Kimco Realty Earnings: High Re-Leasing Spreads Offset by Credit Losses and Operating Expense Growth

First-quarter results for no-moat Kimco Realty were in line with our expectations, leading us to reaffirm our $26.50 fair value estimate. Same-store occupancy improved 10 basis points sequentially and 100 basis points year over year to 95.8% in the first quarter, significantly better than our estimate of a 100-basis-point sequential decline. Blended re-leasing spreads were up 10.2% in the quarter, ahead of our 5.7% estimate, as spaces leased to new tenants saw a rental rate increase of 44.0% over the prior rent terms. However, the company reported higher credit losses from tenants, leading to same-store revenue growth of only 2.4% in the quarter despite minimum rents growing 4.3%. Same-store expenses were up 4.9% in the quarter, leading to same-store net operating income growth of just 1.5% that came in below our estimate of 3.1% growth. Kimco reported funds from operations of $0.39 per share in the first quarter, which was in line with our estimate and matched the $0.39 figure reported in the first quarter of 2022.