Q4 2024 Earnings Summary
- Strong Balance Sheet Positioned for Opportunistic Growth: Kimco Realty has a strong balance sheet that enables the company to capitalize on mispriced opportunities during market dislocations, potentially creating significant shareholder value.
- Expected Same-Store NOI Growth with Upside Potential: The company expects same-store NOI growth of at least 2% in 2025, considering this as a floor with potential upside as they backfill vacated spaces, indicating strong operational performance and conservative guidance.
- Strategic Expansion into Multifamily Assets: Kimco is working to increase its multifamily component, aiming for 10% NOI contribution from apartments, which will enhance diversification and provide additional growth prospects.
- Tenant bankruptcies, including Party City and Jo-Ann, are expected to negatively impact same-property NOI growth in 2025, with guidance lowered to 2%+ compared to 3.5% in 2024, indicating potential weakening fundamentals.
- Higher cost of capital is limiting Kimco's ability to activate multifamily development projects, potentially hindering future growth in this segment and impacting their long-term goal of increasing NOI contribution from apartments.
- Decrease in interest income due to lower cash balances is expected to reduce earnings by at least $0.03 per share in 2025 compared to 2024, negatively impacting FFO growth.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +16% (from $451.603M to $525.397M) | Total Revenue increased by $73.794M YoY due to continued strength in rental property income driven by acquisitions and improved leasing activity—a trend seen previously in Q3 2024 where mergers (such as the RPT merger) boosted rental revenues. This growth is further supported by an expanded portfolio compared to Q4 2023. |
Net Income | +9% (from $142.113M to $154.835M) | Net Income grew by nearly 9% YoY as higher rental and other income partially offset increased costs. Similar to Q3 2024, acquisitions contributed additional revenue; however, rising expenses (interest and D&A) somewhat muted the improvement, reflecting a continuation of trends observed in prior periods. |
Operating Income | -1% (from $168.578M to $166.392M) | Operating Income experienced a slight decline despite higher revenues due to increased operating expenses—such as merger-related charges and higher administrative costs. This indicates that while acquisitions (like the RPT merger) helped boost revenue, the associated expense pressures continued from previous quarters, leading to a marginal overall drop. |
D&A Expense | +26% (from $124.282M to $156.130M) | Depreciation and Amortization expense jumped $31.848M YoY largely because of additional properties acquired through the RPT merger and ongoing redevelopment projects, which expanded the depreciation base. This build-up is consistent with earlier Q3 trends where new acquisitions drove up D&A, albeit partially offset by disposals. |
Interest Expense | +23% (from $67.797M to $83.684M) | Interest Expense increased by $15.887M YoY due to higher debt levels following the RPT merger and the issuance of additional unsecured notes, echoing similar drivers identified in Q3 2024. The increased cost of financing, combined with changes in debt structure prominently impacted the expense despite some paydowns. |
Net Cash Change | From +$359.495K to -$100.313K | Net Cash Change swung significantly as operating cash inflows were reduced (partly from the absence of a prior special dividend receipt as seen in Q3) while financing outflows escalated—with large repayments on unsecured notes and term loans. Compared to Q4 2023, these impacts led to a near-zero net change in cash, reflecting a notable shift in cash management activities vs. |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Financial strength (FFO growth, strong balance sheet) enabling opportunistic expansion | Q2 2024: Highlighted FFO of $0.41/share (+5.1%), net debt-to-EBITDA of 5.5x, and accretive acquisitions. Q1 2024: Reported FFO of $0.39/share (ex-merger costs $0.43/share), net debt-to-EBITDA of 5.3x, strong liquidity. | Q4 2024: Achieved 7.7% FFO growth; net debt-to-EBITDA still near best levels. Raised capital and funded opportunistic acquisitions. | Continues to be a key enabler for growth |
Same-store NOI growth | Q2 2024: Came in at 3% for Q2; full-year guide raised to 2.75–3.25%. Q1 2024: Was 3.9%, driven by higher minimum rents, lower expenses, and lower credit loss. | Q4 2024: Ended at 4.5% in Q4 and 3.5% for full-year, outpacing prior guidance, but 2025 guidance at 2%+ due to bankruptcies and recaptured space. | Remains strong but moderating in 2025 |
Strategic expansion into multifamily assets | Q2 2024: No mention [—]. Q1 2024: Held 6,500 entitled units, emphasizing optionality but cautious on new developments given cost of capital. | Q4 2024: Exceeded 12,000 apartment entitlements, weighing development vs. monetization; higher capital costs limit activations but long-term vision remains. | Growing emphasis with cautious execution |
Tenant bankruptcies and credit loss risk | Q2 2024: Not a major issue; credit loss YTD at 86 bps, within 75–100 bps guidance. Q1 2024: Kept annual credit loss assumption at 75–100 bps despite lower Q1 figure. | Q4 2024: Factoring in bankruptcies (e.g., Big Lots, Party City, Jo-Ann's) ~1.1% ABR. Managed through lease auctions, with a total credit loss range of $17–22 million. | Persistent concern but offset by strong leasing demand |
Higher cost of capital | Q2 2024: Refinanced term loan at 4.78% and issued higher-rate debt, continued structured investments with 9% yields. Q1 2024: Cautious on new developments, focusing on JV/preferred equity structures. | Q4 2024: Still affects development returns; employing ground leases/JVs for multifamily and recycling capital through dispositions to manage debt. | Continued caution and creative structuring |
Decrease in interest income | Q2 2024: Not highlighted; interest income guided $13–15 million full-year. Q1 2024: $7.4 million in Q1 but expected to decline as cash was used for RPT closing. | Q4 2024: Projected to be $0.03/share lower vs. 2024 due to less cash on hand and lower balances. | Reflects reduced cash balances |
Strong rent growth from demand across retail channels | Q2 2024: Maintained double-digit new lease spreads; retailers using stores as fulfillment points. Q1 2024: New lease spreads at 35.5%, renewals at 7.8%, strong occupancy. | Q4 2024: Cited robust demand, especially internet-resistant tenants. Backfills from bankruptcies offer rent upside. | Sustained robust leasing and rent increases |
Small shop leasing as key contributor | Q2 2024: Small shop occupancy at 91.7%, near record highs; significant upside in RPT properties. Q1 2024: Occupancy at 91.5%, identified future growth in RPT portfolio. | Q4 2024: RPT small shop occupancy rose 50 bps; Kimco focusing on surpassing 91.8% threshold. Leasing momentum drives growth. | Ongoing focus to drive occupancy and earnings |
Uncertainty around sustaining elevated NOI growth | Q2 2024: Historically ~2% growth; recent outperformance but unclear future glide path. Q1 2024: Cautious full-year view despite strong Q1; mindful of Q2 comps. | Q4 2024: Guides 2%+ for 2025 (down from 3.5%), citing vacancies from bankrupt tenants. Could rebound later as spaces backfill. | Remains a concern with unit recaptures |
RPT acquisition integration | Q2 2024: Exceeded underwriting, boosting NOI; synergies raised to $35–36 million. Q1 2024: Integration ahead of plan; saved on synergy timing, RPT same-store NOI ~3%. | Q4 2024: Exceeded synergy targets by 13%, sold 10 assets at acquisition cap rate, small shop occupancy +50 bps, same-store NOI +6.2%. | Integration surpassing expectations |
Reduced leasing volume | Q2 2024: Overall transaction volumes down; expecting more activity in back half of year as rates stabilize. Q1 2024: Leased 4M sq. ft., slightly lower YOY but attributed to high occupancy. | Q4 2024: No mention of reduced leasing volume. | Not mentioned this period |
Challenges finding accretive acquisitions | Q2 2024: Less deal flow amid market volatility; focusing on large format assets at higher cap rates. Q1 2024: Asset pricing tight, leaning on structured investments. | Q4 2024: Aggressive institutional bids tighten yields; relying on capital recycling for selective buys. | Ongoing selectivity in acquisitions |
Potential limitations on future rent escalations | Q2 2024: Not explicitly discussed; focus on pushing escalations in anchor renewals. Q1 2024: No specific mention. | Q4 2024: No mention of limitations on escalations. | Not discussed this period |
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Credit Loss Reserves
Q: How will bankruptcies affect credit loss reserves?
A: Kimco expects credit losses of 75 to 100 basis points, translating to $17 million to $22 million in potential losses, inclusive of write-offs and potential lost rent. This accounts for bankrupt tenants like Big Lots, Party City, and Jo-Ann's, which are undergoing bankruptcy processes. The company feels comfortable with this range based on historical levels and robust demand from retailers to backfill these spaces. -
Capital Allocation Plans
Q: What are your plans for acquisitions and funding?
A: After recent acquisitions, including The Markets, Kimco intends to match fund future investments by recycling capital. This includes monetizing ground leases, which represent close to 10% of income, and selling development entitlements. The company is focused on accretive recycling without dilutive dispositions and feels confident about its sources and uses of capital. Additionally, Kimco expects to generate around $140 million of free cash flow after dividends, CapEx, and tenant improvements. -
Same-Store NOI Guidance
Q: How does guidance reflect potential risks?
A: Kimco provides a 2% plus same-store NOI growth guidance, considering potential vacancies from bankruptcies like Party City and Jo-Ann's. The range accounts for the variability in what spaces may be recaptured or retained. The company feels confident about the floor of this guidance and sees opportunities for upside as they backfill spaces. -
Small Shop Occupancy
Q: Why has small shop occupancy stagnated?
A: The integration of RPT's portfolio, which had a small shop occupancy of 88%, has weighed down Kimco's overall small shop occupancy, now over 92%. Despite this, they've grown the RPT small shop occupancy by 50 basis points year-over-year. The company is laser-focused on increasing small shop leasing and aims to break through the 91.8% ceiling. -
Development Spending
Q: What's the outlook for development spending?
A: Development and redevelopment remain focused but are driven by retail demand. The company plans to invest $100 million to $125 million in redevelopment projects in 2025, prioritizing opportunities that offer the best use of capital. They continue to activate multifamily entitlements selectively, aiming for accretive returns given the current cost of capital. -
Debt Maturities
Q: How are you managing upcoming debt maturities?
A: In 2025, Kimco has $290 million of debt maturing, with plans to address it through various means, including free cash flow and potential dispositions. For 2026, there's $750 million maturing, but it doesn't begin until August, giving ample time to address it. Current bond market rates are around 95 basis points over on a 10-year, translating to approximately 5.45% interest rate. -
Impact of Bankruptcies on Rents
Q: Will bankruptcies affect new anchor lease rents?
A: The company doesn't expect bankruptcies to materially impact rents for new anchor leases. The vacancies are typically spread across different submarkets, preventing a significant shift in supply-demand dynamics. Demand remains strong, and they anticipate backfilling spaces at significant mark-to-market rents due to the lack of new supply. -
Ground-Up Development
Q: Are you pursuing new ground-up developments?
A: Kimco sees limited opportunities for ground-up development in first-ring suburbs due to current rent levels and cost of capital. They remain focused on densifying existing properties and backfilling second-generation spaces, working closely with retailers expanding their market share. -
Medical Tenant Quality
Q: How do you assess medical tenant credit?
A: Medical and wellness tenants are considered solid, with minimal bad debt historically. They invest significantly in their build-outs, making them sticky tenants with long-term commitments. The company views them favorably for their internet-resistant nature and ability to drive traffic. -
Backfilling Bankruptcy Spaces
Q: How are you handling spaces from bankrupt tenants?
A: Kimco proactively markets spaces from watchlist tenants, often securing backfill tenants before bankruptcy filings. They focus on single-use backfills and anticipate mark-to-market rent increases of over 10%. Demand is robust, and they are confident in their ability to backfill these spaces with minimal disruption.