Good morning. And welcome to Kimco's First Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to David Bujnicki. Please go ahead, sir.

Good morning, and thank you for joining Kimco's first quarter 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; David Jamieson, Kimco's Chief Operating Officer; as well as other members of our executive team that are also available to answer questions during the call. It is important to note that we will need to this call focused on Kimco's first quarter earnings results and outlook as a standalone company. With more information forthcoming when the merger of proxy statement is filed with the SEC. As a reminder, statements made during the course of this call may be deemed forward-looking. And it's 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. Also, in the event our call was to incur technical difficulties, we'll try to resolve as quickly as possible. And if the need arises, we'll post additional information to our IR website. And with that, I'll turn the call over to Conor.

Good morning and thanks for joining us today. Today, I will focus my remarks on our leasing results. The supply and demand dynamics surrounding those results and the exciting strategic direction we are taking the organization. Ross will cover the transaction market and Glenn will cover the quarterly numbers and our updated guidance. 2021 is off to a refreshing and good start with robust demand for space in our last mile open-air, grocery-anchored portfolio coming from both well capitalized omni channel tenants seeking more market share as well as from smaller businesses that have regrouped and are prepared to reinvest in their business model. The largest leasing demand categories include restaurants, personal care, fitness and dollar stores. We also see healthy activity and have consummated multiple leases with grocery stores, off price and pet supply retailers. Our leasing volume continues to build from the record setting trend last quarter. Our new lease count was 121 totaling 586,000 square feet. This exceeds both last quarter and the prior year quarters. Of particular note, the 586,000 square feet of volume surpassed our five-year first quarter average for new lease GLA of 506,000 square feet and new lease spreads finished at a positive 8.2% pro-rate. We closed the quarter with 237 renewals and options totaling 2.2 million square feet with GLA exceeding the quarter sequentially and the prior year quarter. Renewals and auction spreads finished at 6.4% pro-rate. These spreads continue to reflect the recovery underway and the pricing power inherent in the quality of our portfolio. Conversely, our ability to have withstood the impact of the pandemic reflects the defensive nature and strength of our recurring cash flows. From a supply and demand perspective, the reality is that due to the speed of the recovery, pandemic induced vacancies were short lived. With…

Thank you, Conor and good morning. What a difference a quarter makes. With continued recovery from the pandemic, vaccination rollout and reduced capacity restrictions across the country, we have seen optimism buildings from retailers, consumers and real estate investors at the highest level since the pandemic began almost 14 months ago. Specific to the transaction, industry volume while still off nearly 40% in the first quarter of 2021 compared to 2020 has seen a meaningful uptick on the back half of 2020. The conviction and the stability of property rent rolls, and by extension cash flows has grown beyond only the essential retailers and now includes other categories that were much less clear previously. There is no doubt the grocery anchored shopping center is still the most in demand category of retail and continues to command the most aggressive pricing and lowest cap rates. Furthermore, open-air is valued at an even higher premium. Recent transactions with more specialty and lifestyle components, in addition to traditional power centers have given transparency to the value and stability that our approach provides. Multiple grocery anchor deals have transacted at sub 6% cap rates in Dallas, South Florida, California, Philadelphia, and Seattle to name a few. There are also no signs of investor demand waning for that product site. We anticipate bidding to become even more aggressive as the spread of cap rates and interest rate remains wide for our asset class, particularly when compared to industrial, multifamily, self-storage and others. More recently, aggressive bidding extending beyond the bread-and-butter neighborhood product is starting to emerge. Two recent deals that have a grocery store, but also a significant restaurant and entertainment component saw bidding wars with multiple rounds of offers and pricing well beyond initial expectations. These properties located in Dallas and Denver, have the mix of grocery traffic, restaurants and entertainment, last mile infill locations and future densification opportunities that investors are excited about. On the financing side, and equally important observation is the reemergence of the traditional lender in the space. While the down the fairway grocery anchored assets have been financeable throughout the pandemic, lenders were requiring significant holdbacks and structure around deals with perceived risk. As positive trends continue to emerge that is having direct impact on the transaction market with more deals getting across the finish line at superior pricing and terms. With renewed optimism and conviction comes a vibrant transactions market in which we will remain a disciplined player and we expect to see deal velocity continue to accelerate, which is a great sign for the continued recovery of our industry. Now on to Glenn for the financial results for the quarter.

Thanks, Ross and good morning. The positive results we drove in the fourth quarter last year continued into the first quarter of 2021. With the backdrop of an improving economy and strong leasing velocity, our solid performance was highlighted by improved rent collections and lower credit loss relative to the fourth quarter last year. Our balance sheet metrics also strengthened, we continue to benefit from all the capital markets activity, we undertook the past 24 months to enhance our financial structure. After some details on first quarter results, NAREIT FFO was $144.3 million was $0.33 per diluted share for the first quarter 2021 as compared to $160.5 million, or $0.37 per diluted share for the first quarter of the prior year. The reduction was mainly driven by lower pro-rata NOI of $13.6 million due to COVID related renovate and credit loss, as well as the impact of lower occupancy on net recovery income, below market rent recaptures and straight-line rent. These NOI reductions were offset by a $5.5 million one-time benefit from lease terminations. Also impacting NAREIT AFFO was $5.4 million of higher G&A and interest expense due to lower capitalization from development and redevelopment projects that have been placed in service. Our operating portfolio is continuing to perform effectively. All our shopping centers are open and over 98% of tenants are operating with the strong leasing velocity as Conor discussed, our lease per economic spread has increased to 230 basis points, representing a total of $27 million of pro-rate ABR which is an excellent indicator of future cash flow growth, as expected same site NOI decreased 5.7% for the first quarter, as it is comping against a largely pre-COVID first quarter in 2020. It also marked significant progress from the prior sequential quarter, which was down 10.5%. The improvement…

Before we start the Q&A, I just want to offer a reminder that this call will focus on our first quarter results, and request that you can find your questions and comments to these results, and not the announced merger with Weingarten. To maintain an efficient Q&A session, you may ask a question with an additional follow up. If you have additional questions, you're more than welcome to rejoin the queue. Operator, you may take our first caller.

[Operator Instructions] First question comes from Rich Hill from Morgan Stanley.

Hey, Glenn, thanks for the disclosure in the prepared remarks. I just wanted to make sure I was clear on the percent of rent collections. So the cash base tenants I know it's 8.9% of ABR, you collected 70% of those tenants. Is there any way you could tell us what same store NOI would be x those collections, just so we can get a better sense of the core portfolio?

So just going back a little bit, the cash basis tenants, there was about $7 million collected that related to a prior period from last year. So those came in during the first quarter. So if you added - if you didn't have those that would have an impact on same site of about 320 basis points.

Got it. That's really helpful. I appreciate that. Just a quick, maybe nuanced question, but I think it's important. Could you maybe walk us through what percent of tenants are in bankruptcy? And then what percent of rent you collected on those bankruptcy tenants?

Hey, Richard, Kathleen, and I can actually help you out with that one. So if you recall, in the end of 2020, several of our tenants actually emerged from bankruptcy. So we ended the year at about 70 basis points of our ABR being related to being tenants. And actually as of Q1, it's down to 20 basis points. So it's a small portion of what we have in our ABR at this point.

Got it. Hey, Dave, is that one question or two questions? Can I ask one more?

You got one more, as in like the follow up.

Just a quick question on the 2025 outlook, in the same store NOI. I guess the question I would have is why can't you grow faster than the plus 2% that you referenced, would seem like given the tailwind to the retail sector maybe some of the e-commerce trends that are emerging. Seems like maybe you could grow above inflation. So any context there would be a little bit helpful.

Hey, Rich, it's Conor. We definitely think that that's an achievable goal in the near term. But again, this is a long-term goal. So the way we look at it is there's obviously going to be an uptick in terms of same site NOI through this pandemic fueled recovery. And then as you noticed, we did put 2.5% plus. So our goal is to beat that metric. We clearly see a lot of levers for growth, as we outlined in the call in the remarks. And our job is to beat that number. And obviously, we think we were in a good spot to do that in the near term.

The next question comes from Katy McConnell from Citi.

Hey, this is Chris McCurry on with Katy, just on the grocery leasing front, how sustainable do you view this elevated level of grocery demand if there's more pent-up consumer demand to return to say restaurants or other venues post pandemic?

Yes, hey, this is Dave Jamieson. Right now we're seeing now obviously very strong demand. And we anticipate that this some level of demand will sustain longer term, I think what you're seeing is people starting to adapt and innovate to what the consumer needs and proximity to the end customer is critical. So that last mile distribution element, we don't really see changing in the future, yes, there will be a reversion of some sort of new normal where people will start to go back to restaurants and some of those dollars spent will be diverted to that category. But when you listen to some of the grocers, public companies that are making observing how their customers reacting and responding as a new normal start to take hold, they are still seeing it that net gain to market share and shopping at home. And I think people have adapted to not only going in store but obviously utilization of omni channel vehicles for accessing those groceries. So when you throw that all together, we still see the demand drivers being very strong and based on where we're located in those, first ring suburbs where there's been a lot of net migration out, through the pandemic, starting to take hold, we still see the demand being strong in the future.

Yes, the only thing I would add to that is it's great to have a diversity of demand that's not sort of pigeon holed one square footage category. So grocers right now spread, from the bigger boxes, to the junior boxes, to even the mid-sized boxes of like 10,000 to 12,000 square feet with Trader Joe's and others. So it's really remarkable to have a growth driver that spans all the major categories in terms of square footage needs, which is really I think, again, why we're so confident that we can continue to drive that driver for us.

Yes, got it helpful color. And a quick follow up. Could you comment on your strategy around some of the Albertsons investments just comment on some of the locker provisions and maybe your intentions to monetize that investment?

Sure, it's Glenn. So as it relates to Albertsons, the lockup burns off 25% each six months. So the first 25% did burn off at the end of December, the next 25% would happen at the end of June. There still are other requirements related to our partners around it. And as I mentioned in my prepared remarks, we're not anticipating monetizing anything in Albertsons this year. As we've talked about, we do see real opportunity in 2022 to start monetizing it, and using it towards debt reduction or redemption of our perpetual preferred that become callable in 2022. Got it?

The next question comes from Derek Johnston from Deutsche Bank.

Hi, everybody. Good morning and thanks. On private markets, Ross, can you discuss how pricing and cap rates are holding up in the northeast versus the Sunbelt, or the markets you mentioned in Dallas and Denver, or South Florida? And look, guys, I'm not asking for updated disposition guidance, right. But given the merger, there are likely some non-core dispose that you may be able to take advantage of. So any enhanced color by geography would be helpful.

Sure, happy to respond to that, we are seeing robust demand across the country. I mean, there's no doubt that there's significant demand in the Sunbelt, other parts of the country that have been open, more so than others throughout this pandemic. But when you look at the essential base retailers throughout the country, they have been operating and doing well throughout. So we are still seeing a significant amount of demand in the northeast, whether it be the New York suburbs, Boston, Philadelphia, et cetera. And when you think about the migration and demographics, obviously, there are a lot of headlines about the Sunbelt in Florida and the Carolinas and Texas. So you're also seeing it here in the New York metro area, where we're based, is that a lot of people that are leaving the cities here are moving to the suburbs in Long Island, Westchester, Connecticut, et cetera. So there is an uptick still happening in those suburbs. And we think that there's something to take advantage of there. And investors are certainly doing that. As it relates to future dispositions for us, we'll continue to look at our portfolio, we think that we're in great shape; we do have some non-income producing land parcels that you'll continue to see us chip away at. But again, when we think about the lift that we've done over the last five to seven years, and where the portfolio stands today, we feel very good about those markets, those opportunities that we have, and the go forward portfolio that we will be operating.

Okay, great. So given the pandemic, washed out a lot of weaker retailers. How does your watch list stand today as we hopefully move past the pandemic? And are elevated bankruptcies possibly in the rearview mirror at least for a while?

Yes, this is Dave. In terms of a watch list, it did obviously the categories are most greatly affected through the pandemic, the theaters, the fitness et cetera. We continue to watch and they stay there, there hasn't been much changed beyond that. Obviously, Q1 was always a muted bankruptcy season historically, that's usually where it's a bit elevated. And when you look at those that went into bankruptcy in 2020, a lot of those reemerged with better balance sheets. They're able to recapitalize come out, trim their portfolios and start to take advantage of some of this reopening trade. Now we'll continue to closely watch and monitor the health of all of our tenants really looking, two years out, as we start to get to a new normal and stabilize. And this surplus cash as some did receive throughout the pandemic; it's more a matter of where they made those investments. And the operators that really started to innovate through this and stay ahead of the curve, what the expectations are for consumers. That's what we're really going to start to watch very closely. And you'll start to see, sort of who the winners and losers are downstream, more so than they are today.

The only thing I would add to that is, clearly some of the tenants that reorganized have not necessarily gotten their footing underneath them quite yet. They are still maybe in those categories that have capacity constraints. So we're watching that closely, as they obviously have done a debt for equity swap, but there are still some opportunities I think there for us to upgrade tenancy in the long term and we're watching those tenants closely.

The next question comes from Alexander Goldfarb - Piper Sandler.

Hey, good morning. So, hey, sorry about that. So two questions here. First, on the ESG front and I'm not just talking like solar panels on roofs. But it would seem like shopping centers are really well positioned on the ESG front, not only they're supporting local economies, small business, et cetera. But also just from the benefit of centralized procurement, right, people drive to the shopping center; they can return items rather than throwing them out. You don't have individual boxes; you don't have individual trucks driving in neighborhoods. What are you guys thinking around this, either individually or collectively as an industry to really showcase the benefits that physical retail has in promoting ESG?

Yes, so it's a great question. And an idea to take into consideration all the different constituents that go into making up the shopping center, it's obviously the end shopper, the customer, the retailers and ourselves as landlord. For us, as a landlord, we've always looked at ourselves as the conduit to bring all these retailers to the customer and vice versa, and try to find ways in which we can service everyone, collectively. So when you think of curbside, what we did in 2020, the intent there was to build a program and infrastructure that was agnostic to the retail so that everyone can take advantage of it to avoid having, a separate approach for each individual retailer that we saw as being very successful. That said every retailer has their own defined strategy and what they're trying to solve for their own unique problems. And they do become challenges when you try to consolidate them all into one central vision. And that's our job is to continue working with each of these retail partners to find the best way forward. And as we look to continue to innovate within our common areas, and the way we work with our retailers, our goal is to try to find those uniform strategies that do work for all or at least offer that 80%. And then with the customer, obviously, the closest we are to the home, as you mentioned, it does provide that opportunity for them to return or to revisit and to cut down the travel time and the shipping costs. Obviously, we see that as a clear advantage for retailers with buy online pick up in store, more and more retailers are taking advantage of that today. But this is going to be an evolving process. I think the pandemic did accelerate some of those trends i.e. with curbside that helped pull it forward a couple years, something that we've been talking about for a while. But it's our job to continue to stay on top of that and to innovate where we can to provide those two services.

Yes, but it would just seem like you guys have a benefit, especially as more investor funds have ESG mandates to really showcase the true impact rather than just - not to say cursory things like solar panels, I would just say there's a lot of untapped data that you guys can provide to the investment community to really highlight the benefits for [Indiscernible]

We agree, we agree by the way, the only thing I would add is I think we're going to coordinate with ICSC and others to it's, I think the voices louder when we can combine all of our efforts. And so I think there are a lot of public and private landlords that can come together. And we can help facilitate that to really make that point because I agree with you, Alex. The other piece of it I was just going to mention is ESG clearly is a benefit to our entitlement program. Because Kimco has been so focused on this for decades, when we come into a community and showcase that we're in for the long term, and that we want to work alongside the community to make sure that the asset or the downtown that we're providing evolves alongside the community, we can showcase our ESG initiatives and all the accomplishments that we've been making to give ourselves the opportunity to partner with those folks. And it really does help when we look to try and focus on entitlements and how to unlock the highest and best use for real estate.

Okay, the second question is just on rent collections. Almost all your categories are really rebounded. But fitness, personal services and restaurants are still lagging. Your restaurants are doing quite well actually. But still, it looks like there's some more room to go, is your view by sort of end of summer that really fitness and personal services will have fully rebounded to be something north of call it 85%? Or are there some issues that you can see that are going to hinder the recovery of those two categories?

I think the biggest hold back is the capacity, right? I mean, despite there have been some great success stories in parts of the country where capacity levels have increased substantially. There are other parts of the country that are still a little bit behind. And they're just trying to manage through the spikes of Coronavirus at a local level. So we envision as those capacity constraints continue to get lifted more broadly across the rest of the country that will clearly be a big boost and a tailwind for those other service categories that are - that have been hindered by that. And the summer should show quite well for that hopefully. There's also been with those operators of fitness, there are a number of operators that haven't reopened or won't plan to reopen. So when you think of the supply levels coming down a little bit, we do anticipate the demand side to build people wanting to get out of their at-home gym or the garage, wherever they've been working out for the year and wanting to get back into some sort of facility where there is some social engagement and community. So that should help as well.

The next question comes from Craig Schmidt from Bank of America.

Thank you. I'm wondering, and this may be for Ross. Where do you see class A grocery anchored shopping center cap rates? And how does that compare to the pre COVID level?

Yes, I mean, it continued to be extremely aggressive. And frankly, compared to pre COVID in many cases, the cap rates are even lower and more aggressive. We've seen lots of different examples in the low fives in some cases, sub 5%. And a lot of that just has to do with some of the other dynamics of the demographics, obviously, which tenant is the anchor grocer there, what the lease looks like, where the rents are compared to market and frankly, how much term is left where you can actually look at recasting that lease and pushing rents a little bit. But as you've seen from the collections, there's a lot of conviction in the rent roll outside of just the grocer, the small shops and some of the other ancillary tenants are coming back in a big way. So when you see the stability in the rent rolls, you see the stability in the cash flow, and still a very healthy spread from interest rates to cap rate, there's more and more conviction in our space today than what we've seen in a very long time.

Yes, my sense is just the resiliency the format showed during COVID increase its appetite to investors, and with so much capital on the sidelines. That seems like cap rates could in fact be lower.

Yes, and it's not just your typical investors that we've seen in years past, we're seeing a lot of buyers and bidders today that have historically been buying in other asset classes, that they're just sick of getting priced out or getting the cap rates compressed so low that there's not enough spread, and they see the risk adjusted return in our space.

Great. And then just maybe for David, I know you've been touching on this a bit, but which tenants are not participating in this reopening period?

Well, [Indiscernible] not participating, meaning they're still remains closed.

Yes, well, not only that, but that they don't want to open I mean we were hearing the FOMO in the restaurant category, though, that obviously had a rough time during COVID. But I'm just wondering if there are categories where there are people on the sidelines. I know that Conor mentioned, some people are still, through some reorganization trying to get their feet on the ground, but I'm just not every categorize I assume is participating equally in the reopening period. And I just wonder if you had some insight into which ones aren't.

Sure, no, all the industry sectors are reopening at some capacity. It's an even with some of the big flags they're focused on trying to get as many stores open as possible or fitness or theater locations. AMC is effectively all open, where there are constraints, it's either on a one-off basis, individual basis where, some locales and municipalities are inhibiting that or rolling back restrictions again. Or it's kind of on a one-off basis. But generally speaking, I think the reopening trade is starting to accelerate, as the vaccine distribution does pick up. So from an industry standpoint, we are seeing reopenings, across the board.

Craig, the only one that I can think of that's probably tied a little bit too, going back to work is the dry cleaners, they obviously got hit very hard as people are, we're working from home, and they might be beneficiaries of going back to work in the summer when offices reopen.

The next question comes from Juan Sanabria from BMO Capital Markets.

Hi, this is Lily [Indiscernible] on for Juan Sanabria. Good morning, guys. I just have a question on inflation. Do you have any focus on leasing discussions to put the company in a better position should inflation accelerate from here? Do you plan to change release breakdown what fixed versus CPI based?

We continue to work on a percentage - percent increase basis versus a fixed dollar amount increased. So typically with those percent increases in base rent that tends to trend while with inflation.

Thank you. Just a quick follow up. I think you mentioned payments this quarter were partially offset by some changes in reserves. Could you please recall these pieces? What's the amount reserved in a period7?

Sure. So during the quarter, we recognized $8.9 million in abatements and about half of that was related to prior periods for which there was a significant reserve on those abatements.

The next question comes from Caitlin Burrows from Goldman Sachs.

Hi, good morning. Sorry if I miss this. But I was wondering if you could give some color on your outlook for occupancy over the course of the year on the anchor and small shop side? I guess, given the leasing that you've done the current watch list and upcoming maturities, lease maturities? Do you think occupancy may have dropped? Or do you think there's still more downside risk?

Yes, that's a great question. So we've been messaging previously that, we anticipate Q2 most likely to be the trough of occupancy for '21. we continue to make great progress and headway with our lease philosophy, obviously, in Q1 and we started to see a net benefit of gaining back some of the dip towards the end of Q1, which was encouraging, we do have Dania that's going to be placed into service and occupancy in Q2, so that is going to have a bit of an impact. But on the flip side, it also will start to expand our leased economic occupancy. So it will help continue to fuel cash flow growth, through the back half of '21 and into '22. So we're continuing to be encouraged by the momentum that we're seeing on the lease side, and hope to see it start to level out shortly.

Okay, and then separately, but kind of related, Dania Pointe and the Boulevard are obviously two large developments that you guys were working on for a while, and they should be ramping up NOI. So just wondering if you could give some detail on the amount of NOI currently being recognized by these properties versus what's still to come and kind of over what timeframe, we should expect that to happen.

The NOI you'll see the start ramp up towards the second half of 2021. And for the Boulevard, it should stabilize towards the end of '22. Dania, I would say you also probably towards the end of '22. You'll have stabilization of phases two and three.

The next question comes from Ki Bin Kim from Truist.

Thank you. Good morning. Can you just talk a little bit more about the 2.8 million square feet of leases that you signed this quarter? I am curious how much of this is truly additive versus some shuffling of tenants around spaces or simply releasing space that might be currently occupied, but maybe set to expire. And if you can help us understand what type of tenants are actually driving this activity and credit quality as it compares to like a pre COVID environment?

Sure, yes. So we did 121 new lease deals. So that's five, just roughly about 570,000 square feet of GLA. So that's all the net new add on the leasing side. And when you think of, the type of credit or tenants, it's the offer guys are obviously very aggressive. We did sign a few grocery deals as well. Byblos been very active Ulta, small shops side, restaurant operators are actually starting to come back, franchisees, for example, seeing the opportunity of restaurants that are closed through the pandemic, these are fully fixed rate units ready to go with a bit of capital and a bit of love to get them back open, you can do it relatively quickly. So what we're seeing is a lot of people anticipating the reopening trade, the stimulus funding, flowing through the economy and wanting to be prepared in a position to take advantage of that. And that's where we're seeing a lot of the great demand through our leasing.

Hi, it's still tough to recap that. Is there much reshuffling of tenant spaces that makes us way into leasing activities in general?

There's always some movement, it depends on - it's situational. A lot of times in nature, the prototype of retail tenants does change, some are expanding their footprint, and others are contracting their footprint. And so if there's another opportunity within the center to create a better mousetrap for them, and then subsequently, you have an opportunity to backfill that space at a higher rents and net-net, there's a net positive to the cash flows for the center, you'll always want to consider that. Because you want to make sure that that merchandising mix is fresh and relevant to the market. But I wouldn't say that any anything that's new or different than what's normal course of business.

Got you. And then, just to follow up on the Dania point question, the leasing stat didn't change much. I know it's just one quarter and I don't want to be so myopic in this question, but just curious if you can talk about the demand, you're seeing and expectations for lease up.

Sure, yes, no. The demand is really starting to build back as we're looking through '21 here, we did have Urban Air that did open in March and they exceeded their plan on the opening, which was excellent. And we do have the hotel operators, the two Marriott flags that we'll be opening summer of this year. And then we're continuing to see active construction on a handful of new tenants as well. Regal starting to open this fall and take advantage of the blockbusters that are scheduled to be distributed into theaters for the holiday season this year. And we anticipate that to be a big draw. And then on the new lease activity, it's really started to ramp so that's encouraging. We did sign American Eagle Outfitters to take one of the other anchor spaces along Main Street. And that will be a great compliment and add to what Urban and Ulta are currently doing.

The next question comes from Floris van Dijkum from Compass Point.

Thanks for taking my question, guys. If you could, I'm interested in obviously, you can't talk about the Weingarten thing. So I'm going to ask you some questions on the leasing. I noticed you had $5.3 million of lease term, which is $5 million, approximately $5 million more than it was last year. Maybe if you can give some color on that, what that represents and then maybe also talk about some of the regional differences perhaps.

Just wanted to clarify the first question, the $5.3 million. Can you just sort of restate that trying to understand?

Yes, so you recognize $5.3 million of lease term fee this past quarter. Last year I think it was $400,000. So you had basically a $5 million increase in lease, if you give some more color on that, what that represents or is that obviously, presumably, it's not - that's not a sustainable number, but just to get, what drove that large increase and then maybe talk about some of the other regional differences in that lease term fee that you saw.

Sure. Yes. So I'm so sorry that the lease termination agreements, the LTA, yes portion of those were related to the tenants that wanted to vacate early and so we're able to structure arrangements are opportunistic to free them of their liabilities while getting the net benefit from LTA. And we had the opportunity to backfill with other grocers for those spaces. So again, when you look at the net add, it made a whole lot of sense to proceed with those deal structures to take advantage of it. They are one-time events, which is why we want to make sure to call them out. And those do happen periodically, throughout the course of our business, we just happen to be that we had, a few opportunities that hit all at once in Q1. But when you look at those, it's always about, what is the opportunity to backfill? How does that complement what you're already trying to do with the strategy of the site, and you want to be opportunistic at those times to take advantage of it? And in terms of regional, it's not really regional in nature, it's situational. Just depending on the center, it could vary region to region, quarter-over-quarter if they do exist.

Yes, Floris, just to give a little more color on that we did have a Lucky's grocery store, which was a ground base, backed by Kroger credit. Kroger decided not to move forward with the Lucky's banner. And so what we did have was a lease termination agreement with Kroger to determinate the ground lease with us, which was in that number. And we were able to backfill that space with the sprouts grocery store that Dania, actually, so it was a net win for us there.

Floris, this is Nikki, I'd also remind you that, as you pointed out, the LTAs are purely transactional. And so by no means would this first quarter be reflective of a road rage just as you saw that the prior period was much less.

Thanks guys. I guess my follow up question here is in regards to leasing costs and leasing costs appear to be pretty stable. Maybe if you can comment on what you're seeing, and what you expect is going to happen to leasing costs going forward, as leasing demand potentially builds, are those going to trend up, down in your view, and maybe if you can give us some more color on that, that'd be great.

Sure, as you mentioned, leasing costs were relatively stable, we do that in terms of the scope and the demand and the requirements of the tenants that really hasn't changed. So it's more about material pricing that could have an impact on cost on a go forward basis in the interim, obviously, with there are, we're still working through some supply constraints in distribution as a result of the pandemic. So you have seen some increase in pricing for material costs, whether it be lumber, HVAC, et cetera. That could be short term in nature, as the distribution channels start to release some of those bottlenecks that have occurred through the pandemic. And so we just have to monitor those closely, that could have some moderate impact in the near term, but we anticipate, again, that's a short period of time, and then hopefully would subside again. But in terms of deal costs, in general, we haven't seen much change in terms of the demand and the requirements from the retailer side. So if you net out any potential increase in the short term, you'd assume it to carry on as is, it's also dependent on the type of deals you do per quarter. If you're doing split box by creation opportunities, we had a couple of those this quarter that had elevated costs, while others are just a simple backfill, or if you're going non grocery to grocery, obviously, a big focus is on grocery right now. So you could see some deal costs that are a little bit higher. But it's because of that grocery conversion, but subsequently, on top of that, you're either seeing you're obviously seeing an increase in rent in some of those cases, but in addition, you're getting longer term. So on a net effective basis, net-net; it's worked out pretty well.

So in summary, I guess one of the fears that investors had is during the downturn, heightened vacancies, less pricing power tenants have greater demands, or have greater ability to drive favorable lease terms and higher leasing packages that's not actually occurring based on what you're seeing right now.

No, I mean, what we've seen, so it's all dependent on quality, right, you have to start without the quality of the real estate, and that will drive demand, different than what we saw in the Great Recession where there's prolonged recovery cycle, the impact of the pandemic was so extraordinary and so extreme so fast, recovery has been almost just as quick so it's been more of this V shaped so you haven't really seen an adjustment or reset on market rents. What we're seeing, especially on the anchor side is that there's a short window of opportunity for retailers to upgrade the quality of their portfolio. And so they want to take advantage of that and step in. But it's typically if you have at least more than one person there at the table looking to negotiate a space that helps level set, the supply demand side. And that's what we're seeing. We're seeing a lot of people wanting to upgrade, get closer to the customer, and expand their last mile distribution efforts. Take all the lessons learned from the pandemic and really capitalize on it, because the anticipation is that, those opportunities won't exist for very long.

Yes, Floris. The only thing I would add is that first the lack of supply. So it's been decades since we've seen any uptick in new supply is really benefiting us when we're focused on these last mile location. We're focused on these last mile locations, like the density that surrounds our assets, really inhibits a lot of new supply coming online. And we're seriously experiencing that, as the demand has been robust.

The next question comes from Tammi Fique, Wells Fargo.

Hello, good morning. Conor you mentioned in your opening remarks about enhancing merchandising this as an objective, and I guess I'm wondering longer term, where you see areas for improvement in your portfolio. And once occupancy stabilizes, I guess what types of retailers you would like to target and what categories you could see lightening up exposure.

Sure, I can start and Dave and others can add some color. It's, it starts obviously with our grocery initiative, we really do believe that creates a halo effect on the surrounding retail because of the cross shopping that it generates. And then you go from there, and you start to continue to pick out the best-in-class of each category to make sure that you have an exciting merchandising mix. Clearly, we've benefited from curbside pickup through the pandemic. But now our mission is to make sure that the merchandising mix is so alluring that regardless of why you came to that shopping center in the first place, your eye catches something that makes you want to come back. And so whether it's a coffee or a bagel in the morning, you're always looking to drive traffic throughout the entire day. And so our mission is to really create a vibrant community center that drives traffic, for multiple different demand drivers. And so when you look at the demand of the different categories that are expanding right now, it's a really nice spot to be because it's very diverse. And we can really pick and choose and understand voids and trade areas that we can then backfill some of our vacancies with.

Okay, great, thanks. And then one question for Glenn. You mentioned repaying upcoming mortgage maturities. And I was wondering if that's a function of your balance sheet and ratings, upgrade goals or more a function of leverage on those particular assets and maybe lender caution on certain segments within retail?

Well, we have historically paid off any mortgage that we can as soon as we can, as long as there's no real significant prepayment penalties. So we had bought a portfolio of properties, you might recall the Boston portfolio years back, and that portfolio had two large cross collateralized pools, and they're pre payable without penalty in June. So we're going to just pay those off. So with that, we'll prior to the Weingarten transaction, we'll have very little mortgage debt that remains on the balance sheet. We very much focus on just really being a good borrower; it's a much better way for us to operate. It's much more efficient than having mortgage debt on individual assets.

The next question comes from Linda Tsai from Jefferies.

Hi, sorry, if I missed this earlier, when you're looking at the leasing demand, what percentage is coming from retailers looking to relocate and what percentage is coming from retailers looking to expand store growth?

It really is a combination. So I think it's very clear that there is a lot of net new demand for some of our best-in-class retailers across our major categories that are looking to take the windfall from clearly the pandemic induced shopping that they've experienced and expand there. But there is also Linda continued, that the playbook from retailers typically in downturns is again try and take advantage of the increased vacancy look to upgrade their fleet and look to get into the best centers possible. And so, we do constant portfolio reviews, with our retail to make sure that if there is a relocation opportunity that the Kimco center is the best-in-class opportunity for them in that corridor, so to look at that as well. But I would say the lion's share is coming from net new stores, which really is exciting because it's a nice spot to be having limited supply and a lot of different demand drivers.

Thanks. And then just a follow on, the tenants looking to terminate early, you gave one example involving sprouts was that the bulk of the $5.3 million? And then do you expect elevated lease term fees for the remainder of 2021?

So it wasn't Linda to terminate, sorry. Right, it was Lucky that had terminated and placement; the replacement tenant will be scrapped. And I think it's kind of mentioned that was a Dania. We had two other lease terminations, they were actually with, one was - actually two with [Indiscernible]. And then bank had that as well, but we don't really anticipate a whole lot more for the rest of the year. Maybe another $1 million to $2 million for the balance of the year.

The last question for today's call comes from Greg McGinniss from Scotiabank.

Hey, good morning. Glenn, so the $7 million have repaid rent that's billable amounts from the cash basis tenants. Are those tenants now fully current on rent, or is there more owed from those tenants? So obviously, I'm just trying to get a sense for additional one time or nonrecurring benefits that we may see this year.

No, there's still more owed from them, as I mentioned, we collected about 84% of the deferred billings that we sent out. But there's still more that is still due from those tenants, they are not fully current yet. And then same thing, if you look in the first quarter. Again, as we mentioned, 70% of the cash basis tenants have paid. So there's still, when you look at those - that total, that's about $8 million that's not been collected yet. So we'll have to see how that plays out through the rest of the year and each quarter as we go forward.

Okay, I was more specifically talking about tenants that did pay back some of the rent, right, obviously, I understand that some still aren't paying the full amount. I'm just curious if of that $7 million for those tenants that did pay back rent, those tenants are fully turned or not.

The bulk of those are fully current, yes.

Okay. Great. And then from an accounting standpoint, when might tenants start moving back to accrual accounting.

So we go through a pretty in-depth process. I mean there are certain parameters that we've kind of worked out, we want to see that those tenants are current for a certain period of time, and that they have no outstanding balances that are 30 days old or so we evaluated on a constant basis, but it'll take some time for some of them to move back into accrual basis. Even some of the tenants that emerge from bankruptcy, they still remain on cash basis until they get really get their footing back.

Okay and final question for me. Guidance is up $0.03 at the midpoint, which largely seems to capture the nonrecurring payments in Q1. In the opening remarks you mentioned improvement in credit loss for the second half a year. Same site NOI turning positive. So becoming more positive in general feels like and plus as the leasing happening. So in terms of the guidance increase here, is that more of a, can we view that as a more conservative increase just based on what's happened so far? Or do you really think that captures the potential backup benefit we might see?

Yes, look, I would say that it's still early in the year; we do expect that the second half of the year that credit loss will be much better than the first half. In the guidance, there is still elevated credit loss for the second quarter. But I will tell you that the revised guidance that we were more biased towards the upper end of the rent right now, based on what's happened, so we are feeling good, and we will take a quarter by quarter. There are no more questions so far.

Okay, thank you very much. Appreciate everybody for joining our call today. If there's any follow up questions, you can go to our website and the investor relations area for more information. Thank you very much. Have a nice day.

This concludes our conference call for today. Thank you for attending. And you may now disconnect. Goodbye.