Analyst Note| Kevin Brown |
Kimco Realty's second-quarter results were in line with our expectations, leading us to reaffirm our $21 fair value estimate for the no-moat company. Same-store occupancy improved 60 basis points sequentially to 94.1%, though that is still 150 basis points below the second quarter of 2020. Re-leasing spreads continue to hold up well with Kimco reporting 9.2% higher rents on leases to new tenants and 4.7% higher rents on lease renewals for a blended total company spread of 5.9%, which was in line with our estimate. Kimco benefited from tenants paying previously owed rent in the second quarter, providing a short-term boost to revenue. As a result, same-store revenue increased 14.5% year over year, though same-store revenue fell 1.8% when excluding the rent from prior quarters. For similar reasons, same-store net operating income was up 16.7% in the second quarter but fell 5.8% when excluding the rent from prior quarters, which is in line with our estimate of a 6.2% decline. The higher revenue caused Kimco to report funds from operations of $0.34 in the second quarter, which was in line with our estimate and is 10 cents higher than the second quarter of 2020.