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    KIMCO REALTY (KIM)

    KIM Q2 2025: Small Shop Occupancy at Record 92.2%

    Reported on Jul 31, 2025 (Before Market Open)
    Pre-Earnings Price$21.90Last close (Jul 30, 2025)
    Post-Earnings Price$21.46Open (Jul 31, 2025)
    Price Change
    $-0.44(-2.01%)
    • Resilient leasing performance: The Q&A highlighted record small shop occupancy of 92.2% and rapid backfill of vacant spaces (e.g., Joann’s and Party City boxes), underscoring strong tenant demand and leasing momentum.
    • Robust structured investment pipeline: Management emphasized a solid and growing structured investment program—with significant rights (ROFO/ROFR) and an expanding pipeline—that positions the company to capture attractive, net accretive opportunities regardless of market volatility.
    • Disciplined capital allocation and financial flexibility: Executives detailed proactive balance sheet management, including share repurchases at an attractive 9% FFO yield and strategic capital recycling, which enhances liquidity and positions the company to benefit from market dislocations.
    • Deceleration in Same Store NOI Growth: Management acknowledged that vacancies from key tenants like Party City and Joann's will lower same-store NOI by about $5,000,000 per quarter in the back half of the year, potentially slowing overall performance [Speaker 6][Speaker 7].
    • Reliance on Structured Finance Amid Uncertainty: The guidance incorporates expected repayments from the structured finance program. However, questions raised about its sustainability amid volatile capital markets and varying deal flows suggest potential risks if market conditions deteriorate [Speaker 8][Speaker 9].
    • Challenges in Backfilling Vacancies: While aggressive efforts are underway to backfill spaces from bankruptcies and underperforming assets, any delays or weaker-than-expected lease renewals could negatively impact occupancy and rental revenues [Speaker 13][Speaker 16].
    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    FFO per Share

    FY 2025

    $1.71 to $1.74

    $1.73 to $1.75

    raised

    Same-Site NOI Growth

    FY 2025

    2.5% or better

    3% or better

    raised

    TopicPrevious MentionsCurrent PeriodTrend

    Leasing Performance

    Q1 2025 discussions highlighted robust activity with 583 leases executed, high new lease spreads (48.7%) and strong renewals. In Q4 2024, management emphasized significant leasing momentum with attractive blended spreads and consistent deal flow.

    In Q2 2025, Kimco executed 174 new leases along with 332 renewals and options, achieving their highest blended pro rata leasing spread in nearly eight years.

    Consistently strong leasing performance with increased efficiency and improved pricing—demonstrating robust tenant demand and enhanced execution.

    Occupancy Trends

    Q1 2025 reported overall pro rata occupancy at 95.8% with small shop occupancy climbing to 91.7%. Q4 2024 noted modest sequential declines offset by leasing pipeline strength and slight occupancy increases.

    In Q2 2025, small shop occupancy reached a record 92.2% while overall pro rata occupancy dipped slightly to 95.4% due to anticipated lease rejections, offset by proactive backfilling of vacated spaces.

    Maintaining high occupancy with proactive strategies to counteract temporary dips—record small shop performance highlights continued strength.

    Backfilling Vacancies

    Q1 2025 detailed substantial progress in backfilling vacancies from Party City, Big Lots, and JOANN with LOIs and competitive rent spreads (35%-45%). Q4 2024 emphasized proactive marketing of bankruptcy boxes with double-digit rent improvements.

    In Q2 2025, nearly all Party City and Joann vacancies have been re-leased or secured under LOIs, with fast execution demonstrated by rapid deal turnaround (e.g., three Joann boxes leased in under ten days).

    Continued strong execution with faster turnaround and efficient backfilling, underscoring operational agility in managing vacancies.

    Lease Renewal Challenges

    In Q1 2025, challenges related to assigning versus recapturing leases amid vacancies were discussed along with strong leasing momentum managing these issues. Q4 2024 focused on small shop occupancy integration challenges and maintaining rent spreads through renewals.

    Q2 2025 did not highlight significant lease renewal challenges; rather, robust renewal activity contributed to a strong blended rent spread, indicating fewer issues than earlier periods.

    Improvement in renewal processes, with previous challenges largely mitigated through robust execution and resilient tenant demand.

    Same‑Store NOI Growth Dynamics

    Q1 2025 reported 3.9% same‑site NOI growth with an upward revision in full‑year guidance to 2.5%+, bolstered by strong RPT portfolio performance. Q4 2024 noted 4.5% growth in the quarter with a full‑year 2025 outlook of 2%+ adjusted for bankruptcy impacts.

    Q2 2025 achieved 3.1% same‑site NOI growth in the quarter and raised full‑year guidance to 3% or better, driven by contractual rent growth and contributions from the SNOW pipeline.

    Steady and improving same‑store NOI growth, with full‑year guidance enhanced by strategic pipeline contributions despite adjustment pressures from bankruptcies.

    Tenant Bankruptcy Risks and Credit Loss Concerns

    Q1 2025 addressed risks from bankruptcies (Party City, Big Lots, JOANN) with conservative credit loss assumptions (56 bps observed) and highlighted watchlist tenants like At Home and Rite Aid. Q4 2024 detailed a credit loss reserve of 75–100 bps amid multiple bankruptcies, while emphasizing opportunities to upgrade tenant profiles through backfilling.

    In Q2 2025, the impact of bankruptcies (Party City and Joann) was acknowledged, yet credit loss improved to 89 bps. Rapid backfilling and proactive tenant engagement helped mitigate the risks, with additional attention given to Rite Aid.

    Persistent bankruptcy risks are being managed more effectively, as evidenced by improved credit loss metrics and swift backfill strategies that reduce potential negative impacts.

    Capital Allocation, Financial Flexibility, and Liquidity Management

    Q1 2025 emphasized prudent capital allocation through opportunistic share repurchases (3 million shares at $19.61), disposal of lower‑growth assets, and strong liquidity of $2B alongside aggressive debt repayment. Q4 2024 demonstrated active acquisitions, structured investments, and robust liquidity with $690 million in cash and a $2B revolver.

    Q2 2025 continued this disciplined approach with strategic capital recycling from asset sales, opportunistic share repurchases, and robust liquidity over $2.2B; proactive debt management further supports financial flexibility.

    Consistent strategic capital allocation and strong liquidity management remain key pillars, with Q2 2025 showing ongoing opportunistic repurchases and disciplined debt management in a competitive market.

    Structured Investment Pipeline and Structured Finance Risks

    Q1 2025 featured new senior loan issuances (e.g., $35M and an anticipated $24M deal) with rights of first offer and low repayment expectations amid market volatility. Q4 2024 described a methodical growth of the structured investment platform—with smaller deal sizes (typically $15M to $25M) and recycling of capital, representing about 2% of enterprise value.

    In Q2 2025, the structured investment pipeline remains healthy with two senior mortgages issued and an expected pipeline of repayments in H2 2025, underpinned by disciplined underwriting and creative deal structuring to mitigate risks.

    Steady expansion of the structured investment program continues with disciplined risk management and an emphasis on future acquisition rights, reflecting adaptive strategy in a volatile market.

    Macroeconomic Uncertainty and Market Volatility

    Q1 2025 highlighted caution due to tariff and trade uncertainties, leading to a “wait‑and‑see” approach, although strong liquidity enabled opportunistic share repurchases. Q4 2024 referenced broader economic and political uncertainties indirectly while maintaining confidence in portfolio resilience.

    In Q2 2025, although uncertainty persists, tariff concerns have largely subsided. Management leveraged market dislocations for aggressive pricing and acquisitions, supported by a strong balance sheet and anticipations of rate cuts.

    Evolving sentiment from cautious “wait‑and‑see” to actively leveraging volatility—tariff concerns have diminished while market dislocations are being capitalized on.

    Tariff Uncertainty

    Q1 2025 discussions acknowledged tariff and trade uncertainties that prompted a cautious approach and contributed to a wait‑and‑see market sentiment. Q4 2024 did not address this topic.

    In Q2 2025, tariff uncertainty is noted as mostly muted; the earlier “tariff noise” has diminished, leading to a shift in focus toward exploiting market dislocations and anticipating rate cuts.

    Shift from previous caution toward decreased emphasis, as tariff concerns recede and the focus moves to market opportunism.

    Strategic Diversification into Multifamily Assets

    Q4 2024 marked the introduction of multifamily diversification with achievements such as entitling 12,000 apartment units ahead of schedule, and outlining creative, capital‑efficient approaches for multifamily development and joint ventures. Q1 and Q2 2025 did not mention this topic.

    No mention of multifamily diversification occurred in Q1 2025 or Q2 2025.

    Previously introduced as a strategic diversification initiative in Q4 2024, this topic has not been reiterated in subsequent periods, indicating it may not be a current focus.

    1. NOI Guidance
      Q: H1 growth vs H2 deceleration?
      A: Management noted 3.5% same‐site NOI growth in the first half with full‑year guidance at 3%+, supported by robust lease commencements and swift backfills that offset vacancy impacts.

    2. Guidance Drivers
      Q: Same store vs one‐time effects?
      A: They explained that the bulk of the improved guidance comes from strong operational performance and an accelerating lease pipeline, not from isolated accounting items.

    3. Capital Allocation
      Q: How does buyback fit in?
      A: Management repurchased shares at a 9% FFO yield when the stock was attractive, balancing this with other capital recycling efforts and maintaining flexibility.

    4. Acquisition Environment
      Q: How are deals won?
      A: They are leveraging inside rights like ROFO/ROFR amid increased market product, remaining disciplined in acquisitions despite fierce competition.

    5. Transaction Market
      Q: Which buyers and yields?
      A: Competing with pension funds, sovereigns, and fund structures, they observe aggressive pricing with similar yields on both portfolios and single assets.

    6. Small Shop Outlook
      Q: Can occupancy exceed 92%?
      A: Management is optimistic that the current record of 92.2% can be further improved, with small shop escalator rents pushing in the 3–5% range.

    7. Retail Outlook
      Q: Are retail concerns valid?
      A: Despite negative headlines, strong underlying fundamentals and robust cash flows confirm retail resilience and long‑term growth.

    8. Structured Finance
      Q: Is the debt‐equity book sustainable?
      A: They incorporate expected repayments into guidance and see the structured financing segment as a sustainable, cyclical business capability.

    9. JV Expansion
      Q: Expand JV for grocery deals?
      A: Their JV platform remains a flexible tool—open to scaling with quality partners to capture additional grocery‑anchored opportunities.

    10. Term Fees & Watchlist
      Q: What drives higher term fees?
      A: A major redevelopment deal elevated term fees, with the watch list narrowing as tenant performance improves over time.

    11. Small Shop Demand
      Q: National versus local demand?
      A: Demand is robust from both national brands and regional operators, with service-related small shop deals surging and providing resilient income.

    12. Vacancy Fill Progress
      Q: How fast are vacancies backfilled?
      A: Vacant spaces, notably from Joann’s and Party City, are being filled rapidly—with over 90% already resolved via executed leases and LOIs.

    13. Lease Backfill Details
      Q: What’s the remaining vacancy status?
      A: Recent deal activity shows several leases executed and a handful of outstanding LOIs, indicating near completion of the backfill process by year‑end.

    14. Redevelopment Impact
      Q: When will redevelopment aid NOI?
      A: Redevelopment projects, particularly grocery conversions, are expected to shift from a drag to a positive contributor in the second half as scale increases.

    15. Resi/Entitlements
      Q: How do resi and entitlements fit?
      A: These assets are part of a capital‐light recycling strategy—either monetized or contributed as land in joint ventures—to unlock additional value.

    16. Expense Recovery
      Q: Plans to boost recovery ratios?
      A: By leveraging multi‑year service contracts and deploying AI analytics, management aims to enhance expense recovery as occupancy improves.

    17. Cap Rates
      Q: What are current cap rate trends?
      A: Cap rates remain aggressive and competitive across property types, with core grocery centers and unanchored strips both drawing strong investor interest.

    18. (Additional Insight)
      Q:
      A: While not a separate question, management’s overall discussion reflects a balanced, disciplined approach in scaling operations and capital recycling that stands out even in volatile retail market conditions [all].

    Research analysts covering KIMCO REALTY.