our CFO, Dave 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. 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 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 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.

Good morning, and thanks for joining us today. When we spoke in February, I laid out a clear set of priorities for 2026. Convert our record signed but not open pipeline into cash flow. Recycle capital aggressively to close the gap between our public and private market valuations. Modernize the operating platform to drive speed and efficiency while continuing to push occupancy and same site NOI growth. All underpinned by the structural strength of our grocery anchored portfolio. Three months in, I'm pleased to report we are executing on each of these fronts. Let me walk you through the highlights. Dave Jamieson will provide additional detail on leasing. Ross will cover the transaction market. And Glenn will take you through our financial results and outlook. The momentum we built in 2025 has carried into 2026. For the first quarter, we outperformed as we delivered FFO of 46 cents per diluted share, a 4.5% increase over the prior year, driven by higher minimum rents, strong tenant retention, and favorable credit loss. Same property NOI grew 1.7%, which is consistent with the cadence we outlined in February, that the first quarter would mark the low point of the year as we lapped prior year rents related to Joann's, Party City, Big Lots, and Rite Aid. Our tenant credit profile is also as strong as I can ever remember. Customarily, credit loss tends to be higher during the first quarter as challenged retailers look to get through the holiday season. This year, we didn't experience any meaningful bankruptcy activity and don't foresee that materially changing over the course of the year. As we look ahead, we anticipate accelerating same-site NOI growth through the balance of the year as rents commence from our signed but not open pipeline. Speaking of leasing, our team delivered 576 deals totaling 4.4 million square feet, with new lease spreads of 23.8% and combined spreads of 11.3%. That volume reflects the deep, broad base demand that characterizes our markets. Most importantly, our signed but not open pipeline grew to 77 million of annual base rent, a new all-time record for Kimco, representing 410 basis points of leased versus economic occupancy spread. That is contracted, visible cash flow sitting in the pipeline waiting to convert, and it's the single clearest indicator of where our earnings are headed. occupancy came in at 96.3% pro rata, 50 basis points higher than a year ago and down just 10 basis points from our all-time high at the end of last year. I'll let Dave provide more detail on leasing in a moment, but I want to highlight a milestone that speaks directly to the power of our platform. When we closed the RPT transaction just two years ago, that portfolio carried an occupancy gap of roughly 130 basis points lower than Kimco's legacy assets. At the end of the first quarter, we not only closed the gap, we surpassed it, as the RPT portfolio occupancy is slightly higher than Kimco's. Importantly, even at these occupancy levels, the portfolio continues to have a meaningful runway of below-market rents, providing a significant mark-to-market opportunity as leases roll. Now allow me to touch on the macro environments. Geopolitical uncertainty has injected some volatility into the broader economy in near-term retail sentiment, including the rise of fuel prices and its impact on the consumer. We are not dismissing that. But it is also where the durability of Kimco's portfolio becomes more apparent. Our tenant base is anchored in discount and necessity-driven retail, grocers, off-price, fitness, and everyday services, the categories that have historically demonstrated resilience precisely when discretionary spending comes under pressure. The first quarter validated that thesis, as our traffic at our centres was up more than 2% year-over-year. Retailers are looking beyond the near-term macro issues and remain focused on the long-term, as demand for quality space remains strong, supported by the scarcity of high-quality vacant space and virtually no new supply entering our markets. The structural backdrop remains squarely in Kimco's favour, and our leasing performance reflects that. Demand across the portfolio is strong, spreads are healthy, and we see no signs of that changing. In closing, Kimco entered 2026 with the strongest operational foundation in our company's history, and the first quarter reinforced the financial power of our platform. Strong demand, a record-signed but not open pipeline, disciplined capital recycling, the strongest balance sheet we've ever had, and one of the most resilient tenant bases in the sector give us the billing blocks to continue delivering at the top of the shopping center space. I'll now turn it over to Dave for an update on leasing activity in the operating portfolio.

Thank you, Connor. I'll cover our first quarter leasing results, the snow pipeline, and the progress we're making on our operating transformation, all of which point to a compelling growth trajectory as we move through the year. Then I'll hand it over to Ross. The first quarter demonstrated that the embedded growth in this portfolio is real and accelerating. We closed 576 deals, totaling 4.4 million square feet, with new leases delivering spreads of 23.8%. A clear reflection of the mark-to-market opportunity ahead of us. Renewals and options came in at 12% and 7.9% respectively, and overall blended spreads across new leases, renewals, and options were 11.3%. That extends our streak to 15 consecutive years of positive leasing spreads, a track record that speaks to the enduring pricing power of our real estate. New leasing activity remains strong in both deal count and GLA, reinforcing that retailer demand for our centers is deepening, not plateauing. Packaged leasing continued to build momentum as we secured four leases with Dollar Tree, signing several of those in under 30 days. And in our lifestyle portfolio, we signed two leases with Anthropologie and executed our first deal with Patagonia. This activity validates the strategy behind our dedicated lifestyle operating team and signals growing institutional interest in this segment of the portfolio. Average new lease rents for the quarter came in near $29 per square foot, the highest we've ever reported. This is a significant data point. It tells us that the mark-to-market opportunity in this portfolio is not narrowing, it is expanding. As below-market leases continue to roll, we are capturing that embedded upside at record rent levels. Overall, retailer demand is broad-based and diversified across anchors, junior anchors, and small shops, spanning grocery, off-price, fitness, and general merchandise. The pace of new deal execution through Q1 surpassed the comparable period last year, and the pipeline heading into Q2 remains robust. Crucially, retailers are not pulling back. They are committing to long-term store opening programs, which is the strongest possible signal of confidence in the open-air format and specifically in Kimco centers. Retention reinforces the growth story. Excluding bankruptcy-related activity, we had 47 fewer vacates, a direct reflection of strong store-level performance and the scarcity of viable alternatives for tenants in our markets. They are staying because they are growing in our centers. Small shop occupancy rose 80 basis points year-over-year to 92.5%, near historic highs, and that trajectory has room to continue. Looking ahead, we are positioned to unlock meaningful incremental growth in occupancy and rent through our active repositioning and redevelopment pipeline. The Grocery Anchored Redevelopment Program is a particularly powerful catalyst with approximately 15 anchored grocery projects. The snow pipeline is where the near-term growth story comes into sharpest focus. As Connor mentioned, the pipeline stands at a record $77 million in annual base rent, with occupancy up from 390 to 410 basis points since year end. Over 60% of the current snow is projected to commence in 2026, with commencements weighted toward the second half, meaning the earnings contribution ramps into a period where visibility is high. Our singular operational focus is velocity, converting signed leases to cash-paying rent as efficiently as possible. We are already tracking ahead of plan. Projected cash flow rent from 2026 commencements has increased to $31 million, up from an original budget of $28.5 million, a $2.5 million improvement that reflects both the strength of the pipeline and the operational progress we've made in accelerating commencements. Q1 actual commencements will contribute approximately $13 million in 2026, with over $18 million projected from leases commencing in Q2 through Q4. The growth ramp is in front of us, and it is well defined. This acceleration is directly attributable to the structural changes we put in place. Although we officially go live in Q3, we are already seeing the benefits of the new structural changes via earlier contractor engagement and tighter coordination across leasing, construction, and asset management under this new operating model. The organizational transformation we outlined last quarter is not a future benefit. It is already showing up in the numbers. To sum up, the fundamentals of this business are strong and the growth vectors are clear. 15 consecutive years of positive leasing spreads, a record snow pipeline with $31 million and projected 26 commencements, already tracking $2.5 million ahead of plan. improving tenant retention, record new lease rents, and a grocery-anchored redevelopment program enhancing merchandising, traffic, and long-term growth, and an organizational structure and technology platform that are making us faster and more efficient. The investments we outlined last quarter are already showing up in execution. We are not waiting for growth. We are building it quarter by quarter. With that, I'll turn it over to Ross for an update on the transaction market.

Thank you, Dave, and good morning. As we anticipated, the first quarter was relatively quiet from a transaction volume standpoint. While activity was intentionally measured, we used this period productively, advancing our disposition pipeline, continuing to underwrite and analyze acquisition and structured investment opportunities, and maintaining the discipline that defines our capital allocation approach. This measured start to the year was consistent with our 2026 plan, and we remain confident in achieving our full-year transaction guidance with activity weighted toward the second half. Open Air Retail has firmly established itself as one of the most sought-after asset classes in commercial real estate with investor demand supported by strong sector fundamentals, record occupancy, limited new supply, and durable necessity-based cash flows. As a result, cap rates have remained low and resilient, with best-in-class grocery anchor centers in top markets trading in the low to five-mid percent range. The recently announced acquisition of Whitestone REIT by Aries Management, an all-cash transaction valued at approximately $1.7 billion, is the latest evidence of how aggressively private capital is pursuing our sector and highlights the persistent disconnect between private market valuations for high-quality open-air retail, and where our sector trades publicly. Closing the gap remains a key focus for us. In the first quarter, we maintained a disciplined approach to capital recycling, completing the sale of two flat, low-growth ground leases at cap rates blending to a mid-5% level. We are actively marketing a handful of additional assets, including other ground lease parcels and select residential properties. And we continue to be prudent in structuring these dispositions to shelter gains where possible through 1031 exchanges. This tax efficient approach is consistent with the strategy we executed last year and is an important lever in maximizing after tax returns as we recycle capital from lower growth assets into higher quality investments. Against that backdrop, our ability to source opportunities through proprietary channels continues to be a critical differentiator. On the structured investment side, we were active in the quarter committing capital to new opportunities at attractive yields, each carrying future acquisition rights under a ROFO or ROFR. As a result, we're slightly ahead of plan on structured investments and continue to build a deep pipeline of potential future acquisition opportunities that is largely insulated from open market competition. These investments continue to demonstrate the value of our proprietary deal flow. Looking to the balance of the year, we are actively evaluating additional assets to acquire and properties on which to provide structured investment financing. We expect transaction volume to build meaningfully through the second half, and we remain confident in achieving our full year targets at spreads consistent with our guidance. We are not in a rush. Our proprietary sourcing advantage allows us to be selective, and we will continue to prioritize quality of execution over pace. In summary, with a fortress balance sheet, $2.2 billion in total liquidity, and a robust proprietary pipeline, we are well positioned as we move through 2026. With that, I'll pass the call to Glenn.

Thanks, Ross, and good morning. As the team has outlined, Kimco delivered a strong start to 2026 with 4.5% FFO per share growth, favorable credit trends, and continued balance sheet improvements. I'll focus on the key drivers behind the quarter, followed by the balance sheet and our outlook. The key driver of our FFO result of $0.46 per diluted share was higher ProRad NOI, led by $8.3 million of higher minimum rents, a direct reflection of the contractual escalators and mark-to-market activity embedded in our rent roll. I do want to call out a few items that affected comparability this quarter. First, the quarter benefited from approximately $7 million from accelerated below-market rent associated with early lease termination-related recaptures. This is non-cash in nature and is reflected in our gap revenue line. It is also important to note that first quarter results benefited from the timing of percentage rent that is seasonally weighted toward the first quarter. As a result, we do not expect the percentage rent income collected in the first quarter to be indicative of the remaining quarters, as this dynamic is fully reflected in our full-year outlook. Also, G&A expense of $37 million was elevated due to the timing shift of our annual equity award grant into the first quarter. Last year, this expense was recognized in the second quarter. The biggest driver of the expense is related to retirement eligible employees in which the full grant value is immediately charged, resulting in approximately $6 million of higher incremental expense in the quarter. As this is a timing issue, there is no material impact for the full year and is also fully reflected in our outlook. Turning to the balance sheet, we ended the quarter with consolidated net debt to EBITDA of 5.2 times or 5.5 times on a look-through basis, including pro-rata JV debt and preferred stock. These are the best levels we have reported since we began tracking this metric and reflect the cumulative benefit of our deleveraging efforts over the past several years. liquidity remained strong at approximately 2.2 billion, including 170 million of cash on hand and full availability on our $2 billion unsecured revolving credit facility with no borrowings outstanding. During the quarter, we further improved our capital position by renewing our revolving credit facility, reducing the borrowing spread over SOFR by five basis points, and extending the initial maturity to March 2030, with two six-month extension options. We also reduced spreads on $860 million of outstanding term loans, generating roughly $600,000 of annual interest savings while adding extension options on certain tranches. Looking ahead, our 2026 refinancing activity is already a known headwind and fully reflected in our current outlook. The majority of maturities fall in the second half, providing flexibility on when we choose to address. We have a broad set of financing alternatives available to us, including the unsecured bond market, our recently launched commercial paper program, the term loan market, as well as the convertible market, and we will be opportunistic with execution. Now for an update on our 2026 outlook. Given the positive start to the year, we are tightening our full-year 2026 FFO outlook to a new range of $1.81 to $1.84 per diluted share from the previous range of $1.80 to $1.84 per diluted share. We are updating our outlook based on improved visibility across key drivers, including the following. First, we've raised the full-year outlook range for same-site NOI growth to a new range of 2.8% to 3.5%. driven by improved visibility into the timing of new rent commencements from our S&O pipeline and better-than-expected credit loss. As a result, we are tightening our full-year credit loss assumption to a new range of 65 to 90 basis points compared to the previous range of 75 to 100 basis points. As we previously noted, we expect our same-site NOI growth to continue to accelerate each quarter going forward for the rest of the year. Finally, our outlook remains dependent on the timing of capital activity, including debt refinancing, acquisitions, dispositions, and redevelopment spending. All other outlook assumptions remain substantially unchanged at this time. In closing, it was a solid quarter of operating growth, better than expected credit performance, and continued balance sheet strengthening, which positions us well for continued growth. And with that, we'll open the call for questions.

We will now begin your question and answer session. Please limit yourself to one question. Please rejoin the queue if you wish to ask a follow-up question. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Michael Goldsmith from UBS. Your line is now open.

Good morning. Thanks a lot for taking my question. On the capital allocation front, you sold a couple of the flat ground leases in the quarter. It sounds like you've been marketing more as well as maybe some of the apartment opportunities. So how has the market been for these ground leases on apartments, and how fast do you think you can accelerate some of this capital recycling?

Yeah, thanks Michael. It's been a really strong market as evidenced by some of the execution that we've taken so far and what we're seeing in the pipeline. So we feel really good about the strategy, the guidance, our ability to execute. We do have a fairly substantial pipeline on the disposition side as well as on the acquisition structured side. A couple hundred million of additional dispositions that are at various stages as well as a similar amount on the reinvestment side. feeling really good about the execution and what we're going to be able to accomplish as the year progresses.

Thank you for your question. Your next question comes from the line of Ronald Camden from Morgan Stanley. Ronald, your line is now open.

Hi, thank you for taking my question. This is Caroline on for Ron. As you mentioned, lease occupancy was up year over year but slightly down quarter over quarter. I was just wondering if we could hear a little bit more on what you're seeing in terms of occupancy upside in 26 and what plans you have to capture that.

Sure, yeah. On Q1, it was primarily driven by the American Signature bankruptcy. So without that, we would have been flat to slightly positive. So when you look at the momentum that we're seeing at the start of 2026, obviously 155 new leases. With retention rates for the first half of the year, we're seeing it over 95%, which is near our all-time highs as well. The cadence of tenants that are wanting to stay in place, exercise renewals or exercise options, TAB, Mark McIntyre, reach negotiate renewals and then the newly activity, due to the lack of really any new supply. TAB, Mark McIntyre, All driven by these demand factors is voting really well for the balance of the year when we look at Q2 in terms of our pipeline right now we're on cadence what we saw. TAB, Mark McIntyre, Last year, and we have great momentum on those two boxes that we've got back in the beginning of. TAB, Mark McIntyre, beginning of this this year, and, for example, with American signature our market market on those over 25% so. Not only are we backfilling with higher credit tenants, but the opportunity to drive rents further north.

Yeah, the only thing I would add is the real upside for Kimco and our investors is the growth in economic occupancy. You know, we have a very wide spread in the signed but not open pipeline. But when you see that meaningful uptick in economic occupancy as we progress through the year, that's really what will be a differentiator for us versus the pierce.

Thank you for your question. Your next question comes from the line of Michael Griffin from Evercore SII. Your line is now open.

Great, thanks. I know, Connor, you just talked there about the economic to lease occupancy delta narrowing. If we're at 410 bps, call it this quarter, do you expect that to narrow to 200 bps by the end of the year? I know you're still about 200 bps below your all-time record high economic occupancy. So maybe talk a bit about the cadence and expectation of that delta progressing throughout the year.

I first want to take a step back and talk about what creates the snow pipeline in this 410 basis points. Obviously, the top line is your least occupancy, and the bottom line is your economic occupancy. So starting first with least occupancy, we're at 96.3%. Our all-time high is 96.4, but we see that there's room to run north of that. For example, we're about 110 basis points below our all-time high in anchor occupancy. So if we continue to reach that level and continue to push small shops, you should see lease occupancy grow. As a result of that, that's future cash flow benefits that we would be getting that we have not yet realized, but that would continue to further expand your snow pipeline. So that's a good thing, because we'd want to continue to see that cadence. On the bottom side, there's the economic occupancy. As Connor just mentioned, we want to continue to see that grow. And right now, we're still below our all-time high of 94, about 94.5%. So we have room to run there, and we continue to see that to accelerate through the back half of the year. So not only are tenants now open and operating, but they are also paying higher rents than the previous rents. So that also demonstrates future cash flow growth. So it's not to say that you necessarily want to see it press as a good thing as much as you want to see the cash flow growth come online and you want to continue to rebuild that cadence and that pipeline to demonstrate even further cash flow growth over the coming years. So we see both trending upward as our goal and objective for 2026.

Yeah, I think the nicest part about where we sit today is retention rates are at all-time highs and actually ticked up in the first quarter. So, again, that churn that has been relatively constant in retail has actually slowed down meaningfully. And the demand side is still there, and we're seeing it being continued on the robust path that's on. So that's why I mentioned that the upside that Kimco has versus our peers is that economic occupancy lift as we move through the year and forward.

Your next question comes from the line of Samir Kunal from Bank of America. Your line is now open.

Yeah, good morning, everybody. I guess my question is around the non-cash gap revenue. It sounds like you did around $21 million in the first quarter, and your guide is like $45 to $55. Talk about kind of how to think about the cadence for future quarters and what kind of deal with that for the first quarter. Thanks.

Sure. So in the first quarter, we actually had some larger below-market rents that came back. We had a couple of leases where we early recaptured those boxes, and that generated an extra $7 million in the first quarter. So again, it is weighted more towards the first quarter. When we look to the back half of the year, you know, second quarter, third, fourth quarter, again, we're expecting right now normal cadence of it. So again, you know, you'll probably look at somewhere in the you know, $8 to $10 million a quarter of transactions that relate around this non-GAAP revenue. So it really is more of this one-timer event in the first quarter lifted by these two large below-market rents we got back.

Your next question comes from the line of Juan Sanabria from BMO Capital Markets. Your line is now open.

Hi, good morning and thanks for the time. I'm just wondering or hoping you could talk to a little bit about how you think about the importance of size and liquidity and being more relevant, I guess, to investors and their mind share, particularly the non-dedicated REIT guys, the generalists in the environment today and kind of going forward and the need for scale.

It's a great question. I think when you look at Kimco today, we are a compelling investment to the generalists. I mean, I think when you look at our relative discount on any different level, you look at our multiple relative to the peer set in our sector, which is at about a 15% discount. You look at our net asset value discount, which is really the sum of all the parts of our assets. We're trading at a discount there as well. And then you look at the private capital formation. And look at the example just at Blackstone alone, their second highest conviction is in open-air grocery-anchored shopping centers behind data centers. And you look at the transactions of privatizations of public REITs, you look at ROIC, you look at Alexander and Baldwin, you look at Whitestone, and you look at the compelling factors of the cash flow growth that we're seeing, and you look at the relative multiple against other sectors as well versus Kimco. With an A minus, A3 balance sheet, top of the charts earnings growth, one of the lowest G&A loads, I think we actually have a very compelling offering to the generalist community. And REITs today obviously are dealing with higher interest rates and higher fuel prices, but we feel like we have the supply and demand dynamic that really shines relative to other sectors and relative to other peers in our sector. So we actually feel like the size and the relative strength of the balance sheet, the growth profile, and the team gives us the opportunity to capture mindshare when we go out to generalists. And we do that consistently outside of just the normal REIT sector and REIT conferences. We feel like we have a compelling offering as Kimco really shines on all those metrics and the offering opportunity we present today.

Thank you for your question. Your next question comes from the line of Alexander Goldfarb from Piper Sandler. Your line is now open.

Hey, morning out there. Just a question from the tenant perspective. Given this environment where space is quickly sort of vanishing, if you will, and basically nothing is being built, are you seeing a difference in how the tenants approach leasing, meaning Are you seeing either the CEOs more involved or the tenants rethinking how they go out to landlords to lease space or how they think about their leasing? Or they pretty much have their set game and they're doing not what they've always done. But I'm just trying to understand from the tenant's perspective, it's got to be different, I would think, just given you're close to 98% anchor lease, 92% small shop. I got to think that their game is different than years ago when there was a lot more availability.

Yeah, Alex, great question. I'll sort of break it down to a handful of things. One, that you're absolutely right, and the tenant is changing their approach. They're becoming much more flexible in terms of how they view their prototype. They're becoming much more aggressive and wanting to get out in front of new opportunities and or potential future opportunities and a willingness to sign leases much sooner. As a result of that, as you've seen with us doing the package deals, Most notably, obviously, in Q1, we did a bunch of Dollar Tree deals. It's not so much that we did Dollar Tree deals, but it's more important about the pace and the cadence in which we got those done. There was a few examples in that package in which they got their committee to approve it in, I'd say, early to mid-March, and then we had the deal signed by the end of March. So there's a huge motivation on their part to move much quicker and much faster and work with us as a landlord partner to find a way and a means to do that. Second to that is on the economic structure. Obviously, when you have a competitive set, you can start to negotiate and work through terms. And the idea of value engineering boxes, lowering CapEx costs to deliver the space sooner is really, really important, not only for them, but also for us. So we found other ways in which to work with our retail partners to get the leases signed, but on the back end, Leveraging our relationships and our skills to obviously value engineer to lower CapEx costs and then to get the tenants open sooner is of huge value to the retailers. So for example, with our Sprouts package, our construction team has been working tirelessly with their team to try to pull forward those open dates through the course of this year, which is of real value to them to help them hit their open to buy. So it's really becoming this healthy dynamic between the both parties and we're working very constructively together, which was also part of the impetus of when we went through this reorder to make sure that we're functionally aligned on the leasing side to unlock the full potential of our scale.

Your next question comes from the line of Cooper Clark from Wells Fargo. Your line is now open.

Thanks on the 3700 multi family units entitled for development that you cited as a near term opportunity over the next 3 years. Could you walk through where yields are today? If you were to start those projects and then also where you think some of the multi family disposition dispositions in the pipeline you mentioned earlier may trade on a cap rate basis.

Yeah, sure. So on the near term projects, you're usually seeing gross yields in the fives, mid fives or so, low fives, depending on where you are in the market. Maybe in some secondary markets, you go slightly higher than that. As a reminder for us, we do a capital light strategy with a prep program. So our yield on invested capital for Kimco is much higher than that. Recently, we completed Poulter on a gross basis. It was in the fives. Our invested capital was in the eights. So we're seeing meaningful value in the approach and want to be extremely selective on when we activate these projects. So that's a pipeline that we're monitoring over the next three years, as you articulated, and we'll look to activate it. As it relates to the sales side, I'll pass it over to Ross.

Yeah, I mean, on the disposition side, we continue to see really strong pricing on multifamily. In some cases, high fours, low fives. If you look at the multifamily that we've activated that we own in our portfolio, you have to keep in mind that those projects were very targeted for the best locations, some of the best mixed-use projects within our portfolio, and having the amenity of the retail that we provide in those assets really helps fuel the demand from investors for that product. So as we are very measured and disciplined in what we look at from within our portfolio, we can be extremely selective in which of our projects we look to crystallize that value. And then again, going back to our strategy, taking that really low cap rate capital that we can then reinvest in higher yielding multi-tenant shopping centers that is very much a part of our go-forward strategy.

Your next question comes from the line of Greg McGinnis from Scotiabank. Your line is now open.

Hey, good morning. According to some Q1 broker reports, it looks like market rent growth might be slowing despite the limited new supply and low vacancy. And then we saw that your naked anchor leasing is assuming 30% mark to market this year, which implies, I think, like $17 per square foot rents, which is kind of below where you signed anchors over the last few years. So A couple questions. One, are you experiencing, you know, any of this kind of slowdown in market rent growth? And two, of those 34 anchors, I guess, how many are released? And is that lower rent per square foot assumption location specific? Or is there some sort of pullback that you're seeing?

No, there's no pullback. So, I mean, just in this quarter alone, our new leases on anchor leases was over 20 bucks a foot, which is in the supplemental as well. So you're seeing meaningful market-to-market adjustments, obviously at $13 on existing base rents. There's real upside there, as you alluded to and what I just reinforced. As it relates to the 34, almost 100% of them are resolved, 96 to be more specific at this point, with the balance sort of trailing towards the end of the year, which is sort of natural cadence for negotiating. So No, no meaningful slowdown there. Really, for us, it's always looking at that embedded value on the mark to market and how we can push those rents further north. And obviously, on the demand side, it's continuing to prove out in a positive way. Again, on our new lease side, we just posted $29 a foot on new lease rents, which is the highest we've ever had in Kimco.

I think one thing to watch, too, is the retention rates being so high that existing companies are unlikely to give up a space today because they know the economics across the street or down the road are going to be much, much more challenging for them to meet than what they currently have. And if you have a proven store, you have less risk in terms of projecting sales going forward. So what we've seen is retailers really lean in to their assets that they currently have, reinvest in those stores, and make the compelling argument that what they have is really the best economic deal they're going to find in that market.

Your next question comes from the line of Rich Hightower from Barclays. Your line is now open.

Hi, good morning, guys. Just to go back to the downward revision in expected credit loss for the year. Can you just break that out between sort of known situations? Obviously you had, you know, some known situations in the first quarter, but, you know, known versus theoretical sort of based on the economic environment and what the potential flex in that number could be as we go throughout the year.

Thanks for the question, Rich. So we're really encouraged by the 52 basis points that we experienced for the first quarter. You know, we're not really seeing any slowdown when it comes to our small shop tenants. There's no creep that we're really seeing. On the bankruptcy front, you know, we know that Painted Tree just filed. It's a small impact for us. There's only five leases there, so we don't anticipate anything significant in the credit loss line for that. But obviously, it's, you know, early innings. It's the first quarter. And, you know, there's a lot of uncertainty out there in the macro environment. So we feel comfortable with that revised 65 to 90 basis points on an annual basis at this point. but nothing really specific that we're seeing again on any and on any tenants for the rest of the year.

Thank you for your question. Your next question comes from the line of Craig Mailman from Citi. Your line is now open.

Hey, good morning. I just want to go back to the conversation about kind of being near peak. We strayed in the snow pipeline. I'm just kind of curious that the trajectory looks very good into 27. But is there anything that you guys are doing internally on sort of operating the portfolio as you get to this peak level? Does it give you more flexibility to, I guess, negotiate tougher or re-merchandise at a more aggressive pace to where it could kind of slow the trajectory of breaking through that peak because you guys are intentionally trying to maximize revenues rather than optimize kind of for lease rate. Just kind of curious if there's anything on that side of the equation we should think about from just a growth perspective here in 27 to maybe even 28.

Yeah, I mean, our number one objective is maximizing cash flow growth. So I say you start with that, and then the occupancy side is we're looking at the opportunities to backfill vacant space. We're exploring sort of what's the highest and best value for the box and for the center. So if we're able to backfill a space at a market-to-market adjustment and see a meaningful spread from prior rents at lower costs, that's a great opportunity, assuming everything else is relatively stable within the center or it's the best mousetrap within the market. Secondarily, if we see an opportunity where we can add grocery, as you know, that's a major priority of ours, We're over 86% grocery anchored within the portfolio at this point, and we want to continue to push that as far as we can. We may create vacancy to support that initiative because what we're seeing on our active grocery projects, currently we have 15 active projects under construction right now, we're seeing meaningful mark-to-market adjustments and premiums on the small shop space of upwards of 25%. So that ties back to driving cash flow growth for the future. Obviously, in that case, you may take some occupancy offline for that benefit, but the future long-term benefits of stable higher rents with higher growth is much more valuable. So we always look at the available options on the table and are driven solely by the fact of what will be best to drive future cash flow growth for the company.

The only thing I would add in going back is, again, the economic occupancy is relatively low, so that as that continues to improve, We'll get triple nets as well as the base rent and that the margins will improve. And then if you bring down the CapEx load, which we're starting to see as well on the go forward asset management of the portfolio, your free cash flow will continue to improve, which allows you to invest accretively across all of our different levers for growth. And so that early flywheel, I would say we're in the very early innings of that. So we're really excited because we see this as the trajectory to really enhance and improve the growth profile. All of the last two years, we've been at the very top of the sector in terms of earnings growth.

Thank you for your question. Your next question comes from the line of Floris van Dijkum from Leidenberg. Your line is now open.

Thank you. So the S&O pipeline obviously very, very attractive. I think 36% higher rents than your in-place rents. I guess the question I had for you are also going down to the bottom line, as you think about your portfolio occupancy getting higher, your retention rates being higher, how do you forecast your leasing costs and your AFFO going forward? Obviously, you've had a number of anchor bankruptcies in the past, and you're still working on getting those anchor spaces filled and presumably recognizing the leasing costs. How should investors think about your AFFO trajectory or your FAD trajectory going forward?

Yeah, Flores, great question. So, as we continue to construct and open the the signed leases and get the tenants operating in our shopping centers, that capex load should start to taper over time as your economic occupancy starts to grow to Connor's points earlier. So that should be the natural trend that you ultimately see on the back end. And then Just overall with the continued negotiations that we mentioned earlier in the call about value engineering and finding improvements in our use of capital and lowering those costs to get deals done is a continuation of just good prudent leasing discipline that we continue to exercise.

Yeah, the only thing I would add, Flores, is that AFFO growth, that inflection point, is what's driving the best and brightest in the private capital markets to lean into grocery acre shopping centers. We're at the very early innings of that inflection point. And when you look at other sectors, nobody has the supply and demand dynamics that we have. The new supply under construction actually ticked down to 0.2%. That's the lowest of any commercial real estate sector. And then you look at the occupancy levels and the demand side, it really is going to be, I think, a significant inflection point where you have a lot of pricing power, not a lot of supply, and the existing tenants are trying to grow and are going to be trying to jump in front of one another to push rent. So it's an exciting point in sort of Kimco's history to be where we can point to that spread and sign but not open, also while driving really strong earnings growth at the same time.

Your next question comes from the line of Handel St. Just from Zoho. Your line is now open.

Hi, good morning. This is Ravi Vaidya on the line for Handel. Hope you guys are doing well. I wanted to ask about the guidance here. Regarding the bad debt, how much of that was driving the uptick in the guide? Was bad debt changed by the number of outperformance that was done in the first quarter, and what was embedded regarding buybacks initially and post-guidance range? Thank you.

Sure. So credit loss was certainly better in the first quarter. We came in at, as Kathleen mentioned, at 52 basis points. Overall, if you think about it, every 10 basis points is about a million dollars and change. So a little bit of help certainly coming from the credit loss side of things. Again, the impact and the beat for the quarter really is operationally. Minimum rents were higher by about $8 million, and that's the primary driver overall for why FFO was a penny higher during the quarter. With regards to share buybacks and things like that, again, we are always watching daily, looking at what our cost of capital is. In the very beginning of the quarter, we bought back a little bit of stock when the stock was under 20. So we took advantage of that in a very small amount. Obviously, during the first quarter, we've seen good improvement. But again, we're still trading at a pretty significant discount when you look at where the overall trading's at. We have probably an implied cap rate in the 6.8 level. Our FFO yield where we're sitting today is around 7.7. So we're always keeping a constant eye on the opportunity. But for right now, There's really not a lot baked into the guidance in terms of share buybacks.

Thank you for your question. Your next question comes from the line of Wes Goloby from Baird. Your line is now open.

Hey, good morning, everyone. Can you talk about your overall apartment in Hawaii exposure from ground leases? And I assume it's all through ground leases, but maybe you can clarify that as well.

Um, yeah, it's, it's relatively small in terms of, in terms of our impact right now.

So the evolution of the apartment activation projects, really, we started with ground leases really as a no cost to Kimco where we entitled the project ourselves and then looked at the parking lots, um, where we could activate, where we wouldn't have to take any retail offline. And that's really where we started the journey. Um, and that, that clearly we have a roper on that as well. So the thought process being as the apartment is developed, and if that developer ever wants to sell it, they're selling a leasehold while we can potentially match and acquire it from a fee position. So there should be a nice spread that we can compress there. After that, we decided to contribute the land into joint ventures and add some preferred into the structure, as Dave mentioned, is what we did at Suburban Square with Coulter. which allows us a higher return on invested capital than what the actual gross returns look like. And that usually lines up with about a 50-50 joint venture where we can ride the upside of the NOI growth. And so we continue to manage the pipeline of activation to see where it makes sense. Obviously, there was a lot of supply delivered in the apartment sector this last year. A lot of it is being absorbed, and certain markets are showing sort of a turn and a relatively strength here in the spring. So as we look forward, we'll continue to look for CapEx light activation opportunities, where, again, we can contribute our land, which really has a zero basis because it's parking lots and our shopping centers. I often talk about this, that we have, I think, one of the most underutilized forms of commercial real estate. We have a single-story building that comprises about 20% of the FAR of the asset, and the rest of it, that 80%, is just parking lot that's not generating any revenues. And with driverless cars here, there's a lot of opportunities for us to continue to see parking ratios get lowered, which allows us to activate more of the parking lot for highest and best use. And that's why we've been leaning into this entitlement program that, again, allows us to unlock that future value for our shareholders. And we have a number of different ways to do it, but does not put a lot of capital at risk.

Thank you for your question. Your next question comes from the line of Paulina Roja from Green Street. Your line is now open.

Good morning. In your investor presentation, you highlight that Kinko trades at a discounted multiple relative to peers. And I have two related questions. So first one is, what do you attribute that disconnect to? And second is, What do you think the market needs to see to change that assessment?

I was going to ask you that question. That's a good one. I think there's a combination of things that obviously being large and liquid sometimes is in your favor. But when a sector is out of favor, it sometimes works against you. So I think that may be part of it. Consistency of earnings growth, I think, is a calling card for Kimco. For a while, we wanted the balance sheet to improve dramatically, so that will be a pillar of strength for Kimco. We now feel like we've checked that box with an A-A3 credit rating. When you look at the components of our growth, we continue to see us transforming the portfolio into more of a grocery-anchored shopping center portfolio. Historically, Kimco has been a little bit of a mix of portfolio assets. We're obviously now at 86% grocery-anchored with a number of assets under construction to add grocery. So again, I think as the sector becomes more in vogue, hopefully now that tide is changing where you see the opportunity set changing for Kimco because we've been able to drive significant earnings growth without any real cost of capital advantage. So I don't know any other sector or any other peer that had north of 5% and then north of 6% earnings growth with no cost of capital advantage. So in essence, no external growth. Everything we're driving is from organic internal growth. And so now that we're at a point where we feel like the organic growth is accelerating and we're looking at potentially external growth on top of that, we feel really good about the trajectory changing and hopefully our multiple re-rating.

Thank you for your question. Your next question comes from the line of Caitlin Burrows from Goldman Sachs. Your line is now open.

Hi, good morning. Maybe just on the transaction side, I think you guys said you're confident you can meet your goals for the year, but wondering if you can discuss that a bit more, especially on the acquisition side, since it seems like it's a pretty competitive market. How do you expect to source those deals? Are there certain characteristics of the type of properties you're underwriting to make Kimco more likely to come out the winner? And is there anything in particular that you have lined up at this point?

And Caitlin, it's a great question. Yeah. It's your point. It does continue to be very competitive, but I do want to reiterate our conviction in the guidance and the strategy and our confidence in our ability to execute. I think if you go back and look at, you know, the last five years we've acquired close to $10 billion in assets. So I have the utmost faith and confidence in our team. We're really good at acquiring assets, integrating it into our portfolio, creating value. But we're going to continue to stay disciplined. You know, we have to be very strategic about what we buy and making sure that it's accretive as opposed to, you know, putting up a mark for a particular earnings call. So we're excited about the pipeline, the activity, the opportunities. I do think that we have some differentiators as it relates to our, you know, inside trap on certain deal flow, whether it be from the joint venture platform where we have certain assets that are going to be recycled where we have both the first and the last look. With our JV partners, we've been very successful over the last several years acquiring our partners' interest in several select joint venture opportunities. And then again, when you look at the structure investment pipeline that we have, we've been very active putting out capital. So this first quarter was a good start to the year. We had about $38 million that was net funded, but that's over $70 million of net committed because there are some future fundings with some of the deals that we've done. So with those deals and the ROFOs and the ROFRs, we continue to see additional deal flow oftentimes before it hits the market or we get the last look on it. So we'll be selective, but we're seeing a lot of opportunity. And as I mentioned at the beginning of the call, we have a couple hundred million in the pipeline right now that we're excited about that checks all the boxes for us in terms of quality, growth, demographics. So we're very confident that we're going to get our fair share and absolutely hit our guidance targets.

Your final question comes from the line of Mike Mueller from JP Morgan. Your line is now open.

Yeah, hi. I apologize if I missed this, and I know you gave some color on the snow ramp, but about how many years out do you think it is until you're back to a normalized, leased economic spread?

I mean, when we look at 2016, When we go through 26 and 27 right now, again, we're at 92.2 on the economic. Our high watermark is around 94.5. We have room to run there. When you look at, as I mentioned in my earlier comment, the least occupancy, we're at 96.3. Our all-time high is 96.4, but what I look at is like our anchor occupancy is actually down about 110 basis points, and we're continuing to see meaningful growth on the small shop occupancy. So I still think there's room to run there. I do anticipate as economic occupancy comes online and that cash flow growth starts to get realized in our earnings, you'll start to see economic compressed towards, you know, as we start to move into 2027. But, you know, preserving it, if your economic's growing, your lease is growing, it's not a bad thing to continue to see a healthy spread there because that's just continuing to fuel the future pipeline for cash flow growth.

We have reached the end of the Q&A session. At this time, I will now turn the call back to David Brushnicki for closing remarks.

Great. Thanks to everybody for joining the call today. We look forward to meeting up with a number of you at some of the upcoming investor events that we have. Otherwise, if you have any follow-up questions, please reach out. Have a wonderful day.

This concludes today's call. Thank you for attending. You may now disconnect.