Kimco Realty Earnings: Reports Highest Blended Re-Leasing Spread in Six Years

Third-quarter results for no-moat Kimco Realty KIM were in line with our estimates, leading us to reaffirm our $25.50 fair value estimate. Same-store occupancy sequentially fell 30 basis points to 95.5%, slightly worse than our estimate of flat growth for the third quarter, with Bed Bath & Beyond vacating the last 16 remaining anchor spaces having a 45-basis point impact on occupancy during the quarter. However, blended re-leasing spreads were very strong at 13.4% in the quarter, the highest single quarter in six years, with rent terms to new tenants up 34.9% over prior rent levels, while renewals were also strong at 8.8% higher rent terms. Same-store revenue grew 2.6% in the quarter, while same-store operating expenses grew 2.7%, leading to same-store net operating income growth of 2.6%, which was slightly better than our estimate of 1.4% growth. Kimco reported funds from operations of $0.40 per share in the third quarter, matching our estimate for the quarter.

Thanks to the strong re-leasing spreads, management is raising 2023 guidance. Higher rent on newly signed leases led the company to raise same-store NOI growth for the year to a new range of 1.75% to 2.25% from 1.0% to 2.0%, which is now substantially above our estimate of 1.0% same-store NOI growth for 2023. Management also raised the low end of FFO guidance for 2023 by a penny to a new range of $1.56 to $1.57. The new guidance includes a $3.8 million charge, a negative $0.01 impact, related to the company’s acquisition of RPT Realty, so while our $1.58 estimate is above the updated range it would be in line once we incorporate this one-time charge into our model. The RPT acquisition is expected to close early in 2024 and therefore does not have any other impact on 2023 guidance, though we anticipate that the deal will add approximately $0.02 to FFO for shareholders once the deal closes.