Q3 2021 Kimco Realty Corp Earnings Call

Hello, and welcome to the Kimco is third quarter 2021 earnings conference.

All participants will be in listen only mode.

Should you need assistance places or a conference specialist by pressing the Starkey followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on you touched on phone.

To withdraw your question. Please press Star then two please.

Please note today's event is being recorded.

And now I'd like to turn the conference over to David pushing Hickey Senior Vice President of Investor Relations and strategy. Please go ahead Sir.

Good morning, and thank you for joining kimco third quarter earnings call.

At Kimco management team participating on the call today include Conor Flynn Kimco, CEO, Ross Cooper, President and Chief Investment Officer.

Glenn Cohen, our CFO, David Jamieson Kimco as Chief operating officer as well 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 maybe deemed forward looking and it's 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 fat.

During this presentation.

<unk> management may make reference to certain non-GAAP financial measures that we believe help investors better understand kimco operating results reconciliations of these non-GAAP financial measures can be found in the Investor relations area of our website.

Also in the event our call was to encourage technical difficulties.

Try to resolve as quickly as possible and if the need arises we will post additional information to our IR website.

That I will turn the call over to Conor.

Good morning, and thanks for joining us.

Today, I will share the highlights of the quarter provide a recap of our now closed strategic merger with lawn and garden and give an update on the strong leasing environment Ross will give an update on the transaction market and Glenn will cover our operating metrics in detail discuss our improved balance sheet albertsons valuation and the proactive use of our ATM and how we can take advantage.

There are opportunities in the market.

I'll close with an updated outlook for the balance of the year.

While we have only owned weingarten for a partial quarter, our expanded portfolio of grocery anchored and mixed use properties is already validating our investment thesis to date, we are exceeding our initial underwriting on all major metrics, including S. F O occupancy spreads and renewal rates as for synergies as outlined in our earnings release.

We have achieved the upper end of both ranges and anticipate achieving the full benefit of synergies by the end of 2020 to our dedicated team has done a remarkable job closing on the merger ahead of schedule and implementing an integration plan that included Onboarding and training over 100, new employees significant systems integration and property management.

All while staying focused on executing our strategy.

To all of my teammates I just want to say thank you.

On the operational front leasing demand continues to be robust across the portfolio with the bright spot being the rebound in demand for small shops. This was illustrated by the portfolio delivering another quarter of improved results, including a sequential increase in occupancy and positive leasing spreads our pro rata U S occupancy is up 20 basis points to $94.

1%, while anchor occupancy remained flat at 96, 9%.

Small shop occupancy rose 180 basis points over prior quarter to 87, 3%.

An increase of 60 basis points year over year, new lease spreads were a positive 5% with 141, new leases signed totaling 605000 square feet spreads for renewals and options finished at positive four 9%, we closed the quarter with 270 renewals and options totaling one 4 million square feet exceeding the five year average.

A number of renewals and options reported during the third quarter by 40% and exceeded average GLA renewed by 38% combined.

Combined spreads for third quarter 2021 were positive four 9%.

With total <unk> 'twenty, one deal volume, reaching 411 deals totaling 2.050 million 321 square feet.

411 leases executed represents the most transactions reported during a quarter since the first quarter of 2018 or.

Our same site NOI growth was positive $12, 1%, including a 30 basis point contribution from Redevelopments. The same site population does not include the weingarten sites since we only had them for a partial quarter.

Continued strength in leasing we have maintained our 300 basis point spread of leased versus economic occupancy similar to last quarter as of September 30th 2021, We had over 400 signed leases representing $44 8 million of pro rata annualized based rents awaiting rent commencement.

While the operating environment remains favorable we cannot let down our guard.

Inflation and supply chain issues in the labor market together or alone can impact our business and that is why we continue to look for the most resilient assets improve operational efficiencies and seek out ways to help our tenants 16, we continue to grow our portfolio in the high growth Sunbelt markets and are committed to being the last mile solution for tenants.

There is no question that our mission critical last mile brick and mortar locations are proving to be durable solutions for consumers retailers and many other businesses that want scale and reach to serve the end customer.

In closing we are pleased with the progress we have made and believe that we are position kimco for sustainable growth over the long term with a combination of internal and external growth levers are talented and deep team is focused on execution. As we are in a unique position to take advantage of a wide range of opportunities. We continue to believe we are building something special.

And the best is yet to come.

Ross, Thanks, Conor and good morning.

It's been quite an exciting quarter at kimco and the excitement has continued into the fourth quarter as I will discuss shortly there.

There is no question that open air shopping centers provide one of the best risk adjusted returns of all asset classes.

We continue to see additional capital sources, new and old gaining conviction in quality open air retail leading to the compression of cap rates. We are fortunate to be in a position with multiple investment strategies that enable us to be active when opportunities arise, but also patient when things become too frothy.

With the Finalization of the Weingarten merger, we've been able to execute on several accretive investments and new initiatives and with the addition of new joint venture partners inherited the Weingarten, we are excited about potential growth opportunities.

Subsequent to quarter end, we acquired the remaining 70% interest in a portfolio of six publix anchored sunbelt region shopping centers from our existing joint venture partner Jamestown for a gross purchase price of $425 8 million.

The publix anchored assets represent over one 2 million square feet of gross leasable area in infill markets throughout the southeast with five located in the top performing South Florida market and one in the high growth Atlanta market.

Subsequently kimco entered into a joint venture partnership with Blackstone Real estate income Trust under which we will both owned 50% and Kimco will continue to manage the portfolio. It is rare to have the ability to buy a portfolio like this with short term mark to market opportunities and the exceptional tenant sales.

Yes.

We are thrilled to be partnering with Blackstone again on our new strategic venture also post quarter end and in line with our value creation strategy. We were successful in buying out our partner's 85% interest in two grocery anchored centers in California.

Anaheim Plaza is one of the jewels of our southern California portfolio with extraordinary highway visibility on frontage and two grocery anchors at the same property both performing exceptionally well the second asset is Brookdale shopping center located in Fremont, California anchored by a lucky supermarket and Cvs the gross.

Purchase price of the two assets was $134 million.

Turning to our redevelopment program continues to move ahead, beginning with property level entitlements, and then selectively and creatively activating a few at a time, while the structure and exit strategy are determined on a case by case basis, we see the upside knowing these infill locations are being built at a significant relative spreads.

The stabilized cap rate.

Comps in multifamily industrial and other asset classes are regularly transacting with cap rates, starting in the twos and threes.

Additionally, we're continuing our structured investment program with a disciplined approach and an emphasis placed on location demographics quality of tenancy and operational strength of the sponsors.

We view the base case of these investments as a true win win ease.

They're generating an attractive return with a repayment down the road or exercising our right of first refusal and owning the properties outright.

On that front, we completed a $21 $5 million mezzanine financing on a strong performing center in San Antonio called Alamo Ranch and.

And just a few short months San Antonio has gone from a market that was on our target list at kimco to a major contributor in our portfolio with the Weingarten merger and now our second structured investment there we.

We continue to pursue additional opportunities in San Antonio one of the fastest growing msas in the country.

We also sold three small low growth assets this quarter.

Two single tenant boxes, and an undeveloped parcel for a total of $23 5 million at a flat 5% cap.

While dispositions will remain a relatively small component of our investment strategy, we will be prudent and disposing of low growth assets and undeveloped parcels from which we can redeploy the capital.

So repeat counterstatement, we're confident that the best is yet to come.

<unk> for the financials. Thanks, Ross and good morning, we are pleased to report very strong third quarter results overall, the portfolio continues to produce improving results, including record quarterly revenue increased occupancy positive leasing spreads strong same site NOI growth increased collections.

And lower credit loss.

Balance sheet metrics are also at the strongest levels ever as you might expect the completion of the 5.9 billion.

Weingarten merger, which closed in early August was a key contributor.

While we did not have a full quarter of contribution from the addition of the Weingarten portfolio benefits are clearly apparent our team has put in an enormous effort to accomplish the successful integration of weingarten in a very short period of time, many thanks to our highly motivated and skilled team we couldnt be prouder.

Now for some details on our third quarter results NAREIT <unk> was $173 7 million or 32 cents per diluted share and includes $47 million or eight cents per diluted share of merger related expenses. This.

This compares to the third quarter 2020, NAREIT <unk> of $106 7 million or 25 cents per diluted share, which includes aggregate charges of $16 1 million or four cents per diluted share related to severance for our voluntary early retirement program and early redemption.

$185 million of unsecured bonds.

The increase in <unk> was primarily driven by higher NOI of $98 7 million of which the Weingarten merger contributed $62 6 million. In addition.

NOI benefited from low credit loss of $30 7 million in higher straight line rent of $14 $5 million, including $2 million from the weingarten portfolio improvements in collections and new leases commencing during the quarter were the major contributors specifically during the third quarter, we collected approximately <unk> <unk>.

98% of base rents, we also collected 80% of rents due from cash basis tenants up from 77% last quarter.

Furthermore, collections of prior period amounts from cash basis tenants totaled 8 million during the third quarter 2021.

Our cash basis, and it's comprised nine 1% of pro rata annualized base rents. If we excluded. The addition of the weingarten cash basis tenants.

This amount would have been seven 3%, which compares favorably to the eight 8% level reported last quarter.

In connection with the preliminary purchase price allocation for the Weingarten transaction.

The debt, we assumed was recorded at fair value, which was $107 million higher than the face amount.

This resulted in $6 2 million of fair market value amortization for the third quarter, which reduces interest expense and is also part of the <unk> improvements, we expect to finalize our purchase price allocation by year end.

During the third quarter <unk> also included approximately $6 million or one cent per diluted share related to one time contributions from several joint ventures and higher lease termination fees.

Turning to the balance sheet, we had an active quarter in the capital markets, We issued a new 500 million unsecured bond at a coupon of 225% the lowest coupon for 10 year unsecured financing in the Companys history.

Proceeds from this issuance were primarily used to fund the cash component of the merger merger consideration and the merger costs.

We also opportunistically used our ATM equity program to issue $3 5 million shares of common stock raising almost 77 million in net proceeds to fund some of the investment activity Ross just mentioned.

This is in addition to the $179 9 million shares of common stock issued in connection with the Weingarten merger valued at $3 7 billion.

We also assume $1 8 billion of debt, including the fair value adjustment as part of the Weingarten merger total common shares outstanding at quarter end was $616 4 million and we expect this should be a good guide for the fourth quarter.

As anticipated the Weingarten merger was a deleveraging events as of September 30th net debt to EBITDA on a look through basis, including pro rata share of joint venture debt and preferred stock outstanding was seven times.

This metric only includes two months of EBITDA from the one garten merger, but all of the dentist.

On a pro forma basis, including a full quarter of EBIT from Weingarten look through net debt to EBITDA would be 6.3 times, representing the lowest level since we began tracking this metric.

Our liquidity position also remains very strong we ended the third quarter with over $450 million of cash and full availability on our $2 billion revolving credit facility in.

In addition, during the third quarter the value of our Albertsons marketable security investment climbed to more than $1 2 billion after increasing by $457 million, which is included in net income, but not F <unk> for the quarter.

We continue to evaluate our opportunities to begin the albertsons monetization process. As we look ahead. During 2022, we will have a variety of potential uses for the capital from the redemption of our preferred stock issuances that become callable bonds that mature in October and November of 2022 and <unk>.

Accretive investment opportunities.

As our overall business continues to recover from the effects of the pandemic and as we begin to benefit from the successful merger and integration of the Weingarten portfolio. We are raising our full year 2021, NAREIT <unk> per share guidance range to $1 36 to $1 37, which includes 10 cents per diluted share.

Merger related costs and the inclusion of the weingarten portfolio for five months.

This compares to previous NAREIT <unk> per share guidance of $1 29 to $1 33, which did not include any impact from the weingarten merger, except one cent related to merger costs as I touched upon our third quarter. <unk> includes a total of three cents per share related to items that were more.

More onetime in nature, and which were not budgeted for as recurring items. This includes two cents per diluted share from improvements in credit loss and another penny from contributions from joint ventures and lease termination fees. We will provide initial 2022 guidance on our next earnings call and with that we're happy to take you.

Questions.

Yes in terms of the Q&A, we want to make this an efficient process. So you may ask one question with an additional follow up if you have additional questions you're more than welcome to rejoin the queue.

Take the first caller.

Yes, Thank you and as I mentioned, we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speaker phone. Please pick up your handset before pressing the case to try your question. Please press Star then two.

At this time, we will pause momentarily to assemble the roster.

And the first question comes from Rich Hill with Morgan Stanley.

Hey, Good morning, guys first of all congrats on a nice quarter I wanted to start off with leasing spreads maybe.

Get some insights from you guys. If this is what a normalized market feels like I typically look at leasing spreads is leaning indicator for same store revenue and same store NOI. So I'm curious does this feel like a normal environment to you post COVID-19.

Yeah. Thanks Rich yeah. Good question, so leasing spreads I mentioned each quarter, it's really dependent on the population that that is rolling and gets executed quarter over quarter. So you do see volatility in that number or some quarters you could have significantly below market leases that roll in you're executing any obviously, you'll get a real net benefit.

Out of that this quarter, we had an outsized amount of small shop volume.

Came through which is typically closer to market. So that's where you see.

That's sub five range for this quarter, but it is not indicative necessarily of what could happen next quarter. If you have some outsized anchor activity that has a significant below market value.

Capture so when you look at what we've been doing over the last.

Mailings eight quarters and maintaining that positive spread there is some volatility in that number and it's really just indicative of what's rolling.

Okay.

Pretty significant pricing power on escalating rents in the Sunbelt, I think thats, where youre going to see this.

Spreads continue to be quite strong as were seeing really the market rent growth there outpaced the rest of the country.

Yeah. That's that's helpful and the reason I'm just focusing on it as I go back to your 2022 'twenty twenty-five guide and you know if you can put up these leasing spreads that that that that might mean that as a conservative guide, but well taken Conor maybe this is for you I noted that Albertsons is worth $1 2 billion at the end of the quarter and have you given any.

Thought to monetization, how you would use that in our capital allocations and any thoughts there.

Yes, as we noted in the remarks, we have a lot of Optionality I think that's the beauty of where we sit today rich if you look at the business and where we sit we've got obviously a lot of leasing momentum clearly, we're going to allocate a lot of capital to that that's our first priority is that really fuels. The earnings growth that we have redevelopment opportunity as well you've seen the.

Entitlement work, we've done throughout the portfolio.

The nice part is we're seeing a lot of external growth opportunities as well as Ross outlined.

We do have some debt reduction opportunity is as Glenn outlined in his script. So yeah, we're going to look at the menu and see whats really the most accretive towards our <unk> growth because that's really where we're focused and we have a lot of different levers to pull so it's a nice it's a nice obviously bucket of capital to redeploy its not earning a tremendous amount right now so we're gonna be prudent.

With it and recognize that we have.

Great Great many of the select from.

Great. Thanks, guys. Congrats on a good quarter again I'll jump back in the queue.

Thank you and that's part of it comes from Alexander Goldfarb with Piper Sandler.

Hey, good morning, good morning out there.

<unk>.

So two questions first just going to the Uh Huh I don't know if you guys are going to return to that Kingstone name, but.

The sub five cap rates that you guys bought at one just a little bit more beyond what is underlying that sub five and then two just bigger picture not surprised to see cap rates compressing, but how do you guys. You know how is your underwriting of acquisitions.

Other portfolio or individual assets changed because obviously the price that you paid for weingarten.

Can't be replicated today, so just sort of curious how you're underwriting deals today, given where pricing is going.

Yeah sure happy to address that Alex.

So as it relates to the venture.

Venture with Blackstone I mean, these are clearly fixed asset that we felt very strongly about between the location Publix being one of the best grocery anchors that you could possibly have with exceptional sales as I mentioned in the script, having near term mark to market opportunities and Publix anchored centers is somewhat rare. So when you look at the vintage of those.

Assets it gives us an opportunity to.

To create some additional growth probably sooner than some other opportunities that we have in the portfolio with publix. So we're really excited about that we're really excited about.

Sort of re engaging our venture with Blackstone after a very successful one several years ago.

Underwriting is still a very specific exercise when you look at every single asset every single space taking into consideration the growth in the market demographics.

The population growth is coming from and just making sure that we have very strong conviction in our ability to push rents you know, we're not looking to invest in assets that don't have outsized growth. So the ones that you do see us on the trigger on you can.

Rest assured that we believe very strongly that we're going to be able to push that outsized growth beyond the average of our portfolio. So I don't think that there is anything specifically changing in terms of our underwriting strategy, whether its single asset or portfolio. It's really just making sure that we look at every single asset every single space and feel pretty good that there is a below market lease.

With that we can push overtime.

So as far as the the Blackstone the subplot what would you say that that cap rate will get to in a few years out when you have an ability to roll rents.

Yeah, I mean, it's hard to predict you know we have opportunities to discuss things you know sooner than later hopefully with the grocery anchor. So the timing is going to depend on where those negotiations go but like I said, we're very confident that the growth there is going to outpace the average of our portfolio hopefully by a wide margin.

And then the second is as far as retailer demand for space are you sensing that the retailers are we want to pay more rent pretty you sensing that that rent conversation, it's easier today, so when you're saying Hey look we have multiple.

Tenants for certain space you guys have to pay more now the tenants are more willing to engage in those conversations, whereas maybe a few years ago. There were more willing to push back do you sense a change there on the leasing dynamic to the rent discussion.

Yeah, Great question.

That dynamic is is always evolving and I think where we are today is there is there's so much pent up demand on the open to buy side for retailers. So you have some retailers that have really expanded the breadth of their offering their multiple brands that they are looking to expand T. J X being a great example, and they actually increase their open to buy target.

So that just makes them.

More competitive for space, they want space they need to grow I think COVID-19, there's silver lining.

Through Covid is that brick and mortar is essential for for any omnichannel strategy retailers have really come to appreciate that.

Customers have appreciated that and it's a great form of distribution the margins are better there.

And then thirdly, obviously, there's no new news development supply coming online, it's really COVID-19 inventory, that's getting absorbed so does that third point I think generally speaking as more of that gets absorbed youre able to push rents further north that said to <unk> point earlier, we are seeing rent progressions in the sunbelt and coastal.

It's you know southern California. For example is becoming extremely competitive where we are seeing some nice traction pushing that that rent forward, even beyond where we were pre pandemic levels, but I'd say generally speaking.

We're in a very healthy environment from a landlord perspective as a result of all of those variables.

Thank you.

Thank you and the next question comes from Greg Mcginniss with Scotiabank.

Hey, good morning.

So I'm thinking.

The synergies, which.

I guess I was pleasantly surprised you guys.

Expectations on the top end of the synergies, but given the fairly quick achievement of those goals is there any potential for additional cost savings through trying trying to perhaps.

And there are yes. So we were really proud of the team and how we're able to integrate both companies. So quickly that the majority of those initial synergies were really related to staffing and G&A, which is something that you could anticipate and plan for pre merger. What we're really seeing now is an opportunity. Once we merge these companies and really looked at professional service.

And for information technology and in the longer term contracts at Weingarten had pads, where we can now merged them and our dissolved and some in <unk>.

Tim will create some additional synergies that will help us push that number further north or it. So you know from.

From the outset, we felt very good and we invested a tremendous amount of time upfront with our integration management office you have kicking off 60 days prior to the merger.

Did a deep dive on how.

The combined company will look and operate.

Which enabled us obviously to achieve the numbers, we did today and feel very good about what's going to happen in 'twenty, two and the only thing I would add is kimco is laser focused on efficiency. We always happen Milton is ingrained in our DNA. So yes, we're happy with the integration and where it sits today, but where our combined entity going forward.

We'll make sure that the same focus continues going forward.

Okay. Thanks.

Going back to the shop.

Leasing real quick is there anything you can tell us in terms of the trends you're seeing in that space, how much of that demand.

And thus demand which tenant categories in January.

And then most inquiries and demand for space.

Any color there would be appreciated.

Sure Yeah, I mean, there's demand across almost all categories right now grocery is the obvious one.

There is a clear beneficiary of the pandemic and now have the surplus of cash that they're looking to reinvest in their four walls.

Span their open to buy grab market share and really invest towards the future. So how do they create better connectivity with the customer so that's going to be really important for them as well as all sectors.

Off price as I mentioned earlier at T. J Maxx, Ross, Burlington, and others old Navy, they're all actively expanding their footprint.

Again, they see I think all retailers see this opportunity where it's a short window to upgrade the quality of their portfolio, maybe penetrate a market or expand their market share in certain areas that pre pandemic. There was no inventory available and so you do have this COVID-19 inventory that that's creating this unique opportunity for them.

But what I found it was actually interesting.

This last quarter when we go back to our small shop activity is that you know 35% of our new deal activity.

It was related to restaurants, and the fast casual side on the small shop side. So it's nice to see that the fast casual and <unk> are coming back.

The crumbled cookies of the world et cetera, so you're starting to see that expand out and I think as Covid started kogan anxiety starts to subside people wanted to go back and Reengage. They want a socialized social features that's creating that opportunity on the foodservice side fitness.

Yeah.

The value oriented planet fitness I mentioned early on.

Several quarters ago that planet and crushed you've been very proactive in wanting to expand their footprint and recapture but you're also seeing that now extend out into <unk>.

Boutique fitness category. So that's again, attracting the small shops, so you're really seeing it from.

A variety of areas and then people are playing with formats.

Bob's discount who's experimenting with that with a smaller format right now so it's giving them optionality appreciating that they may be able to provide different service offerings to two different customers in different areas and so it's important that they have a college at play from.

This all seems like sustainable demand in your view like if you look at the forward pipeline still just as strong as it has been.

I do I mean, I think that goes back to the validation of open air.

Nowadays that brick and mortar is an essential part of any retailer strategy and we've obviously gone through a very volatile evolution over the last six years about people's views and opinions and know the markets responded to a different idea as it related to e-commerce, and whether or not what's essential but.

Let's go all the way back to the core basic people like to engage I'd like to touch on field product retailers need multiple forms of distribution to reach that customer and so brick and mortar I see it very much as being a central to that.

We're more convinced than ever that last mile retail is.

Where we want to be where we want to continue to focus on strategy. If you look back.

Five years ago, that's exactly where we're focused and so we feel like we're in a really good spot to benefit from that that increased demand.

Great. Thank you.

Thank you and the next question comes from Michael What Smith with UBS.

Good morning, Thanks, a lot for taking my question.

My question is on the lease at least occupancy to economic occupancy spread given that there is a myriad of supply chain and labor issues and maybe a slowdown from lease signing to rent commencement like how should this how should this metric.

Progress from here given that the time to go from lease signing to rent commencement is expanding and at the same time.

Leasing has been so strong how did those dynamics impact you impair.

Impact the progression from here.

Sure Yeah.

Sure. The question is whether or not least economic will expand or contract as we look out into the future and I think what we could see is three.

300 basis points is more or less at our high watermark.

On a historic basis.

And you could see some additional expansion is as we approach you know first part of 'twenty two but as these tenants start to come online and open you are going to start to see that compression.

Set in through the back half of 'twenty and into 'twenty, three and then I believe our normalized there was about 170 basis of 170 basis points on spread out I don't think you'd see that for a period of time, but.

You are right to your points about.

Supply in openings is something that we watch very very closely we work hand in hand, with our tenants. We have a very substantial tenant coordination program, which really is designed to shepherd tenants through the permitting and build out process does that don't have the resources available to them to address all of these issues that are coming out to the market.

So that's been really helpful. In addition to that we're trying to get you know well ahead on preordering of supplies and materials. When we can when it makes sense we all.

We all lived through the backlog that doesn't matter, who you are and no one is immune to it.

So we're just eyes wide open about that process and we'll manage it as best we can and apply the resources that we need to do to get it done yeah, I would just add that the one big benefit that kimco has.

<unk> is our scale and our efficiencies of scale. So we were not buying you know small amounts of HVAC units. So a roofing materials or anything that's needed for a fit out for a specific tenant we usually buy in bulk and we usually get you know premier pricing as well as you know relationship pricing. So we feel like we have the ability.

As Dave mentioned to utilize our network and to utilize our efficiencies as best we can to try and mitigate supply chain issues.

And scale is a good segue into my next question now that you've had one garda and tucked into the business for about three months.

How can how has your scale change your conversations with national tenants.

Are willing is there a willingness to partner and.

These tenants.

So it kind of go further with you because of your scale and you're able to offer offer more opportunity for leasing than than maybe smaller landlords.

<unk>.

I think I'm trying to understand.

Trying to understand the revenue synergy I'm trying to understand if there are revenue synergies associated with the transaction.

Sure well on the retailer side I mean prior to the transaction, where typically the largest landlord for a lot of these are a lot of these retail partners. So that's just compounded as a result of the merger.

That conversation, obviously always has its benefits.

We'll both ways.

Depending on what's being discussed but in general it does afford us the opportunity to be out in front of those retail partners. They have a very aggressive open to buy strategy. We now have over 560 sites that we can show them.

Two to help accommodate infill buildout voyage, obviously, you can do that at scale that that's a good thing for both parties, but also helps us progressed to the conversation beyond that retailers are trying to.

Figure out and innovate and change to become and stay more relevant to the customer we want to work with them to be part of that solution and understand from a landlord perspective, why do we need to do so it creates a very very constructive dialogue.

To help drive our business forward and to your point, you know revenue and top line growth.

Thank you very much.

Thank you and the next question comes from Huddle Suntrust with them as well.

Yeah.

Hey, good morning.

Good morning.

<unk>.

The recent JV.

Transaction with Blackstone I found very interesting case study of capitalizing on the market move in cap rates and then you bought.

To.

J b assets out in California.

Further kind of spotlighting the embedded acquisition opportunities. So I guess my question is what's your interest level in pursuing further deals like this.

And can you discuss the funding sources.

Bulk albertsons stock at all thanks.

Sure happy to address that so for us I mean, we really view it as a significant level of Optionality and we said even as we've been sort of skinning down our joint venture exposure over the last seven or eight years now.

The kimco side, we've had three very strong long term partners that we continue to do business with and as we've said from the start that we like having the ability to potentially grow opportunistically. If there is a reason to bring in a new partner like you felt here on this particular transaction, but for those.

<unk>.

That are potentially looking for a monetization event, we are willing and able to be able to have that discussion with them hopefully in a negotiated basis, if not having that writer first refusal to be ready to take advantage of that if the partner is looking to exit so one of the nice benefits that we see in the Weingarten merger is after getting.

Down to really just re major partners on the Kimco side. There are now about 14, new joint venture partners from that transaction some of which are looking to do long term business with compelling we welcome at others that are potentially looking to take some chips off the table or monetize their retail investments and we're also prepared to.

To have those discussions as well and we are having those conversations as we speak.

So for us given all the levers that we have Conor mentioned and Glenn both mentioned in their prepared remarks.

Between the significant amount of cash availability on our credit facility ultimately albertsons monetization opportunity.

Just to be very prudent and selective with where we want to utilize that capital, but having a lot of different ways to take advantage of opportunities as they present themselves.

Okay.

Great appreciate the thoughts.

One follow up on the signed but not least ADR I think you mentioned $44 8 billion how much of that should we expect to hit in 2022.

Right now we're tracking around 25 to about $30 million potentially that could flow in 'twenty, two and that would be obviously back loaded.

And the remainder in 'twenty three.

Yes, yes.

Got it thank you.

Thank you and the next question comes from Craig Schmidt with Bank of America.

Yes.

Great. Thank you I guess I, just I want to talk bigger about the current operating environment, which seems to have real strength from the consumer and then just the aggressive leucine from retailers you know this looks like an environment that's much better than 2019. When you go back to look at peoples.

Earnings results. So beyond you know Reuben spending and then retailers looking to.

Take advantage of opportunities.

That's what's beneath this this impressive growth that's happening in the operating environment.

Yeah, I think again, it's not on the retailer demand is a lot of the points that I mentioned earlier, Craig, but it depreciating that.

The value of brick and mortar is real.

Operator C N N their margins consumers see the convenience and the efficiencies the last mile distribution. It goes into this very complex network of how to distribute goods from the retailer to the customer and so I think COVID-19 the irony of it.

Covid was it sort of validated that open air was really essential it's closest to the customer I think you also now have this hybrid work environment.

It's we don't really know what that will look like long term, but I think the one thing that's clear is going to be a little bit different for everyone and as a result of that you are having people that are staying more in that first ring suburban markets that are maybe starting to appreciate the value.

Opposition, there too, which also then creates that opportunity to engage in an open air out of the first ring suburbs, where you know the majority of all of our portfolio resides we are seeing that benefit as well and that could probably carry longer term into the market. So I think you're just starting to see all of these pieces that were in Blackstone and development over multiple years sort of come to ahead.

And and now creating this.

It is this environment that we're in today.

So going forward I think you continue to see.

Open to buys be aggressive as we start to absorb that COVID-19 inventory.

And then yeah.

There I think the consumer is in a very strong position right now to take advantage of that.

Great. Thanks, and then just on your net debt to EBITDA I guess, it's at seven or pro forma six three.

Glenn what's your long term target for net debt to EBITDA.

Yeah, well I mean again, we want to try and keep it in that six to six five times range on a total basis. So.

On a pro forma basis were right in that sweet spot right now and.

And again, we continue to focus on just bringing leverage down over time I think is as you continue to see EBITDA grow again, we are being very cautious about how much that comes on we've been doing a lot to reduce debt levels absolute debt levels over time again.

Weingarten merger added.

1 billion eight in total between seven on a face value of 1 billion eight with the fair market value adjustment, but again on an absolute basis, you'll continue to see us reduce debt and we continue to try and reduce as much secured debt as we can as well so.

We did assume about $300 million of mortgages.

Over time, we will just continue to pay those off.

With unsecured debt or cash flows from the company.

Thank you.

Thank you and the next question comes from Katy Mcconnell of Citi.

Thanks, Good morning, everyone.

Now that you have another quarter of leasing underway can you update us on your expectations for mark to market upside depending on the account activation within your portfolio, especially on the anchor side and now you're expecting somewhat come along with them.

Yeah sure Katy.

We're in the process of going through our R. 22 budgets now so when you look at our 22 rollovers scheduled for anchors. It is it is below market. It's below our average anchor bank base rents as well so we do see nice mark to market opportunities.

As we either started to renew those leases of which were well underway, there and or signed new leases. So we do see a net benefit as we go into 'twenty two but we're in the process of finalizing our budgets right now a lot better perspective in the next call.

Okay. Thanks, and then on the retail side, how do you expect the supply chain disruptions and labor shortages to play out.

Tenants around the holidays. This year and are you concerned about any potential rent collection fallout or impact kidney leasing momentum.

On the rent collection side, we don't have I mean.

Real concern there I think on the supply chain every retailers tried to address it differently some have.

And aggressively focused on and trying to figure out ways and alternatives to redirect their supply chain yet through the course of this entire year appreciating that this may be an issue some had brought inventory levels.

And back.

Onto our out of the mainland to their preparation for the holiday season, but it's clear that there is there are there are pressures there.

Just we all buy early we don't want to disappoint any any of our loved ones during the holiday season, and what that means to you that means as a result that retailers can probably.

Have fewer promotions, so theres, a smaller promotional window, which helps drive topline revenues, which isn't that benefits them.

So it's a really interesting dynamic that's all playing out.

On the labor shortage side, obviously there are.

A number of job openings now, it's a very robust job market job or it's just oh, it's about I think 500 footprint says, yes, I mean, it's so it's so that's very encouraging but yeah, there's clearly a need for more workers at the retailers and at the at the restaurants and I think that will continue to play out through that through the first part of 'twenty two.

The only thing I would add is our traffic levels around 105% of 2019 levels and we see that.

In this environment, where there is supply chain disruption, we're watching closely as what we think may occur as people will probably buy at the store more often than buying something online and potentially having to wait where it might not arrive in time. So that's the dynamic we're watching closely that we think might play out.

Thanks for the color.

Thank you and the next question comes from Caitlin Burrows with Goldman Sachs.

Hi, Good morning, everyone I'm, giving me issued 77 million of equity in the quarter and your share price.

2019 can you just go through the thinking on issuing equity in the quarter and going forward and does it suggest you could at least from the.

Going forward.

I'm sure.

Again, we issued some.

We use the ATM a little bit during the quarter again, it was really to match up against some of the investment.

Opportunities that we have and again just a continued focus on a balance of our capital structure to further improve our leverage metrics. So we you know we are always looking at cost of capital and we're looking at the opportunities that we haven't heard of us.

So it was a modest supplement of equity during the quarter.

To match up really some very accretive investments.

We were very fortunate position to have a number of different pools of capital sources. So we're we're trying to make sure that we look at everything and again, our cost of capital and use it effectively to continue to grow in an accretive manner.

We are as I mentioned, we ended the quarter.

With over.

480 million on the balance sheet, we had some obviously activity that Ross mentioned subsequent to quarter end. So we're still sitting with $330 million of cash no real near term debt maturities and full access to our revolver and.

In addition, we have the Albertsons investment.

We're in very very strong liquidity position to deal with.

Things that are upcoming.

Okay, Great. That's all for me thanks.

Okay.

Thank you and the next question comes from Kevin Kim with Trust.

Oh. Thanks, Good morning can you hear me.

Yes.

So just going back to that demand question.

Obviously things are great.

I'm, just curious about where youre seeing the hottest pockets of demand and Conversely, where it's a little bit weaker.

And I know you mentioned sunbelt versus not but maybe you can go a bit deeper does it matter what type of center power center or grocery anchored is it.

Just.

Acacia demographic space, where you're seeing more customers or more population growth just trying to understand just a little more granularity on where the demand is.

Sure.

Today, I mean over the next couple of years.

Yeah, I mean, I think the next couple of years can be somewhat reflective today as well. So just thinking of geographic first you mentioned that the sunbelt out of the 141 leases that we signed this quarter over 52% came from Sunbelt markets and then within that the substantial majority of where we're actually coastal sunbelt.

So I think you will continue to see that trend.

Over the next couple of years that is where population growth is.

Continuing to rise greater than the rest of the country.

Second of that though on the coastal markets for that remaining 48% always society was heavily weighted towards the coastal markets. So I think you still see that high demand there so between that the coastal sunbelt, that's where we've seen the majority of activity.

Beyond that you like southern California, as I mentioned earlier, it's extremely aggressive.

It's a very very tight market to penetrate so this COVID-19 inventory created opportunities multiple demand factors that helped push rents further north.

In the North East is it's typically been a fairly mature portfolio.

You usually have any higher occupancy levels and so it's just there are natural constraints there it actually I mean, any new supply as well and people wanted to penetrate long Island. For example, I think will continue to be difficult. So when there is that opportunity do you see multiple bidders at the table wanting to wanting to enter the market.

And then.

So I think that's why you continue to see play out over the next couple of years.

Okay.

And.

Thinking about the weingarten portfolio.

How has that performed well.

Relative to your own portfolio and I guess looking forward.

How much more accretive Ken Weingarten contribution be to the overall enterprise.

Yeah. So when we when we actually put it when we get first one under contract on that on the transaction their occupancy levels are less than ours, but by the time, we actually close it was it was very very close to where we were so we're getting that net benefit now those signed leases that have yet to slow and so we always had the original thesis that it was a very complementary portfolio.

Additive in nature I think when you look at the small shop gains that we had of 180 basis points.

<unk> 20th wedge came from the Weingarten portfolio 60 of which came from from Kimco gains, which was one of our high watermarks as well.

Quarter over quarter, so youre seeing a real a real benefit there from Weingart and then obviously combined as the entity, where we're both growing together now.

The other part of it is the three mixed use projects that they have there now the concessions are rolling off so the mark to market on those renewals is pretty strong on those three projects and then when we look at the future entitlement opportunities within that portfolio.

That's really excited because that's obviously, where we've been focusing a lot of our time and effort for future value creation, and we feel like there's going to be some incremental opportunities embedded throughout their portfolio, specifically, Miami Houston and in Silicon Valley that we're digging our teeth into right now.

Okay. Thank you.

Thank you and the next question comes from West holiday with Baird.

Hey, good morning, everyone I guess when looking at the balance sheet. It looks like you're in a good spot right now, especially with the Albertsons lift through so I'm. Just wondering why you elected to do a joint venture on the Jamestown portfolio when there's so much upside in the assets.

Yeah, I mean, it's a good question, we thought long and hard about the best approach here, we have a huge tremendous amount of respect for Blackstone, we've continued conversations with them.

Since the success of our early venture and ultimately we felt that it was a perfect opportunity for us to Reengage the venture that we had with them.

We think that there could be some future opportunities here and this could be the beginning there's no.

Guarantees one way or the other but we thought this was a great jumping point given all the activity that we have in the market all the things that we see to engage that venture and see where it takes us out.

That's really what the conversation was and we're excited about it.

Got it and then when we looked at Albertsons, how should we think about the monetization of that asset maybe on a I guess a max dollar per year. If you wanted to maximize your retained cash flow not pay a special dividend.

Yes, that's a great question I think.

There's a few components that we have to look at when it comes to Albertsons because of.

The significant increase in its value keep in mind, our basis is incredibly low rate basis say is still a little over $100 million.

So the real governing factor for US is REIT compliance. So if you think about the REIT rules, 75% of your gross revenues have to come from real estate related items.

Items. So that leaves about you know you have a 5% net income bucket and then you have the other 20% equity interest in dividends and capital gains. So the governor is going to be how much. Our gross revenues are and our gross revenues today on a look forward basis with the merger somewhere around $1 8 billion. So you know.

Monetization wise about somewhere around 350 to 400 million of year of gain is what we could absorb today. The larger the gross revenue number is the more we can do but I would say today that we're looking at somewhere around $400 million on an annual basis is what we can do.

Got it thanks for the time.

Thank you and the next question comes from Tammy <unk> with Wells Fargo Securities.

Thank you.

Just maybe Ross I'm thinking about it.

I know you said it earlier I guess that you would think about selling some assets going forward, but given your you know your strong capital position I guess I'm wondering you know what we can expect in terms of that sales activity in 2022, and if that will be driven by geography or will it be more one off based upon at that quite profile.

Yeah, I think we believe that our dispositions program will continue to be just a pruning.

Select assets for a variety of reason I did mentioned how there are several joint venture partners that we have and that might be looking to exit. So we have conversations with them every day many of the assets of which we're talking with them about potentially buying out their position, depending on where that pricing is or the quality of those assets.

Some of them differ we may be market sellers. If we think the pricing is too aggressive or the asset just doesn't necessarily fit the growth profile for the portfolio. So you may see a little bit more activity from the joint venture portfolio, both on buyouts and some potentials.

Physicians otherwise you know part of what we inherited with the weingarten portfolio as well as from the previous Kimco portfolio is some undeveloped land parcels that we're constantly evaluating whether we believe there are prudent to be developed over time or if we're better off recycling that capital selling.

From non income producing assets and then taking that capital for higher growth opportunities. So that's really where you're going to see the bulk of the disposition activity, but again, we don't think its going to be a tremendous component of our capital stack.

Okay, great. Thanks, and then maybe one for Glenn it looks like <unk> per share is 99 cents here to date I guess with the guidance range raise implies 37 to 38 cents per share in the fourth quarter is there anything in that fourth quarter implied F. O that is nonrecurring or is that a pretty good run rate to think about 2022.

Well again, the 3700 38 level again that that is a recurring rate.

Again as I mentioned.

The third quarter did have some call them onetime in nature items, you had some real benefit coming from the.

The improvement in credit loss, and we did have about a penny coming from.

Higher lease termination fees and some of the contributions from the joint ventures on a onetime basis, but 37 38 cents is.

Really a recurring number that we would expect in the fourth quarter.

Great.

Thank you and the next question comes from Sameer Kumar with Evercore ISI.

Hey, good morning, guys just in terms of occupancy I mean, when I look at that number you're already over 94%.

We've talked about how strong leasing or can you provide some color on how you think occupancy could.

And then maybe into the end of the year and how much pickup you could see next year I mean, you're you're sort of your high watermark level as you call. It.

Sort of that 96, 5%, so kind of figure out how much <unk>.

Upside there is into next year.

Sure Yeah, I mean, obviously the last few quarters have been very strong with.

On average about 30 basis point gains between when you blend the two together I tend to like to look back to try to understand what's going to happen going forward. So during the great recession. When we were going through the recovery period, we average about 15 basis point gain.

Winning over over an extended period of time to recover back to the occupancy that we lost now when you look at the the pandemic of Covid, we ended up losing less about 270 basis points versus around 400 basis points in occupancy it was over a much shorter period of time, so you're starting to see that recovery cycle.

Up a little bit sooner and when I look out of your range in that 10 to 30 basis point occupancy gains quarter over quarter.

Feels about right.

Just to clarify that I can pinpoint a 15 basis point gain in occupancy that's a sequential average.

Right and then and then in terms of shop leasing I know, we've talked a lot about it in the call today, but I mean is this a scenario where you could even go beyond 90%, which is sort of a high watermark in prior periods.

That's the goal.

Oh sure.

Every day to push it.

As aggressively as we can and hoping with the higher quality portfolio.

All the efforts and the investments that we made at site on sites.

Now that we have that opportunity to do so I think we're well positioned to do it.

One thing we haven't mentioned is the pandemic really shine a light on the quality of the landlord.

And the landlord and its ability to make critical investments for the health and support and in some cases the survival survivability of the tenants when we launched that tap program back in April of 2020. It was a real lifeline to help a lot of these.

A great operators that we're just struggling for something that was completely outside of their control and that helped us really secure and retain a number of tenants and you start to see that now with our retention levels.

And she means sort of historic highs on our end as well so I think when he makes at all of these components. We have the rating radiance I think incumbent upon us to <unk>.

Kim.

Okay.

Okay. Thanks, guys.

Thank you and the next question comes from Hong Zhang with J P. Morgan.

Hey, guys I guess my first question you saw pretty good sequential growth and.

Small shop occupancy this quarter I was wondering how much of that was due to the inclusion of weingarten in Europe portfolio compared to last quarter.

Sure. Yeah. We mentioned it is 180 point 80 basis point gain 120 of those basis points were related to Weingarten and 60 was related to kimco.

Got it.

And in terms of thinking about it.

Your development redevelopment pipeline.

Pipeline I guess when should we expect to see some projects from the wind farm portfolio would be added in there.

Sure.

I think it's important to look at our redevelopment pipeline pipeline and due to the <unk>.

Separate but complementary categories. The first is our core retail and repositioning effort.

Repositioning and re merchandize.

Anchor boxes are building a better mousetrap for the existing retailers, that's where you're going to continue to see a lot of investment and we're just in the process of integrating those opportunities in those projects into the combined kimco portfolio, so that should start to be reflected.

In the coming quarters, and then the second part of that is obviously our signature program. The one project. We did activate earlier on was the Milton the second tower at Pentagon, where we had recently completed the witmer.

The 253 residential unit project and when we look at those projects going forward. We have we have a real menu of options we have over.

4000, entitled residential units that we can draw upon now our goal is to obviously expand the entitled and built population to over 10012 thousand in the next five years. So we will look at those selectively and determine at what point in time, it makes sense to activate them and at what structure.

And the structure will then.

Influencing factor and how much capital, we actually have to deploy out in the market.

Got it thank you.

Thank you and the next question comes from Anthony Powell with Barclays.

Hi, Good morning, just a question on the demand related to last mile. Given warehouses are sold out nationally it seems like it could be a pretty powerful driver of demand could you quantify how much the leasing demand youre seeing related to retailers in meeting more distribution in their local areas.

Sure, it's hard to quantify right now, but anecdotally, what you're seeing is retailers looking to either expand their back of house. So theyre looking for some additional square footage did use some inventory youre.

You're also seeing others like some of the grocers that are actually repurposing some of their square footage within the four walls.

To utilize for last mile fulfillment and micro fulfillment and so they'll actually receive the goods.

From the loading dock and then and then split it distribute them in to do different categories. One goes to the Florida. So the customers that walk into the store, while the balance goes to the micro fulfillment.

Facility, which is actually within their existing four walls and I think what you're seeing right. Now is all the retailers that have the means experimenting with what works best for them.

I can't say that I'm, an expert on supply chain logistics and distribution, but I know, it's extremely complex and so it's really about foundational how they're set up.

But it but it is clear that we are having these conversations in that last mile our brick and mortar distribution is going to be a critical part for them going forward.

Yeah, and just anecdotally the last I would say five to 10 years, we've been dealing with the narrative up <unk>.

Shrinking box sizes downsizing downsizing downsizing in now.

Question is hey is there additional adjacent space that we can we can take to enlarge the box. So it has changed I think the narrative on becoming more flexible in how you use the square footage and integrating that last mile distribution inside the box. So to your point, it's one that we're watching closely.

Got it thanks, and then maybe on supply in Manhattan, I know, it's not a huge issue now.

But given the strong fundamentals.

I'd imagine that some people will start to try to build extra supply.

What do you think will change that came into the dynamics of low supply growth kind of in your markets now.

At what point does it become more of an issue.

Costs are a big issue right. So if you think of the land values, where we're located so if you look at our portfolio of map. That's a main reason why we transformed our portfolio to where it sits today.

We wanted to be in locations that have high barriers to entry. So when the supply cycle does come back it's very hard to make it pencil to go and buy land and develop a shopping center that would compete with kimco is you've got to look at the obviously the F. A R as well in terms of the build versus the parking lot and that's again another barrier to entry or in these dense areas.

You just don't have the luxury of putting 80% of your property as parking lot and not generating any revenues from that and so we're watching it closely we do think there's a good amount of slack still to be absorbed from the pandemic and we're experiencing that throughout our portfolio, but to your point of rents get to a point, where they justify new development it should start to happen.

I haven't seen it yet.

But those barriers to entry is why are we positioned our portfolio, where it is because we don't want to be sitting in a in a in an asset that has.

Tremendous amount of Unbilled dirt around it where you can have a competitor come quickly.

Our position you know and so that's why we've done a lot of work to be in the position we are today.

Okay.

Got it thank you good quarter.

Thank you and our next question comes from Chris Lucas with capital one.

Good morning, everybody.

Two questions for me.

Close the brief deal.

There is no mortgage debt on that joint venture.

Is there plans to put mortgage debt on that or given the you know where your balance sheet sits and where their balance sheets system, it's going to stay debt free at this point.

Yes, Chris there actually is a small amount of debt of about $170 million on that portfolio, which we assumed into the new joint venture.

It does mature those soon doesn't it I thought you paid it off but I don't mature so yes.

Yes. It does we're having conversations now and finally with the partnership and we will determine what the next steps are there.

Expectation, though is again with this partnership as <unk> seen in many of our joint ventures that there'll be property level debt on it.

Okay, and then Glenn while I've got you.

You know the portfolio is bigger it's more diverse.

<unk> deleverage some got a lot more liquidity in.

And different levers to pull.

Is there a.

Goal of getting a ratings increase from the rating agencies.

Given that backdrop, where are you comfortable where you sit right now.

So as we've talked about.

It is clearly a objective and a goal of ours to get put on positive outlook and eventually get to an <unk> III a minus level. We think it's we think it's a separator a differentiator for us and it's something that we think actually should just happen naturally as EBITDA continues to grow and we continue to.

Just improve overall capital structure, I mean, we really check almost all the boxes for them.

Some monetization of Albertsons I think over time will show.

It should hopefully sealed the deal for them.

Thank you that's all I had this morning.

Thank you and that concludes our question and answer session I would like to we're trying to afford David Nikki for any closing comments.

Just want to thank everybody that participated on the call today, we look forward to connecting with a number of you at next week's upcoming NAREIT conference until then have a great weekend.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.