Kimco's (KIM) Q3 FFO & Revenues Beat Estimates, '23 View Raised
Kimco Realty Corp. KIM reported third-quarter 2023 funds from operations (FFO) per share of 40 cents, ahead of the Zacks Consensus Estimate of 39 cents. The figure was only a cent lower than the year-ago quarter’s tally.
Results reflect better-than-anticipated revenues, aided by rental rate growth and healthy occupancy levels. Kimco raised its 2023 FFO per share outlook and also announced a hike in its quarterly dividend.
Reflecting positive sentiments, shares of KIM are up more than 4% so far today.
This retail REIT clocked in revenues of $446.1 million, beating the consensus mark of $439.1 million. Moreover, the figure improved 2.9% year over year.
According to Conor Flynn, CEO of Kimco, “With virtually no new supply and strong demand from a multitude of tenants, buoyed by a resilient consumer, we continue to produce strong operating results capped off by the 2.1 million square feet leased during the quarter with positive double-digit leasing spreads highlighting our portfolio’s pricing power.”
Quarter in Detail
Pro-rata portfolio occupancy at the end of the third quarter was 95.5%, reflecting an expansion of 20 basis points (bps) year over year but down 30 bps sequentially. The third-quarter figure included an impact of 37 bps due to vacating the last remaining leases with Bed Bath & Beyond.
Pro-rata anchor occupancy ended the quarter at 97.2%. Pro-rata small shop occupancy ended the quarter at 91.1%, representing an uptick of 10 bps sequentially and 190 basis points year over year. This also matched the company’s all-time high.
Kimco executed 457 leases, aggregating 2.1 million square feet in the quarter. Blended pro-rata rent spreads on comparable spaces generated was 13.4%, the highest level of combined leasing spreads in six years, with pro-rata cash rent spreads for new leases climbing 34.9%, and renewals and options rising 8.8%.
Same-property net operating income (NOI) grew 2.6% year over year to $332.4 million, backed by a rise in the minimum rent of 2.9%. We estimated 1.8% growth in same-store NOI.
Portfolio Activity
In the reported quarter, Kimco agreed to acquire RPT Realty in an all-stock transaction valued at roughly $2 billion. The transaction is expected to close at the beginning of 2024, subject to the approval of RPT shareholders and other customary closing norms. This acquisition is expected to be accretive to FFO, leverage neutral and increase Kimco’s size and scale in target markets.
During the quarter, Kimco acquired Stonebridge at Potomac Town Center for $172.5 million. This is a 96%-occupied, 504,000-square-foot, grocery-anchored lifestyle center in Woodbridge, VA.
In the reported quarter, Kimco sold one shopping center and two wholly owned parcels totaling 143,000 square feet for $40.1 million, with the company’s pro-rata share of the aggregate sales price being $15.6 million.
Balance Sheet Position
This retail REIT exited the third quarter with more than $2.4 billion of immediate liquidity. This included full availability under its $2-billion unsecured revolving credit facility and cash and cash equivalents of $424.3 million. Its net-debt-to-EBITDA was 5.9X on a look-through basis as of Sep 30, 2023, down from 6.3X witnessed in the prior-year quarter.
As of Sep 30, 2023, Kimco held 14.2 million shares of Albertsons Companies, Inc. (ACI) common stock valued at $323.3 million.
Dividend Raised
Concurrent with the third-quarter earnings release, Kimco’s board of directors approved a quarterly cash dividend of 24 cents per share, representing a 4.3% increase from the prior dividend. This dividend will be paid out on Dec 21 to its shareholders on record as of Dec 7, 2023.
2023 Guidance Raised
For 2023, Kimco now projects FFO per share in the range of $1.56-$1.57, revised from the prior outlook of $1.55-$1.57. The Zacks Consensus Estimate is currently pegged at $1.56, which lies within the guided range.
For the full year, KIM projects same-property NOI growth of 1.75-2.25% compared to the prior guided range of 1-2% and total property acquisitions (including structured investments), net of dispositions, of $175 million, up from $100 million projected earlier.
Kimco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kimco Realty Corporation Price, Consensus and EPS Surprise
Kimco Realty Corporation price-consensus-eps-surprise-chart | Kimco Realty Corporation Quote
Upcoming Earnings Releases
We now look forward to the earnings releases of other retail REITs like Simon Property Group SPG and Regency Centers REG slated to report on Oct 30 and Nov 2, respectively.
The Zacks Consensus Estimate for Simon Property’s third-quarter 2023 FFO per share is pegged at $2.98, suggesting a year-over-year increase of 0.3%. SPG currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for Regency Centers’ third-quarter 2023 FFO per share is pegged at $1.01, implying a year-over-year increase of 7.45%. REG currently carries a Zacks Rank #3.
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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