Good morning, and welcome to Kimco’s Fourth Quarter 2021 Earnings Conference. All participants will be in a listen only mode [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to David F. Bujnicki, Senior Vice President, Investor Relations and Strategy. Please go ahead..

Good morning and thank you for joining Kimco’s quarterly earnings call.

The Kimco management team participating on the call today includes Conor Flynn, Kimco’s CEO; Ross Cooper, President and Chief Investment Officer; Glenn Cohen, our CFO; Dave Jamieson, Kimco’s Chief Operating Officer; as well as other members of our executive team that are also available to answer questions during the call.

As a reminder, statements made during the course of this call 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.

Please refer to the Company’s SEC filings that address such factors. During this presentation, management may make reference to certain non-GAAP financial measures that we believe help investors better understand Kimco’s operating results. Reconciliations of these non-GAAP financial measures can be found in the Investor Relations area of our website.

Also, in the event our call were to incur technical difficulties, we will try to resolve as quickly as possible, and if the need arises, we will post additional information to our Investor Relations website. And with that, I will turn the call over to Conor..

Good morning, and thanks for joining us. Today, I will recap our operating results for the fourth quarter, provide an update on our strategic merger with Weingarten and outline our key goals for the year ahead. Ross will give an update on the transaction market and Glenn will cover our earnings results and guidance for 2022.

We continue to focus on execution as reflected by our strong fourth quarter performance. Leasing, leasing, leasing has been, is now and will continue to be our first, second and third priority.

Our entire team has worked tirelessly to create a one-of-a-kind platform that utilizes our scale, portfolio quality, relationships, procurement abilities, data analytics, tenant support programs, last mile infrastructure and pricing power.

This platform has proven to be resilient when times are tough, and shown to generate growth when the economic climate is favorable. It is a key reason why we have been successful in re-leasing pandemic-induced vacancies, while simultaneously attracting best-in-class operators that have embraced the future of last mile omnichannel retail.

Now for some details on the quarter. Pro rata occupancy increased to 94.4%, up 30 basis points from last quarter and 50 basis points from a year ago. Anchor occupancy grew 20 basis points from last quarter to 97.1% and was up 40 basis points year-over-year.

Small shop occupancy also increased and is now at 87.7%, up 40 basis points from last quarter and 160 basis points from a year ago. Our portfolio continued to exhibit strong pricing power. During the fourth quarter, as illustrated by the solid increase in new leasing spreads, which were up 14.1% based on 152 deals and 588,000 square feet.

Blended spreads on renewals and options also increased by a healthy 7%, comprised of 4.1% for renewals and 13.1% for options. These spreads were based on 286 deals covering 1.5 million square feet. Overall, our combined leasing spreads grew 8.1% based on 438 deals covering nearly 2.1 million square feet.

A couple of things to note about our strong results. First, the suburbanization trends spurred by the pandemic helped to increase retailer sales and supported our efforts to push rents on our high barrier to entry location.

Second, our portfolio continues to benefit from the pandemic-induced work-from-home trends as people are eating more takeout and home cooked meals, which is driving more frequent visits to our restaurants and grocery stores. As a result of this activity, our traffic counts have exceeded 2019 levels.

We expect this trend to continue in the post pandemic, new normal as shopping centers continue to play a critical role in omnichannel retailer. Our strategy to have a grocery and mixed-use portfolio surrounding the first ring of our top 20 major metropolitan markets in the U.S. continues.

When we started this strategy over five-years ago, it was nearly a 50/50 split of our annual base rent coming from our grocery-anchored shopping centers versus our non-grocer. Today, 80% of our annual base rent comes from shopping centers that have a grocer.

We have continued to successfully invest in our assets, and over the past year, signed eight new grocery leases, two of which converted non-grocery spaces. The other six leases backfilled former grocers who vacated. And with the Weingarten merger now complete, we have further solidified our dominant grocery portfolio in the major Sunbelt markets.

In addition, we have taken a deep dive into every asset we own and believe there continues to be further opportunity to push our ABR from the portfolio to 85% from grocery-anchored centers and increase our mixed use over the next five-years, with a combination of strategic redevelopment, leasing, acquisitions and to a smaller extent, dispositions.

The Weingarten merger was a perfect fit for our strategic vision, and I am happy to report that our fourth quarter results from the Weingarten portfolio exceeded all of our underwriting assumptions. We were ahead on leasing spreads, occupancy gains, retention rates and cash flow.

In addition, we have exceeded the high end of the synergy forecast range of $35 million to $38 million, and we will continue to mine for additional savings throughout 2022.

With our first full quarter as a combined entity complete, we demonstrated that our proactive efforts to ensure a seamless integration really paid off, resulting in outperformance, including enhanced margins and cash flow.

I want to thank all the new and existing Kimco employees for their ongoing commitment and contributions without skipping a beat during the integration. In closing, we have a good visibility into our leasing momentum, and continue to see strong demand across our portfolio in all categories.

We remain committed to strengthening our long-term earnings growth through the portfolio by [curating] (Ph) the right merchandising mix that will drive traffic at all points of the day.

Ultimately, we expect to be first in the last mile retail by attracting tenants that can plug into the supply chain and deliver goods and services to the consumer in the most flexible and convenient way possible. We believe that this ongoing approach is the best way to generate long-term growth and value creation. Now I will turn it over to Ross..

Thanks, Conor, and good morning, everyone. 2021 was a banner year on many fronts, and we are incredibly excited about the positioning of Kimco and the platform we have built that will support future growth. Today, I will discuss our fourth quarter activity and then make a few comments on current market conditions and our expectations for 2022.

As outlined on previous earnings calls, our Q4 transaction activity came mostly from partnership buyouts and structured investments. Buyout activity included two grocery-anchored assets in California for a gross value of 134 million, increasing our ownership from 15% to 100%.

The previously announced buyout of Jamestown and the subsequent formation of a new 50/50 partnership with Blackstone’s BREIT, on our portfolio of six high-quality, public-anchored centers in South Florida and Atlanta based upon a gross valuation of 425.75 million, this deal increased our ownership level from 30% to 50%.

And the buyout of our partner’s 10% interest in the Centro Arlington project, a 366-unit Class A mixed-use residential asset in Arlington, Virginia for a pro rata price of 26 million, increasing the Kimco ownership on the Signature Series asset to 100%.

A major benefit of our joint venture program is the ability to acquire assets throughout the cycle while typically having both the first and last look when the partnership decides it is the appropriate time to exit. While we have had success acquiring portions of several JV assets that we didn’t previously own, we remain prudent in our evaluation.

To that point, in the fourth quarter, we sold our interest in several minority-owned joint venture assets where pricing was very aggressive. We anticipate selling a few more joint venture assets in the first quarter of 2022 and as the market remains extremely hot for all open air retail centers.

On the structured investment side, we closed on a $15 million mezzanine financing investment in a Sprouts-anchored center in Jacksonville, Florida, adjacent to the dominant St. Johns Town Center.

As with prior mezzanine financings, we will retain a right of first refusal in connection with any future sale, while achieving a double-digit current return in the interim.

We expect to allocate additional capital towards our structured investment platform and will selectively add assets into the program that fit our criteria for quality locations, tenancy, demographics and sponsors.

Since the inception of the preferred equity and mezzanine financing programs in late 2020, we have invested $126 million at double-digit returns, with an option to acquire each of the assets in the future. All of these investments are currently performing as expected.

As we have entered 2022, a very different landscape exists than at this time last year. Rent rolls are more predictable and reliable, open-air retail has undoubtedly proven its relevancy for retailers and shoppers alike, and capital continues to flow into our sector.

I would classify the investment landscape today as ultra competitive, with very crowded bidding by qualified buyers with an abundance of capital that they are ready to put to work.

The relatively modest level of increase in interest rates so far this year has not created any pause in the transaction market with equity investors or lenders at this stage. While this is a positive sign for the industry at large, it creates a challenge for us when seeking external growth opportunities.

To illustrate this point, we have seen deals trading at some 5% cap rates regularly including one-off assets and portfolios on the West Coast, Metro D.C., Florida, Boston, New York, Charlotte and elsewhere. Buyers consist of our public REIT peers, non-traded REITs, pension funds and 1031 exchange buyers.

In many cases, we are competing with investors who are agnostic on asset class and see a wonderful risk-adjusted return in open-air retail when compared to industrial, multifamily, self-storage or life science, which are trading in the twos and threes.

We will continue to be selective and disciplined from an acquisition perspective and ensure that there is a strategic fit or a unique circumstance that helps further differentiate Kimco in this environment.

There is no question that we are extremely fortunate to have multiple avenues of investment opportunity to not only provide a slightly greater yield than current market, but a higher likelihood of success than simply participating in a bidding war.

As such, we will continue to work through partnership buyouts and structured investments as our main source of external growth, with perhaps a few select third-party assets in the 2022 pipeline as well.

Given what we see ahead of us and currently have in the works, we are comfortable to initially guide towards being a net acquirer of real estate investments for this year. Depending on the opportunity set, market conditions and our cost of capital, we will update you on our progress towards this goal as the year continues.

I’m now happy to pass it over to Glenn to review our financial results and provide our expectations for the year ahead..

same-property NOI growth will be positive. Please keep in mind the robust comps we will have for the last three quarters of 2022 are against varying levels of significant improvement in credit loss during the same period in 2021. A normalized credit loss for 2022 of 100 basis points or approximately 18 million.

No additional income from the collection of prior period accounts receivable attributable to cash basis tenants or reinstatement of straight-line rent receivables. No redemption charges or prepayment charges associated with callable preferred stock outstanding or early repayment of debt obligations.

No monetization of Albertsons shares, but inclusive of the expected dividends from the investment. Total real estate acquisitions net of dispositions of 100 million, subject to timing. Annual G&A expenses of approximately 105 million to 112 million, with the first quarter higher due to the timing of annual equity awards.

Annual financing expenses of 248 million to 258 million from debt and perpetual preferred stock outstanding and no issuance of common equity. Based on our expected performance during 2022, the Board has raised a quarterly cash dividend on the common stock to $0.19 per share representing an 11.8% increase.

This dividend level is based on anticipated REIT taxable income for 2022 and represents an FFO payout ratio in the low 50% area, based on our 2022 NAREIT FFO guidance range. Looking back, 2021 was an incredibly successful year despite the ongoing pandemic.

We fully integrated the $6 billion Weingarten portfolio, successfully on-boarded close to 100 associates, improved occupancy levels, produced positive leasing spreads all year and made significant progress on our leverage metrics. There is a lot to be proud of, and we thank the entire Kimco team for all their hard work and commitment.

We look forward to another successful year in 2022. And with that, we are ready to take your questions..

In terms of the Q&A, we have a pretty decent line up today. To make an efficient process, I encourage you just to ask one question with an appropriate follow-up and then you are more than welcome to rejoin the queue. Andrew, you could take the first caller..

The first questioner is Rich Hill from Morgan Stanley. Please go ahead..

Hey good morning guys. I wanted to just come back to the guide for a little bit and talk about the same-store NOI guide of being positive. I think that is well below maybe some of the expectations and even some of the long-term forecast that you had put out.

And so while I appreciate desire to be conservative and I do appreciate the tough comps comment, maybe you can just elaborate on that a little bit more and help us unpack it and maybe provide a little bit more of a bridge..

Sure, Rich. It is Glenn. Hey how are you doing? Again, we do expect it to be positive for the full year. But as we have talked about, the metric itself is a little bit tough because of all the noise that is in the credit loss aspect of it, between reserves, straight-line rents coming back. So you have that.

So it is a challenge to really endpoint a really specific range. If you took all the credit loss out on both sides of it, same-site NOI growth would be somewhere close to the 3% range. That will give you a feel for where it is, but to pinpoint a specific range today, it is just very challenging.

However, we are comfortable and confident that it will be positive this year..

Okay. That is helpful. I appreciate that. And just one more follow-up regarding the guide. I noted that you are not including Albertsons in it, which I understand. And I also understand that Albertsons monetization wouldn’t go into FFO.

But given where your net debt-to-EBITDA is, maybe, Conor, this is a question for you, what would you do with the monetization? It sounds like the buying assets is really competitive right now, your debt levels are at a good level. When you think about deploying that capital and recognize you want to maintain maximum flexibility.

But could you maybe just walk through the capital allocation process?.

Sure. Thanks, Rich, for the question. The beauty of the Albertsons investment, it gives us a menu of different options to utilize that capital. We do have two bonds actually coming due this year. We have two callable preferreds. So that is obviously a piece of the menu. We do have some opportunities on external growth, as Ross outlined in his script.

We like our strategy there of looking at - buying out joint venture partners, looking at core properties as well as the mezz and pref investments that we have been making. We have a lot of leasing and redevelopment spend to do. There is no doubt about it.

You have seen the uptick in the leasing volumes, and that continues to be wind at our back and say, I think we are really in the sweet spot in terms of last mile retail and where retailers want to invest not only in the existing store fleet but in net new stores. So we have got a great menu of options.

We will continue to see as the year progresses, how that Albertsons investment continues to perform. But we feel very fortunate to have that as an additional almost free equity raise that we will look to deploy that really..

Perfect. Thanks guys..

The next question comes from Michael Goldsmith with UBS. Please go ahead..

Good morning. Thanks a lot for taking my questions. A really nice acceleration on the re-leasing spread, and that was both on the new leases and renewals. Can you walk through what is driving the gains, were they broad-based, were they concentrated in certain markets like anything to dig into where the strength is coming from would be really helpful..

Sure. Yes. This is Dave Jamieson. It is broad-based, but I would say that the majority of our leases our leases are executed in 2021 came from the Sunbelt and coastal markets. That is a substantial majority of our portfolio at this point. So when you look at geographic concentration, that is where we are seeing a significant uptick in activity.

In terms of our ability to push rents, you have seen it through the course of this year, you have no new supply from development that is come online, you have this COVID inventory that is getting absorbed relatively quickly as a result of what Conor mentioned, the value of last mile distribution and the utility of brick-and-mortar retail has really come into its own through the pandemic.

And so you have these demand drivers that are pushing it with muted supply that is helping us push rents further north. So we are very encouraged by the spreads this quarter. I always say the spreads are lumpy. It is all about the deals that qualify as comp deals in any given quarter. So it does go up. It does go down.

But when I look at the net effect of rents, it is really what we are focused on because that factors in costs as well. We are up over 9% when we look at our trailing four quarters in Q4, and we were up at 12% year-over-year. So that, to me, is a better indicator where we are going because that is factoring in the cost as well..

That is really helpful.

And as a relevant follow-up, as we think about the drivers of leasing, can we hit the point where the pent-up demand has dried up and what is left is, I don’t know, like good old-fashioned underlying demand rather than a catch-up that we had kind of been seeing in the past?.

No, I think you still have pent-up demand that is flushing through the system. But more importantly, it is retailers redefining their strategy and how to utilize brick-and-mortar.

And you have some of the leaders like Target who have been at the forefront for years now continuing to find ways to repurpose their small format as well as their full-sized store. They are continuing to make investments to test how they can better connect with the customer.

I think you are then starting to see that trickle down into other national, regional and local players. You are seeing digitally native brands come into the market appreciating that brick-and-mortar has value. The margins are better on distribution to the customers.

So you are seeing this somewhat reinvention of how people are utilizing the box, like for fulfillment within in the store is becoming a component. When you look at the grocery stores, carving out 10,000 to 15,000 square feet of their box and/or leasing adjacent space to accommodate this new use.

So you are beyond just the pent-up demand, which still takes time to absorb. You are seeing new utility for the box and the shopping center, which I think is really encouraging as we move into what I consider the next iteration of the open-air sector..

Yes. Just one thing to add on that is if you watch our retailers, and I anticipate this to occur not just this quarter but for the next few quarters, you will see a capital allocation shift really towards last mile retail.

And I think that is where you are going to start to see significant dollars being invested in existing stores because they are hard to replace as well as net new stores.

And I think that is going to be a big shift from prior years where they were probably more focused on the e-commerce platform and are now really starting to shift more the additional dollars towards that last mile retail..

Thank you very much. Good luck in 2022..

The next question comes from Samir Khanal with Evercore ISI. Please go ahead..

Hey good morning everybody. So Conor, I just wanted to kind of dig a little bit more into this guidance here.

I guess what are you assuming from Weingarten? I know we have talked about the overhead savings before, but I’m just trying to understand in terms of additional opportunities, the margins that from Weingarten’s perspective, I remember at that time, their occupancy rate was probably about 100 basis points lower.

Just trying to see what is baked in the guidance.

What are the opportunities that exist there in the portfolio today?.

Yes. Good question. So the Weingarten portfolio did have lower occupancy when we announced the deal. Within the time frame by the time we announced it when we closed, the occupancy actually caught up to Kimco’s occupancy level. So we are sort of in tandem now as we go forward.

The nice part about, as Dave mentioned on the demand side of it, the leasing is robust across the Sunbelt and the coastal markets.

And we continue to lean into our strategy there of portfolio reviews using our size and scale, using our ability to tap our network for new concepts, and continue to think that, that is really going to be the driving force of the earnings growth going forward. .

There will be some synergy savings, as I mentioned in my script, going forward, that are above our targeted range that we are mining for. We have been very focused on the integration. We have hit the ground running. As you have seen with our results, there hasn’t been any sort of bubble of any type to like where we hit a pause.

We have hit the ground running and think that there is more opportunities on the redevelopment side. We focused on entitlements on their major mixed-use projects as well.

Ross mentioned buying out the JV partner and the mixed-use asset near our Pentagon project, so we have a nice cluster there of mixed-use assets that continue to define our strategy in the D.C. market. So there is a number of different levers to pull for growth from the Weingarten portfolio. First and foremost is the leasing side of it.

Second is obviously the redevelopment side of it and then the JV buyouts, as I mentioned before. So it is a nice menu of options to help our growth profile going forward. And obviously, the Sunbelt continues to shine..

And my second question, I guess for Glenn, is just in terms of prior period rent collections that you could potentially collect in 2022. I mean how big is that bucket today.

Please remind us on that And then maybe of that bucket, what percentage of those tenants are sort of still active today in the business?.

So Samir, it is actually Kathleen, and I will jump in and answer your question. So I think, of course, we all wish we had a crystal ball and we don’t. But I think the best way to look at it is right now, our cash basis tenants have a reserve of about $35.5 million.

And so in that number, about seven million of it relates to our deferred receivables and then about quarter of it is related to vacated tenants. So when you are narrowing down what we are looking at from a cash basis perspective, you start with that 35.5%, which is what the reserve is. And then any collections on that is on the plus side..

I will just add. Again, as I mentioned inside the guidance, we are not anticipating any further collections from that. So to the extent that we pick up some of it, it will just be additive to where we are..

Thanks so much guys..

The next question comes from Craig Schmidt with Bank of America. Please go ahead..

Thank you. The off-price category seems particularly aggressive in terms of store opening. I think between TJX, Ross and Burlington, they plan on opening over 350 stores. I wonder if you could tell us how many of these stores are entering into the Kimco portfolio in 2022?..

Yes. So off-price combined with some dollar stores actually represented in 2021, almost 25% of the deal flow. So you are seeing a substantial voice from the off-price category. And I would anticipate that that demand will continue through 2022. TJ has multiple brands, all of which they are pushing.

They have been really encouraged by the signs that they saw through the pandemic. T.J. Maxx, Marshalls, HomeGoods, HomeSense is now expanding to new markets, they are trading as well. So they see a lot of runway and a lot of white space that they can fill and also greater density and pockets of concentration to grab market share. Same with Burlington.

Burlington continues to modify their footprint. They are becoming much more efficient in the utility of the box. So it gives them more flexibility to penetrate markets that may otherwise not have been available to them in the past.

So I think you are going to continue to see them grab market share where they can, appreciating that they really are in the sweet spot. People love the treasure hunt, price point is appropriate, they have goods and services, they have a good supply chain, merchandise mix. So they are in a good position right now..

Yes.

And Kimco has been trying to add grocers to the portfolio, can you give us an update on the number of grocers you have been able to add?.

Yes. We did eight grocery deals in 2021, and we converted a couple of those non-grocery centers into grocery-anchored centers. In terms of the grocery demand, it really is across the board as well. Sprouts’ expanding, you have fresh market expanding. You have New Seasons in Pacific Northwest looking to do new deals.

You have Aldi, on more the value-oriented side expanding. So grocers have appreciated that, obviously, they were in vogue during the pandemic.

They are continuing able to retain customers, to some of Conor’s earlier point, about the change in behavior with this hybrid work-from-home, go-to-work, structured now, it does increase maybe our shops one time a week, one more meal at home. That has a material impact when you scale it across the country.

So I think you will continue to see that expand through. And obviously, Amazon and their grocery initiative as well is fairly aggressive..

Thank you..

The next question comes from Juan Sanabria with BMO. Please go ahead..

Hi good morning, thanks for the time. Just hoping you could talk a little bit about expectations or range of expectations underlying the guidance for both occupancy and spread the cadence and/or trends from 2021 into 2022.

And how you think we should be looking at that given a robust environment to start the year?.

So occupancy, we try to look back to look forward. And when we look back in the Great Recession, we had noticed around a 10 to 30 basis point gain quarter-over-quarter on the recovery rate. Obviously, this last year, we had about a 50 basis point gain on the recovery year-over-year. In 2021, we are going to hold within that range of that 10 to 30.

It can be lumpy at times. Obviously, historically been a little more muted as it is always the jingle mill, you get back post holiday. So you would have to manage that. And then as you play it out through the course of the year, that is sort of where we are seeing it today. But demand is strong, as we have already talked about..

Any color on spreads?.

Spreads, again, I mentioned it before, spreads are lumpy. It really depends on what falls into that that category on a quarterly basis. What I would say is when you look at our 2022 and 2023 anchor rollover schedule, it is about $12 a foot in rent. Our average ABR on anchor signed last year was $17.

So you have a nice window there to continue to see growth in the rents. And again, we are highly focused on NER, and that is where we are seeing some encouraging times as well..

Yes, I would just add, we still, as a portfolio, have large amount of below-market rents. So as those come due, they add pretty considerably to the portfolio. But to Dave’s point, they are lumpy..

And then just my last question, just on the joint venture buyouts and/or sales, any quantum you can give us in terms of the potential opportunity for how you guys are thinking about it on both the acquisition and/or sales side? It seems you kind of hinted at some dispositions here in the first half of the year particular on that.

Any color around size and/or pricing around those potential transactions?.

Yes. I mean it is a little bit difficult to predict. We keep in very close contact with each and every one of our partners, and they all have varying degrees of views on time horizon on their investment strategy. So we are having active conversations with several.

We don’t know necessarily which ones will hit this year or next year or even five-years into the future. So we try to maintain a pretty conservative view on our acquisition and disposition guidance. But what I can tell you is that several partners are active today.

As I mentioned, we have sold a couple of joint venture minority interest that we own in the fourth quarter and already here in the first quarter thus far, and we do anticipate a few more on both the acquisition and disposition side.

So we will update you as the year progresses in terms of what the volume is, but there are substantial active conversations ongoing..

Thank you..

The next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead..

Hi good morning. Maybe just a question back on the credit loss. So guidance is assuming a headwind of 100 basis points.

Can you go through how this would compare to pre-pandemic years? And to what extent this is based on specific tenants that you have concern about versus a more general unknown bucket?.

Caitlin, I mean, again, credit loss, if you look pre-pandemic, we were in a range of somewhere in the 75 to 85 basis points in a given year. Again, very hard to predict early on, so we take an approach of 100 basis points in our guidance. And then obviously, we will report quarter-by-quarter. But we think it is a good starting point.

And we do feel pretty good about where the collection levels are because they are back to more pre-pandemic levels. And I would say the tenant base is certainly very, very strong today. The pandemic was able to - you have a lot of tenants that went away that probably needed to go away.

And the team has just done a great job replacing that, and you have uplift coming certainly from the occupancy side from the low that we hit. So we think that is really the right starting point..

Okay. Got it. And then maybe just one back to Albertsons. I was wondering if you could go through what the kind of FFO tax implications could be when there is a monetization.

As in given the time you have waited, to what extent are you able to manage and avoid a more significant impact or not?.

That is a great question. I think as I mentioned previously, in any given year, the way the investments held today, we could sell and absorb a gain in the REIT of around $350 million. And we could do that to stay a REIT. The key there is the gross receipts test, the 75% gross receipt test.

So if you look at overall gross receipts of the company today it is somewhere in that 1.7 billion, 1.8 billion range, we could do around 350 million of gain, and we would be fine. From an FFO standpoint, again, we are not including gains on marketable securities and FFO.

So it is not an FFO issue, but obviously the cash would come in and how we utilize that cash would have some impact on FFO. Bear in mind that whatever we sell, the dividend that we are earning, which is baked in the guidance would fall away. So we have room.

Again, we also have strategies that if something was larger, we can move part of the investment back into a TRS. That has other tax implications. So we are going to monitor the investment and try and be as opportunistic as we can and monetizing it over time..

Okay. Thank you..

Next question comes from Greg McGinniss with Scotiabank. Please go ahead..

Hey good morning. I was hoping to talk about the development pipeline just for a moment, which kind of appears to be going down quarter-over-quarter as you continue to deliver projects.

But has that become a less-important aspect to the growth story relative to external growth or how should we think about the potential for adding projects, especially given the mixed-use entitlements you already have?.

Yes. It is great question, obviously accurate observation. I would say where you are seeing the strategic shift on our investment on the development and redevelopment side is less of an influence on a go-forward basis on ground-up development and more of an emphasis on redevelopment. Redevelopment broken into two distinct categories.

The first one being our core retail redevelopments. It has been part of our DNA for last 10, 15-years, and that is really the repositioning of retail within the center, adding of outparcels; anchor repositionings, which are a very big focus of ours right now coming out of COVID and backbone space.

And the second part of that is the activation of our entitlements to mix use pipeline. So as you can see in the SEP, we obviously have The Milton that is currently under construction, Phase II of the Pentagon Centre, which is across the Amazon HQ campus in Arlington, Virginia.

In addition to that, though, we do have a couple of ground leases, one in Camino Square, which is in South Florida; as well as the Avery Tower 2, which is part of the Dania Pointe project, that is another 600 or so residential units.

So we almost have about 1,000 units under construction, either through our joint venture structure at the Pentagon or a rounded structure. We will continue to focus on the opportunity to activate some of those entitled projects in the future.

The time and how the structure is, will be sort of condition on the market and what we see as the most opportunistic way to proceed. So that is definitely where we are going to apply our focus going forward..

So is there any like level of guidance you can give on kind of expected pipeline size in terms of future development or future spends that expected to stay around the same level and just recycle as you finish up assets? Or do we expect some growth in the level of pipeline size income and spend each year?.

I would say, from a future spend standpoint, somewhere between 100 million and 125 million a year on redevelopment is what we have baked into our plan. So pretty similar to what you have seen previously. But again, we are going to be very methodical and disciplined about how we start executing on those projects..

Okay. Thanks..

The next question comes from Katie McConnell with Citi. Please go ahead..

It is Michael Bilerman here with Katie. Maybe Glenn sticking with you, I just wanted to circle back on the guidance just to make sure that we all have it correctly. Coming out of the fourth quarter, I think you said the $0.39 was really $0.38 when you adjust for the Weingarten benefit on the G&A, so call it about 1.52 going to next year.

It appears this credit loss reserve, obviously, you had a benefit in the fourth quarter, which probably added $0.01 to $0.015. So maybe the run rate is 36.5, which is effectively the low end of your guidance. And so I’m just trying to put it all together because it sounds like everything is really positive.

You have increased synergies going next year from Weingarten, you have positive same-store, you have positive net investment income, you have the benefit of the investments you made in the fourth quarter. So I guess I’m struggling a little bit to sort of comprehend the 1.46 to 1.50 and why that really shouldn’t be up towards 1.50 to 1.54..

So Michael, I guess he was sitting in the room with me when we were doing guidance because your math is pretty accurate. Again, you hit on the points that are important, right? The Weingarten pension accrual is a onetime thing. So again, that is why we have pointed it out. So you do need to pull that roughly penny out for that.

About 7.8 million of collections of prior period cash basis tenants that came during the quarter. So again, in our guidance, as I mentioned, that is not in there. So to the extent that we collect some of that, you are right, there is some room for upside and your run rate is kind of where you are at. That is right, too.

This is where we are going to start out. We feel good about where things are. We have put credit loss back in, which is a pretty significant number. We are using $18 million of credit loss in the numbers for this year, where we had, net-net, about $7 million of income.

So year-over-year, you are looking at like a $25 million swing, which is $0.04 or $0.05. So that is kind of the math. As we will go forward, we will see where things fall out and we will make adjustments accordingly..

Yes, Michael, just remember, we are still in the midst pandemic, and we felt like this was the appropriate starting spot. Now as you have seen before, it is not how you start is how you finish. And so I think we are focused on that. And we feel like as we would sit in still in the midst of a pandemic, we feel like it is a good starting spot..

So it sounds like there is nothing else other than this credit loss of 100 basis points that obviously would be probably an incremental drag relative to where Street estimates are probably in the range of at least $0.02 to $0.03 relative to probably what people were expecting.

Is there anything else in your numbers that is acting as a negative surprise or conversely, are there things out there other than credit loss that could be a positive surprise? I’m just trying to make sure that there is nothing else that we are missing in the numbers..

I think there is a couple of things, I mean we are early on in the year. We have talked about the fact that there is a fair amount of refinancing that needs to be done. So depending on where interest rates are at the time we do it, that could have some level of impact on where everything falls out and where things go forward.

And again, Albertsons, again, is not really baked into the numbers at this point. So anything that happens there has some impact as well. So again, it is early on. We tried to lay out all the pieces of the way we are thinking about it. And again, as we move along through the year, we will continue to update it..

Okay. Katy, I had a question as well..

It is Katy. Just wanted to go back to capital allocation again, the acquisition guidance is pretty light start. I’m just wondering how much you think you could potentially allocate this year to debt or preferred pay down as opposed to refi for your upcoming maturities..

So our capital plan is to really refinance obviously, the bonds that we have. The company today is forecasted to generate around 200 million of free cash flow after dividends. I mean, again, cash is fungible.

But to the extent that the plan ran exactly as is, we would expect that for the most part, we could use a good portion of that cash towards debt - again, it is fungible, but towards debt repayment. So overall, again, depending on how the whole year goes, you are not expecting debt levels, absolute debt levels really.

Got it. okay, thanks..

I think I just want to add one other point, again, just back to Michael a little bit. I think I have said in my prepared remarks, there are no charges baked into this plan or the redemption of preferreds or any prepayment charges related around your debt.

Should any of that occur, obviously we will make adjustments to the headline FFO guidance, but that is not incorporated in the plan today..

And is the refinancing and the accretion or dilution embedded in the numbers I mean do you have anything from the net effect of it, forget about the charges for a second?.

Yes. Yes, we do. There is a modest amount that is baked into it. But remember, most of it is later in the year. So the first preferred is in callable until middle of August, and the second preferred isn’t callable until December 20. So you are going to have very little impact for 2022 as it relates to that.

The bonds don’t mature until October 15th and November 1st. So a similar situation where the refinancing of those items is really late in the year. So it is more of a - we will get to it later, but it is more of a 2023 impact, and we will see where the refinancings of those occur at the time..

Okay. Thank you..

The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead..

Hey good morning and Dave, maybe you will permit me to use Michael Bilerman’s two plus one question. So just following up on Michael’s question, just for simplicity, what is the abnormal or sort of the onetime benefit in 2021 because obviously, you guys collected a lot of back rent, et cetera.

So as we think about the base run rate heading into 2022, how much was 2021 inflated by the one-timers, the catch-up repayment of prior due rent, et cetera?.

Hey Alex, it is Kathleen. So for 2021 if you include AR, deferred and straight line, it is closer to 7.3 million is the income that we did record related to those items..

To 7.1 million.

So basically, when we are thinking about the comp to get to the guidance for 2022, we would take out - call it, 7.5 million of FFO to start the base?.

Yes and then add in the 100 basis points from the credit loss that we have built into the projections..

Correct. So you really have - you have a spread of - that was I was mentioning, a spread of about $25 million when you are looking at the guidance. ..

Okay. Okay. Now for my two questions. The first is, obviously, we got the CPI print 7.5%, which is just crazy. But you mentioned that the bidding for shopping centers is intensifying no real change in cap rates.

Couldn’t you make the argument that given there is been no supply in like 15-years and you have a lot of tenants finally coming back to their store fleets, that we will actually see cap rates continue to compress as institutional buyers try and buy up that inflationary mark-to-market and that maybe with that Albertsons proceeds, that you guys would want to go on a client like be more aggressive in buying because of what potentially could be happened as far as that inflationary mark-to-market and cap rate compression or is your view that that is not probably what is going to happen or that is not a reasonable assumption to be going out and making acquisition decisions based on?.

Yes. No, it is a good point. I mean I think we like to be selectively aggressive and really pick our spots. You have sort of counterbalancing impacts from inflation and the impact on interest rates. So we obviously are watching that closely. My point wasn’t to say that the pricing and the cap rates are not justified.

The low cap rates and what we are seeing transacting regularly in the fours, there is good reason for it. There is substantial growth in a lot of these assets. And frankly, when we look at acquisition opportunities, cap rate is one of multiple metrics that we are looking at. Obviously, CAGR, the compounded annual growth rate is critical.

Where do you land an IRR versus just the going in cap rate, cash on cash, FFO impact. And then again, when compared to other asset classes, which is who we are competing with, a lot of these deals are buyers of other asset classes, there is a real reason that they see a very solid risk-adjusted return in grocery-anchored retail.

So we expect that the market is going to continue to be very aggressive throughout this year, notwithstanding where interest rates go for a variety of reasons, including what you just pointed out. And we will pick our spots. We will definitely be active. We will be putting out money.

We do anticipate being a net acquirer, to what extent will depend on the opportunity set and where our cost of capital is and a variety of other factors. But your point is well taken..

Just one other point to add is the capital formation for our product. I mean the private REITs, some of them are putting a toe in the water, some are just getting started. And I think that is going to be a major impact on cap rates in 2022 when they really start to put a lot of capital to work.

And as Ross said, the relative returns are still pretty juicy relative to other food groups..

[Operator Instructions] The next questioner is Forest Van Dijkum with Compass Point. Please go ahead..

Good morning. Thanks for taking my question guys. Conor, you guys are the largest shopping center REIT in the country now. You have got tremendous information at your fingertips. I saw that you appointed a Chief Information Officer. You have access to a huge amount of data, probably more data in the shopping center space than anybody else in the country.

Just help us think about how you are mining that data, trying to monetize that. We heard one of your competitors yesterday talk about how they are using data to get into the unanchored center space because they think that that is an underappreciated segment.

And what kind of impact could all of this information have in your view or what initiatives do you have in place to raise also the occupancy level, particularly in your small shop space, which has historically lagged your anchor space by almost 10%?.

Yes. Floris, it is a great question. And I think you are spot on in a lot of ways. You might have picked up that I mentioned data analytics in my script as well. I think it is a big differentiator. And I think having scale has that advantage when you are able to invest in data analytics and information and tracking that others can’t.

And it gives you the opportunity to understand your consumer better than ever before and it helps with capital allocation and it helps with leasing. And so we are at the very forefront of that. We are doing a lot of things to test out different products. I would say that we understand trade areas better than we ever have before.

We understand consumer habits better than we ever have before. We are also partnering with our retailers to start to share information because we sort of have data around the shopping center, where they have data inside the four walls. So all of these are, I would say, are going to be major differentiators in the future.

I think data analytics is at the very first inning of utilization in the shopping center sector. And online has had that advantage for a very long time where they have all of your data, all of your habits and sort of anticipate what you are going to need.

And I think that, that is just starting to come to the brick-and-mortar space as most of the best online retailers are now brick-and-mortar retailers.

And I think you are going to see that customer acquisition continue to be sort of critical, and I think it is going to be a major game changer for us for capital allocation as well as on leasing, because we can anticipate what the demographic needs, what is missing, a void analysis tool that we utilize for our leasing is important, trade area information.

It goes on and on, but I do think data analytics is really just starting. And I think we are putting a lot of investment, both capital and human resources into it to make sure that we take advantage of it from our scale side of it..

I would just like to add two things. One, on the specific retailer initiatives, when we are working with the retailers that Conor had mentioned, we are able to share some of the information that we have related to performance at the center, their catchment area, their overlap in market share and how our center could be an appealing option for them.

And in several cases, it is actually drawn the retailer to our center versus a competing center, so we will continue to refine and utilize that going forward.

And I think second of that, tying back to Weingarten is you have to look at technology and data in a much broader context because I think you also have to take into consideration our operating platform and the dollars that we have invested and the time that we have invested into building a very sophisticated operating platform, that is now allowing us to grow at scale and be very efficient in doing so.

If we didn’t make the investments that we had done over the last three years, prior to Weingarten, we would have been in a very different position. But as a result of that, we were able to absorb a very large portfolio in a very short period of time, report our numbers in 60-days and the operating team really didn’t skip a beat.

So that to me also is a go-forward opportunity that we can utilize in Flex..

You can tell we are pretty passionate about it. I mean I think when you look at the benefits of scale, historically, it is probably been, number one, pricing power; number two, maybe G&A savings; and number three, technology. And I think in a matter of probably a few quarters that is going to be flipped.

And I think technology is going to be the dominant reason for scale to take advantage of that opportunity..

Great. If I can ask one little follow-up. The Dania Pointe portfolio supposedly is trading, you guys must have looked at that. It appears to be a very tight cap rates based on market sources.

Maybe can you talk about the impact on the markets? And again, another lower cap rate print and maybe how much should people get worried that return expectations are factoring in more growth but slightly less current income or should we feel pretty confident about that growth going forward?.

Yes. I mean look, it is a great portfolio. So we are not surprised to see that it is traded aggressively and that there was a lot of competition for it. It is just another of many data points that we continue to see in our sector of a lot of capital chasing a smaller amount of supply.

And with that, you are going to continue to see pricing remain very aggressive. There has been a tremendous emphasis on certain parts of the country, the Sunbelt especially, and we love the Sunbelt and we continue to invest capital there.

But let’s not lose sight of the fact that the other markets and because we are geographically diverse, there is a lot of demand and a lot of pricing power for the Northeast and New England and the mid-Atlantic and Pacific Northwest and especially California as well. So there are tremendous barriers to entry in a lot of these markets.

And it is not surprising to see the rest of the investment community coming around to it and continuing to provide a lot of capital to those assets. So there is going to continue to be more and more single assets and portfolios that are going to surprise how competitive and low cap rates are..

It still shines a light on that disconnect between public and private pricing. And I think that -- as deals come through this year, especially sizable ones, it will be very apparent that there is a sizable disconnect still..

Great. Thanks guys..

The next question comes from Haendel St. Juste with Mizuho. Please go ahead..

Hey good morning. Conor I was intrigued by your comments on technology, I wanted to follow up on that a bit.

I guess I’m curious, first of all, what is the built-in assumption for expense growth this year where are you seeing the most pressure and what is your sense of pricing power in the Kimco platform’s ability to offset these rising costs, both from a rent or ABR growth side, but also from a platform of technology-driven cost savings you know how much are we thinking or maybe reflected in the guide from some benefits of margin expansion from those two items? Thanks..

Yes. So technology does continue to be a focus of ours and we do invest. And I think the keyword there is invest, I think annually, and making sure that our platforms are up to date and sort of the most efficient for the portfolio to operate and improve margins. So utilize sales force really as our backbone and NRI.

We did a pretty significant upgrade there and continue to think that those platforms give us an advantage going forward to integrate, whether it is one-off or portfolios onto the platform and gives us tremendous data relatively real time. And so the annual investment there continues to be sizable..

We invest somewhere between $5 million and $10 million in a given year..

And we continue to pilot new ideas as well. I think that, again, as long as you continue to think of it as an investment and a differentiator for you going forward, I think that is the right way to look at it.

I think as soon as you start looking at it as an expense item, that is when you can get in trouble because then you are going to start to cut corners and you are not going to have the advantage going forward..

Yes. I mean, I will just add a little bit to give you - I mean, we have invested a fair amount of money in developing bots that do things that are repetitive transactions.

Instead of having people doing Excel spreadsheets, we are using technology, and it just creates an enormous amount of efficiency and allows our people to focus on higher-level things that help drive future value in the business. So anywhere where we can use technology to our advantage we have really done that.

And we have taken even things like MRI that we have migrated to from CTI, I mean we are a major contributor to increasing the power of that product. So we work very, very closely with the vendor same thing with Salesforce. So technology is a key part of what we are doing to create all the efficiencies we can within the business..

It is also part of our ESG initiative, I mean if you look at all the investments we are making, it really is for improving waste, improving the long-standing value creation to all of our stakeholders. That obviously includes the communities that we serve..

That is helpful. And I guess I understand that you are still investing. I’m curious when do you think you will be able to put some numbers around some of those potential cost savings. It seems like you are still kind of early on when do you think you will be able to put numbers.

And then back original question, one of the pieces was what is in the guide for expense growth this year. Maybe you could talk about that a bit, maybe some of the key pressure points..

Yes. I mean from an expense standpoint, again, inflation is clearly something that is in the works and you have to deal with. Our recovery rates are pretty strong from a CAM and tax standpoint. So the amount of leakage is not tremendous, but you have that. And if you look at overall NOI margins, NOI margins are in the low 70s.

So we would expect them to kind of stay in that range throughout the year. We gave you guidance as it relates on the G&A side, so that is already baked into the guidance range..

Got it..

The next question comes from Ki Bin Kim with Truist. Please go ahead..

Thanks and good morning. Just going back to the last question on expense reimbursement. The reimbursement rate looks like it dropped a little bit in 4Q. I was just curious if there was anything that you can help us understand about that.

And do you have caps on the amount of reimbursement that - or how much a tenant will pay versus how much you would pay on expense prices?.

Sure. So Kim, when it comes to recoveries, there is a lot of facets to it. It really comes down to timing of spend and the nature of the spend. So as there are certain tenants that have caps in their leases.

So if your spend reaches that cap in the fourth quarter, you may see a drop off of the recovery related to that particular lease, just as an example.

When it comes to the capping things, you also have a component of fixed CAM, which means that it is a set dollar amount that we are going to get from the tenant and that amount comes through pro rata throughout the entire year irrespective of where the actual spend happens.

So again, when it comes to recovery, there is a lot of timing impact, which makes it a little bit lumpy..

Yes. I would just add that, again, when you look at the spend during the fourth quarter of 2021 versus the fourth quarter of 2020, it was clearly more spend.

You have more spend related not just to the Weingarten acquisition, but fourth quarter of 2020 was still pretty deep in the pandemic and the amount of spend that was going on was a little bit more limited. So I think when you look at the fourth quarter, that is a pretty decent run rate about where spend is going..

So some of these fixed CAM nature and maybe some caps on expenses that a tenant would pay, is that at all a drag in your 2022 guidance for your same-store line, given what were your inflation is?.

When it comes to fixed CAM, just something to note, there is a bump each year in the lease with regards to the reimbursement that the tenant gives us. So it is not a set it and forget it, the amount keeps increasing over the years..

And there is also a component in terms of as you are building back occupancy and getting more tenants open, they are starting to contribute to the CAM pool. You still have to operate a shopping center even if the occupancy is down a little bit.

So you still have recurring expenses, some of which the landlord will bear until you have a new tenant that comes online. So as you start to see at least the economic compress, more tenants open and starts contributing to the reimbursement pool, that recovery rate will increase.

And as we go through our budget process, any cap component that may be associated with the lease is well understood, and we manage our expense within what the contribution could be.

But to Kathleen’s earlier point, what is really essential is that the fixed CAM element continues to grow on an annualized basis and allows us to make the investments that we need to make to ensure that our centers stay at the top of the market and relevant for both our retailers and customers..

Right. I guess what I was getting to was your fixed CAMs are growing, but perhaps not the pace of inflation. So I was wondering if that is on a basis -- yes..

Yes. No. So stock inflation. Obviously, inflation is real is here. The numbers just came out this morning, but we are very mindful of that and you are managing through that as well and so you have the opportunity to adjust your spend as needed.

In addition to that, what we have done is we have also prepurchased materials that we knew would be needed in 2022.

We started buying roofing materials and other items that were essential back well into 2021 in preparation to utilize for 2022, stay in front of that, and that is something that we will just continue to manage as we are working through our budgets. ..

We don’t see it having a negative impact on same-site NOI to your question..

Okay. Yes. Thank you guys..

Next question comes from Wes Golladay with Baird. Please go ahead..

Hey good morning everyone. There is been a lot of noise in the quarterly noncash rent.

And so can you tell us what is embedded in the full year guidance this year for the noncash rent on a pro rata basis?.

Collections for the quarter were 7.8 million of previous rents that were reserved that we did collect. As Glenn mentioned, there is no estimate of past collections inside the projections for 2022. What is in there is actually the 100 basis of credit loss is what is actually embedded in the numbers.

So as I mentioned, there is no income related to prior periods included in any of the numbers that we put out..

Apologies, I meant from the non-cash rent the straight-line rents..

Same concept there. So we are not showing any of the tenants flipping back on to accrual where we reinstate the straight line. There is no impact in the numbers related to that..

There was about 1.5 million in the fourth quarter. So if you look at the straight line income number, it was about 1.5 million that came back through that line. So if you are trying to figure out run rate, you would have to kind of back that off a little bit..

That is exactly what I was looking for. And then now going back to the, I guess, the strong bid in the private market for shopping centers.

Can you maybe talk about the bid from noncore assets, is that firming up as well, how much has that been tightened up? And then when we look at your disposition program this year, will it be mainly noncore assets or do we have some opportunistic assets in there as well?.

Yes. I mean, fortunately, we don’t have a whole lot of noncore assets at this point. So when we look at our disposition pipeline for the year, it is really assets where we feel we have maximized the value. Maybe there is less growth, but still good tenancy, good credit. And there is a lot of demand for credit in this market.

So I think all facets of open-air retail have continued to be more aggressively priced, and we have seen pricing and cap rates continuing to compress not just institutional grocery-anchored product but power lifestyle, certainly single tenant as well. So everything is getting more aggressive as the amount of capital is flowing into the sector..

Great. thanks everyone..

Next question comes from Mike Mueller with JPMorgan. Please go ahead..

Yes, hi. Conor, you talked about wanting to own last mile retail I think a few times.

Just curious, what is the difference between what you see as last mile retail and what isn’t?.

Yes, it is a really good question. I think when we define last mile retail, it is retail that is embedded in the community that it serves So that when you look at the trade area using data analytics, you understand that it is the closest to where people live.

And so that is sort of the neighborhood grocery store, the asset that sits within dense populations, really high barrier-to-entry locations where you don’t necessarily have significant opportunity to see new supply come into the market anytime soon.

And so that is why we continue to think we are in the right spot or we are in the sweet spot of last mile retail because when you look at where we have put our chips, the map for us is really around the top 20 major metro markets first string, where we are seeing a lot of population growth, a lot of demographic shifts and continuing to think that our locations have a lot of barriers to entry.

So the supply and demand continues to be in our favor..

I was going to add. If you think about a lot of the retailers, they are looking at the store today as their - a main distribution point. So a lot of this online activity that they are getting, they are delivering that product from the store. I think also having curbside pickup is just another advantage for the consumer and for the retailer.

So if you put all that together, when you have an asset that is sitting surrounded by just general housing, it is just much easier for them to get their product quicker..

Got it. Thanks..

Next question comes from Anthony Powell with Barclays. Please go ahead..

Hi good morning. So maybe one for me on credit losses. You said historically that you are at 75 to 85 basis points.

Did you exit 2022 at that level? And looking long-term, given the increased quality of tenants, more grocers, could you be below that in future years given kind of the improved quality of the tenant base?.

I mean, it is a great question. I mean if I had a crystal ball, I guess I could tell you the answer, but it is possible. But again, to Conor’s point, we are still in the midst of pandemic. And it is very difficult to predict what is going to happen, which tenants might fall out. We have had very, very little in terms of bankruptcies.

It would be great if that would continue, but it is always possible that something could happen that it could go the other way. So again, as we sit and think about guidance, we think this is really the appropriate level to start with. And we will make adjustments as we go. And if things improve, we can certainly see it be better than what it is..

I think it is a fair assumption just if we lease correctly and upgrade the tenant base with the credit tenants that are doing new deals, and you think that last mile retail is finally plugged into the supply chain and used in the e-commerce platforms that all of our retailers have, that you should be able to use, after the pandemic, a lower credit loss reserve.

I think that is a fair assumption to make..

And maybe on, I guess, lease spreads. They were very strong in the quarter. There was a big difference between new and renewal.

Is there an opportunity to push some of those renewals, I guess, went a bit higher given what you are seeing or are you more focused on retention at this point?.

Well, I mean, our renewal and option spreads continue to be in the high single-digit range, mid to high single-digit range, which continues to be encouraging. We always look at that as an opportunity for tenants to walk away or renegotiate. So the fact that it is still holding a healthy positive is good. We push as hard as we can. It is case-by-case.

And we will continue to do that going forward. Again, I always revert back to, though, the fact that the spreads that are posted are comp spreads based on a point in time with a certain population so that can vary quarter-to-quarter..

Just 1 more point on that.

New lease spreads typically are higher because you have more below-market leases coming to maturity, where they don’t have any more control and you get the opportunity then to replace them with the at market rent where some of the renewals and options have embedded bumps that are lower than what the mark-to-market would be..

Yes. And one more part on top of that is that we did a lot of small shop leasing which is typically closer to market, and so that is where you are seeing the difference still..

Thank you..

Next question comes from Linda Tsai with Jefferies. Please go ahead..

Hi.

Can you give us some color on shop retention in the quarter and any trends to note between the CAM and legacy Weingarten portfolio?.

What has been so nice about the Weingarten portfolio is how it is really complemented the Kimco portfolio. And I think we both had very similar strategies over several years of pruning the noncore assets, improving the overall quality. So when we merged together in August, there is very complementary quality.

So we are seeing very similar trends between the two. When you look at retention levels in 2021, our deal retention was over 80% to 83%, which is really the highest it has been in over five-years, and the GLA was almost over 90%.

So the retention time to vacate level as well is at the lowest point we have seen really over the last six years as well, it is 56% below our historic average. So I really think though this is a reflection of what happened during the midst of the pandemic and really 2020.

And the purging of distressed tenancy, those that really just couldn’t make it through, didn’t see a path forward, that really fell out in 2020. So in 2021, you really saw a renewed base that was relatively stable, had a desire to stay and grow within the shopping center.

And then compounded now, obviously, with the new deal activity that is where you are seeing the occupancy growth. So you are getting occupancy growth not only with elevated retention, reduced vacates, but also new deal flow..

And then we have heard some of your smaller competitors discuss increased competition in the transaction market and mentioned unanchored centers as one opportunity.

Is this something you would consider or are you sticking with grocery anchored?.

It is an interesting concept. We do look at all sorts of formats of retail. We talked about it in the past. We love grocery. We love mixed-use. We have also seen some of our power centers be some of our best performers with redevelopment potential.

So at the end of the day, we are focused on the real estate, the location, but we do believe that having that grocery anchored is really a component that adds a lot of value and a lot of traffic to the center. So I don’t want to discount the strategy or say it is something that we wouldn’t consider.

But just given our focus right now, we have been more focused on larger-format, grocery-anchored type shopping centers..

Thanks..

The next question comes from Michael Gorman with BTIG. Please go ahead..

Yes, thanks good morning. I will try to be quick here, I know we are running long. Conor, just wondering, you talked a lot about last mile retail and I think you mentioned MFCs in there as well, especially on the grocery side.

Can you just give us any stats that you have about MSPs that are currently in the portfolio, maybe ones that are planned for the portfolio and is there an opportunity for Kimco to partner with the tenants here to kind of do some improvements and invest in MFCs in your centers?.

Sure. So it is very, very early on micro fulfillment. And I think what you are going to see is continuation of a lot of testing on that.

What we found is that some of our grocers are looking for adjacent space to either have that micro fulfillment bolted on, where some are actually looking at freestanding locations that are within last mile retail that are vertically integrated, automated, so you can have that help with last mile delivery.

I continue to think that the store will continue to evolve.

A lot of the groceries that we have talked to have also talked with is not far off to think that the center of store comes a micro fulfillment, where you walk around the outer rim of the store, and that is where you get the fresh, you get the meats you get the bakery type goods, and then your commodity type goods are fulfilled and they are ready for checkout when you walk through the rest of the store.

So it is still very, very early there. But I think with retailers reinvesting in their store base, the way that we see that, that will be a part of their strategy. Now some will have that bolt-on strategy, some we will probably test integrating it. Some will probably have freestanding.

But the store continues to be a focus for the lion’s share of our retailers, and I think that is how you are going to continue to see it evolve..

I would also add that you have to start, I think, thinking about micro fulfillment a little bit differently.

There is the physical change so you have a grocery store that may parcel out 10,000 to 15,000 square feet, throwing a racking system with some robotics to fulfill the orders, so that is something a visual change that you noticed is something different than it wasn’t there a year ago.

But then you got to think of like a target, 95% of their goods are distributed through a store. Is that not micro fulfillment and some capacity? They are already utilizing their existing footprint to accommodate addresses same needs, similar to like QSRs as well. So I think we have to broaden that definition or appreciation of how we view that.

But to Conor’s point, it is still very much in the early days of its evolution, and it will be different for each retailer..

And are you seeing like just for flexibility or as it evolves as you are doing some of these grocery leasing, are you seeing them ask for more space, look for more space? Are they looking for things where there are potential adjacencies already in place or is it still too far out for that?.

No, no. It is very much now. I mean sometimes they may have had a box that was an older format that could have been 65,000-plus square feet. And so now they are going to utilize 15,000 of that to do that where maybe some of their newer formats in the last five-years were slightly smaller.

But now they appreciate that they need more space, so then they will do the adjacent vacancy, expand out the back or otherwise. We now portfolio views on a weekly basis with a number of retailers and I would say that continues to be a topic of conversation for some.

I would like to know what you have to the left and the right of me that might be available either now or in the near-term..

The next question comes from Tammy Fique with Wells Fargo Securities. Please go ahead..

Thank you. Maybe just following up on the asset pricing question and understanding cap rates are compressing across segments.

I’m just curious what you are seeing in the market today in terms of cap rate spread between grocery and power center and is that narrower or wider today versus where it is been historically?.

I think it is pretty similar. They are both compressing at a pretty aggressive pace. So if we have seen grocery anchor institutional quality now sub-five. We are seeing a lot of the traditional more commodity power centers compressing sub-seven, in some cases, low sixes. So I think you are still seeing maybe 150 basis point spread on average.

But a lot of factors go into the pricing, of course. But I think that is consistent with historic. Everything is just compressing, cap rate-wise..

Okay, thank you. And then curious, what do you need to redevelop or acquire in order to get to the 15% of ABR and mixed-use target by 2025. Just trying to think about that in the context of the $100 million to $125 million annual spend for redevelopment, or if there is planned acquisition activity of this product type in the longer-term plan.

Thank you..

Yes. Yes. It is a great question. So that ABR is the ABR of a center, there is a mixed-use component associated with it. So for us, it could be achieved in several different ways.

Obviously, the activation of several more of our multifamily projects, if we were potentially partner to buy out the ground lease and get the full benefit of the income that will contribute as well. Obviously, external growth through what Ross and his team are doing, finding opportunities to acquire mixed use.

But when you look at our entitlement platform and the number of entitlements we have thousands activity, we have the opportunity to pull the trigger on several of those over the next three years, which will help contribute to that..

Yes that is the lion’s share is coming from the internal entitlement platform, the activation of it. In a number of different ways, in ground lease, we can joint venture. But that continues. And then, obviously, the bigger projects that have multiple phases to them. Clearly, we will continue to trend that percentage higher.

I think we are at 11% today of mixed use. So we have done a lot of work because five-years ago, that was zero.

So we continue to think that, that has the nice trajectory of adding density to our existing assets, and that is where you will see our capital allocation plan continue to shift away from ground up development more towards that redevelopment side of the equation..

Great. thank you..

The next question comes from Chris Lucas with Capital One Securities. Please go ahead..

Real quick guys. Glenn, just the 10-years touched on 2% this morning. I guess I’m just curious as to what you think you could price your 10-year bonds at.

And with inflation print the way it was, the Fed’s expectations, the general macro outlook, how are you thinking about the fourth quarter maturities are you thinking you want to get in front of those or does it not matter in terms of how you are thinking about the funding plan for those?.

310, three 15-ish range would be the coupon today..

Super. Thank you. I appreciate it..

And we have a follow-up from Greg McGinniss with Scotiabank. Please go ahead..

Hi, Just two quick ones. Sorry about that.

Looking at the rent collections that fell slightly from last quarter, is there anything to read into that, perhaps highlighting some weaker tenants start to fall out before occupancy recovers or is that just a year and timing issue?.

So what you are seeing there, Greg, is actually there is some significant billings that go out in the fourth quarter related to our real estate taxes. And those aren’t like your contractual rents where it is every month no number. So when those go out, it takes a little bit longer to collect those.

So that is what is just causing that relative small dip, but those collections will pick up in the first quarter related to those real estate taxes..

Okay. And then at NAREIT last year, you mentioned true rent growth versus 2019 was limited to certain Sunbelt markets. Is that still true where you are starting to see improvement in other regions as well. So any details you can provide on market rent growth would be appreciated..

Yes, no. I mean, again, when you look at the net effective rents spreads that were posted, the volume of activity between our coastal and Sunbelt markets, which represents over 94%, 95% for deal flow, we are seeing market rents move north in almost every case at this point.

So it really has spread balance throughout the country and I think that is a result of several items we talked about before, obviously, no development supply, open inventory getting absorbed relatively quickly, retailers fully appreciating the value of open air and wanting to grab market share and/or expand their growth in open air that otherwise may have been a little bit muted in the past.

And so I think when you combine those all, that is putting some nice demand for us in our favor that we can get to..

Yes, Greg, that is another tool that we use, right, with data analytics to give us sort of an advantage, I would say, in capital allocation to understand maybe where the market has yet to reflect some of the pricing power that we see. Obviously, Sunbelt gets a lot of airtime. And clearly, there is a lot of rent growth going on down there.

But there are other markets where we see rent growth that potentially is not yet reflected in pricing that we continue to manage up..

Okay, thank you..

And the final question today comes from Katy McConnell with Citi. Please go ahead..

It is Michael Bilerman. Page 28 in the supplemental where you broke out all the It is pretty comprehensive.

How does that tie to Page 26 and then ultimately, Page 43, where you sort of value the entitlements today at least that are active and so Page 26 and Page 43 have it at about 4,400 units and keys, whereas Page 28 only breaks up the entitlement at that 3,400.

So I don’t know where those other 1,000 units are coming from, maybe that is some that are undergoing entitlement that have more of certainty.

Can you just reconcile that?.

Yes, yes. There is two parts to it. So one of which I actually mentioned earlier, where you have the Camino Square and you have the Avery Part 2, which is over 600 entitled units that are actually - our spend is fully completed, so you won’t see it reflected in the active mixed-use stage, which is just in Milton right now.

But those are accounting for a portion of that delta and then the other ones that are undergoing entitlements that wouldn’t necessarily be reflected on that page. But that is effectively where you are getting the tie out..

Those are ground leases, Michael. So that is why our spend is like pad prep and then it is over. So that is why you don’t see that..

Yes, I was on Page 26, right, 37.95 multifamily count and then you flip to Page 28, then it is at 28.56..

Right. And then you have 2,200 and you have another 1,000 or so that are currently under construction. I will tie it out..

Okay.

I guess what is the potential that some of these projects get launched this year so that when we look at Page 26, your sort of active mixed-use starts to grow?.

Yes. So I mean, we are evaluating - when you look at the entitled product, actually, you go to Page 28. So when you look at the 11 entitled projects that are on the pipeline there, there are two that are referenced that currently have ground leases in place that are pending permit approval from the developers.

So those could be opportunities to activate. In addition to that, we are evaluating probably three to five of those. And again, everything I had mentioned before, market conditions, capital but it is something that we are wanting to pursue..

And all the spend that you have in pursuing entitlements, all that is being capitalized now and is there a certain balance of capitalized costs for these projects?.

Yes. I mean the capital that we are spending on those projects is definitely capitalized. It goes into the building basis for the asset..

We are trying to have a balanced Michael of how much we activate and how much we activate using ground leases as well as bringing in sort of a world-class multifamily developer, because we have seen that it is a nice have too much capital going into these projects, where we can continue to focus on FFO growth.

It activates more mixed-use opportunities without having the drag of these - these are lower-return projects. So the ground probably set these projects up for future generations to collapse the ownership and have Kimco shareholders benefit from it long-term..

Great. See you in few weeks..

This concludes our question-and-answer session. I would like to turn the conference back over to David Bujnicki for any closing remarks..

I just want to thank everybody that participated on our call today, and we hope you enjoy the rest of your day. Thank you..

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