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Kimco Realty (KIM) Beats Q2 FFO Estimates, Raises 2021 Outlook

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Kimco Realty Corp.’s KIM second-quarter 2021 NAREIT funds from operations (FFO) came in at 34 cents per share, topping the Zacks Consensus Estimate of 31 cents. This also compares favorably with the year-ago quarter tally of 24 cents.

Results reflect better-than-anticipated revenue numbers. Moreover, the retail REIT raised the guidance for 2021 on improved outlook, and Kimco stock gained in begging hours of trading, reflecting upbeat market sentiments.

The retail REIT generated revenues of $289 million, exceeding the consensus mark of $272.6 million. Quarterly revenues increased 21% year one year.

According to Conor Flynn, Kimco’s CEO, “Our raised outlook also reflects our confidence that the upcoming merger with Weingarten Realty will create additional value for our shareholders, as the combined business will benefit from enhanced diversification and embedded growth opportunities to drive future cash flow.”

As announced earlier, Kimco agreed to acquire grocery-anchored Sun Belt shopping center owner, manager and developer Weingarten Realty Investors WRI. This transaction, expected to close following shareholders’ approval at their respective special meetings on Aug 3, and customary closing norms, will likely be immediately accretive to Kimco’s earnings.

Quarter in Detail

Pro-rata portfolio occupancy at the end of the second quarter was 93.9%, reflecting an expansion of 40 basis points (bps), sequentially. Pro-rata anchor occupancy was 96.9%, marking a 70-basis point sequential improvement.

However, pro-rata small shop occupancy ended the quarter at 85.5%, representing a contraction of 30 bps, quarter on quarter. This reflects the impact of the inclusion of Dania Pointe Phases II & III into occupancy at the end of the second quarter.

The company signed 333 leases, aggregating 1.8 million square feet of gross leasable area.

Pro-rata rental-rate spreads on comparable spaces jumped 5.9%, with rental rates for new leases and renewals/options climbing 9.2% and 4.7%, respectively.

Same-property net operating income (NOI), including redevelopments, increased 16.7%, year over year.

Moreover, the retail REIT sold two Rite Aid distribution centers in California for $108 million.

Balance Sheet Position

Kimco exited second-quarter 2021 with cash and cash equivalents of $230.1 million, down from the $293.2 million recorded at the end of 2020. The retail REIT had more than $2.2 billion of immediate liquidity at the end of the reported quarter. This included full availability under its $2-billion unsecured revolving credit facility.

In addition, at the end of the quarter, Kimco held $783.2 million of Albertson’s common stock, subject to certain lock-up provisions. Its consolidated net debt to EBITDA improved to the pre-pandemic levels of 6.3x at the end of the April-June quarter.

Outlook

Kimco raised the 2021 guidance ranges, projecting the NAREIT FFO per share at $1.29 - $1.33 from the $1.22- $1.26 estimated earlier. The Zacks Consensus Estimate for the same is currently pinned at $1.26.

Dividend Update

Kimco intends to announce a regular quarterly cash dividend, which will be payable during the third quarter, shortly after the pending merger with Weingarten closes.

Kimco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other retail REITs, including Realty Income Corporation O and Simon Property Group, Inc. SPG, which are slated to be out early next week.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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