Kimco Realty Q4 2021 Earnings Call Transcript

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Provided by Quartr
February 10, 2022

Key Takeaways

  • Positive Sentiment: Kimco achieved strong portfolio performance in 4Q21 with 94.4% pro rata occupancy, including 97.1% anchor and 87.7% small‐shop occupancy, and delivered 8.1% combined leasing spread growth on 2.1 million sq ft of deals, driven by suburbanization and omnichannel retail trends.
  • Positive Sentiment: The Weingarten merger closed seamlessly in Q4, delivering above‐underwriting results and reinforcing Kimco’s dominant grocery‐anchored portfolio in key Sunbelt markets.
  • Neutral Sentiment: Capital markets remain ultra‐competitive, with cap rates compressing to sub‐5% for open‐air retail; Kimco plans a disciplined approach to external growth via JV buyouts, structured investments and selective acquisitions.
  • Positive Sentiment: Kimco reported Q4 NAREIT FFO of $0.39 per share ($0.38 ex‐pension), raised its common dividend 11.8% to $0.19 per share, and guided 2022 FFO to $1.46–$1.50 per share with expected positive same‐store NOI growth.
  • Neutral Sentiment: The company is targeting a mixed‐use share of 15% of annual base rent by 2025 and plans to invest $100–125 million annually in retail redevelopments and mixed‐use entitlements to enhance density and ABR in its core markets.
AI Generated. May Contain Errors.
Earnings Conference Call
Kimco Realty Q4 2021
00:00 / 00:00

There are 22 speakers on the call.

Operator

Good morning, and welcome to Kimco's 4th Quarter 2021 Earnings Conference. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to David F. Buznicki, Senior Vice President, Investor Relations and Strategy.

Operator

Please go ahead.

Speaker 1

Good morning, and thank you for joining Kimco's quarterly earnings call. The Kimco management team participating on the call today include Conor Flynn, Kimco's CEO Ross Cooper, President and Chief Investment Officer Glenn Cohen, our CFO Dave As a reminder, statements made during the course of this call may be deemed forward looking, and it is important to note that the company's actual results could differ materially from those projected in such forward looking statements due to a variety of risks, uncertainties and other factors. Please refer to the company's SEC filings that address such factors. During this presentation, management may make reference to certain non GAAP Financial measures that we believe help investors better understand Kimco's operating results. Reconciliations of these non GAAP financial measures can be found in the Investor Relations area of our website.

Speaker 1

Also, in the event our call were to incur technical difficulties, we'll try to resolve as

Speaker 2

Good morning and thanks for joining us. Today, I will recap our operating results for the Q4, provide an update on our strategic merger with Weingarten and outline our Key goals for the year ahead. Ross will give an update on the transaction market and Glenn will cover our earnings results and guidance for 2022. We continue to focus on As reflected by our strong 4th quarter performance, leasing leasing leasing has been, is now and will continue to be our first, second and third Our entire team has worked tirelessly to create a one of a kind platform that utilizes our scale, portfolio This platform has proven to be resilient when times are tough and shown to generate growth when the economic climate is favorable. Have embraced the future of last mile omni channel retail.

Speaker 2

Now for some details on the quarter. Pro rata occupancy increased to 94.4%, up 30 basis points from last quarter and 50 basis points from a year ago. Anchor occupancy grew 20 basis points from last quarter to points from last quarter to 97.1 percent and was up 40 basis points year over year. Small shop occupancy also And is now at 87.7 percent, up 40 basis points from last quarter and 160 basis points from a year ago. Our portfolio continued to exhibit Strong pricing power during the Q4 as illustrated by the solid increase in new leasing spreads, which were up 14.1% Based on 152 deals and 588,000 square feet, blended spreads on renewals and options also increased by a healthy comprised of 4.1 percent for renewals and 13.1 percent for options.

Speaker 2

These spreads were based on 286 Deals covering 1,500,000 Square Feet. Overall, our combined leasing spreads grew 8.1% based on 4 38 deals covering nearly 2,100,000 square feet. A couple of things to note about our strong results. First, the suburbanization trends spurred by the pandemic helped to increase retailer sales and supported our efforts to push rents at our high barrier to entry locations. 2nd, our portfolio continues pandemic.

Speaker 2

New normal as shopping centers continue to play a critical role in omnichannel retailing. Our strategy to have a grocery and mixed use portfolio Surrounding the first ring of our top 20 major metropolitan markets in the U. S. Continues. When we started this strategy over 5 years ago, It was nearly a fifty-fifty split of our annual base rent coming from our grocery anchored shopping centers versus our non grocer.

Speaker 2

Today, 80% of our annual base rent comes from shopping centers that have a grocery. We have continued to successfully invest in our assets and over the past year 8 new grocery leases, 2 of which converted non grocery spaces. The other 6 leases backfilled former grocers who vacated. And with the Weingarten merger Now complete, we have further solidified our dominant grocery portfolio in the major Sunbelt markets. In addition, we've taken a deep dive into every asset we own and There continues to be further opportunity to push our ABR from the portfolio to 85% from grocery anchored centers and increase our mixed use over the 5 years with a combination of strategic redevelopment, leasing, acquisitions and to a smaller extent dispositions.

Speaker 2

The Weingarten merger was a perfect fit our strategic vision. And I am happy to report that our 4th quarter results from the Weingarten portfolio exceeded all of our underwriting without skipping a beat during the integration. In closing, we have a good visibility into our leasing momentum and continue to see strong demand across our in all categories. We remain committed to strengthening our long term earnings growth through the portfolio by curating the right merchandising mix that Drive traffic at all points of the day. Ultimately, we expect to be first in last mile retail by attracting tenants I can plug into the supply chain and deliver goods and services to the consumer in the most flexible and convenient way possible.

Speaker 2

We believe that this ongoing

Speaker 3

Thanks, Connor, and good morning, everyone. 2021 was a banner year on many fronts and we are incredibly excited about the positioning of Kimco and the platform we have built that will support future growth. Today, I will discuss our 4th quarter activity then make a few comments on current market conditions and our expectations for 2022. As outlined on previous earnings calls. Our Q4 transaction activity came mostly from partnership buyouts and structured investments.

Speaker 3

Buyout activity included Two grocery anchored assets in California for a gross value of $134,000,000 increasing our ownership from 15% to 100 The previously announced buyout of Jamestown and the subsequent formation of a new fifty-fifty partnership with Black on our portfolio of 6 high quality Publix Anchored Centers in South Florida and Atlanta. Based upon a gross valuation of 420 set in Arlington, Virginia for a pro rata price of $26,000,000 increasing the Kimco ownership on this Signature Series asset to 100%. A major benefit of our joint venture program is the ability to acquire assets Throughout the cycle, while typically having both the first and last look when the partnership decides it is the appropriate time to exit. While we have had success acquiring portions of several JV assets that we didn't previously own, we remain prudent in our valuation. To that point, in the Q4, we sold our interest in several minority owned joint venture assets where pricing was very aggressive.

Speaker 3

We anticipate selling a few more joint venture assets in the Q1 of 2022 as the market remains extremely hot for all Open Air Retail Centers. On the structured investment side, we closed on a $15,000,000 mezzanine financing in a Sprouts anchored center in Jacksonville, Florida, adjacent to the dominant St. John's Town Center. As with prior mezzanine financings, we will retain a right of first refusal in connection with any future sale, while form and will selectively add assets into the program that fit our criteria for quality locations, tenancy, demographics and Since the inception of the preferred equity and mezzanine financing programs in late 2020, we have invested $126,000,000 at Double digit returns with an option to acquire each of the assets in the future. All of these investments are currently performing as expected.

Speaker 3

As we've entered 2022, a very different landscape exists than at this time last year. Rent rolls are more predictable and reliable. Open Air Retail has Undoubtedly proven its relevancy for retailers and shoppers alike and capital continues to flow into our sector. I would classify the investment landscape today as ultra competitive with very crowded bidding by qualified buyers with an abundance of capital that they're ready to put to work. The relatively modest level of increase in interest rates so far this year has not created any pause in the transaction market with equity investors or lenders at this stage.

Speaker 3

While this is a positive sign for the industry at large, it creates a challenge for us when seeking external growth opportunities. To illustrate this point, we've seen deals trading at sub 5% cap rates regularly, including 1 off assets Buyers consist of our public REIT peers, non traded REITs, pension funds and 10/31 exchange buyers. In many cases, We are competing with investors who are agnostic on asset class and see a wonderful risk adjusted return in Open Air Retail when compared to industrial, multifamily, self storage or life science, which are trading in the 2s and 3s. We will continue to be selective and disciplined from an acquisition perspective and ensure that there is a strategic fit or a unique circumstance that helps further differentiate Kimco in this environment. There is no question that we are We are extremely fortunate to have multiple avenues of investment opportunity that not only provide a slightly greater yield than current market, but a and structured investments as our main source of external growth with perhaps a few select third party assets in the 2022 pipeline Given what we see ahead of us and currently have in the works, we are comfortable to initially guide towards being a net acquirer of real estate investments for this year.

Speaker 3

Depending on the opportunity set, market conditions and our cost of capital, we will update you on our and provide our expectations for the year ahead.

Speaker 4

Thanks, Ross, and good morning. We finished 2021 with Strong Q4 results produced from increased occupancy, strong same site NOI growth, further improvement in collections and Credit loss and a full quarter of better than expected contribution from the Weingarten acquisition. For the 4th quarter, NAREIT FFO was $240,100,000 or $0.39 per diluted share and includes $3,000,000 of income or about $0.01 per diluted share related to the valuation adjustment of the Weingarten pension plan. Excluding the pension valuation adjustment, NAREIT FFO would have been $0.38 per diluted share. Either way, This compares favorably to the $133,000,000 or $0.31 per diluted share reported for NAREIT FFO for the Q4 2020.

Speaker 4

The increase in FFO was primarily driven by higher NOI of 124,200,000 of which the Weingarten acquisition contributed $91,000,000 In addition, NOI benefited from improvements in credit loss, Abatements and straight line rent reserves of $28,000,000 compared to the Q4 last year. Higher Cash collections returning to pre pandemic levels were the primary driver, including $7,800,000 from cash basis accounts receivable, which FFO was impacted by higher interest expense of $11,600,000 resulting from the $1,800,000,000 of debt With the Weingarten acquisition, in addition G and A expense was higher due to increased staffing levels to support the Weingarten portfolio and higher bonus based on the company's operating performance as compared to the Q4 last year. We collected 79% of rents due from cash basis Annualized base rents down from the 9.1% at the end of the 3rd quarter, the operating portfolio continues to deliver strong results with same site NOI growth of 12.9% for the Q4 of 2021, inclusive of the Weingarten sites for the first time. The primary drivers of the same site NOI growth were higher minimum rents contributing 3.4% and improved Credit loss and lower abatements adding 9.4%. In addition, redevelopment sites provided an additional 50 basis points.

Speaker 4

Turning to the balance We ended 2021 with a very strong liquidity position comprised of over $330,000,000 in cash and full availability of our $2,000,000,000 revolving credit facility. In addition, our marketable securities investment in Albertsons was valued at over $1,100,000,000 and all restrictions are scheduled to expire in June of this year. As of year end 2021, our consolidated net debt to EBITDA was 6.1 times and on a look through basis including our pro rata share of joint venture Debt and perpetual preferred stock outstanding was 6.6 times, the lowest reported level since the company began Cash, these metrics would improve by 0.7x bringing look through net debt to EBITDA below 6x. Now for our 20 outlook. While the pandemic and its effects on certain of our tenants continues, we are in a much better position than a year ago given our Strong balance sheet and highly diversified and well located open air shopping center portfolio.

Speaker 4

Consumers continue to frequent our high range is $1.46 to $1.50 The guidance range is based on the following assumptions. Same property NOI growth will be positive. Please keep in mind, the robust comps we will have for the last three quarters of 2022 are against varying levels of significant improvement in credit loss during the same periods in 2021. A normalized credit loss for 2022 of 100 basis points or approximately $18,000,000 No additional income from the collection of prior period accounts receivable attributable cash basis tenants or reinstatement of straight line rent receivables. No redemption charges or prepayment charges associated Callable preferred stock outstanding or early repayment of debt obligations.

Speaker 4

No monetization of Albertsons shares, but inclusive of the expected dividends from the investments. Total real estate acquisitions net of Dispositions of $100,000,000 subject to timing. Annual G and A expenses of approximately $105,000,000 to 100 $258,000,000 from debt and perpetual preferred stock outstanding and no issuance of common equity. Based on our expected performance during 2020 2, the Board has raised a quarterly cash dividend on the common stock to $0.19 per share, representing an 11.8 This dividend level is based on anticipated re taxable income for 2022 and represents an FFO payout ratio in the low 50 percent area based on our 2022 NAREIT FFO guidance range. Looking back, 2021 was an incredibly successful year despite the ongoing pandemic.

Speaker 4

We fully integrated the $6,000,000,000 Weingarten portfolio, Successfully onboarded close to 100 associates, improved occupancy levels, produced positive leasing spreads all year and made significant progress on our leverage metrics. There's a lot to be proud of and we thank the entire Kimco team for all their hard work and commitments. We look In

Speaker 1

In terms of

Speaker 2

the Q and A, we have

Speaker 1

a pretty deep lineup today. To make it an efficient process, we encourage you just to ask Andrew, you could take the first caller.

Operator

Okay. The first questioner is Rich Hill from Morgan Stanley. Please go ahead.

Speaker 5

Hey, good morning guys. I wanted to just come back to the guide for a little bit and talk about the same store NOI guide of being positive. I think that's well below maybe some of the expectations and even some of the long term forecast that you had put out. So while I appreciate desire to be conservative, and I do appreciate the tough comps comment. Maybe you can just elaborate on that a little bit more and help us unpack it and maybe provide a little bit more of a bridge.

Speaker 4

Sure, Rich. It's Glenn. Hey, gentlemen. Again, we do expect it to be positive for the full year. But as we've talked about, the metric itself It's a little bit tough because of all the noise that's in the credit loss aspect of it between reserves, straight line rents Coming back, so you have that.

Speaker 4

So it is a challenge to really pinpoint a really specific range. If you took all the credit loss On both sides of it, same site NOI growth would be somewhere close to the 3% range. That'll give you a feel Where it is, but to pinpoint a specific range today, it's just very challenging. However, we are comfortable And confident that it will be positive this year.

Speaker 5

Okay. That's helpful. I appreciate that. And just one more follow-up regarding the guide. I noted that You're not including Albertsons in it, which I understand.

Speaker 5

And I also understand that Albertsons monetization wouldn't go into FFO. Given where your net debt to EBITDA is, maybe Conor, this is a question for you. What would you do with the monetization? It sounds like The buying assets is really competitive right now. Your debt levels are at a good level.

Speaker 5

When you think about deploying that capital and recognize you want Maintain maximum flexibility, but could you maybe just walk through the capital allocation process?

Speaker 2

Sure. Thanks, Rich, for the The beauty of the Albertsons investment, it gives us a menu of different options to utilize that capital. We do have some 2 bonds actually coming due this year. We have 2 callable preferreds. So that's obviously a piece of the menu.

Speaker 2

We do have some opportunities on external growth as Ross outlined in his script. We like our strategy there of looking at buying our joint venture partners, looking at core properties as well as the mezz and prep Investments that we've been making, we have a lot of leasing and redevelopment spend to do. There is no doubt about it. You've seen the uptick The leasing volumes and that continues to be wind at our back. I think we're really in the sweet spot in terms of last mile retail and Where retailers want to invest not only in the existing store fleet, but in net new stores.

Speaker 2

So we've got a great menu of options. We'll continue to see as As the year progresses, how that Albertsons investment continues to perform, but we feel very fortunate to have that as an additional almost free equity raise that

Operator

The next question comes from Michael Goldsmith with UBS. Please go ahead.

Speaker 6

We had a really nice acceleration on the releasing spread and that was both on the new leases and renewals. Can you walk through what's Driving the gains, were they broad based, were they concentrated in certain markets, any way to dig into Where the strength is coming from would be really helpful?

Speaker 7

Sure. Yes, this is Dave Jamieson. It is broad based, I would say that the majority of our leases, 95% of our leases are executed in 'twenty one came from the Sunbelt. Sunbelt and Coastal markets, that's a substantial majority of our portfolio at this point. So when you look at geographic concentration, That's where we're seeing a significant uptick in activity.

Speaker 7

In terms of our ability to push rents, You've seen it through the course of this year, you have muted, you have no new supply developed from development that's come online. The value of last mile distribution and the utility of brick and mortar retail has really come into its own through the pandemic. And so you have these demand drivers that are pushing it with muted supply that's helping us push rents further north. So We're very encouraged by the spreads this quarter. I always say the spreads are lumpy.

Speaker 7

It's all about the deals that qualify as comp deals in any given quarter, so it does go up, it does go down. But when I look at the net effective rents, it's really what we're focused on because that factors in Costs as well. We're up over 9% when we look at our trailing 4 quarters in Q4 and we're up at 12% year over year. So that to me is a better

Speaker 6

That's really helpful. And as a relevant follow-up, As we think about the drivers of leasing, have we hit the point where the pent up demand has dried up and what's left is, I don't know, like good old fashioned underlying And rather than a catch up that we had kind of been seeing in the past?

Speaker 7

No, I think you still have pent up demand that's flushing through the But more importantly, it's retailers redefining their strategy and how they utilize brick and mortar. And you have some of the leaders like Target who have been at the forefront for years now continuing to find ways to read Purpose, they're small format as well as their full size store. They're continuing to make investments to test how they can better connect with the customer. I think you're then starting to see that trickle down into other nationals, regional and local players. You're seeing digitally native brands come into the market Appreciating that brick and mortar has value, the margins are better in distribution to the customer.

Speaker 7

So you are seeing this Somewhat reinvention of how people are utilizing the box, micro fulfillment within the store is becoming a component when you look at the grocery stores Carving out 10000 to 15000 square feet of their box and or leasing adjacent space to accommodate this new use. So you're beyond just the pent up demand, which still takes time to explore. You are seeing new utility for the box and the shopping center, which I think is really encouraging as we move into what I consider the next iteration of the Open Air sector. Yes. Just one thing to add on that is if

Speaker 2

you watch our retailers and I anticipate this to occur not just this quarter but for the next few quarters. You'll see a capital allocation shift really towards last mile retail. And I think that's where you're going to start to see significant dollars being invested in existing stores because they're hard to replace as well as net new stores. And I think that's going to be a big shift From prior years where they were probably more focused on the e commerce platform and are now really starting to shift more the additional Dollars towards that last mile retail.

Speaker 6

Thank you very much. Good luck in 2022.

Speaker 8

Thank

Operator

you. The next question comes from Samir Khanal with Evercore ISI. Please go ahead.

Speaker 9

Hey, Good morning, everybody. So Connor, I just wanted to kind of dig deep a little bit more into this guidance here. I guess, what are you assuming from Weingarten. I know we've talked about the overhead savings before, but I'm just trying to understand in terms of additional opportunities, the margins that From Weingarten's perspective, I remember at that time, their occupancy rate was probably about 100 basis points lower. Just trying to see what Based in the guidance, what are the opportunities that exist there in the portfolio today?

Speaker 2

Yes. Good question. So the Weingarten portfolio And see actually caught up to Kimco's occupancy level. So we're sort of in tandem now as we go forward. The nice part about, as Dave On the demand side of it, leasing is robust across the Sunbelt and the coastal markets and we continue to lean into our strategy there of Portfolio reviews using our size and scale, using our ability to tap our network for new concepts and continue to think that that's really going to be the driving The earnings growth going forward, there will be some synergy savings, as I mentioned in my script, going forward that are above our targeted range that we're mining for.

Speaker 2

We've been very focused on the integration. We've hit the ground running. As you've seen with our results, there hasn't been any sort of bubble of any type feel like where we hit a pause. We've hit the ground running and think that there's more opportunities on the redevelopment side. We've focused It's on their major mixed use projects as well.

Speaker 2

Ross mentioned buying out the JV partner and the mixed use asset near our Pentagon project. So we have a nice cluster there of assets that continue to define our strategy in the DC market. So there's a number of different levers to pull for growth from the Weingarten portfolio. 1st and foremost is the leasing side of it. 2nd is obviously the redevelopment side of it and then the JV buyouts as I mentioned before.

Speaker 2

So It's a nice menu of options to help our growth profile going forward and obviously the Sunbelt continues to shine.

Speaker 9

And my second question, I guess, for Glenn is, just in terms of prior period rent collections that you could potentially collect In 'twenty two, how big is that bucket today? Please remind us on that. And then maybe of that bucket, What percentage of those tenants are sort of still active today in the business?

Speaker 10

So Sameer, it's actually Kathleen, and I'll jump in and So I think, of course, we all wish we had a crystal ball and we don't, but I think the best way to look at it is right now, our cash basis tenants And then about a quarter of it is related to vacated tenants. So, when you're narrowing down what we're looking at from a cash basis perspective, you start with that $35,500,000 which is what the reserve is. And then any collections on that is on the plus side.

Speaker 4

I'll just add. Again, as I mentioned, inside the guidance, we're not anticipating any further collections from that. To the extent that we pick up some of it, it will just be additive to where we are.

Speaker 9

Thanks so much guys.

Operator

The next question comes from Craig Schmidt with Bank of America. Please go ahead.

Speaker 11

Thank you. The off price category seems particularly aggressive in terms of store opening. I think between TGX, Ross and Burlington, they plan on opening over 3 50 stores. I wonder how you can if you could tell us how many of these stores Are entering into the Kimco portfolio in 2022?

Speaker 7

Yes. So off price and Combined with some dollar stores actually represented in 'twenty one almost 25 percent of the deal flow. So you're seeing a substantial From the off price category, and I would anticipate that that demand will continue through 'twenty two. TJ has multiple brands, all of which They've been really encouraged by the signs that they saw through the pandemic. TJ Maxx, Marshalls, HomeGoods, HomeSense is now expanding in new markets, Sierra Trading as well.

Speaker 7

So they see a lot of runway and a lot of white space that they can fill and also Greater density and pockets of concentration to grab market share. Same with Burlington. Burlington continues to modify their footprint. They're becoming much more efficient in the utility

Speaker 4

So it

Speaker 7

gives them more flexibility to penetrate markets that may otherwise not have been available to them in the past. So I think you're going to continue to see them grab market share where they can, appreciating that they really are in We spot people love the treasure hunt, price points appropriate, they have goods and services, they have a good supply chain, merchandise mix. So They're in a good position right now.

Speaker 11

Yes. And Kit Colaso has been trying to add grocers to the Can you give us an update on the number of groceries you've been able to add?

Speaker 7

Yes, we added we did 8 Grocery deals in 2021, and we converted a couple of those non grocery centers into grocery anchored centers. In terms of the grocery demand, it really is across the board as well. You have Sprouts expanding, you have Fresh Market expanding, We have new seasons in Pacific Northwest looking to do new deals. You have all these, sorry, on the more value oriented side Expanding. So, brochures have appreciated that obviously they were in vogue during the pandemic.

Speaker 7

They're continuing able to Hain customers, so some of Connor's earlier points about the change in behavior with this hybrid work from home, Go to work structure now, it does increase maybe your shops one time a week, one more meal at home. It has a material impact when you scale it across the country. So I think you'll continue to see that expand through. And obviously, Amazon and their grocery initiative as well as It's fairly aggressive.

Speaker 9

Thank you.

Operator

The next question comes from Juan, Tanabria with BMO. Please go ahead.

Speaker 12

Hi, good morning. Thanks for the time. Just hoping you could talk a little bit about expectations or range of expectations Underlying the guidance for both occupancy and spread, the cadence and or trends from 'twenty one into 'twenty two and how you think we should be looking at that given a robust environment to start the year?

Speaker 7

So occupancy when we came out of we try to look back to look forward. And when we look back Great recession. We had noticed around a 10 to 30 basis point gain quarter over quarter on the recovery rate. Obviously, this last year, we had about a 50 basis point gain on the recovery year over year. In 2021, We're going to hold within that range of that 10 to 30.

Speaker 7

It can be lumpy at times. Obviously, Q1 has historically

Speaker 3

been a We've been a

Speaker 7

little more muted as it's always the jingle mail you get back post holiday. So you'd have to manage that. And As you played out through the course of the year, that's sort of where we're seeing it today. But demand is strong as we've already talked about.

Speaker 12

Any color on spreads?

Speaker 7

Spreads Again, I mentioned it before, spreads are lumpy. It really depends on what falls into that category On a quarterly basis, what I would say is when you look at our 2022 and 2023 anchor rollover schedule, it's about $12 a foot in rent. Our average ABR on anchor signed last It was $17 so you have a nice window there. Just continue to see growth in the rents. And again, we're highly focused on NER, and that's where we're seeing some encouraging signs as well.

Speaker 4

I would just add, we still as a portfolio have Large amount of below market rents. So as those come due, they add pretty considerably to the portfolio. But to Dave's point, Yes. They are lumpy.

Speaker 12

And then just my last question, just on The joint venture buyouts and or sales, any quantum that you can give us in terms of the potential How are you guys thinking about it on both the acquisition and or sales side? It seems you kind of hinted at Some dispositions here in the first half of the year, particularly on that and any color around size and or pricing around those potential transactions?

Speaker 4

Yes, I mean, it is

Speaker 3

a little bit difficult to predict. We keep in very close with each and every one of our partners, and they all have varying degrees of views on time horizon on their investment strategy, so we are having active conversations with several. We don't know necessarily which ones will hit this year, next year or even 5 years into the future. So we try to maintain a pretty conservative view on our acquisition and disposition guidance. But what I can tell you is that several partners are active today.

Speaker 3

As I mentioned, we have sold a couple of joint venture minority interest that we own in the 4th quarter and already here in the Q1 thus far. And we do anticipate a few more Both the acquisition and disposition side. So we'll update you as the year progresses in terms of what the volume is, but there are substantial active conversations ongoing.

Speaker 12

Thank you.

Operator

The next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.

Speaker 13

Hi, good morning. Maybe just a question Back on the credit loss, so guidance is assuming a headwind of 100 basis points. Can you go through How this would compare to pre pandemic years and to what extent this is based on specific tenants that you have concern about versus the more general unknown Bucket?

Speaker 4

Yes. Hi, Caitlin. I mean, again, credit loss, if you look pre pandemic, We were in a range of somewhere in the 75 basis points to 85 basis points in a given year. Again, Very hard to predict early on, but so we've taken approach of 100 basis points in our guidance. And then, We'll report quarter by quarter, but we think it's a good starting point.

Speaker 4

And we do feel pretty good about where the collection levels are because they are back to more pre pandemic levels. And I would say the tenant base is certainly very, very strong today. The pandemic I was able to you have a lot of tenants that went away that probably needed to go away, and the team has just done a great job replacing that and you have uplift I mean, certainly, from the occupancy side, from the low that we hit. So we think that's really the right starting point.

Speaker 13

Okay, got it. And then maybe just one back to Albertsons. I was wondering if you could go through what the kind of FFO tax implications Could be when there is a monetization. I think given the time you've waited, to what extent are you able to manage And avoid a more significant impact or not?

Speaker 4

That's a great question. I think as I mentioned previously, In any given year the way the investments held today, we could sell and absorb a gain in the REIT of around $350,000,000 And we could do that to stay a REIT, right? The key there is the gross receipts test, The 75% gross receipts test. So if you look at overall gross receipts of the company today is somewhere in that $1,700,000,000 $1,800,000,000 range, We could do around $350,000,000 of gain and we would be fine. From an FFO standpoint, again, We're not including gains on marketable securities and FFO.

Speaker 4

So it's not an FFO issue, but obviously the cash would come in and how we utilize that cash would have some impact on FFO. Bear in mind that whatever we sell, the dividend that we're earning, which is baked In the guidance, that would fall away. So we have room. If again, we also have Strategies that if something was larger, we can move part of the investment back into a TRS that has other tax implications. So We're going to monitor the investment and try and be as opportunistic as we can in monetizing it over time.

Speaker 10

Okay. Thank you.

Operator

The next question comes from Greg McGinniss with Scotiabank. Please go ahead.

Speaker 7

Hey, good morning.

Speaker 14

I was hoping to talk about the development pipeline just for a moment, which kind of appears to be Going down quarter over quarter as you continue to deliver projects. But has that become a less important aspect Back to the growth story relative to external growth or how should we think about the potential for adding projects, especially given the mixed use entitlements

Speaker 7

you already have? Yes. It's a great question. Obviously, accurate observation. I would say where you're seeing the strategic shift on our investment Strategy on the development and redevelopment side is less of an influence on a go forward basis on ground up development and more of an emphasis on redevelopment.

Speaker 7

Redevelopment broken into 2 distinct categories. The first one being our core retail redevelopments, which It's been part of our DNA for last 10, 15 years and that's really the repositioning of retail within the center adding about parcels, Anchor repositionings, which are a very big focus of ours right now coming out of COVID and tobacco in the space. And the second part of that is the activation Our entitlements, the mixed use pipeline. So as you can see in the stuff, we obviously have the Milton that's currently under construction, Phase 2 Center, which is across the Amazon HQ Campus in Arlington, Virginia. In addition to that, though, we do have A couple of ground leases, 1 in Camino Square, which is in South Florida, as well as the Avery Tower II, which is part of The Damien Point project, that's another 600 or so residential units.

Speaker 7

So we almost have about 1,000 units Under construction either through our joint venture structure at Pentagon or at the ground restructuring structure, we'll see us continue to Focus on the opportunity to activate some of those entitled projects in the future at the time and how the Structure is, we'll be sort of conditioned on the market and what we see as the most opportunistic way to proceed. But that's Definitely, where we're going to find

Speaker 15

our focus going forward.

Speaker 14

So is there any like level of guidance you can give on kind of expected pipeline size In terms of future development or future spends that expecting to stay around the same level and just recycle as you finish up assets or do we

Speaker 4

I would say from a future spend Standpoint, somewhere between $100,000,000 $125,000,000 a year on redevelopment is what we've baked into our plan. So pretty similar to what you've seen previously, but again, we're going to be very methodical and disciplined about how we start

Speaker 9

Executing on those projects.

Speaker 14

Okay. Thanks.

Operator

The next question comes from Katy McConnell with Citi. Please go ahead.

Speaker 8

It's Michael Bellerman here with Katy. Maybe Glenn sticking with you, I just wanted to circle back on the guidance just to make sure that we all have it correctly. Coming out of the Q4, I think you said the $0.39 was really $38, when you adjust for the Weingarten benefit on the G and A, So call it about $1.52 going to next year. It appears as credit loss reserve, obviously, you had a benefit in the 3rd in the 4th quarter, which probably added $0.01 to $0.015 So maybe the run rate is $0.36 which is effectively the low end And so I'm just trying to put it all together because it sounds like everything is really positive. You have increased synergies going to next year from One Garden, you have positive same store, You have positive net investment income.

Speaker 8

You have the benefit of the investments you made in the Q4. So I guess I'm struggling a little bit to Sure. To comprehend the $146,000,000 to $150,000,000 and why that really shouldn't be up towards $150,000,000 to $154,000,000

Speaker 4

So Michael, I guess you were sitting in the room with me when we were doing guidance because your math is pretty accurate. Again, you hit on the points that are important, right? The Weingarten pension accrual is a one time thing. So again, that's why we've pointed it out. So you do need to pull that roughly $0.01 out for that.

Speaker 4

We did have, as I mentioned, about $7,800,000 of collections of prior period cash basis Tenants that came during the quarter. So again, in our guidance, as I mentioned, that's not in there. So to the extent that we collect some of that, You're right. There is some room for upside and your run rate is kind of where you're at. That's right too.

Speaker 4

This is where we're going to start out. We feel good about where things are. We have put credit loss back in, which is a pretty Significant number, right? We're using $18,000,000 of credit loss in the numbers for this year where we add net net That's $7,000,000 of income. So year over year, you're looking at like a $25,000,000 swing, which is $0.04 or $0.05 So That's kind of the math.

Speaker 4

As we'll go forward, we'll see where things fall out and we'll make adjustments accordingly.

Speaker 2

Yes, Michael, just remember, we are still in the midst of a pandemic and we felt like this was the appropriate starting spot. Now as you've seen before, It's not how you start, it's how you finish. And so I think we're focused on that and we feel like as we sit and still in the midst of a pandemic, we feel like it's a good starting spot.

Speaker 8

So it sounds like there's nothing else other than this credit loss of 100 basis points that obviously would be an incremental drag relative to where street estimates are probably in the range of at least $0.02 to $0.03 relative to probably what We're expecting, is there anything else in your numbers that is acting as a negative surprise? Or Conversely, are there things out there other than credit loss that could be a positive surprise? I'm just trying to make sure that there's nothing that we're missing in the numbers?

Speaker 4

Well, I think there's a couple of things, right? I mean, we're early on in the year. We've talked about the fact that there is a fair amount of refinancing that needs to be done. So depending on where interest rates are at We do it that could have some level of impact on where everything falls out and where things go forward. And again, Albertsons Again, it's not really baked into the numbers at this point.

Speaker 4

So anything that happens there has some impact as well. So again, it's early on. We try Lay out all the pieces of the way we're thinking about it. And again, as we move along through the year, we will continue to update it.

Speaker 8

Katie, you had a question as well.

Speaker 16

Hi, everyone. It's Katie. Just wanted to go back to capital allocation again, because the acquisition guidance is pretty light I'm just wondering how much you think you could potentially allocate this year to debt or preferred pay down as opposed to refi for your upcoming maturity?

Speaker 4

So our capital plan is to really refinance, obviously, the bonds that we The company today is forecasted to generate around $200,000,000 of free cash flow after dividends. I mean, again, cash is fungible, but to the extent that the plan ran exactly as is, we would expect that for the most part, we could use a good portion of that Cash towards debt, again, it's fungible, but towards debt repayment. So overall, again, depending on How the whole year goes, we are not expecting debt levels, absolute debt levels really rise.

Speaker 16

Got it. Okay, thanks.

Speaker 4

I think I just want to add one other point, again, back to Michael a little bit. Think I've said in my prepared remarks that there are no charges baked into this plan for the redemption of preferreds or any prepayment charges related to any of your debt. Should any of that occur, obviously, we'll make adjustments to the headline FFO guidance, but That is not incorporated in the plan today.

Speaker 8

That is the refinancing and the accretion or dilution embedded in the numbers? Mig, do you have anything from the net effect of it? Forget about the charges for a second.

Speaker 4

Yes. Yes, we do. There's a modest That's baked into it. But remember, most of it is later in the year. Yes.

Speaker 4

Right. So the preferred the first preferred isn't callable until middle of August And the second preferred isn't callable until December 20. So you're going to have very little impact for 2022 as it relates to that. The bonds don't mature until October 15 November 1. So a similar situation where The refinancing of those items is really late in the year.

Speaker 4

So more of a we'll get to it later, but it's more of a 'twenty three impact

Operator

The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Speaker 17

Hey, good morning. And Dave, maybe You'll permit me to use Michael Bellerman's 2 plus 1 questions. So just following up on Michael's question just for simplicity. What is the abnormal or sort of the one time benefit in 2021? Because obviously, you guys collected a lot of back etcetera.

Speaker 17

So as we think about the base run rate heading into 2022, how much was 2021 inflated By the one timers to catch up, repayment of prior due rent, etcetera.

Speaker 10

Yes, this is Kathleen. So for 2021, if you include AR, deferred and straight line, it's closer to 7 $3,000,000 is the income that we did record related to those items.

Speaker 17

So, second point one, so basically we're thinking about the comp to get to the guidance For 2022, we would take out $7,500,000 of FFO to

Speaker 10

And then add in the 100 basis points from the credit loss that we have built into the projection.

Speaker 4

Correct. So you really have a spread of as I was mentioning, a spread of about $25,000,000 when you're looking at the guidance.

Speaker 17

Okay. Okay. Now for my two questions. The first is, obviously, we got the CPI print 7.5%, which is just crazy. But you mentioned that the bidding for shopping centers is intensifying, no real change in cap rates.

Speaker 17

Couldn't you make the argument that Buyers try and buy up that inflationary mark to market and that maybe with that Albertsons Proceeds that you guys would want to go on to buying like be more aggressive in buying because of what potentially could be happened as far as That inflationary mark to market and cap rate compression or is your view that that's not probably what's going to happen or That's not a reasonable assumption to be going out and making acquisition decisions based on.

Speaker 3

No, it's a good point. I mean, I think we like to be selectively aggressive and really pick our spots. You have sort of counterbalancing impacts from inflation and Seeing impacts from inflation and the impact on interest rates. So we obviously are watching that closely. My It wasn't to say that the pricing and the cap rates are not justified.

Speaker 3

The low cap rates and what we're seeing transacting regularly in the 4s, There's good reason for it. There is substantial growth in a lot of these assets. And frankly, when we look at acquisition opportunities, cap rate is one of multiple metrics That we're looking at. Obviously, CAGR, the compounding annual growth rate is critical. Where do you land in IRR versus just the going in cap rate, cash on cash FFO impact.

Speaker 3

So and then again, when compared to other asset classes, which is who we're competing with, and a lot of these deals are buyers of other asset classes, There's a real reason that they see a very solid risk adjusted return in grocery anchored retail. So We expect that the market is going to continue to be very aggressive throughout this year, notwithstanding where interest rates go for A variety of reasons, including what you just pointed out and we'll pick our spots. We will definitely be active. We will be putting out money. We do anticipate being To what extent will depend on the opportunity set and where our cost of capital is and a variety of other factors, but your point

Speaker 2

is well taken. Just one other point to add The capital formation for our product, I mean the private REITs, some of them are putting a toe in the water, some are just getting Started and I think that's going to be a major impact on cap rates in 2022 when they really start to put a lot of capital to work. As Ross said, the relative returns are still pretty juicy relative to other food groups.

Operator

The next questioner is Forrest Ben Guicham with Compass Point. Please go ahead.

Speaker 2

Good morning. Thanks for taking my question guys.

Speaker 18

Connor, you guys are the largest Shopping center REIT in the country now. You've got tremendous information at your fingertips. I saw that you appointed a Chief Information Officer. You have access to A huge amount of data, probably more data in the shopping center space than anybody else in the country. Just help us think about how you're mining that data, trying to monetize that.

Speaker 18

We heard one of your competitors yesterday Talk about how they're using data to get into the unanchored center space because they think that that's and underappreciated segments. And what kind of impact could all of this information in your view or what initiatives do you have in place to really to raise also the occupancy level, particularly in your small space, which has historically lagged your anchor space by almost 10%.

Speaker 2

Yes, Florence, it's a great question. And I think you're spot on. In a lot of ways, you might have picked up that I mentioned data analytics in my script as well. I think it's a big differentiator. And I think having scale has that advantage when you're able to invest And data analytics and information and tracking that others can't and it gives you the opportunity to understand your consumer better than ever before And it helps with capital allocation and it helps with leasing.

Speaker 2

And so we're at the very forefront of that. We're doing a lot of things to test out different products.

Speaker 6

I

Speaker 2

would say that we understand trade areas better than we ever have before. We understand consumer habits better than we ever have before. We're also partnering with our retailers to start to share information because we sort of have data around the shopping center where they have data inside the 4 walls. So all of these are, I would say, are going to be major differentiators in the future. I think data analytics is at the very first inning of utilization in the shopping center sector.

Speaker 2

And online has had that advantage for a very long time where they have All of your data, all of your habits and sort of anticipate what you're going to need. And I think that that's just starting to Come to the brick and mortar space as most of the best online retailers are not brick and mortar retailers. And I think you're going to see that customer Acquisition continue to be sort of critical and I think it's going to be a major game changer for us For capital allocation as well as on leasing because we can anticipate what the demographic needs, what's missing, avoid analysis tool that we utilize Leasing is important. Trade area information, it goes on and on, but I do think data analytics is really just starting. And I think we're putting a lot of investment, both capital and human resources into it to make sure that we take advantage of it from our scale side of it.

Speaker 7

I'd just like to add 2 things. 1, on the specific retailer initiatives, when we're working with the retailers Conor had mentioned, we're able to share some of the information that we have related to performance of the center, their catchment area, their overlap in market And how our center could be an appealing option for them. And in several cases, it's actually drawn Our center versus competing center. So we'll continue to refine and utilize that going forward. I think second of that, tying back Weingarten is you have to look at technology and data in a much broader context, because I think you also have to take into consideration Our operating platform and the dollars that we've invested and the time that we've invested into building a very sophisticated operating platform That's now allowing us to grow at scale and be very efficient in doing so.

Speaker 7

If we didn't make the investments that we had done for the last 3 years Prior to Weingarten, we would have been in a very different position. But as a result of that, we were able to absorb a very large portfolio in a very short period of time, Report our numbers in 60 days and the operating team really didn't skip a beat. So that to me also It's a go forward opportunity that we can utilize in Flex.

Speaker 2

You can tell we're pretty passionate about it. I mean, I think when you look at The benefits of scale, historically, it's probably been number 1, pricing power number 2, maybe G and A savings and number 3, technology. And I think in a matter of probably a few quarters that's going to be flipped. And I think technology is going to be the dominant reason for scale to take advantage of that opportunity.

Speaker 18

Great. If I can ask one little follow-up. The Donahue Schreiber portfolio supposedly is trading. You guys must have looked at that. It appears to be a very, very tight cap rates based on market sources.

Speaker 18

Maybe can you talk about the impact on the markets and again another print lower cap rate print and maybe the How much should people get worried that return expectations are factoring in more growth, but slightly less current income or should we be feel pretty confident about that growth going forward?

Speaker 3

Yes. I mean, look, it's a great portfolio. So we're not surprised to see that it's traded aggressively and that there was a lot of competition for it. It's just another of many data points that we continue to see in our sector of a lot of capital chasing a smaller amount of supply. And with that, you're going to continue to see pricing remain very aggressive.

Speaker 3

There's been a tremendous emphasis on certain parts of the country, The Sunbelt especially and we love the Sunbelt and we continue to invest capital there. But let's not lose sight of the fact that The other markets and because we are geographically diverse, there is a lot of demand and a lot of pricing power for the Northeast and New England and the Mid Atlantic and Pacific Northwest and especially California as Also, there are tremendous barriers to entry in a lot of these markets and it's not surprising to see the rest The investment community coming around to it and continuing to provide a lot of capital to those assets. So there's going to continue to be more More single assets and portfolios that are going to surprise how competitive and less cap rates are.

Speaker 2

It still shines a light on that disconnect between public and private pricing. And I think that as deals come through this year, especially sizable ones, it will be very apparent There's a sizable disconnect still.

Speaker 18

Great. Thanks, guys.

Operator

The next question comes from Haendel St. Justin with Mizuho. Please go ahead.

Speaker 2

Hey, good morning.

Speaker 12

Conor, I was intrigued by

Speaker 19

your comments on technology and wanted to follow-up on that a bit. I guess I'm curious, first What's the built in assumption for expense growth this year? Where are you seeing the most pressure? And what's your sense of pricing power in the Kimco's platform's ability to offset these rising costs, both from A retro ABR growth side, but also from a platform of technology driven cost savings. How much are we thinking or maybe reflecting the guide from some benefits of margin expansion from those two items?

Speaker 19

Thanks.

Speaker 2

Yes. So technology does continue to be a focus of ours and we do invest and I think the keyword there is invest, I think annually and making sure that our Forms are up to date and sort of the most efficient for the portfolio to operate and improve margins. So Utilize Salesforce really as our backbone in MRI, we did a pretty significant upgrade there, and continue to think that those platforms give us an advantage going forward to integrate whether it's Give us an advantage going forward to integrate whether it's one off or portfolios onto the platform and gives us tremendous data relatively real Time. And so the annual investment there continues

Speaker 4

to be sizable. We invest somewhere between $5,000,000 $10,000,000 in a given year.

Speaker 2

And we continue to pilot new ideas as well. I think that again, as long as you continue to think of it as an investment a differentiator for you going forward, I think that's the right way to look at it. I think as soon as you start looking at it as an expense item, that's when you can get in trouble because then you're going to start to cut corners and not going to have the advantage going forward.

Speaker 4

Yes, I mean, I'd just add a little bit to give you I mean, we have invested a fair amount of money in developing bots That do things that are repetitive transactions instead of having people doing Excel spreadsheets, we're using The technology and it just creates an enormous amount of efficiency and allows our people to focus on higher level things that help drive Future value in the business. So anywhere where we can use technology to our advantage, we've really done that. And we've taken Even things like MRI that we've migrated to from CTI, I mean, we are a major contributor to increasing the Power of that product. So we work very, very closely with the vendor, same thing with sales force. So technology is a Key part of what we're doing to create all the efficiencies we can within the business.

Speaker 2

It's also part of our ESG initiative. I mean, if you look at all the investments we're making, it really is for improving waste, improving the long standing value creation to all That obviously includes the communities that we serve. That's helpful. And I guess understand

Speaker 19

that you're still investing. I'm curious when you think you'll be able to put some numbers around some of those potential cost savings. It seems like you're still kind of early stages, maybe that's Top of the list for next year, but just curious on when do you think you'll be able to put numbers? And then back to my original question, one of the pieces was what's in the guide for growth this year, maybe you could talk about that a bit, maybe some of the key pressure points? Thanks.

Speaker 4

Yes. I mean, from an expense Again, inflation is clearly something that is in the works and you have to deal with. Our recovery rates are pretty Strong from a CAM and tax standpoint. So the amount of leakage is not tremendous, but you have that. And if you look at Overall NOI margins are in the low 70s, so we would expect them to kind of stay in that range throughout the year.

Speaker 4

We gave you guidance as it relates on the G and A side. So that's already baked into the guidance range.

Speaker 7

Got it.

Operator

The next question comes from Ki Bin Kim with Truist. Please go ahead.

Speaker 9

Thanks, and good morning. Just going back to the last question on expense reimbursements, the reimbursement rate looks like it dropped a little bit in 4Q. I was just curious if there was anything that you can help us understand about that? And do you have caps on the amount of reimbursement that it how much a tenant would pay versus how much you would pay on expense prices?

Speaker 10

So Ki Bin, when it comes to recoveries, there's a lot of facets to it. It really comes down to timing of spend and the nature of the spend. As there are certain tenants that have caps in their leases, so if your spend reaches that cap in the 4th quarter, you may see a drop off of the Related to that particular lease just as an example. When it comes to the capping things, you also have a component of fixed CAM, which means that it's a set dollar amount that we're going to get from the tenant and that amount comes through pro rata throughout the entire year, Irrespective of where the actual spend happens. So again, when it comes to recoveries, there's a lot of timing impact, which makes it a little bit lumpy.

Speaker 4

Yes. I would just add that, Again, when you look at the spend during the Q4 of 2021 versus the Q4 of 2020, It was clearly more spend. You have more spend related not just to the Weingarten acquisition, but Q4 of 2020 was still pretty deep in the pandemic and the amount of spend that was going on was a little bit more limited. So I think when you look at the 4th quarter, That's a pretty decent run rate about where spend is going.

Speaker 9

So some of these fixed cam nature and maybe some caps on expenses that a tenant would pay. Is that At all a drag in your 2022 guidance for your same store NOI given what we're seeing where the expectation is?

Speaker 10

So when it comes to fixed TAM, just something to note, there's a bump each year in the lease with regards to the reimbursement that the tenant gives us. So it's Not a set of forget it, the amount keeps increasing over the years.

Speaker 7

There's also component in terms of As you're building back occupancy and getting more tenants open, they're starting to contribute to the Campbell. You still have to operate a shopping center even if the occupancy is down a little bit. So you still Recurring expenses, some of which the landlord will bear until you have a new tenant that comes online. So as you start to see At least the economic compress, more tenants open and start contributing to the reimbursement pool, that recovery rate will increase. As we go through our budget process, any cap component that may be associated with the lease is well And we manage our expense within what the contribution could be.

Speaker 7

But to Kathleen's earlier What's really essential is that the fixed cam element continues to grow on an annualized basis It allows us to make the investments that we need to make to ensure that our centers stay at the top of the market and relevant for both our retailers and customers.

Speaker 9

Right. I guess what I was getting to was your fixed accounts are growing, but perhaps not at the pace of inflation. So I was wondering if that's

Speaker 4

on a Right.

Speaker 7

No, I understand. Yes. Yes. No, so let's talk inflation. Obviously, inflation is real.

Speaker 7

It's here. The numbers just came out this morning. We're very mindful of that. I mean, you're managing through that as well. And so you have the opportunity to adjust your spend as needed.

Speaker 7

In addition to that, what we've done is we've also pre purchased materials that we knew would be needed '22, we started buying roofing materials and other items that were essential back well into 'twenty one In preparation to utilize for 'twenty two, stay in front of that and that's something that we'll just continue to manage As we're working through our budgets, we

Speaker 2

don't have it we don't see it having a negative impact on

Speaker 15

same site NOI Your question.

Speaker 9

Okay. Yes. Thank you, guys.

Operator

The next question comes from Wes Golladay with Baird. Please go ahead.

Speaker 9

Hey, good morning, everyone. There's been a lot of noise in the quarterly non cash rent. And so can you tell us what's embedded in the your guidance this year for the non cash rent on a pro rata basis.

Speaker 10

So the collections for the quarter were 7 $800,000 of previous rents that were reserved that we did collect. As Glenn mentioned, there's no estimate of Past collections inside the projections for 2022. What's in there is actually the 100 basis of credit loss is what's actually embedded in the numbers. So As I mentioned, there's no income related to prior periods included in any of the numbers that we put out.

Speaker 9

Apologies, I meant from the non cash rent, the straight line rents.

Speaker 10

Same concept there. So we're not showing Any of the tenants flipping back onto accrual where we reinstate the straight line, that's there's no impact in the numbers related to that.

Speaker 4

There was about $1,500,000 in the 4th quarter. So if you look at the straight line income number, it was about $1,500,000 that came back That line, so if you're trying to figure out run rates, you'd have to kind of back that off a little bit.

Speaker 9

That's exactly what I was looking for. And then now going back to the, I guess, the strong bid in the private market for shopping centers. Can you maybe talk about the bid for non core assets? Is that Firming up as well. How much of that bit tightened up?

Speaker 9

And then when we look at your disposition program this year, will it be mainly non core assets? We do have some opportunistic assets

Speaker 3

Yes. I mean, fortunately, we don't have a whole lot of non core assets at this point. So when we look at our disposition pipeline for the year, It's really assets where we feel we've maximized the value. Maybe there's less growth, but still good tenancy, good credit. And there's a lot of demand for Credit in this market.

Speaker 3

So I think all facets of Open Air Retail have continued to be more aggressively priced and we've seen Pricing and cap rates continuing to compress, not just institutional grocery anchor product, Power, lifestyle, certainly single tenant as well. So everything is getting more aggressive as the amount of capital is flowing into the sector.

Speaker 14

Great. Thanks everyone.

Operator

The next question comes from Mike Mueller with JPMorgan. Please go ahead.

Speaker 8

Yes. Hi. Conor, you talked about wanting to own last mile retail, I think a few times. Just curious, what's the difference between what you see as last mile retail and what is it?

Speaker 2

Yes, it's a really good question. I think when we define last mile retail, it's retail that's embedded in the community that it serves So that when you look at the trade area using data analytics, you understand that it is the closest to where people And so that is sort of the neighborhood grocery store, the asset that sits within dense populations, really High barrier to entry locations where you don't necessarily have significant opportunity to see new supply come into the market anytime soon. And so that's why we continue to think we're in the right spot or we're in the sweet spot of last mile retail because when you look at where we've put Our chips, the map for us is really around the top 20 major metro markets, first ring where we're seeing a lot of population growth, a lot of demographic Shifts and continuing to think that our locations have a lot of various entry. So the supply and demand continues to be in our favor.

Speaker 4

Got it. Okay. That was it. Thank you. Sorry, I was just going to add, if you think about a lot of the retailers, they're looking at the store today as their a main distribution point.

Speaker 4

So a lot of this online activity that they're getting, they're delivering that product from the store. I think also Having curbside pickup is just another advantage where for the consumer and for the retailer. So You put all that together when you have an asset that's sitting surrounded by just general housing, it's just much easier for them to get their product quicker.

Speaker 6

Got it. Thanks.

Operator

The next question comes from Anthony Powell with Barclays. Please go ahead.

Speaker 14

Hi, good morning. So maybe one for me on credit losses. You said historically that you're at the 75 basis points to 85 basis points. Could you exit 2022 at that level and looking long term Given the increased quality of tenants, more grocers, could you be below that in future years given kind of the improved quality of the tenant base?

Speaker 4

I mean, it's a great question. I mean, if I had a crystal ball, I guess I could tell you the answer, but it's possible. But again, We're still to Conor's point, we're still in the midst of pandemic and it's very difficult to predict what's going to happen, which tenants might fall out. We've had Very, very little in terms of bankruptcies. It would be great if that would continue, That's something that happened that they could go the other way.

Speaker 4

So again, as we said and think about guidance, We think this is really the appropriate level to start with and we'll make adjustments as we go and if things improve, we can certainly see it be better than what it is.

Speaker 2

I think it's a fair assumption just if we lease correctly and upgrade the tenant base with the credit tenants that are doing new deals And you think that last mile retail is finally plugged into the supply chain and used in the e commerce platforms that all of our retailers have That you should be able to use after the pandemic, a lower credit loss reserve. I think that's a fair assumption to make.

Speaker 14

Thanks. And maybe on I guess, lease spreads, they were very strong in the quarter. There was a big difference between new and renewal. Is there an opportunity to push some of those renewal, I guess, Went a bit higher given what you're seeing or are you more focused on retention at this point?

Speaker 7

Well, I mean, Our renewal and option spreads continue to be in the high single digit range, mid to high single digit range, which continues to be encouraging. We always look at that as an Opportunity for tenants to walk away or renegotiate. So the fact that it's still holding a healthy positive is good. We push as hard as we can. It's case by case and we'll continue to do that going Again, I always revert back to the fact that the spreads that are posted are comp spreads based on a point in time with a certain population, so that can Very quarter to quarter.

Speaker 2

Yes, just one more point on that. New lease spreads typically are higher because you have more below market leases coming to maturity where they don't have any more control, and you get the opportunity then to replace them with the at market rent where some of the renewals and options have embedded bumps that are lower than what a mark to market would be.

Speaker 7

Yes. And one more point on top of that is that we did a lot of small shop leasing, which is typically Closer to market, and so that's where you're seeing the difference still.

Speaker 4

Thank you.

Operator

The next question comes from Linda Tsai with Jefferies. Please go ahead.

Speaker 20

Hi. Can you give us some color on shop retention in the Any trends to note between the Kim and legacy Weingarten portfolio?

Speaker 7

So what's been so nice about the Weingarten portfolio is how it's really complemented the Kimco portfolio and I think we both had very similar Over several years of pruning the non core assets, improving the overall quality. So when we merged together in August, there is very So we're seeing very similar trends between the 2. When you look at retention levels in 2021, Our deal retention was over 82%, 83%, which is really the highest it's been in over 5 years and the GLA was almost near 90%. So the retention time, the vacate level as well is at the lowest point we've seen

Speaker 3

Really over

Speaker 7

the last 6 years as well, it's 56% below our historic average. So I really think that this is a reflection of what And during the midst of the pandemic and really 2020 and the purging of distressed tenancy, those that really just Couldn't make it through. I didn't see a path forward. That really fell out in 2020. So in 2021, you really saw Our renewed base that was relatively stable had a desire to stay and grow within the shopping center And then compounded now obviously with the new deal activity, that's where you're seeing the occupancy growth.

Speaker 7

So you're getting occupancy growth not only with elevated retention, Reduce vacates, but also new deal flow.

Speaker 20

And then we've heard some of your smaller Competitors discuss increased competition, in the transaction market and mention unanchored centers as one opportunity. Is this Something you'd consider or are you sticking with grocery anchored?

Speaker 3

It's an interesting concept. We do look at all sorts of Formats of retail, we've talked about it in the past. We love grocery. We love mixed use. We've also seen some of our power centers be some of our best performers redevelopment potential.

Speaker 3

So at the end of the day, we're focused on the real estate, the location, but we do believe that having that grocery anchor is really a component adds a lot of value and a lot of traffic to the center. So I don't want to discount the strategy or say it's something that we wouldn't consider, but just given our focus right now, We have been more focused on larger format grocery anchored type shopping centers.

Speaker 13

Thanks.

Operator

The next question comes from Michael Gorman with BTIG. Please go ahead.

Speaker 21

Yes, thanks. Good morning. I'll try to be quick here and then we're running long. Connor, just wondering, you talked a lot about Last Mile Retail. And I you mentioned MSCs in there as well, especially on the grocery side.

Speaker 21

Can you just give us any stats that you have about MSCs That are currently in the portfolio, maybe ones that are planned for the portfolio. And is there an opportunity for Kimco to partner with Tenants here to kind of do some improvements and invest in MFCs in your centers.

Speaker 2

Sure. So it is very, very early on micro fulfillment. And I think what you're going to see is Continuation of a lot of testing on that. What we found is that some of our grocers are looking for adjacent space To either have that micro fulfillment bolted on where some are actually looking at freestanding locations That are within last mile retail, that are vertically integrated and automated, so you can have that help with last mile delivery. I continue to think that the store will Continue to evolve.

Speaker 2

A lot of the grocers that we've talked to have also talked with that that's not far off to think that the center of store Comes a micro fulfillment where you walk around the outer rim of the store and that's where you get the fresh, you get the meats, You get the bakery type goods and then your commodity type goods are fulfilled, and they're ready for checkout when you walk Through the rest of the store. So it's still very, very early there, but I think with retailers reinvesting in their store base the way that we see That will be a part of their strategy. Now some will have that bolt on strategy, some will probably test integrating, We'll probably have freestanding, but the store continues to be a focus for the lion's share of our retailers. And I think that's how you're going to

Speaker 7

I would also add that you have to start I think thinking about micro fulfillment a little Differently, there is the physical change, right? So you have a grocery store that may Parcel out 10000 to 15000 square feet, throw in a racking system with some robotics to fulfill the orders, right? That is something a visual change that you noticed, it's something different that wasn't there a year ago. But then you got to think of like a target, 95 Percent of their goods are distributed through a store. Is that not micro fulfillment in some capacity?

Speaker 7

They are already utilizing their existing footprints to accommodate addresses same needs similar to like QSRs as well. So I think we have to broaden that definition or appreciation of how we But to Conor's point, it's still very much in the early days of its evolution and it will be different for each retailer.

Speaker 21

And are you seeing like just for flexibility or as it evolves as you're doing some of these gross releasing, are you seeing them ask For more space, look for more space, are you looking are they looking for things where there are potential adjacencies already in place or is it still too far out for that?

Speaker 7

No, no, it is very much now. I mean, sometimes they may have had a box that was an older format that could have been 65 plus 1,000 square feet. And so now they're going to Utilize 15 of that to do that where maybe some of their newer formats in the last 5 years were slightly Smaller, but now they appreciate that they need more space, so then they'll do the adjacent vacancy, expand out the back or otherwise. We host portfolio views on a weekly basis with a number of retailers and I'd say that continues to be a topic of conversation for some. I'd like to know what you have to the left and to the right of me that might be available either now or in the near term.

Operator

The next question comes from Tami Sik with Wells Fargo Securities. Please go ahead.

Speaker 13

Thank you. Maybe just following up on the asset pricing question and understanding cap rates are compressing across segments. I'm just curious what you're seeing in the market today in terms of cap rate spread Grocery and Power Center and is that narrower or wider today versus where it's been historically?

Speaker 3

Think it's pretty similar. They're both compressing at a pretty aggressive pace. So if we've seen grocery Institutional quality now sub-five percent, we're seeing a lot of the traditional more commodity power centers Compressing sub-seven, in some cases, low-sixes. So I think you're still seeing maybe 150 basis points spread on average, but a lot of factors go into the pricing, of course, but I think that's consistent with historic. Everything is just compressing cap rate wise.

Speaker 13

Okay. Thank you. And then curious, what do you need to redevelop or acquire in order to get to the 15% of ABR and mixed use target by 2025, just trying to think about that in the context of the $100,000,000 to $125,000,000 annual spend for redevelopment or if there's planned acquisition activity of this product type in the longer term plan? Thank you.

Speaker 7

Yes. It's a great And so that ABR is the ABR of a center if there's a mixed use component associated with it. So for us, it could be achieved In several different ways, obviously, the activation of several more of our multifamily projects, if we are potentially buy out a Partner to buy off the ground lease and get the full benefit of the income that will contribute as well. Obviously, external growth through what Ross And his team are doing finding opportunities to acquire mixed use. But when you look at our entitlement platform and the number of entitlements we have, the 1,000 to Activate, we have the opportunity to pull the trigger on several of those over the next 3 years, which will help contribute to that.

Speaker 2

That's the lion's share. It's coming from the internal Entitlement platform, the activation of it in a number of different ways. We can ground lease, we can joint venture, but that continues. And then obviously, the Bigger projects that have multiple phases to them, clearly, we'll continue to trend that percentage higher. I think we're at 11% today of mixed use.

Speaker 2

So we've done a lot of work because 5 years ago that was 0. So we continue to think that that It has the nice trajectory of adding density to our existing assets and that's where you'll see our capital allocation plan continue to shift Away from ground up development more towards that redevelopment side of the equation.

Speaker 13

Great. Thank you.

Operator

The next question comes from Chris Lucas with Capital One Securities. Please go ahead.

Speaker 14

Real quick guys. Glenn, just the 10 years touching 2% this morning. I guess I'm just curious as to what you think you could price your 10 year bonds at? And with inflation print the way it was, the Fed expectations to general macro outlook, how are you thinking about the 4th Are you thinking you want to get in front of those or does it not matter in terms

Speaker 2

of how you're thinking about

Speaker 4

the funding plan for those? That's a great question. Again, we're always constantly monitoring the market looking for open windows that make sense for us to issue. Again, we have 2 bonds that mature 1 in October, 1 in November. Ideally, we'll Try and probably look to maybe do something sooner than later with one of them.

Speaker 4

But we're watching the markets pretty closely. In terms Pricing, again, it really depends on the day, it depends on the particular market. But I would say that we're probably somewhere in the $110,000,000 range or so around above the 10 year treasury. So you're looking at somewhere in that 3.10, 3.15 ish

Operator

And we have a follow-up from Greg McGinnis with Scotiabank. Please go ahead.

Speaker 14

Hi. Just two quick ones, sorry about that. Looking at the rent collections that fell slightly from last quarter, is there anything to read into that, perhaps Hi, thanks. Weaker tends to expect to fall out before occupancy recovers or is that just some year end timing issue?

Speaker 10

So what you're seeing there, Greg, is actually there's some significant billings that go out in the 4th quarter related to our real estate taxes. And those aren't like your contractual rents where it's every month and no numbers. So when those go out, it takes a little bit longer to collect those. So that's what's just causing that Relative small dip, but those questions will pick up in the Q1 related to those real estate taxes.

Speaker 7

Okay, thanks. And then at NAREIT last year, you mentioned

Speaker 14

True rent growth versus 2019 was limited to certain Sunbelt markets. Is that still true? Are you starting to see improvement in other regions as well? Any details you can provide on market rent growth would be appreciated.

Speaker 7

Yes. I mean we're seeing I mean again When you look at the net effective rents, the spreads that were posted, the volume of activity between our coastal And Sunbelt markets, which represents over 94%, 95% of our deal flow, we're seeing market Rents moved north in almost every case. So at this point, so it's really has spread and bounced throughout the country. I think that's a result of the several items we talked about before. Obviously, no new development supply, COVID inventory getting absorbed relatively quickly, Retailers fully appreciating the value of Open Air and wanting to grab market share and or enter and or expand their growth In Open Air that otherwise may have been a little bit muted in the past.

Speaker 7

So I think when you combine those all, that's putting some nice demand

Speaker 2

Yes, Greg, that's another tool that we use, right, with data analytics to give us An advantage, I would say, in capital allocation to understand maybe where the market has yet to reflect Some of the pricing power that we see, Sunbelt gets a lot of airtime and clearly there's a lot of rent growth going on down there. But there are other markets where we see rent growth that

Operator

And the final question today comes from Katy McConnell with Citi. Please go ahead.

Speaker 8

It's Michael Bilerman. I was on Page in the supplemental where you broke out all the entitlement projects. Thank you for doing that. It's pretty comprehensive. How does The how does that tie to Page 26 and then ultimately Page 43, where you sort of value the entitlements today at least that are Active.

Speaker 8

And so Page 26 and Page 43 have it at about 4,400 units and keys, Whereas Page 28 only breaks out the entitlement at that 3,400. So I don't know where those other 1,000 units are coming from. Maybe that's some that are undergoing entitlement that have more of a certainty, but can you just reconcile that?

Speaker 7

Yes, no problem. There's 2 parts to it. So one of which I actually mentioned earlier where you have the Camino Square and you have the Avery part Which is over 600 entitled units that are actually our spend is fully completed, so you won't see it reflected in the active mixed use page, which is just in Milton right now. But those are accounting for a portion of that delta and then the other ones that are Undergoing entitlements that wouldn't necessarily be reflected on that page, but that's effectively where you're getting the tie out.

Speaker 2

Those are ground leases, Michael. So that's why our spend is like pad prep

Speaker 15

and then it's over. So that's why you don't see that.

Speaker 7

Yes. I was looking at that

Speaker 8

On Page 26, ready, 3,795 multifamily count and then you flip to Page 28 and it's a 2,856.

Speaker 7

Right. And then you have 2,200, then you have another 1,000 or so that are currently under construction.

Speaker 15

I'll tie it out.

Speaker 8

Okay. I guess is there what's the potential that some of these projects get launched this year so that when we look at Page 26, Your sort of active mixed use starts to grow.

Speaker 7

Yes. So I mean, we're evaluating when you look at the entitled product, Go to Page 28. When you look at the 11 entitled projects that are on the pipeline there, there are 2 that are referenced That currently have ground leases in place that are pending permit approval from the developers. So those could be opportunities to activate. In addition to that, We're evaluating probably 3 to 5 of those.

Speaker 7

And again, everything I've mentioned before, market conditions, capital allocation, how we want to structure a deal, Which one do we actually want to pull the trigger on? So not necessarily committing to a number today, but it's something that we're wanting to pursue. And all the

Speaker 8

spend that you have in pursuing entitlements, all that's being capitalized now? And is there a certain balance of capitalized costs for these projects?

Speaker 4

Yes. I mean, the capital that we're spending on those projects is definitely capitalized. It goes into The building basis for the asset, we're trying

Speaker 2

to have a balance, Michael, of how much we activate How much we activate using ground leases as well as bringing in sort of a world class multifamily developer. As we've seen that it's a nice Blend for us to not have too much capital going into these projects where we can continue to focus on FFO growth It activate more mixed use opportunities without having the drag of these these are lower return projects. So the ground lease continues to be a nice way for To probably set these projects up for future generations to collapse the ownership and have Kimco shareholders benefit from it long term.

Speaker 8

Okay. See you in a few weeks.

Operator

This concludes our question and answer session. I would like to turn the conference back over to David Bujnicki for any closing remarks.

Speaker 1

We just want to thank everybody that participated on our call today. We hope

Speaker 7

you enjoy the rest of your day. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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