Kimco Realty Corporation Q2 FY2025 earnings call

Conor began by acknowledging the tragic events in New York and then highlighted key Q2 highlights: funds from operations growth, strong leasing spreads, and high small shop occupancy. Ross discussed the transaction market, noting opportunities via the structured investment program and a recent flat lease sale. Glenn provided details on financial metrics, including FFO growth, same-site NOI trends, and balance sheet strength. Operational highlights included successful leasing across the portfolio, progress in the RPT portfolio, disciplined capital allocation, and the use of AI in areas like lease abstraction and small shop tenant prospecting. The company also emphasized its focus on driving leasing velocity, backfilling vacated spaces, and enhancing execution through innovation.

In the second quarter, Kimco delivered funds from operations of $0.44 per diluted share, representing a 7.3% year-over-year increase. Property-level fundamentals were robust with a blended pro-rata leasing spread of 15%, the highest in nearly 8 years. Small shop occupancy reached a new all-time high of 92.2%, and the RPT portfolio small shop occupancy stood at 90.3%, up 190 basis points since acquisition and 90 basis points sequentially. Total FFO for the quarter was $297.6 million, or $0.44 per diluted share. For the first half, FFO totaled $599.5 million or $0.88 per diluted share, a 10% increase over the first half of 2024. The revenue contribution was driven by strong leasing activity, with 174 new leases and 332 renewals/options contributing to a blended spread of 15.2%.

Based on strong first half results and improved visibility into lease-up and cash flow timing, Kimco raised the FFO per share range to $1.73 to $1.75, representing annual growth of 4.8% to 6.1% over 2024. The full year same-site NOI growth outlook was raised to 3% or better, 50 basis points above prior guidance. This updated range accounts for lease rejections already absorbed, with other guidance assumptions remaining unchanged.

Risks include macroeconomic uncertainties that could impact retail demand and property values. There is also the potential impact of retailer bankruptcies like JOANN and Party City on occupancy and rent. Fluctuations in interest rates may affect capital allocation and the transaction market, and competition in the real estate space could impact acquisition opportunities.

Q: Michael Goldsmith with UBS asked about the same-property NOI growth outlook for the back half.

A: Glenn Gary Cohen and Conor C. Flynn responded that the increase is driven by operational factors such as rent commencements from the small shop occupancy (SNO) pipeline and successful backfills of JOANN and Party City boxes.

Q: Alexander Goldfarb with Piper Sandler inquired about the structured finance book and its sustainability.

A: Ross Cooper stated that the guidance incorporates repayments and new capital, and the business is sustainable with a strong pipeline and disciplined underwriting. Conor C. Flynn added that the company is positioned to potentially scale the business due to right of first refusal opportunities.

Q: Greg McGinniss with Scotiabank asked about expanding the joint venture (JV) platform.

A: Ross Cooper replied that the company views the JV platform as a tool, is disciplined in underwriting, and anticipates scaling the business while being selective.

Q: Samir Khanal with Bank of America asked about lease termination agreements (LTA) and watch list tenancy.

A: David Jamieson said the LTA was primarily driven by a large redevelopment, and the watch list tenancy is narrowing with limited rollovers expected in 2026, with the company already engaged in backfilling.

Q: Ronald Kamdem with Morgan Stanley asked about the acquisition environment.

A: Ross Cooper and Conor C. Flynn discussed product availability, competition, and the use of right of first offer/right of first refusal (ROFO/ROFR) to gain inside track on real estate, noting the company has a significant pipeline of assets.