Q4 2024 Kimco Realty Corp Earnings Call
Speaker Change: Ian Herd Bertrand McNeely Narrator Director of the New York Times
Speaker Change: Good day and welcome to the CHEMCO Realty 4th Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star and then 2. Please note, this event is being recorded. I would now like to turn the conference over to David Bujnicki.
David Bujnicki: Senior Investor Relations and Strategy. Please go ahead. Good morning and thank you for joining Kimco's quarterly earnings call.
David Bujnicki: The Kimco management team participating on the call today include Conor Flynn, Kimco CEO, Ross Cooper, President and Chief Investment Officer.
David Bujnicki: 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.
David Bujnicki: 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.
David Bujnicki: Please refer to the company's SCC filings that address such factors.
David Bujnicki: During this presentation, management may make reference to certain non-GAAP financial measures that we believe help investors better understand Kimco's operating results.
David Bujnicki: Reconciliations of these non-GAAP financial measures can be found in our quarterly supplemental financial information on the Kimco Investor Relations website.
David Bujnicki: 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 Conor.
Conor Flynn: Good morning everyone and thanks for joining us. My remarks today will cover the favorable supply and demand dynamics that continue to drive leasing across our portfolio, our well-curated tenant mix that is servicing the healthy Kimco consumer, and our strategic accomplishments and future goals.
Speaker Change: Ross will provide an update on the transaction market, and then Glenn will cap things off with our Q4 and year-end results and our outlook ranges for 2025.
Speaker Change: I first want to speak to the recently announced changes to the board and our management team.
Speaker Change: With respect to Milton's retirement from his role as Executive Chairman and Director, on behalf of our entire organization, I want to thank Milton for his leadership, mentorship, and friendship.
Speaker Change: Milton will always be synonymous with Kimco and our ongoing success is a direct result of not only his stewardship but also the passion and optimism that he exudes every day.
Speaker Change: His enthusiasm for CHEMCO is contagious and permeates through our entire organization.
Speaker Change: The great news is that in his new role as Chairman Emeritus, Milton will continue to challenge us every day and serve as an invaluable resource, making sure we can be the best we can be. Richard Salzman's new role as Chairman comes at the perfect time.
Speaker Change: Other than Milton, no one understands the company's history better, and Richard brings vast experience, creativity, and insight to help lead us into the future.
Speaker Change: Additionally, I want to welcome Ross Cooper and Nancy Lasheen to the board.
Speaker Change: Ross needs no introduction. His leadership role at Kimco and his reputation in the industry make him a logical addition and will make for an easy transition to board member.
Speaker Change: As for Nancy, her capital markets and real estate background, along with her energetic and collaborative demeanor, makes for a compelling addition. I am truly excited about our evolving board and believe we are well positioned as Kimco moves forward.
Speaker Change: Now on to the quarter. We continue to drive significant leasing momentum across the Kimco portfolio. The lack of new supply, now measured at just three-tenths of a percent of existing retail stock, combined with the near record low national vacancy rate, continues to facilitate strong fundamental results in earnings growth.
Speaker Change: The only new shopping center development taking place is limited to 3rd and 4th ring suburbs where population growth has forced sprawl into new areas.
Speaker Change: Drilling down further, the favorable supply and demand dynamics we're benefiting from today is no accident.
Speaker Change: Part of our 2020 Five-Year Strategic Vision focused on repositioning our portfolio into first-ring suburbs with natural barriers to entry, making it difficult for new competition to outposition our assets.
while at the same time producing natural pricing power advantages.
Speaker Change: Moreover, the population in these first-ring suburbs continues to grow, as more and more people desire to be near central business districts while enjoying the suburban live-work-play experience.
Speaker Change: Kimco's densification initiatives dovetail perfectly with the strong demand, pricing power advantages, and demographic trends enjoyed by our high-quality retail centers.
Speaker Change: More specifically, we reached our goal of entitling 12,000 apartment units a year ahead of schedule, providing the opportunity to further expand our mixed-use portfolio.
Speaker Change: We continue to believe our ongoing portfolio transformation to a grocery-anchored and mixed-use portfolio positions us to be in the sweet spot of the retail and multifamily sectors for the foreseeable future.
Speaker Change: At the property level, the Chemco consumer continues to gravitate toward our merchandising mix of everyday goods and services.
Speaker Change: We continue to see positive year-over-year traffic increases, both on a quarterly and yearly basis.
Speaker Change: The strength in the employment market, combined with robust traffic, has led to increased sales at our retailers. Our grocery anchors, together with our off-price anchors, form the perfect blend of cross-shopping.
Speaker Change: This is further enhanced by our service-oriented retailers, including quick-service restaurants that drive traffic all points of the day. It's also worth noting that internet-resistant retailers, which include service providers, now make up more than 50% of our new lease volume.
Speaker Change: We have seen a surge in leasing to medical, health and wellness, fitness, medispas, hair and nail salons that complement our traditional grocery anchored tenants.
Speaker Change: In closing, we have built a portfolio in areas characterized by limited supply, high employment and population growth, and curated our centers to meet the needs of consumers' tastes and preferences.
Speaker Change: Our portfolio is designed to generate growth and shareholder value. Our team is excited and ready to move the needle in 2025. Thank you for your ongoing support and interest in Kimco Realty. And now I will turn things over to Ross.
Ross Cooper: Thank you, Conor, for the kind words. I'm honored and excited about being added to the board and cannot be more enthused about the future of our company.
Ross Cooper: First, I'd like to highlight our capital allocation achievements during 2024, starting with the most notable transaction we undertook, which was the RPT Realty Acquisition, as we recently celebrated the one-year anniversary of its closing.
Ross Cooper: Reflecting back, the speed and efficiency of our integration has enabled us to exceed our expectations in all facets.
Ross Cooper: It is even clearer today that this was an incredibly opportunistic purchase with an implied cap rate of 8.5%, equating to approximately $165 per square foot at pricing that could not be replicated in today's market.
Ross Cooper: Beyond our initial underwriting assumptions, we were able to improve cost synergies by approximately 13% to 36 million.
Ross Cooper: Integral to our success was the swift disposition of 10 former RPT properties which did not fit our strict investment criteria for 248 million dollars for the same cap rate we bought RPT.
Ross Cooper: During the year, our operations team did a remarkable job with this portfolio, signing 57 new leases with an average pro-rata cash rent spread of 52% and completed 98 renewals or option exercises at a blended 9.9% spread.
Ross Cooper: Overall, we increased RPT's occupancy 120 basis points, with anchors rising 140 basis points and small shops 50 basis points, which helped drive the RPT same-site NOI growth to 6.2%.
Ross Cooper: As we put a bow on 2024, I wanted to quickly summarize our fourth quarter activity. As previously announced, Kimco acquired Waterford Lakes Town Center in Orlando, Florida in October, and we have already started to benefit from the purchase.
Ross Cooper: In our view, the timing of this acquisition was ideal, as larger assets and portfolios were priced at a discount compared to smaller, less complex properties.
Since that time, that pricing dynamic has shifted.
Ross Cooper: Throughout 2024, we talked about institutional retail capital curiosity and questioned at what point that would convert to action. The ROIC acquisition announcement by Blackstone in November seemed to be the turning point.
Ross Cooper: Given the sector an aggressive stamp of approval that the shopping center sector is one of the top convictions for investment opportunities
Ross Cooper: This sentiment and excitement for our asset class has continued through year-end and into 2025.
Ross Cooper: As capital has gotten more aggressive on open air retail and investors have greater comfort making bigger investments, Waterford Lakes would likely trade at a higher price today. On the structured investment side, we continue to see significant deal flow and potential to grow this platform responsibly.
Ross Cooper: Since the inception of this program in 2020, we have touted its benefits for CHEMCO.
Ross Cooper: It is a strategy that allows us to get our foot in the door on high-quality real estate, generating outsized returns on a very safe and comfortable basis, while retaining a right to acquire in the future if the borrower elects to sell.
Ross Cooper: To those points, in January of 2025, we successfully converted our first structured investment into an equity ownership position.
Ross Cooper: We accretively purchased the Markets at Town Center in Jacksonville, Florida for $108 million at a low 7% cap rate using the proceeds we raised from our ATM program in December.
Ross Cooper: Originally sourced as a mezzanine financing in late 2021, we underwrote this property with the premise that it would be a great core acquisition candidate and align well with our own portfolio.
Ross Cooper: While our borrower did a great job in the time they own the asset, we believe there remains a meaningful opportunity to create additional value.
Ross Cooper: We see significant long-term upside as we continue to push rents and further enhance tenant quality, benefiting from the property's location, which is adjacent to the Simon-owned St. John's Town Center and the bullseye of the rapidly growing Jacksonville Trade Area.
Ross Cooper: The competitive advantage we have is that the all-in rents, including common area pass-throughs, are at a fraction of what St. John's Town Center is able to command. We are confidently looking ahead to 2025 with our outlook establishing us as a net acquirer, inclusive of structured investments.
Ross Cooper: The markets at Town Center acquisition has given us a strong start toward this objective.
Ross Cooper: We will continue to be selective on core acquisitions and structured investments, selecting opportunities accordingly. From a disposition perspective, our portfolio is performing exceptionally well, and we don't see the need for any significant disposition activity.
Ross Cooper: Instead, we will focus on the opportunity to further enhance our growth profile and accretively recycle capital with two new initiatives in 2025.
Ross Cooper: The first initiative is the disposition of several long-term flat ground leases in the portfolio at aggressive cap rates.
Ross Cooper: The second focuses on monetizing select development entitlements where we believe the most prudent approach is to mitigate risk and sell the rights to a developer and still benefit from the densification of our centers.
Ross Cooper: We plan to redeploy the capital from these flat growth and non-income producing assets into core investments that offer a growing recurring income stream and value-add opportunities.
Speaker Change: We will continue to provide updates on our progress as we move through the year. I will now pass it on to Glenn for the financial update and outlook.
Glenn Cohen: Thanks, Ross, and good morning. We finished 2024 with solid fourth quarter results, highlighted by robust leasing activity, strong same-site NOI growth, and high single-digit FFO per share growth.
Glenn Cohen: In addition, our abundant liquidity position and modest upcoming debt maturities position us well as we start the new year.
Glenn Cohen: Now for some details on our fourth quarter results and our 2025 outlook. FFO for the fourth quarter was $286.9 million, or $0.42 per diluted share.
Glenn Cohen: This compares favorably to last year's 4th quarter FFO of $239.4 million, or $0.39 per diluted share, representing a per share increase of 7.7%.
Glenn Cohen: Instrumental to this was a 60.8 million dollar or 17.8 percent increase in total pro-rata NOI to 403.4 million over the same period in the prior year.
Glenn Cohen: Key drivers of the NOI growth include $38.1 million from the RPT acquisition, $7 million from other acquisitions, and $15.7 million from the balance of the operating portfolio, which benefited from higher minimum rents due to an acceleration of rent commencements.
Glenn Cohen: The NOI growth was offset by greater pro-rata interest expense of $16.4 million due to higher debt levels from the RPT acquisition and the pre-funding of the $500 million bond that matures in February 2025.
Glenn Cohen: Our operating portfolio fired on all cylinders to end the year. Our year-end portfolio occupancy stood at 96.3 percent, reflecting a year-over-year increase of 10 basis points
despite a 10 basis point sequential decline.
Glenn Cohen: This achievement underscores the strength of our leasing pipeline as we effectively manage to offset a nearly 40 basis point impact
Glenn Cohen: caused by the vacating of 16 leases associated with lumber liquidators, big lots, cons, and bob stores in the fourth quarter. Same site NOI growth was four and a half percent for the fourth quarter.
Glenn Cohen: The primary driver continues to be higher minimum rents, contributing 3.8 percent, mostly from contractual rent increases and faster rent commencements from the signed, not open pipeline.
Glenn Cohen: In addition, overall NOI continues to benefit from lower credit loss.
Glenn Cohen: For the fourth quarter in full year, credit loss was 82 basis points and 75 basis points, respectively, meeting the low end of our 2024 Outlook assumption.
Glenn Cohen: For the full year 2024, same-site NOI growth was 3.5%, outperforming our previously raised outlook assumption of 3.25% plus.
Higher minimum rent was the primary contributor of the growth.
Glenn Cohen: As a result of the faster pace of rent commencements, the spread between leased occupancy and economic occupancy compressed to 270 basis points.
Glenn Cohen: A change of 40 bases points sequentially and represents 374 leases totaling $56 million of future annual base rent.
Glenn Cohen: We anticipate approximately 80% of this to commence with a total of $25 million in rent being received from the signed but not open pipeline in 2025. Turning to the balance sheet.
Glenn Cohen: We ended the fourth quarter with consolidated net debt to EBITDA of 5.3 times and on a look-through basis including pro rata share of JV debt and preferred stock outstanding of 5.6 times maintaining our best levels for these metrics.
Glenn Cohen: During the fourth quarter, we raised $136.3 million from the sale of 5.4 million shares.
at an average price of $25.07 per share.
Glenn Cohen: through our At-The-Market Common Equity Offering Program. These proceeds were creatively invested toward the acquisition of the markets at Town Center in Jacksonville, Florida that Ross mentioned.
Glenn Cohen: We also conducted a cash tender for the outstanding depository shares representing the seven and a quarter percent class and cumulative convertible perpetual preferred stock
Glenn Cohen: successfully tendering for just over 22% of the shares and reducing the liquidation preference to $71.9 million. Our year-end liquidity position remained very strong, comprised of $690 million of cash and the full availability of our $2 billion revolving credit facility.
Glenn Cohen: As a reminder, included in the cash balance is $500 million from the 4.85% long 10-year bond issued in September 2024, which proceeds were invested accretively in short-term interest-bearing instruments.
Glenn Cohen: We recently used the cash to pay off our 3.3% $500 million bond on February 3rd. Subsequent to year-end, Moody's affirmed our BAA1 unsecured debt rating and changed our outlook from stable to positive.
Glenn Cohen: Our unsecured debt is rated A- with a stable outlook from Fitch.
Glenn Cohen: and Triple B plus with a positive outlook from S&P. Now to our 2025 outlook.
Glenn Cohen: Notwithstanding some of the uncertainty given the economic and political environment and several recently announced bankruptcy filings by a few additional tenants, we remain confident about the growth prospects of our operating portfolio and balance sheet positioning.
Glenn Cohen: Our initial 2025 FFO per share outlook range is $1.70 to $1.72, representing an initial per share growth range of 3% to 4.2%.
and David Bujnicki. And I'm David Bujnicki. Thank you.
Our outlook range is based on the following assumptions.
Glenn Cohen: Same property NOI growth of 2% plus included in the same property NOI outlook is a credit loss assumption of 75 basis points to 100 basis points.
Glenn Cohen: This is a similar level to our credit loss experience in 2024 and considers the potential impact from the party city on Joanne's bankruptcy filings.
Glenn Cohen: In addition, the 2025 Same Property Outlook Assumption takes into account the boxes vacated at the end of 2024 related to the bankruptcies of Big Lots, Cons, Lumber Liquidators, and a few others.
Glenn Cohen: Given the strength of our leasing demand, we view the recapture of these spaces as an opportunity to further increase rents and enhance the credit profile of our tenant mix.
Glenn Cohen: Other 2025 ALEC assumptions include lease termination income between $6 million and $9 million as compared to $4 million in 2024.
Glenn Cohen: Interest income from cash on hand is expected to range between $6 million and $9 million.
approximately three cents per common share less.
than the 26 million reported in 2024.
Glenn Cohen: due to the significantly higher cash balances last year. Acquisitions, including structure investments, net of dispositions of $100 million to $125 million.
Glenn Cohen: This is inclusive of the markets at Town Center Structure and Investment Acquisition completed in January.
Glenn Cohen: Corporate financing costs ranging from $354 million to $363 million, comprised of consolidated interest expense and preferred stock dividends.
Glenn Cohen: This is a copy of the annual GNA expense ranging from $131 million to $137 million as we expect to realize annual savings from the Board leadership transition that was undertaken to start the year.
Glenn Cohen: Lastly, the Outlook range assumes no redemption charges or prepayment charges associated with the callable preferred stock outstanding or early repayment of debt obligations and no planned issuance of additional common equity.
Glenn Cohen: I want to thank all our associates for their unwavering effort given each and every day. Kimco is a special place to be a part of and we look forward to a successful 2025 together.
And we are now ready to take your questions.
Glenn Cohen: We will now begin the question and answer session. To ask a question, you may press star, then one on a touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.
Glenn Cohen: If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. Please limit yourself to one question and rejoin the queue for follow-ups.
Michael Goldsmith: Our first question comes from Michael Goldsmith with UBS. Please go ahead.
Good morning. Thanks a lot for taking my question.
Michael Goldsmith: You went with a crowd loss reserve of 75 to 100 basis points, kind of in line with your historical average.
Speaker Change: Can you talk about what you have visibility to to start the year where your watch list is and then maybe try to put some context into
um, you know...
Speaker Change: how much exposure you have to potential trouble tenants to start the year, maybe to...
Speaker Change: pre-pandemic levels and how that played out. Just trying to put 20, just set up for 2025 into context with, you know, how it may have played out in the past. Thanks.
Speaker Change: Yeah, sure. I appreciate it. So, you know, in terms of a watch list that obviously is going through the bankruptcy process, Big Lots, Party City, Joanne's, starting meeting 24 is about 130 basis point impact. We already absorbed about 10 basis.
Thank you very much.
Speaker Change: being collected next week for the remaining five locations that we have. Party City, I believe the lease auction is actually running today and then concurrently after that auction there's still going to be an opportunity for retailers to bid.
Speaker Change: but for a period of time. And then with Joanne, they're currently collecting going concern bids next Wednesday.
Speaker Change: I will give some answers. However there are a few questions I know there are some that go into a lot of the stuff that we do in the budget which are baked into our guidance ... The demand side, it's robust, dollar stores, footwear books, grocery, wwe so we do have important
Speaker Change: across the board there are a number of retailers that are looking at a variety of
package deals to
Speaker Change: I'll absorb some of these boxes on the Joanne side. You have a lot of the off-price guys
Speaker Change: We're very encouraged by that opportunity. There are a number of locations where we don't have grocery, we're able to actually backfill with grocery. So when you're looking at the credit upgrade, it's significant.
Conor Flynn: These are really the opportunities Conor mentioned in his script, the lack of new supply.
Conor Flynn: These second generation boxes are the opportunity for retailers to grow market share, to grow store count, which they're very focused on doing. And so I'd say the relationship between landlord and retailers couldn't be stronger today.
Conor Flynn: because of the collective opportunities that we have and we want to grow the relationship together.
Conor Flynn: So, in terms of the watch list and how it's evolved, it's really been status quo. When you look at...
Conor Flynn: Those that have filed, they're repeat offenders, right? They filed in the last two years, they came out of bankruptcy, they closed very, very few stores, if any.
Conor Flynn: During the first bankruptcy, we were able to modify terms to our benefit. So in coming into this bankruptcy round, we're able to work with the new retailers on opportunities to better the terms and obviously secure better credit. So not much has really changed on our watch list and
Conor Flynn: And from there, I'll pass it on to people I haven't shown. Hey, let me just help frame it a little bit in terms of the numbers. So, if you look at our expectation of revenues, it's around $2.2 billion.
Conor Flynn: So at 75 to 100 basis point range you're looking at
Conor Flynn: credit laws baked in of 17 a range of 17 million to 22 million and we feel pretty comfortable with that based on our Bottoms up budget that we ran through and just the historic levels of where we've been, you know
Pandemic aside...
Conor Flynn: We feel pretty comfortable where this sits as a starting point.
Speaker Change: And those $17 to $22 million credit loss that Glenn mentioned is inclusive of both just write-offs as well as a potential loss rent you may have from some of those retailers that Dave Jameson mentioned that may go bankrupt or during the course of the year.
Thank you very much.
Craig Mailman: And the next question comes from Craig Mailman of Citi. Please go ahead.
Hey, good morning.
Craig Mailman: You guys have been a little bit more inquisitive, as have some of your peers.
Craig Mailman: You know, you took the opportunity to raise a little bit of equity.
just kind of curious.
Craig Mailman: It seems like in guidance you just have what you've done so far this year.
Craig Mailman: kind of dialed in, but could you talk a little bit about what the opportunity set looks like today and then maybe put some thoughts around, you know, sources of funds. Ross, I know you talked about some of the
Craig Mailman: ground leases, like, what's the magnitude of those sales? Kind of just talk through everything and also where, you know, cap rates and IRRs are trending.
Speaker Change: Sure, happy to. Thanks for the question. As you mentioned, we really have already identified and closed on
Speaker Change: sort of the net acquisition activity, primarily with the markets acquisition. So, as we look to the remainder of 2025,
The intention is really to match funds.
Speaker Change: through some of the initiatives that I mentioned. As Glenn indicated, we don't have any additional equity in our plan, but as showcased in Q4, to the extent that we like where the stock is trading, we're not shy about tapping into that. So the intent for this year, which is a little bit different than what we've seen in years past, is to recycle capital accretively.
Speaker Change: So the dispositions of old at higher cap rates that were dilutive is not something that we're planning on undertaking. We don't need to, as I indicated, based upon how the portfolio is operating. So when we look at what are the opportunities in terms of source of funds,
Speaker Change: The ground leases, you know, we have close to 10% of our income stream right now that comes from long-term ground leases. Now, that's a big pool. Obviously, not all of those are going to be considered for disposition. But when you break down that bucket...
Speaker Change: and you look at what is the use, what's the foot traffic that comes from that retailer, how much term do we have remaining? Do we need to go back and look at blended extends?
Speaker Change: what is the location within that center, there is a pool of those opportunities that we anticipate that we're going to monetize, and that will somewhat be opportunity-driven based upon what we see on the investment side in terms of the capital that we'll need to raise.
Conor Flynn: In addition on the entitlements, Conor mentioned it, we achieved our goal of the 12,000 units a year earlier than anticipated.
Conor Flynn: So again, we have a tremendous pool of potential densification opportunities and when you prioritize that list
based upon what is compelling geographically, financially, or otherwise.
Conor Flynn: There are several opportunities that we think are better suited to potentially monetize.
Conor Flynn: and sell to a developer versus something that we may not activate ourselves for many years and utilize that capital to reinvest. So we feel very comfortable in terms of the sources and uses of where the capital will come from in terms of new opportunities. We continue to identify and look at
a wide range of acquisition opportunities.
to be active.
Conor Flynn: at all parts of the cycle. So, you know, we've been more focused in the last couple of years on large, larger format.
grocery anchored but with a lifestyle component.
That's where we've found
Conor Flynn: better yields over the last couple of years. Now, as more capital is coming into the system and into the market, I think that that...
quote-unquote discount.
Conor Flynn: has dissipated, so we'll continue to evaluate if there are other formats or geographies where we think that we can get a little bit of a better yield or differentiation. And of course, with our structured investment program, we continue to see opportunities to put out capital. And the nice part about the structured program is the average check size for those deals are anywhere from $15 to $25 million. So they're not tremendous capital investments.
Conor Flynn: but as showcased by the markets acquisition, it can be a small investment on our side.
Speaker Change: on a larger asset that ultimately can become $100 million plus acquisition. So when we look at all of those different opportunities rolled together, we're very confident in what we're going to be able to do on the investment side. Yeah, I would just add, though, as I mentioned in my prepared remarks, in addition to the cash on the balance sheet, our availability of our lines,
Speaker Change: The company should generate around $140 million of free cash flow after dividends, CapEx, and TI. So, that's another pool of capital, obviously on a lowest cost, so kind of keep that in mind.
Speaker Change: And the next question comes from Alexander Goldfarb with Piper Sandler.
Please go ahead.
Alexander Goldfarb: Hey, good morning out there and first to Milton and all sorts of congrats on a well-earned retirement and Ross
Welcome to the board. Just a question on Small Shop.
Alexander Goldfarb: Over the past year, it's sort of stagnated around 97.7, 97.8.
Alexander Goldfarb: And just sort of curious, if this is sort of a frictional cap, or if there are other issues going on, would think, given the comments about lack of supply and the robust demand that you outlined for backfilling a number of the troubled retailers, would think that small shop
Alexander Goldfarb: would be, you know, where people would be looking, especially as retailers get more flexible on their prototypes.
Speaker Change: Yeah, great, great question, Alex. Appreciate it. And I know Ross appreciates.
your kind words, so I'll take that.
Thank you all.
Speaker Change: As it relates to the small shops, the one thing to be mindful of, too, though, is we observed RPT and the RPT small shop documents.
Speaker Change: it was significantly lower than Kimco's, it was 88 plus percent so, year over year we actually grew the RPT small shop portfolio by 50 basis points. Kimco Legacy is over 92 percent. So there was a way down and that ultimately contributed to the flat year over year.
Speaker Change: As it relates to the opportunity going forward, though, you're absolutely right, though. In terms of flexibility of format, people are looking, especially that mid- to larger-sized small shop box, I'm thinking like 6,000 to 9,000 square feet. Some of the retailers I mentioned earlier on the part of city locations, you know, are looking to...
Speaker Change: as far as we can. Our goal is to, you know, break through that.
Speaker Change: sort of viewed as a ceiling right now is at 91.8, and we want to extend that further, and we think there's opportunities to do that.
Thank you.
Speaker Change: And the next question comes from Dory Keston with Wells Fargo. Please go ahead.
Dory Keston: Thanks, good morning. Within your 2% same-store NOI growth, how will you describe the growth for legacy RPT versus legacy Kimco?
Dory Keston: I mean, it's we're all one company today, so it's all completely blended together
Dory Keston: And you have to remember, you now have a full year of RPT.
Dory Keston: numbers last year. We actually have a full year of results of RPT in the Kim Cohen numbers.
Dory Keston: It's all in a complete blend and we would expect it to be in the same, very similar range as what the core legacy would have been. But you have to view it as it's all one big company.
And we still see upside on the small.
Ross Cooper: I mean, if you look at the spread between the two, as Ross mentioned in his remarks.
Ross Cooper: and Dave just mentioned, there's still a lot of upsides that we plan to harvest there.
Really?
Ross Cooper: said though, it's one combined company now. We've done a lot in the first year and now the second year we continue to think there's continued growth to harvest.
Ross Cooper: But we're super excited about, even in the fourth quarter, some of the deals that we finished and converted to a grocery anchored center in Delray, Florida, with BJ's. So we're pretty excited about continued small shop opportunity as well as the anchor leasing we have, Momentum, in that portfolio.
Thanks, understood, very helpful.
Speaker Change: And the next question comes from Hondell St. Just with Mizzouho. Please go ahead.
Speaker Change: Hey guys, good morning. Thanks for highlighting some of the one-timers influencing guide like the lease termination fee and the interest income call-out, but I was hoping maybe you could set some color on the reduction in G&A. I think that's
Speaker Change: about $4 million. Curious what's driving that. Is that some capitalized interest? And then maybe some color on some of the items that could be swing factors getting you to the upper and lower end of the guide. Thanks.
Speaker Change: Sure, great question. As far as the G&A, actually, as you can see, the G&A is actually down at the midpoint around $4 million. The bulk of it is related to the transition of Milton Klingel coming off as executive chair and off the board.
Speaker Change: But the balance of it really there's no there's nothing related to capitalized interest. We don't have an enormous amount of
Speaker Change: development, redevelopment going on, like the target for that range for this year is $100 to $125 million. So the cap interest component is actually very, very small for us. We really just spend a lot of time focused on controlling costs.
Speaker Change: And even with, you know, annual increases that went through, the overall G&A budget is flat, and then less by the amount of the management transition.
Speaker Change: As far as the other things that are in the budget, quite candidly, there are not a whole lot of one-time things that are forecasted. It is a really, really clean, forward-looking year for us. We called out the items that we think that people will focus on.
Speaker Change: It's real straightforward. It is a very much blocking, tackling, run the business, keep costs maintained, acquire accretively where it makes sense.
and Lise, and Lise, and Lise.
Speaker Change: Yeah, I think the spread on the earnings guidance is reflective of really sort of what may or may not happen in the market with the bankruptcy proceedings. So that is sort of what gets you to the low end and that's what gets you to the high end in terms of starting off the year.
Speaker Change: And the next question comes from Greg McGinnis with Scotiabank. Please go ahead.
Greg McGinnis: Hey, good morning. I just want to touch on the redevelopment spend again.
Greg McGinnis: appreciate the clarity on what that expectation is for this year.
Speaker Change: Is this just less of a focus now and, you know, you'd be looking more at on the acquisition front and letting all the kind of redevelopment opportunities use stuff. This is going to be kind of sold off and joint ventured or ground leased out.
Speaker Change: And then also, can you also touch on Coulter Place, where we saw the stabilized yield drop from last quarter? Thank you.
Speaker Change: Yeah, just touching on cold air, it didn't drop from last quarter. All we did was we, because we only have one
Speaker Change: project posted right now on the Mixuse. We just tightened the range to what it always was, so there was actually no change on yield. It's just how it was guided to for this, and as we activate more projects, you know, the range of that guide...
Speaker Change: Maybe modified as well as it relates to the focus three development. It's always a focus. It's really retail driven there's opportunities as you've seen through
Speaker Change: with the Robust Leasing Program that we have, that there's opportunities to backfill the existing space. We went through a very extensive redevelopment program over the years to repurpose, build better mousetraps for retailers and quality of our portfolio as such.
Speaker Change: We're opportunistic in nature. If it's the best use of capital, given all the other opportunities that we have, we'll pursue it, absolutely, and it's something that we continue to focus on. But again, it's retail-driven, so we're able to backfill space.
Speaker Change: with less investment and less disruption to get cash flow coming sooner, that's a great option.
most likely a better opportunity.
Speaker Change: So we'll continue to focus on that. And as it relates to the multi-family program,
Speaker Change: Obviously, as you saw that we've exceeded our 12,000 units. That was a corporate goal. We did it a year ahead.
of Time.
Speaker Change: We have a number of projects that we're actively looking at right now to potentially activate and
Speaker Change: in the coming year or two, whether or not we develop joint venture, monetize the entitlements, all those options continue to be on the table and we'll just look at the market cycle and what makes the most sense for our use of funds and then proceed as such.
Thank you very much.
Speaker Change: We still think there's a lot of upside, as we outlined earlier in the call, that mixed use.
Speaker Change: You know, when you add those residential units to your retail center, you do get a significant benefit both from the retail side and on the residential side. The challenge for us is the cost of capital and those returns for apartment developments.
Speaker Change: are lower than what we're seeing in the open market for other uses of our capital. So what we're trying to do is make sure we prioritize.
Speaker Change: the highest returns on our capital and then look to get creative on structuring those entitlements so that we get the benefit of the density around our shopping centers without potentially having a lower yielding investment versus what we're seeing in the open market.
Thank you.
Andrew Real: And the next question comes from Andrew Real with Bank of America. Please go ahead.
Andrew Real: Good morning. Thanks for taking my question. Just of the bankruptcy boxes you've already gotten back and may get back this year, what's the average square footage on those, and how many would you have to really reposition, maybe split up, versus what proportion do you think you could just fill as is?
Andrew Real: The majority right now we're looking at are to backfill the single-use tenants. I mean with Bed Bath & Beyond we were very...
Andrew Real: We were very aggressive in terms of finding single-use operators to backfill the spaces, and over time the substantial majority were similar. When you look at the part of city boxes, the average is 13,000 square feet.
on the show. Thanks for having us.
Andrew Real: and a variety of others that are interested in those, and those also range in size pretty dramatically. So I think in general we'll be fairly successful in backfilling with single-use operators.
Andrew Real: The only thing I would mention is to think about the lack of new supply for our sector and then if you think of this as shadow supply or potential opportunities for growing retailers
Andrew Real: If you took it that subset and add it to the new shopping center supply that's under construction, it's still extremely modest, and it's one of the lowest, if not the lowest, of the entire commercial real estate sector.
Andrew Real: So we feel very confident that because of the range of sizes of these tenants that are giving back space, we're going to be uniquely positioned to backfill with single-tenant users at significant mark-to-market rents.
Thank you for tuning in. Have a great day.
Speaker Change: And the next question comes from Juan Sanabria with BMO Capital Markets. Please go ahead.
Juan Sanabria: Hi, good morning. I'm just hoping for a little bit more color on the assumptions on the credit loss reserves. If I just look at Party City and Joanne.
Juan Sanabria: That's about 1.1% of ABR. So just hoping you could help us square that with the
75 to 100 basis points in guidance.
Juan Sanabria: And kind of a Part B to the question, is there any skew in the timing of bad debt? Is it more front half loaded given the upcoming options you referenced and the recent headline BKs we've seen? Thank you.
Juan Sanabria: Again, as I mentioned, we do feel pretty comfortable with the range, with the dollars that we're talking about of potential credit loss.
Juan Sanabria: um... party city is you know working through you know their auction will see what happens with their GOB's when they end Joanne's although they filed for bankruptcy hasn't actually even started their GOB sales yet
Juan Sanabria: So, you're going to have rent that runs for a minimum for the first quarter, probably well into the second quarter, and then it's going to come down to, is there a going concern buyer for some of the boxes?
Juan Sanabria: So there's a lot of variability, and again, that's why we feel comfortable with the range that we have. It takes into account what could happen, both good and bad, for both Party City and Joanne's.
Speaker Change: And the next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.
Caitlin Burrows: Hi, good morning. Maybe two quick ones on guidance related. First on the acquisitions than FFO. It seems like
Caitlin Burrows: Somebody else already mentioned, you've already met the net acquisition guidance. So are you just saying that from here, property acquisition volume would be offset by dispositions of ground leases and development entitlements, which would suggest like a meaningful spread? And then just on the FFO side, it seems like the range of two cents is quite tight. So wondering kind of how you're thinking about that, and if it's more of what you might otherwise think of as like a bottom end of the range with upside potential.
Ross Cooper: As I mentioned, I'll take the second part first and I'll let Ross deal with the acquisition piece. But on the guidance, if you think about the range...
The range really is about $20 million in total.
Ross Cooper: So, if you go, you know, again, we're a pretty large company, it takes $7 million.
Ross Cooper: of FFO for a penny, so that range, although narrow in terms of pennies, it is a 20 million dollar range to start with, and as I mentioned, you know, we feel like we have pretty good visibility about what we're seeing in front of us.
Ross Cooper: There's not a whole bunch of one-timers either way, you know, good or bad, but we feel very comfortable about where the portfolio is going. We know what we've done already in terms of this initial acquisition and what's baked in, so
It requires a little bit more of an hour range.
Speaker Change: Yeah, in the first part of your question, I think the short answer is yes.
Speaker Change: The expectation is a recycling of capital from some of the initiatives that I mentioned into new opportunities. So we have the ability to be patient, see what comes our way on the new deal side, new investment side, and then utilize those opportunities to source those appropriately. Obviously, to the extent that there is more opportunity at accretive yields.
Glenn Cohen: In excess, we have other capital sources, as Glenn outlined earlier, and we'll certainly update it as the year progresses with our activity.
Thanks.
Operator: And the next question comes from Keebin Kim with Truist. Please go ahead.
Operator: Thank you. Good morning. I just want to go back to this one, the Bad Debt Guidance.
Speaker Change: If you can frame Party City and Joanne and some of these other couple of retailers to your experience with Bed Bath & Beyond
Speaker Change: I was curious about, kind of, when do you actually start to really ramp up the marketing for these spaces?
Speaker Change: at what point during the bankruptcy process or before and what the potential rent upside looks like compared to what you experienced at that path. Thank you.
and I recapture.
Speaker Change: We felt confident in those recaptures because we reduced the term of those leases, so we knew an absolute end date there.
Speaker Change: And then, you know, we're constantly looking at upgrading the tenancies. So that's no different. When you look at the blend between Big Lots, Party City, Joann's, you're seeing double-digit yields, 10% plus, over the blend of all of these. Obviously, there's higher ones and lower ones.
And when you look at the the bed bath
Speaker Change: the Bed Bath Activity that we had over the years, it was
It was significant. The mark-to-market on those was...
Speaker Change: higher, just because there are more vintage leases, bigger boxes signed a long time ago. But, you know, again, most of those were backfilled with single-tenant users, and the interest was real fast.
Thank you.
And the next question comes from Lauris Ban.
Dykem with Compass. Please go ahead.
Thank you.
Morning everyone. Thanks for taking my question.
Capital allocation question, maybe Ross
Speaker Change: as best suited for this. But in terms of your apartment entitlements, I think you've got 8.
Speaker Change: You know, 8,900 currently entitled and other similar amounts in the process of being entitled.
Thank you.
Speaker Change: A couple of those are, you know, more than 1,000 units. I think there are four of them out there. Are those the ones that are most likely to be JV'd or sold off because of exposure? And then maybe.
Speaker Change: Conor, by the end of the decade, what percentage of NOI do you think CHEMCO is going to get from apartment contributions? Is it 10-15% in that range?
and David Bujnicki.
David Bujnicki: I'll start and then Conor can jump in. You know when we're looking at
David Bujnicki: the prioritization of the entitlements and where we want to identify. It's a pretty detailed and involved analysis that
David Bujnicki: includes market feasibility studies. We're working with all of our different regions to understand where trends are happening geographically. So it's not necessarily based upon size. We're looking at...
David Bujnicki: You know, what is the timing? What is the supply and demand dynamic in that particular market? What are the yields that we're looking at for creating this project?
David Bujnicki: and then ultimately making a decision given all of the information that we've gathered and the market intel, given our cost of capital and other uses that we have for that capital, where do we want to put that and which projects are best suited for
David Bujnicki: Kim Coe to invest a substantial amount of our own capital, which you've seen us do on certain projects. Where is it best suited to ground lease and to retain that roofer and allow somebody else to put their capital work?
David Bujnicki: We've gotten creative in terms of structuring, as you've seen on Coulter and some others that we're considering in terms of joint venturing and putting our
entitled land into that venture.
at a marked-up basis and our component being
David Bujnicki: preferred equity or different pieces of capital and then of course we have the option to potentially sell. So we're evaluating all of those alternatives on each one of these projects and the beauty you know of the program is that based upon our geographic diversification and all the entitlements that we've had we can be very selective in where and when we want to activate and how we want to do so.
Thank you.
Speaker Change: I'm sorry, just to touch base on the two projects you mentioned that have over 1,000 units entitled. Those are both large master plans, one's in Kentlands, the other in Kentlands Market Square and Pentagon. And so when you go in for entitlements, there's the opportunity sometimes to really secure a large allocation of residential. That does not mean that you have to build it all at once.
So.
Speaker Change: You can take a thousand units and break it into five different phases of, you know, 200 units a piece over an extended period of time, so you're managing, you know, new supply coming on, market absorption, et cetera, and then, to Ross's point, you can activate each of those phases in whatever is most appropriate, you know, given the market cycle time and use of funds.
So just for clarity there
Speaker Change: And then Floris, I think for the long term, you know, we continue to push towards activating more multifamily entitlements where we can structure it accretively to our cost of capital.
Speaker Change: Putting a target, you know, the dream scenario would get to 90-10, where 10% is coming from apartments.
Speaker Change: and then build it from there. Again, where our cost of capital is today and where we can accretively deploy it, you know, it's limiting how much we can activate on the multifamily side. So, you know, we'll continue to use the structure like we have before, whether it's ground lease with the roofer.
Speaker Change: or it's a contribution to a joint venture with the ROFA upon stabilization as well. So those are ways that, again, we can take a CapEx-like approach, hit our return hurdles, and still activate apartments. As you know, we've activated over 3,000 and continue to take that approach to see how we can go about.
Speaker Change: adding value, creating value for our shareholders over the long term.
Thanks.
Speaker Change: And the next question comes from Steve Sackwa with Evercore ISI. Please go ahead.
Speaker Change: Yeah, thanks. Good morning. I guess given the tightness in the whole industry and retailers still looking to grow and their, I guess, inability maybe to hit store opening plans, I guess, what's Kimco's appetite?
Speaker Change: to take on actual ground-up development in retail and what discussions have you had you know with some of the bigger retailers to kind of jumpstart that development process. Thanks.
Speaker Change: Yeah, I mean you're you're you're seeing ground up right now in more like the second and third ring
Speaker Change: As urban or suburban sprawl extends out in some of the markets in say like Arizona and Texas, you're not really seeing ground-up development in first-ring suburb opportunities. Rents still have to reach a higher premium to justify the underwriting for development yield that's accretive or cost of capital.
Speaker Change: In those more tertiary market development projects, where you're doing like a large format target or whatnot, aren't necessarily in the core markets that we're looking to expand. For us, that opportunity is really working with these retailers.
on the backfill of second-generation space, further densifying, you know,
for Mark Gitts.
Speaker Change: How do they expand market share? They are starting to look at their...
Speaker Change: The tightness of their radius between individual stores and those are starting to narrow, realizing that they can operate more locations within a tighter trade area than they did historically. So there's real opportunities there for them as well. And that's where we continue to see it. But we do talk to them. If there's an opportunity that comes about, we would consider.
Speaker Change: Yeah, it's a good question, Steve, and I think that's what gives us a lot of confidence about our credit loss reserve of $75,000 to $100,000, because if you think about the lack of options for retailers today...
Speaker Change: You know, we don't see a huge ground-up opportunity on the horizon that either we or others will take advantage of.
Speaker Change: And so the opportunity set is really on these bankrupt tenants, these second-generation boxes.
Speaker Change: that are going through the auction process. As you saw from last year, there was a tremendous amount of activity from retailers in the bankruptcy process.
Speaker Change: you've been outbidding us on a few ones that we tried to acquire and bring back under control. So we feel like there's a similar backdrop today with supply and demand and that's what gives us a lot of confidence in our 75 to 100 basis point credit loss reserve.
Speaker Change: And the next question comes from Wes Soliday with Baird. Please go ahead.
Wes Soliday: Hey, good morning everyone. Quick clarification, the savings from the management changes, would that start in January or at the time of the annual meeting? And then Conor, on that point you just made about bidding on boxes, do you plan on doing a lot of that?
Conor Flynn: I'll take the first one because it's a bit straightforward. It started at the time of the announcement, end of January.
Wes Soliday: And then on the auction process, I think, again, we look at every box, we look at every opportunity set.
You know, we're talking to a lot of retailers.
Wes Soliday: both pre-bankruptcy auction and during the bankruptcy auction. We know a lot of these retailers will be in the auction tent.
Wes Soliday: But they're also looking at doing package deals with us across multiple locations. So, it really just depends on the returns that we can generate from the capital and what tenant we have to backfill that location.
Wes Soliday: where we've been unsuccessful in the auction process where others have outbid us.
Wes Soliday: We were running with a grocery anchor to backfill a location that we were excited about and another retailer that was not grocery.
Wes Soliday: was super aggressive for the location and so again not necessarily a lose-lose situation because obviously the tenant that wins that bankruptcy auction has to fulfill you know all the back rent as well as to go forward lease obligations so we're in a good spot where we can be selective and really get aggressive where we think we can dramatically improve the valuation of the asset not only on that box but on the surrounding retail that we own as well.
All right, thanks for the time.
I'll take the next question.
Speaker Change: And the next question comes from Paulina Rojas with Green Street. Please go ahead.
Speaker Change: Good morning. Thank you for joining us. We are going to start in just a moment.
Paulina Rojas: Recent bankruptcies have been significant, right? Do you believe these bankruptcies will materially impact the rents that you can achieve for new uncle leases?
Paulina Rojas: I understand that the mark-to-market of rents will likely be still very significant, but I'm more focused on how the market dynamics will shift and how rents might change compared to a scenario where these bankruptcies had not occurred.
Paulina Rojas: Yeah, it's a good question, Paulina. It's one that I think you have to think about a little bit from
Paulina Rojas: because if it's a good location in a tight trade area, that is usually the only box available in that trade area. As you can see, our occupancies are at all-time highs, vacancy rates for the entire sector.
Paulina Rojas: is at all-time lows. It's a very tight market right now for good quality retail and so when these boxes are available there's usually not a second option for retailers to fall back into.
Paulina Rojas: And so that's what's driving the competitive set to take advantage of these unique opportunities.
Paulina Rojas: And we feel confident that, again, because of that tightness in the market, you're going to see activity both in the auction tents, but as well post-auction, with retailers wanting to do package deals on a number of these locations that are spread across multiple subsectors.
Paulina Rojas: And the next question comes from Mike Mueller with J.P. Morgan.
Mike Mueller: Yeah, hi. You talked about the demand for medical and wellness and curious like how do you size up the the credits versus other national and local options and in the past have you had any meaningful bad debts from from that category?
Thank you.
Speaker Change: I can take it if you want. I mean the nice thing about medical is they put a lot of money in themselves, the build-outs that they have with the equipment. They are very very sticky tenants. You know they stay for a long time and I would say the bad debt on those is really de minimis.
Speaker Change: It really doesn't even come up very often. They're really, really solid tenants.
Speaker Change: Yeah, a lot of the push recently have been from urgent care, pediatric urgent care.
Speaker Change: some off-site facilities from hospitals because we've always had dentistry. We've always had, you know, physical therapy is becoming a bigger piece as well, but we continue to like that use. It's a service use.
Speaker Change: It's internet resistant, you know, it does drive traffic, it does bring people that want convenience to the shopping center, and usually it does drive, you know, the right shopper as well, because of cross-shopping opportunities.
Speaker Change: We always look at credit quality, and to Glenn's point, we've been very successful in underwriting the medical uses that have come into shopping centers and haven't had really dramatic issues in any shape or form.
Got it. Thanks.
Michael Gorman: And the next question comes from Michael Gorman with VTIG. Please go ahead.
Michael Gorman: Yeah, thanks. Good morning. Maybe just circling back to the transactions for a minute here, just a question on the match funding, and apologies if I missed it, but when we think about the match funding with the sales of either ground lease or entitlements,
Michael Gorman: in 2025. Would those proceeds also apply to future structured investments? And I guess if so, can you talk about...
Michael Gorman: Maybe the scale of opportunity and the strategy of selling out of understandably slower growing but but fee positions into
a more structured investment for the long-term strategy.
Thank you
Michael Gorman: Sure, yes, it does include structured investments, so we look at sort of our blended investments between the core acquisition strategy as well as the structure. You know, when we think about the structured program, as I mentioned previously, I mean, most of these investments, with a few exceptions, are relatively bite-sized.
Michael Gorman: So you're looking at, you know, $15, $20, $25 million check sizes, so it really does...
Michael Gorman: expand and diversify the risk profile. You know, we feel very comfortable about our underwriting strategy and the basis at which we enter these properties. But to your point, we acknowledge that there is a differential between.
Michael Gorman: the acquisitions of existing shopping centers and a structured investment that has
a variable timeline.
Michael Gorman: So, as part of that program, we're constantly looking at the rollover schedule, where we might get redeemed or repaid on any of the structured investments, and are building a pipeline to consistently backfill and recycle that capital as well. So, one component that I didn't mention, in addition to the ground leases and the entitlements,
Michael Gorman: It is crucial that we get capital back from prior structured investment so as we see new investment opportunities on the structured, there is a recycling that occurs within that program as well. We feel very confident and comfortable with the size of that program right now being
Michael Gorman: right around 2% of enterprise value. So we think that we can sort of responsibly, gradually grow that over time as we continue to see more opportunity, but it's gonna be at a slow methodical pace.
Thank you.
All right.
Speaker Change: and the next question comes from Linda Thao with Jeffries. Please go ahead.
Linda Thao: Hi. Could you provide color on upcoming refis in 25 and then 26, and then how to think about the timing of when you might refi and the increased cost impacts?
Linda Thao: Sure. So we just paid off a bond, as I mentioned, so that's done. The only debt that remains...
Linda Thao: outstanding or maturing in 25 is about 290 million dollars. There's about 50 million of mortgage debt that's going to get paid off.
on March 10th.
Linda Thao: Then we have a bond that matures June 1st, so it's about $240 million.
Linda Thao: We have a whole variety of ways to deal with it, whether it be from free cash flow.
Linda Thao: Again, it could come from some of the disposition activity. Our line is fully available to us, and quite candidly, the borrowings on our line today are priced better than where we would do something even longer range, so we have a whole bunch of opportunities.
Linda Thao: As far as 26 goes, there's about 750 million in 26, but it doesn't really start maturing until August.
Linda Thao: But we have plenty of time to address the upcoming maturity
Linda Thao: The only thing I would add is it's nice to be on positive watch from S&P and Moody's because if you think about the timing of when they may make a move to improve our credit rating, it lines up nicely with some of our refinancing opportunities to take advantage of that tighter pricing we can achieve.
Linda Thao: I mean it just in terms of pricing like if we would go to the bond market today we're probably somewhere around 95 over on a 10-year so it'd be somewhere in the you know probably 5.45% range today.
Speaker Change: And the next question comes from Ronald Camden with Morgan Stanley. Please go ahead.
Ronald Camden: Hey, just a couple quick ones, just some themes that was touched before, back to the same story on why, so sort of the two plus percent guidance, I think in the opening comments you mentioned that there was some sort of end of 24, you know, closures and stuff that impacted. Any chance we could sort of quantify what that hit was to
Ronald Camden: 25 and and and does that create an opportunity as you sort of backfill those into 26 and 27 thanks
Yeah, I mean, again, the...
Ronald Camden: The vacancies that I mentioned, they're out now of the same sine and a line number. So that's all baked into the overall 2% plus starting point. So it'll vary as we go through the quarters again, because we do same sine and a line for the most part, it's on a cash basis, right?
Ronald Camden: The tenants have to be paying rent, that's what goes into the number. We don't include straight line rents, we don't include these termination fees in it. So it's all baked into that 2% plus starting point.
Speaker Change: Yeah, and then as we backfill, you're right, I mean, it's going to be a contributor into 26.
Speaker Change: Right, so if I could ask the question just a different way is like what's the bridge from 3.5 to 2%? Same story on why. Like what are the deltas there and the big pieces?
Speaker Change: Well, I mean, again, we have to take into account all the different, the bankruptcies, we have to really see what we get back, what we don't get back. If we don't get a lot of the boxes back from whether it be Joanne's or Party City, there's more upside in that number, which is the plus point of it. So we're just trying to use, we feel very comfortable that.
2% is the floor.
Speaker Change: And that we'll see how the rest of the year goes, and as we go through the year, we'll make adjustments to that guidance.
Speaker Change: Ron, I'll also say we start the year out with a little more ambiguity, right?
Speaker Change: last year even when we started out assuming how much we would get from the snow pipeline it was between 15 and 20 million we ended the year close to 35 million somewhere between 33 and 35 million
Speaker Change: Same thing, we're starting the year out making an assumption of the snow pipeline. We're getting about 25 million dollars So that's sometime an estimate you make and as we go through the course of the year that can change and that can move
Speaker Change: from where you start the year out in your same site guide. So there's a number of different levers, but to Glenn's point, if you feel confident where the floor is, it's just a question how high the ceiling can be.
Speaker Change: Ah, that makes a ton of sense. If I could just sneak my second one in, it's just on the Net Acquisition Guidance.
Speaker Change: and, you know, obviously the opening comments about selling sort of flat leases and so forth. Just a sense of the quantum of dispositions, because it's hard to tell from the guidance, what could that look like this year? Like is it $50 million, $100 million, could it be $300 million, just how big is that opportunity on the sell side?
Speaker Change: Yeah, as I mentioned, I mean, having close to 10% of our income from ground leases, there is a large pool, but it really is intended to be a match funding mechanism.
Speaker Change: So, it's going to be very much dependent upon what we see on the new investment side as to how much we want to push into the market to potentially sell. But we'll be relatively measured to start the year and then as we progress and we see opportunity we'll update you and the market on what we're seeing and how much we anticipate doing there.
and David Bujnicki. And I'm David Bujnicki. Thank you.
Great. Thanks so much.
Speaker Change: And the next question comes from Omikayo Okasana with Deutsche Bank. Please go ahead.
Speaker Change: Good morning, everyone. You guys historically have been well-known to come up with creative ways to create shareholder value. As you look at the landscape for retailers and as well as retail real estate over the next 12 to 18 months,
Speaker Change: Could you just talk about the probability that you guys could do something of that nature as well, whether it's something Albertson's like, whether it's more of the SIP loan to own program, or maybe something totally new and out of the box.
Speaker Change: Yeah, I think we always look for opportunities. I think, as you've seen us do in the past, our best deals...
Speaker Change: typically occur when there's dislocation in the market or mispricing that we can take advantage of. We're excited that our balance sheet continues to improve and put us in a position that when
Speaker Change: the next cycle occurs, the balance sheet strength usually is rewarded. I think that's at a time where, you know, when the tide goes out.
Speaker Change: When you look at some of the individual retailers that are in trouble that we've talked about,
Speaker Change: Not a tremendous amount of owned real estate in those portfolios. We really look for real estate rich retailers where we can take advantage of owning or repurposing.
Speaker Change: of the properties. But that being said, we always take a look for unique opportunities. Albertson's obviously a complete home run.
Speaker Change: that we were able to achieve. We continue to look across the relationship spectrum that we have, and every deal is a little different, a little different shape or size, but our team is always looking for those unique opportunities to take advantage of to create shareholder value.
Speaker Change: Thank you. And a quick modeling question, if I may ask, on the Waterford acquisition, the interest rate on the assumed debt?
The interest rate on the loan was 4.86 percent.
and David Bujnicki.
Thank you.
Is that straight? All right, thank you.
Caitlin Burrows: And the next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.
Caitlin Burrows: Oh, hi. Quick one. I know over time, CapEx has been a big topic for certain property types, including retail. So it looks like the midpoint of your CapEx guidance for 25 is lower than 24 actual was. So wondering what's driving that, and is it more timing related or run rate improvement or any other details?
Caitlin Burrows: Yeah, I mean, as attendance come online, obviously, you know, the funding's been processed and now you're getting the compression of the snow pipeline, so that's what we're seeing in 2025. Obviously, with these bankruptcies, right now, you know, we would anticipate, obviously, investment would have to occur, but that would be more of a 2026 item.
Thanks.
Speaker Change: And the final question comes from Ki-Bin Kim with Truist. Please go ahead.
Ki-Bin Kim: Thanks for allowing me to back in. Just a quick question on Dania Point. I remember one of your office tenants was Spirit. Can you just remind us the structure of that deal? I can't remember if you sold that building to them, but just overall curious about the potential impact from their bankruptcy.
Ki-Bin Kim: Yeah, so Yespirit does own their own headquarters. They purchased it from us early on in the project, and then they built it and opened it. We do have a ground lease with them on the multifamily, which they're current on. They are anticipating to come out of bankruptcy.
Ki-Bin Kim: this quarter. If you may have read the headlines, Frontier is now going back and looking at Spirit as well. Currently, though, it's open and operating. There's 900 or so employees there that occupy Dany every day.
Okay, thank you.
This concludes our questions.
for any closing remarks.
Ki-Bin Kim: I'd just like to thank everybody who joined our call today. We look forward to getting together with a number of you in the upcoming several weeks, and at the same time, have a wonderful weekend. Thanks so much.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.