Kimco Realty's Q3 2025: Contradictions Surface in Capital Recycling, SNO Impact, and Retailer Investment Strategy

Date of Call: None provided

Financials Results

• EPS: $0.44 FFO per diluted share; FFO $300.3M, up 2.3% YOY; raised full-year FFO guidance to $1.75 - $1.76 (from $1.73 - $1.75)

Guidance:

• Full-year FFO raised to $1.75–$1.76 per diluted share (from $1.73–$1.75).
• Maintain full-year same-site NOI growth outlook of 3% or better.
• Revised credit loss assumption to 75–85 basis points (prior 75–100 bps).
• Signed-not-open pipeline $71M (360 bps); ~20% expected to commence in Q4 adding $2–$3M; ~60% to commence in 2026.
• Quarterly common dividend increased 4% to $0.26.

Business Commentary:

• Strong Financial Performance and Leasing Activity:
• Kimco Realty reported funds from operations of $0.44 per diluted share for the third quarter, reflecting consistent high-quality execution.
• This performance was driven by continued strength across its grocery-anchored portfolio, healthy leasing spreads, and disciplined execution across regions.

• The strong leasing momentum was underscored by completing 427 leases totaling 2.3 million square feet, including 144 new deals with an average spread of 21%.

• Increasing Same-Site NOI and Occupancy Rates:

• Same-site net operating income (NOI) increased 1.9% for the quarter and 3% year-to-date, despite early recapture of large anchor boxes.
• This was due to healthy base rent growth and recoveries, with the lost rents from recaptured spaces amounting to about 130 basis points of drag.

• The company's pro rata occupancy increased by 30 basis points to 95.7%, with anchor occupancy at 97% and small shop occupancy reaching a new all-time high of 92.5%.

• Redevelopment Pipeline and Value Creation:

• Kimco Realty elevated approximately $250 million worth of projects to active or near-term status, bringing their total development and redevelopment pipeline to roughly $600 million.
• These projects are expected to generate 10% to 12% unlevered returns, with a blended yield of 13.7% for completed projects, reinforcing the attractive risk-adjusted yields from reinvesting in their own centers.

• The focus on redevelopment is a key pillar of their long-term value creation strategy, enhancing income streams and converting leasing strength into sustained earnings growth.

• Capital Allocation and Strategic Differentiation:

• The company continues to recycle capital from low-growth, low cap rate assets into higher yielding acquisitions and structured investments.
• This strategy has enabled Kimco Realty to generate attractive investment spreads, even in a competitive environment with substantial capital chasing their product type.
• The competitive landscape is strengthened by geographic diversification, diversification of strategies, and a strong portfolio of right of first offers and refusals.

Sentiment Analysis:

Overall Tone: Positive

• Management raised full-year FFO guidance and reported FFO of $0.44 (up 2.3% YOY), record small-shop occupancy (92.5%), a record signed-not-open pipeline of $71M, and expanded redevelopment pipeline to $600M—cited as evidence of strong leasing and durable demand.

Q&A:

• Question from Ronald Kandom (Morgan Stanley): Curious about the transaction environment and what you’re seeing on the cap rate side?
  Response: Market is extremely competitive with many private capital bidders and aggressive cap rates; Kimco focuses on geographic diversification, recycling capital accretively, and using its structured program/ROFOs to source opportunities.

• Question from Michael Goldsmith (UBS): With the signed-not-open pipeline and debt refinancing next year, what are the key puts and takes for 2026?
  Response: Key drivers are SNO pipeline ramp (60% of current SNO ~$24M expected in 2026), redevelopment NOI coming online, and interest expense headwinds from ~$825M maturing debt—management will minimize refinancing impact where possible.

• Question from Alexander Goldfarb (Piper Sandler): Can you give an overview of the retailer investment environment and cadence for deals like Family Dollar?
  Response: Retailer-investment deals are opportunity-driven and infrequent; Kimco targets retailers with substantial owned real estate and stays actively engaged so it’s first in line when capital needs arise.

• Question from Samir Kunal (BofA Securities): What were the one-time benefits in the quarter and for the year?
  Response: One-time items totaled about $0.03 for the year; the quarter included ~$0.005 benefit from recaptured below-market Rite Aid rents; such items are lumpy and not included in baseline guidance.

• Question from Floris Van Dykum (Ladenburg Thalmann): On capital recycling, what should we expect from ground leases vs other disposals and 2026 pace?
  Response: Recycling will continue as a mix of ground-lease monetizations and non-core sales; program accelerating in 2025 with expectation to do more in 2026, while ensuring assets are fully value-maximized before sale.

• Question from Michael Griffin (Evercore ISI): How are retailers thinking about their real estate plans given tariffs—confidence to execute growth?
  Response: Retailer confidence remains intact; tenants continue to pursue growth and market share expansion with active leasing pipelines across anchors, grocery redevelopments and small shops.

• Question from Rich Hightower (Barclays): How predictable are flows in the structured investment program and how do buybacks fit capital allocation?
  Response: Structured program repayments are well-telegraphed (the $240M repayment was anticipated) and reinvested across multiple deals; buybacks are opportunistic and evaluated against stock price and balance-sheet priorities (avg buyback price $19.61).

• Question from Cooper Clark (Wells Fargo): Thoughts on private portfolio deals today and appetite for larger deals in 2026?
  Response: Large portfolio acquisitions remain possible but must be accretive and high-quality; current market is very competitive so best near-term returns have come from internal JV and structured-program sourced opportunities.

• Question from Handel Saint-Hilaire (Mizuho): Redevelopment pipeline increased to ~$600M—what yields and how will you fund it?
  Response: Pipeline targets 10–12% unlevered returns (completed redevelops YTD blended 13.7%); near-term annual spend ($90–$110M) funded by free cash flow, pro rata JV capital and capex-light multifamily partnerships.

• Question from Juan Sonavara (BMO Capital Markets): What uplift do redevelopments drive for small-shop rents?
  Response: Redevelopments create clear halo effects; small-shop rent lifts often in the high-teens to low-20% range on a case-by-case basis when paired with grocery activations.

• Question from Caitlin Burrows (Goldman Sachs): What’s the opportunity for ground-up development and will there be more?
  Response: Ground-up development is limited and highly selective; Kimco focuses on pre-leased, de-risked projects using legacy land and expects very modest, opportunistic ground-up activity given low sector-wide supply (≈0.3% under construction).

• Question from Craig Mailman (Citi): What resources/ROI expectations for the Office of Innovation and Transformation and tech investments?
  Response: Kimco will continue targeted tech and transformation investments focused on measurable ROI—expense efficiencies, productivity gains and pipeline growth—leveraging prior investments and a multidisciplinary implementation playbook.

• Question from Mike Mueller (J.P. Morgan): Expected development dollars for 2026–27 and mix between retail vs residential?
  Response: Expect continuation of current mix: prioritized high-return retail redevelopments, limited opportunistic ground-up retail, and multifamily via capex-light joint ventures—no material shift to heavy standalone ground-up retail.

• Question from Alec Fagan (Bard): How many Family Dollar locations do you have and what was the nature of the investment?
  Response: Kimco has five Family Dollar locations; the investment was a loan participation backed by the retailer’s owned real estate collateral rather than an acquisition of multiple locations.

• Question from Greg McInnes (Scotiabank): Does the SIP repayment remove ROFOs and how likely are repayments vs conversions to acquisitions?
  Response: Repayments and ROFO/ROFR outcomes vary; Kimco views all outcomes favorably—repayment, acquisition or takeover are acceptable given underwriting, and the program has already led to at least one acquisition.

• Question from Linda Tsai (Jefferies): With 60% of SNO coming online in 2026, what is the cadence between H1 and H2?
  Response: SNO benefits are weighted toward the second half of 2026, though some contribution will occur in the first half.

Contradiction Point 1

Transaction Environment and Cap Rates

It involves differing perspectives on the transaction environment and Kimco's ability to recycle capital at higher yields, which are crucial factors in strategic decision-making and investor expectations.

Can you discuss the transaction environment's opportunity availability and cap rates? - Ronald Kandom (Morgan Stanley)

2025Q3: The environment remains highly competitive, with a substantial amount of capital chasing good deals. Kimco's ability to recycle capital at higher yields is a key differentiator. Geo-diversified deal flow and a strong structured investment program help Kimco leverage opportunities effectively. - Glenn Cohen(CFO)

What is your strategy for future acquisitions and funding sources? - Craig Mailman (Citi)

2024Q4: Disciplined capital allocation remains a core tenet of our value creation strategy. Over the last few years, we have been recycling capital across numerous transactions at attractive yields and maintaining our diversified portfolio. - David Jamieson(COO)

Contradiction Point 2

Impact of SNO Pipeline on Same-Store NOI

It concerns the timing and impact of the SNO pipeline on same-store NOI, which affects financial performance expectations and investor projections.

When will 60% of the 2026 SNO pipeline impact same-store NOI? - Linda Tsai (Jefferies)

2025Q3: The impact is more heavily weighted to the second half of the year, with some impact in the first half as well. - Glenn Cohen(CFO)

Will 2025 show traction from SNO and some rental benefits at the store level, with 2026 being the key year for SNO? - Michael Goldsmith (UBS)

2024Q4: SNO will remain an important driver of same-store NOI growth in the coming years. Approximately 60% of the remaining SNO project starts are expected over the next 24 months. - David Jamieson(COO)

Contradiction Point 3

Strategic Focus on Retailer Investments

It highlights a difference in emphasis on the strategic focus of Kimco's Realty investments, particularly in the retailer investment space, which affects the company's growth strategy and investor expectations.

Can you explain your long-term retail investment strategy in light of the Family Dollar investment? - Alexander Goldfarb (Piper Sandler)

2025Q3: The Family Dollar investment aligns with Kimco's track record of participating in real estate-rich retailer investments. Kimco actively reviews opportunities in this space, with a focus on retailers owning a significant amount of their real estate. - Conor Flynn(CEO)

Can you elaborate on the partnership with Family Dollar and its potential as an opportunity for the company? - Craig Mailman (Citi)

2024Q4: Our strategic focus remains unchanged. We will continue to invest in our existing SNO projects and complete our core redevelopment projects. We will also continue to pursue strategic partnerships and investments with retailers that own a significant amount of their real estate. - Conor Flynn(CEO)