Kimco Realty Corp. 2026 Q2 Earnings Call

Thank you all for joining Kimco's quarterly earnings conference call. With me today are Conor Flynn, CEO; Ross Cooper, President and Chief Investment Officer; David Jamieson, Executive Vice President and Chief Operating Officer; Glenn Cohen, Executive Vice President and CFO, as well as other members of the Kimco leadership team who are available for Q&A. Before we begin, some of our comments today may include forward-looking statements based on management's current beliefs and expectations. These are subject to risks and uncertainties described in our SEC filings, and actual results may differ materially. We assume no obligation to update any forward-looking statements. We will also reference non-GAAP financial measures. Reconciliations to GAAP are available in our earnings release and supplemental package, both posted to our IR website along with an accompanying presentation. The same forward-looking caution applies to those materials. Following prepared remarks, we'll open the call to Q&A.

To allow a smooth and efficient call, please limit yourself to one question and re-queue for follow-ups. With that, I'll turn the call over to Conor.

Good morning, thanks for joining us. Today, I'll walk you through our solid second quarter results, which continue to validate our growth strategy and the strength of our portfolio, platform, and operating model. Dave will cover our leasing accomplishments in detail. Ross will take you through our transaction activity, and Glenn will close with our financial results and updated outlook. We delivered another strong quarter with FFO per diluted share of $0.46, up 4.5% year-over-year, and same-property NOI growth of 3.5%, driven by higher minimum rents and stronger net recoveries. Small shop occupancy reached a new record of 92.9%, while overall pro-rata portfolio occupancy matched our all-time high at 96.4%, even after absorbing a 16 basis points impact from the Painted Tree bankruptcy lease rejections. These results reinforce the depth of demand across the portfolio, with the growth potential stronger than the headline numbers suggest.

Leasing remained one of the clearest indicators of demand for our portfolio. Across the quarter, we continue to see retailers compete for space in high-quality, open-air grocery anchored centers with demand outpacing available supply as new shopping center development remains limited across our markets. Dave will cover the detailed leasing metrics, but the broader takeaway is that our centers continue to attract growing retailers, drive strong rent growth, and benefit from positive shopper traffic and healthy tenant sales. That trend remained evident during the quarter, with foot traffic across our centers increasing 3% year-over-year, including 3.2% growth in June, and spending across our tenant base also remains robust. With respect to our mixed-use portfolio, I want to share a meaningful proof point and what it means for future value creation.

During the quarter, we completed the sale of The Milton, a 253-unit multi-family building at our Pentagon Centre mixed-use property in Pentagon City, Virginia. The sale of The Milton marks an important milestone for our mixed-use platform and our first full-cycle monetization of a ground-up multi-family development within our value-add redevelopment program. The transaction provides a tangible proof point of the embedded value we can create by entitling, developing, stabilizing, and then selectively monetizing mixed-use assets at the right time. Ross will provide more detail. The broader message is clear. Our mixed-use platform is another meaningful source of long-term value creation. Our capital recycling program continues to be an integral and recurring part of our strategy. Recent asset sales and ground lease monetizations demonstrate our ability to harvest value from low-growth assets and redeploy capital into shopping center investments with stronger long-term growth prospects.

This approach enhances the quality of the portfolio, supports future earnings growth, and allows us to create value without depending solely on external capital. This strategy was further illustrated by the acquisition of two high-quality shopping centers in Florida, utilizing 1031 exchange proceeds. We purchased Pompano Marketplace, a Walmart-anchored center in Pompano Beach, Florida, for $53 million, marking the third acquisition sourced through our structured investment program, a differentiated platform unique to Kimco. The other center was Sunshine Plaza, a Publix-anchored center in a first-ring suburb of Fort Lauderdale, Florida, for $56 million. On the balance sheet, it remains a clear competitive advantage for Kimco. Glenn will provide more detail on our recent capital markets activity, including our inaugural $600 million exchangeable notes at an attractive 3.5% coupon.

The key point is that our liquidity position, access to capital, and investment-grade profile give us the financial flexibility to remain opportunistic and play offense while maintaining discipline in the current environment. Lastly, reflecting on our strong first-half performance, improved visibility into the balance of the year, and confidence in the underlying strength of the portfolio, we are raising the midpoint of our full-year outlook. In addition, our board has increased the quarterly common cash dividend by 12% over the prior year, supported by our strong operating performance, earnings growth and rising taxable income, and confidence in the company's long-term growth outlook. Together, these actions underscore the durability of our cash flows and commitment to delivering long-term value for our shareholders. In conclusion, I want to thank our entire team. The second quarter only reinforced what we believed at the very start of the year.

Kimco has the right platform, portfolio, and balance sheet to drive sustainable earnings growth. Strong retailer demand, positive shopper traffic, visible cash flow growth from our sizable signed but not open pipeline, accretive capital recycling, and disciplined balance sheet management all position us to continue creating long-term value for shareholders. With that, I'll turn it over to Dave to cover leasing in more detail.

Thanks, Conor. I'll cover second quarter leasing results, occupancy trends, the SNO pipeline, and the launch of our new operating model, all of which continue to support the growth trajectory we laid out last quarter. We signed 461 leases across 2.5 million square feet in the second quarter at a blended spread of 13.1%, bringing our total leased for the first half of the year to over 7 million square feet. New leasing activity remained a clear standout, with 161 deals covering 685,000 pro rata square feet at a blended spread of 40.4%, marking our 19th consecutive quarter of double-digit new leasing spreads. This quarter included several notable lease transactions that highlight the strength of tenant demand and our ability to enhance the merchandising mix across the portfolio.

On the anchor side, we replaced a former Rite Aid with Teso Life, a Japanese-inspired home goods retailer at Marketplace of Victoria. At our Woodlawn Marketplace in Charlotte, North Carolina, we added Lowes Foods, bringing a new grocery component to the site. Within our lifestyle portfolio, we signed our first ever Uniqlo lease, further validating the appeal of that segment of our business and the growing interest we're seeing from leading retailers. On the non-anchor side, leasing activity remained broad-based with particular strength seen in service-oriented tenants, including fitness, health and wellness, restaurants, and professional services. This includes several solid core leases that not only complemented our lifestyle portfolio, but also were a nice addition to our core grocery community assets, which further demonstrates the leverage of our operating platform and our ability to cross-pollinate between the lifestyle and core assets.

Our package leasing initiative also continued to gain momentum this quarter, signing 7 deals with 2 retailers that further enhanced small shop occupancy. This disciplined approach is helping us accelerate deal velocity, capture efficiencies of scale, and deepening relationships with growing retailers. Together, these deals reflect what we continue to see across the portfolio. Today's retailers are willing to pay premiums for our high-quality locations, and they're actively upgrading our merchandising mix in the process. Renewals and options totaled 300 deals across 1.9 million square feet at a blended spread of 7%, comprising 6.1% on renewals and 8% on options. This is another clear example of the health and stickiness of our portfolio, with retention remaining at historically high levels as tenants continue to prioritize our open air grocery anchored locations.

Small shop occupancy hit a new record high of 92.9%, and we continue to see room for further occupancy gains as demand for smaller format space remains exceptionally strong. Anchor occupancy only dipped 10 basis points quarter-over-quarter to 97.8%, despite a 23 basis point impact from Painted Tree, but remains up 110 basis points year-over-year. Turning to our SNO pipeline, economic occupancy increased by 20 basis points to 92.4%. The pipeline now represents $95 million in annual base rent, of which $75 million is incremental and 48% of that is projected to commence by the end of the year. Importantly, this pipeline continues to track ahead of our original plan, with construction and leasing tightly coordinated to keep converting signed leases into cash paying rent as quickly as possible.

In terms of the actual cash flow from rent commencements, we are now projecting $33 million to be received in 2026, which is 16% higher than our initial estimate. The timing of the rent commencement includes $24 million from tenants that opened in the first half of the year, with an additional $9 million projected for the back half of 2026. Effective July 1, we launched our new operating model, moving from a regional structure to a nationally aligned functional team organized around our assets. It sharpens accountability around the metrics that drive value, brings greater consistency across the portfolio, and accelerates execution. This leverages the scale of our national platform without adding incremental cost. We expect the benefits to build over time through improved FFO growth, same-property performance, leasing productivity, and margin expansion. That structural change is the most visible piece of a broader effort we call One Kimco.

Alongside it, we are investing in the operating infrastructure behind it. First, a unified data platform that brings our portfolio, leasing, and property data into one place. Second, AI tools that are helping automate routine workflows. Third, modern collaboration tools we are rolling out across the organization. Taken together, this is how we build durable operating leverage, converting the scale of our platform into speed and margin. To sum up, leasing demand remains healthy. Spreads continue to run solidly double digits. Small shop occupancy reached a new all-time high, and our SNO pipeline continues to convert into cash flow growth. Combined with continued momentum in package leasing, growing retailer interest in our lifestyle portfolio, and a more focused operating model, we believe the setup for the back half of the year remains strong. With that, I will turn it over to Ross for an update on the transaction market.