Greetings, welcome to the Kimco Realty Corporation's fourth quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. If you'd like to ask a question, please press star one on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the keys. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Bujnicki, Senior Vice President of Investor Relations and Strategy. Thank you, Mr. Bujnicki. You may begin.
Good morning. 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, 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. As a reminder, statements made during the course of this call may be deemed forward-looking. 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 our quarterly supplemental financial information on the Kimco Investor Relations website. 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. With that, I'll turn the call over to Conor.
Thanks, Dave. Good morning, everyone, thanks for joining us. Today, I will provide a quick recap of our major accomplishments for 2022 and share some of the progress we have made on our longer term strategic goals. Ross will follow with an update on the transaction market, Glenn will report on our earnings results for Q4 and our guidance for 2023. At Kimco, we believe a winning strategy is one that can be successful in any economic environment. It needs to be opportunistic, have multiple growth drivers, and be resilient during downturns. A winning strategy also needs to be easy to understand and be supported by a best-in-class team to implement and execute on it. The Kimco strategic plan meets all these criteria, that is why we are so proud of our 2022 results and excited about our longer term prospects.
If the ultimate measure of evaluating a strategic plan is results, it is abundantly clear that we are on the right track. 2022 was a banner year, the fourth quarter was again outstanding from a leasing perspective as our team achieved some recent and all-time highs across many of our key metrics. This includes strong overall occupancy that finished up 40 basis points pro rata to 95.7%. This represents a recovery of nearly 90% of the COVID inventory we experienced and only 70 basis points below our all-time high. Year-over-year, overall occupancy was up 130 basis points, which is one of the highest year-over-year gains we've experienced. Contributing to our strong results was a 20 basis point sequential and a 90 basis point year-over-year rise in anchor occupancy to 98%.
Small shop occupancy increased 80 basis points sequentially to 90% and was up 230 basis points year-over-year. In 2022, we leased over 11.5 million sq ft, which is the highest level on record. Specifically, we ended the quarter with 152 new leases totaling 795,000 sq ft, exceeding the five-year average new lease GLA for the fourth quarter. Our new lease spread was very strong, 30.4%, and includes new grocery leases with Whole Foods and Albertsons. We closed the quarter with 340 renewals and options totaling 1.7 million sq ft, exceeding the five-year average for renewals and options GLA for fourth quarter.
The spread on renewals and options was 4.6% during the quarter, with options ending at 8.5% and renewals at 2.7%. Total fourth quarter 2022 leasing volume was 492 deals totaling 2.5 million sq ft at a combined spread of 8.7%. We experienced only 99 vacates, totaling just 305,000 sq ft in the fourth quarter, which is 37% lower than the prior five-year historical average for the fourth quarter. Our mixed use entitlement initiatives reached new highs in 2022 as we continued to unlock the highest and best use of our real estate. We set another Kimco record by entitling 2,805 apartment units in 2022, bringing our current total entitlements to 5,461 units.
Combined with the 2,218 apartment units we have already built and 1,139 units that are under construction, this brings our overall total to 8,818 units, and we are well on our way to our upsized target of 12,000 by the end of 2025. Our % of ABR from mixed use assets is now up to 13%, and we continue to use a CapEx light strategy to activate projects by either ground leasing or joint venturing with best in class apartment developers.
Turning to 2023 and beyond, we believe our platform advantage is just beginning to demonstrate its potential. Thus far it is clear from our performance throughout the pandemic and during 2022 that both our strategy and efforts are being validated. Our unmatched diversification, our access to capital, our internal and external growth profile, our large-scale M&A experience, our CapEx light mixed-use redevelopment strategy, and our opportunistic investment record are just some of the differentiators that characterize Kimco. That said, we can't rest on our 2022 accomplishments. We know 2023 will require a full team effort to produce another year of sector-leading results. We are also encouraged by the fundamental strength of our operating business.
Limited new supply, high retention levels, and robust retailer demand for quality space such as ours makes for a healthy leasing environment. While we anticipate leasing velocity and retention rates to continue at elevated levels, we can't ignore the macro environment and the potential for credit defaults to revert to the mean. That is why our 2023 priorities include additional focus on controlling expenses, upgrading the credit and merchandise mix of our tenant base, and attracting recurring customers. One of the keys for Kimco in 2023 will be to expedite tenant openings and compress the leased economic occupancy spread of 260 basis points. That represents approximately $43 million of annual base rent that is not yet contributing to cash flow. While our size and diversification have significantly reduced our exposure to weaker credit tenants, we still need to be vigilant and proactive.
We need to closely monitor our tenant watch lists, anticipate changes and turn them into opportunities. Bed Bath & Beyond is a case in point. Subsequent to year-end, we sold a shopping center with one Bed Bath, reducing our exposure to 25 Bed Bath, one Cost Plus sublease, and 4 buybuy BABY locations. At this point, we know that Bed Bath is planning to close 6 stores. Of those locations, we already have 2 leases executed, 2 ready for execution, and 2 with active LOI negotiations with a combined potential spread of over 12%. We are also in active negotiations with retailers on the balance of the portfolio, representing 60 basis points of Kim share ABR, of which 10 basis points relates to buybuy BABY.
This level of activity proves we continue to see strong demand from a diverse set of retailers for the vast majority of these well-located boxes, which are primarily in desirable demographic areas where there is virtually no new supply. Leasing, leasing will continue to be our mantra in 2023. Together with a solid balance sheet, strong free cash flow, and ample liquidity, including further potential monetization of our Albertsons stake, we are poised to take advantage of any dislocation and ready to pounce as opportunities present themselves. We have made meaningful progress towards our stated 2025 goals, both on the operating and earnings front, along with further strengthening our balance sheet. Specifically, we have improved our debt maturity profile and increased our portfolio of unencumbered assets while minimizing exposure to floating rate debt.
At Kimco, we are never satisfied with the status quo, and our entrepreneurial team is laser focused on building upon our past achievements and advancing what we believe to be as our best-in-class platform and portfolio. You will see the continued evolution of our portfolio composition through a mix of our unique leasing strategies, including adding grocery anchors where feasible, entitlements, redevelopments, and data analytics and tools that give our platform a unique advantage. With our focus on owning and operating the last mile open air grocery anchored shopping centers, along with a growing portfolio of mixed-use assets, Kimco has come a long way in a short period of time, and we all collectively believe that the best is yet to come in our efforts to maximize long-term shareholder value. Ross.
Good morning. I hope everyone is having a great start to their year. I will quickly touch upon a few additional details on the fourth quarter and year-end before getting into the current environment and our external growth expectations for 2023. As previously mentioned, in the fourth quarter we closed on the $375.8 million acquisition of eight open-air retail centers from a privately held portfolio based in the high barrier to entry Long Island, New York market. With five of the centers grocery anchored, this acquisition is well aligned with our long-term investment approach. Utilizing a combination of cash, the assumption of below market fixed rate debt, and tax-deferred DownREIT units, we were able to structure an accretive transaction for this generational portfolio.
We are very excited about the potential to create incremental long-term value on these properties with our leasing and our operating platform. In the fourth quarter, we closed on another unique opportunity for our structured investment program. We had previously mentioned a $22 million participating loan on a three-property grocery anchored portfolio in Pennsylvania. In just over 4 months, our borrower sold the assets for a sizable gain. Our loan was repaid and we received a $4 million participating interest. On an annualized basis, our investment yielded a 76% IRR. These 2 transactions serve to reinforce our already strong operating results. Subsequent to the fourth quarter, we kicked off the year by disposing of 2 slower growth commodity power centers located in Georgia, which included several watch list tenants, including a Bed Bath & Beyond.
We recycled the capital from the sale of these 2 properties into a 1031 exchange on 2 high quality open air grocery anchored shopping centers in Southern California that were previously held in one of our institutional joint ventures in which Kimco owned a 15% interest. We were successful in securing and purchasing our partner's 85% stake of these 2 last- mile centers located in Huntington Beach and Tustin, anchored by a Vons grocer and a soon-to-open 99 Ranch grocer. The demographic profile for the area includes a combined average 3-mile population approaching 200,000 people and average household income in excess of $120,000. In the coming years, we anticipate the growth profile on the 2 acquired assets will far outpace that of the sold properties in Georgia. A trade-off we continually seek as our portfolio enhancement efforts continue to generate outperformance.
We also expect partnership buyouts to yield additional opportunities for us as we move ahead. As far as the transaction outlook for 2023, we believe Kimco has an enviable position in a market marked by uncertainty and inefficiency. For 18 months through mid to late 2022, liquidity in the sector was abundant and capital was relatively inexpensive. We saw open air and necessity-based retail rise to the forefront of investors minds and appetites, with other sectors such as industrial, multifamily and self-storage, setting all-time low cap rates. Sectors such as office and enclosed malls experiencing operational challenges. Fast forward to today, the conviction in our focused asset class, open air, grocery anchored, last mile, necessity-based retail remains strong. However, access to capital has certainly tightened with elevated borrowing costs. Institutions such as private REITs, opportunity funds, and pensions have seen redemption requests and withdrawals.
This has created additional uncertainty on pricing, a once extremely efficient market has become much less predictable. We view this as opportunity. Kimco has the strongest liquidity in the company's history with over $2.1 billion from cash on hand and our line of credit, and our unique access to additional low yielding capital in the form of Albertsons stock, which we expect to continue to monetize in 2023. We plan to take advantage of our position with a combination of select open air grocery anchored acquisitions, continued partnership buyouts where appropriate, and mixing in opportune structured investments that present themselves in an environment with substantial dislocation. Dispositions will be modest in 2023 as our portfolio has proven to be in very healthy shape with only a select level of pruning and sales of non-income producing land parcels and holdings.
We are excited about the new opportunities that 2023 will bring, and while we anticipate that there will always be challenges, we believe we have positioned Kimco to take advantage of the uncertainty to create additional long-term value. I will now pass it off to Glenn to talk about the financial results and forecast for the year ahead.
Thanks, Ross. Good morning. We finished 2022 with solid fourth quarter results, highlighted by strong leasing activity, which produced an increase in occupancy, positive leasing spreads and same-site NOI growth. In addition, we further enhanced our liquidity position with the partial monetization of our Albertsons investment. For some details on our fourth quarter results. FFO was $234.9 million or $0.38 per diluted share. This compares to fourth quarter 2021 of $240.1 million or $0.39 per diluted share, which includes about $0.01 per diluted share related to the valuation adjustment of the Weingarten pension plan. Worth noting, this is the first quarter with the full impact of the Weingarten merger included in the year-ago comparison.
The key reasons for the penny per share decrease are higher consolidated NOI of six and a half million, offset by higher pro rata interest expense of $5.6 million. Other items included higher G&A expense of $2.9 million from the increased personnel levels as part of the Weingarten merger and costs associated with the UPREIT conversion, and a $3.2 million change in the Weingarten pension valuation I just mentioned. The growth in consolidated NOI is comprised of higher minimum rent of $12.1 million, higher lease termination income, percentage rent income, and other rental property income totaling two and a half million dollars, offset by higher credit loss of $10 million. Three million of credit loss in the fourth quarter 2022, as compared to $7 million of credit loss income in the comparable quarter.
Our operating portfolio continues to deliver positive results. Same-site NOI growth was 1.9% for the fourth quarter 2022, comping against 12.9% for the fourth quarter last year, bringing full year 2022 same-site NOI growth to 4.4%. During the fourth quarter, same-site NOI benefited from higher minimum rents and lower abatements of $13.7 million, as well as higher percentage rent of $0.8 million compared to the same quarter last year. These increases were offset by a higher credit loss of $9.5 million, primarily related to reversals of reserves in the prior year quarter and a normalized level of credit loss for the current period. The minimum rent component contributed 3.9% to the same-site NOI growth, while credit loss was -3%. Turning to the balance sheet.
During the fourth quarter, we monetized 11.5 million shares of our Albertsons stock, receiving proceeds of $301 million. This sale generated a capital gain for tax purposes of about $250 million. In order to maximize the amount of proceeds we were able to retain from the sale for future investment and debt reduction, we elected to pay the income tax on the capital gain of approximately $57 million, allowing us to retain $244 million. Further, our shareholders are eligible for a pro rata credit of the federal income tax we paid. We've added a FAQ on our investor relations website that provides further detail on this. We ended 2022 with a very strong liquidity position comprised of $150 million in cash and full availability from our $2 billion revolving credit facility.
Additionally, after year-end, we received a $194 million special dividend from our Albertsons investment and continue to own 28.3 million shares, currently valued at over $600 million. As of year-end 2022, our look-through net debt to EBITDA, which includes our pro rata share of joint venture debt and preferred stock outstanding, was 6.4 times and represents an improvement of 0.2 times from the 6.6 times level at the end of 2021. Our weighted average debt maturity profile is 9.5 years, and we have only $50 million of mortgage debt maturing in 2023. Now for our 2023 outlook. We remain confident about the growth prospects of our operating portfolio.
As we mentioned on our last call, we anticipate earnings headwinds due to higher levels of credit loss, more consistent with pre-pandemic levels, as well as higher interest expense compared to last year. Also, as I touched on, in 2022, we benefited from credit loss income of $7.4 million, which amounted to about $0.01 per share for the year. Our initial 2023 FFO per share guidance range is $1.53-$1.57. The guidance range is based on the following assumptions. Positive same-site NOI growth of 1%-2%. Included in the same property NOI guidance range is a credit loss assumption of 75 basis points to 125 basis points, representing a credit loss ranging from $15 million-$22 million.
No income attributable to the collection of prior period accounts receivable from cash basis tenants. Lease termination income between $14 million-$16 million, with a substantial portion being received in the first quarter 2023. An increase in pro rata interest expense of $20 million-$28 million, most of which is attributable to lower fair market value amortization to the Weingarten bonds paid off during 2022, and higher interest rates on the floating rate debt in our joint ventures. Total acquisitions, including structured investments, net of dispositions of $100 million, subject to timing. Monetization of approximately $300 million of Albertsons shares, subject to timing. Also, the $194 million special dividend received in January will not be included in FFO.
Annual G&A expense of $123 million-$129 million, with the first quarter higher due to the timing of annual equity grants. No redemption charges or prepayment charges associated with callable preferred stock outstanding or early repayment of debt obligations and no planned issuance of common equity. With that, we are ready to take your questions.
We will now begin the question and answer session. To ask a question, you may press Star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star then 2. Please note, callers will be limited to 1 question and you will need to rejoin the queue to ask a follow-up. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Michael Goldsmith from UBS. Please go ahead.
Good morning. Thanks a lot for taking my question. Last quarter you talked about reverting to an initial credit loss expectation of 75 to 100 basis points, kind of in line with the historical levels. Your guidance is 75 to 125 basis points, a little bit higher at the top end. What are you seeing in the market? What is the scenario reflected by the high end of the range? Do your concerns extend beyond the usual suspects that we've been talking about? Thanks.
Hi, Michael, it's Glenn. Again, we took a hard look at just the overall portfolio and looked at really the environment that we're in today. you know, there's a little bit more risk. We've started to see some more bankruptcies than we have in the past years, and we felt it prudent to just widen the range a little bit, and that's just baked into the guidance. it takes into account really the scenarios that we see both top and bottom.
Our next question comes from Samir Khanal from Evercore ISI. Please go ahead.
Good morning, everybody. I guess, Conor, can you provide a little bit color on the timing of the monetization of the $300 million of Albertsons shares, which you mentioned in the guidance? Just trying to think through the allocation of that capital proceeds, and maybe along that, just expand on the.
The opportunities that you talked about, right, as in your opening remarks as well. Thank you.
Yeah, happy to. Thanks, Samir, for the question. Look, we think that the capital coming from the Albertsons investment is a big differentiator for Kimco. We've already received the special dividend, as we talked about in our opening remarks. We do have the opportunity to monetize another portion of our Albertsons shares, similar to what we did last year in the same type of a range of value. The expiration of the lockout is end of May. So that really sort of showcases when we have full potential to take advantage of that. Then, you know, we have Ross can talk a little bit about the menu of options we have to reinvest those proceeds.
It's a real opportunistic investment that is gonna actually really reward our shareholders. When you think about it, we don't have to issue any equity this year. We have this investment that's really coming back to us now to redeploy into our core business, which should generate significant earnings growth, not necessarily in this year, but obviously in the out years. That's where the long-term value creation is really gonna shine.
Yeah, in terms of the opportunity set, I mean, we've talked about our different acquisition verticals, and we're having lots of conversations in all three components of that. As I mentioned in the remarks, we do anticipate that there'll be continued partnership buyouts. We were able to execute on the acquisition of two assets from a partnership at the beginning of the year. We're focused on potential additional structured investments as we start to see some additional dislocation in the market. Depending on where pricing is, and if we see a thawing of the market to a certain extent, we'll be active on acquiring open air grocery anchored shopping centers. We like the fact that we have all three opportunity sets that we can be nimble when they present themselves.
The next question comes from Juan Sanabria from BMO Capital Markets. Please go ahead.
Hi, good morning. Thanks for the time. Just curious, Glenn, if you could lay out a little bit more some of the assumptions behind the guidance, mainly what's assumed, I guess, for Bed Bath and Party City in the bad debt, and is that the driver of the lease term fees that you noted something chunky in the first quarter? If you could just provide any expectations where you think occupancy will end the year at, please.
As far as the credit loss, again, we know that there are several bankruptcies. You know, Party City obviously has filed already. Bed Bath & Beyond obviously seems to have found a lifeline for the moment. We have taken into account really all the scenarios around Bed Bath & Beyond in our overall guidance. Again, as I mentioned, as it relates to the credit loss, again, we did widen the range a little bit to just deal with what we're seeing in the current marketplace today.
Yeah. As it relates to the LTA that you mentioned, income in the first quarter, the majority of it is associated with the deal structure that we did with Kohl's. As consideration to the LTA, we helped restructure a lease with them for two locations where we were able to recapture those opportunities, just in one being just in Northeast Philly and the other one just outside of Philadelphia, across the border in New Jersey. Third to that, we're also able to recapture fee title of a operating box that's a shadow of one of our centers as well. Net-net, it was a positive on both sides there.
As it relates to occupancy, you know, it is always fluid throughout the course of the year, dependent on the outcomes of Bed Bath and Party City. There could be some, you know, volatility in the anchor side of it. Small shop is extremely robust right now. A tremendous amount of activity there as you see us now cresting over 90%, which is great. We'll continue on our stride and hope to meet and exceed our goals. We do anticipate a little bit of, you know, Q1 normalcy, of potential, you know, what we call jingle mail of tenants closing after the holidays and seeing a little bit of a dip in occupancy in Q1, which is traditional seasonality for us. We think that that's, again, reverting back to the pre-pandemic ways of the historical averages.
Juan, just a reminder that LTA income is not included in our same-site guidance as well.
Our next question comes from Greg McGinniss from Scotiabank. Please go ahead.
Hey, good morning. Glenn, just a quick point of clarification. When looking at the corporate financing disclosure in the sup, which looks to be about $9 million-$20 million higher for 2023, what's that delta between the pro rata interest expense that's $20 million-$28 million higher?
Right. That's a great question. The corporate financing line that you see is really the consolidated portfolio. That's our interest expense and the cost of our preferred. Included in the portfolio contribution above is the pro rata share of the joint venture interest expense, that's about $9 million-$10 million higher than it was last year. Again, it's attributable to the rise in rates. There was more floating rate debt in the joint ventures. We have actually swapped out about $0.5 billion of debt in the mid to upper 5% range. We fixed it, a good portion of it, but that's what's causing the $9 million-$10 million increase over last year.
Our next question comes from Floris van Dijkum from Compass Point. Please go ahead.
Morning, guys. Thanks for taking my question. I had a question on your small shop. Obviously, the, you know, very nice pickup in occupancy there. Maybe if you can talk about the spread between occupied and leased, and also maybe where your peak small shop occupancy was previously, and where do you think you can get it to this cycle?
Sure. Flores. Happy to take that. Just to reconcile first on the lease to economic overall, we're at 260 basis points. That was compressed down from 280. We're down 20 basis points there, which shows two things. One, we're able to get these tenants open and operating, which was a huge achievement considering some of the activity in the environment right now. We had a lot of openings in Q4. Outside of that too, with all the gains in occupancy that you saw, as well as in Q4 gaining 40 basis points overall and then bringing our small shops up to 90%.
As it relates to small shops specifically, we're at 340 basis point lease to economics spread, just around $23 million or so baked into that. There is a huge opportunity there to actually bring those tenants online. Obviously, you see that growth in the coming quarters, which we're excited about, as we move forward. Feel pretty good about that. Oh, yeah, our high watermark on small shops was at 91.1%. That was in Q4, I believe, of 2019. Our goal is always to meet and exceed our high watermark levels, and we'll continue to do our best to achieve that.
Our next question comes from Craig Mailman from Citi. Please go ahead.
Good morning. Just a question on the leasing environment here. I know everyone's pretty focused on the sustainability of it. You know, as we look at the economic weakness coming, you know, relative to previous cycles, it's a little bit more telegraphed maybe and maybe expected to be more garden variety. I'm just kind of curious, you know, as you think about tenant behavior, maybe between anchor and small shop, right, and the timing of where we are today versus maybe the coming weakness at the end of the year, and how these tenants look at when they need to lease stores for store openings.
I mean, is there, you know, any thoughts around whether just the timing of a potential recession, you know, relative to when people need to open stores, that the leasing demand could continue at a level maybe above expectations just because, you know, the space needs for 2023 were already leased previously, and if the recession's not so deep, people are gonna look out for 2024 and 2025 openings. I'm just kind of curious your thoughts there and whether there's any big difference between anchor and small shop behavior.
Yeah. Great set of questions all rolled into one. I think you first start with the fundamentals, right? The fundamentals here on there's no new development supply on the horizon in the coming years. The COVID inventory that we've talked about in past quarters and continue to talk about now is really the inventory that's available. Some of that inventory may increase as a result of pending bankruptcies. Party City, Bed Bath being the two obvious ones right now as potentials to get some space back. That still is, it's representing a very limited amount of inventory to actually backfill. When you look at us, we're at 98% on the anchors, 90% on the small shops. For high quality retail, it's really hard to find.
The retailers, I think what they're doing is they're seeing through this and saying, "Hey, where do I find growth, you know, not just next year, but years two, three, four and five? If there's no new supply, I really have to take advantage of what opportunities I see today to set myself up for growth potential going forward to hit my own targets." I think you continue to see that. Some lessons learned from past cycles is that it's really hard to ramp up a program to find new stores and to grow and to open them, and then to shut it down and then try to re-ramp it again. You're always kind of playing a game of catch up, and you tend to miss the better opportunities early.
I think for some of those well-capitalized retailers, they've sort of seen through that and said, "Let's continue on our plan. Let's continue to source and find new opportunities, knowing that if we sign a lease, say, mid-year 2023, we can be looking at a 2024, maybe in some cases a little bit further out as that opening." As you've seen these market cycles compress in terms of its cycle through the program of dipping and then recovering, it's the time of recovery seems to be compressing much quicker. By the time you get these stores open, the intent hopefully is that you're if we do go through a bit of a dip, that you're on the backside of that and you're already opening during a growth cycle again. Those are a lot of the conversations that we continue to see.
On the small shop side, you know, you're seeing, you know, service-based tenants, restaurants, et cetera, continue to open and find opportunities. There's still some of that COVID inventory out there that had, you know, fully fixturized units that operators can go in and start to operate quickly. We will continue to watch that closely. Obviously, the discretionary side, maybe the full service restaurants and some entertainment, see how that plays out, you know, in this coming year, if there's any disruption in terms of the broader markets. You know, people are really kind of looking through it right now.
Our next question comes from Haendel St. Juste from Mizuho. Please go ahead.
Hey there. Sorry about that. Just wanted to follow up, if I could, Ross, on the transactional market comments you made. Things obviously have a bit stalled out there. Retail volumes, transactions were down 60%, I think, in the fourth quarter. We're still here with a pretty wide bid-ask spread out there. I guess I'm curious what you're seeing in terms of cap rates for the quality of open-air centers you'd like to own. Given your cost of capital, what's your hurdle rate? Maybe where would asset price need to be for you to get more active? Thanks.
Yeah, it's a good observation. To your point, it is still somewhat wide in terms of the bid-ask spread. You know, it's a nuanced market, so every deal is a little bit unique. I would say historically, and in most cycles, it's a pretty efficient market, but right now it's fairly inconsistent. You are seeing select deals getting done, but it really depends on, you know, having two motivated parties to do so. I would say that we're in a position where we're not forced to do anything. When the market comes to us, we're happy to continue to invest and to put our capital to work. On the acquisition side, and I would say the partnership buy-out side that are pretty closely aligned.
You know, we're seeing pricing where deals make sense to us, you know, somewhere in that low 6 cap range. Certain sellers are in many cases, are still looking for pricing from 12 months ago in the low 5s, and that's where you're seeing a lot of the deals stalling out. To the extent that we can, you know, obtain assets that are 100 basis points higher than where they were a year ago, with very strong fundamentals that really haven't changed based upon all the comments that you heard from Dave and the team here, we feel really good about putting to work in that in that range.
When you factor in or layer in our structured investment program, which has a higher yield, currently in the high single-digits or low double-digits, that sort of blends together to get us above our hurdle rate and make our acquisition pipeline, and our program accretive from an overall standpoint. We'll continue to look to put money to work if we find those. Otherwise, we'll continue to stay patient as the year progresses.
Our next question comes from Craig Schmidt from Bank of America. Please go ahead.
Thank you. What is your expected expectation on consumer sales and/or traffic at your properties in 2023 versus 2022?
Hey, Craig. Great question. We're off to a good start on 2023. The traffic that we've experienced thus far has been above 2022 levels. I think the consumer continues to gravitate towards the shopping center, towards the grocery anchors that we have, towards the off-price users that are getting, you know, great value and convenience. That continues to show well. The future is still a little unclear. You know, that's why I think from a guidance standpoint and from what we're talking about, we're not necessarily sure what the second half of the year looks like. As we've all been talking about, so far so good. The retailer demand is robust. The consumer continues to gravitate towards our pro-product, and we see a virtually no new supply on the horizon.
As we continue to monitor the situation, you know, we feel like the business is on very strong footing, allows us to really see into the consumer and their habits. So far it looks like we're really delivering on what the consumer is looking for.
Our next question comes from Ki Bin Kim from Truist. Please go ahead.
Thanks. Good morning. You guys have done a great job increasing your entitlements, across a lot of your, different sites. Can you just provide a kind of high-level path for the next couple of years of how you're thinking about monetizing it? Second, when I look at your supplemental, on the development section for some of these ground leases, multifamily ground leases, can you just help me understand that a little better? Because if I look at the value that it's contributing at and the yield, it doesn't seem to make sense because the land contribution value should be much higher even after taking account for the higher yield. Just if you can help me understand that a little better.
Sure. Happy to. Good question, Ki Bin. It's a long-term strategy for us, as I mentioned in my prepared remarks. We want to activate these entitlements using a CapEx-light strategy, meaning that we really want to increase the value of the asset, unlock that highest and best use without putting a tremendous amount of capital out that doesn't necessarily return a high yield during the construction and development process. What we've done is tried to entitle as much as we possibly can across the portfolio, layering in projects each year so that we can activate. We've been running around 1,000 units a year of how much we have in the active pipeline. We've built over 2,000. We've got a little over 1,000 in the pipeline today. We continue to want to set this up for long-term value creation.
It gives us optionality and flexibility to look at each asset and look at those entitlements and say, "Which should we monetize? Which should we ground lease? And which should we contribute to a joint venture?" The way we've been doing it is we've been monetizing the office entitlements. We've been ground leasing assets where we have multifamily rights to build, but we think that that market may need a little time to mature. In essence, the ground lease gives us time to activate the project without having a lot of capital at risk, but then having a right of first refusal on it to bring it into the core upon the right time and place, or the contribution to a joint venture where we see the project is ripe to participate in the economics and the cash flow growth.
That's the way we've set up the program. We continue to think that long term, it's a great way to create value on the asset, and we'll continue to monitor what's the right time to monetize those if we see fit. That's the way the projects continue to evolve. We've seen great results in terms of being able to actually create a environment, a mixed use environment where the multifamily feeds the retail and the retail feeds the multifamily. That's the flywheel you're trying to create, is you're actually generating higher than market rents on the retail and even higher than market rents on the residential when the environment is complementary.
Our next question comes from Ronald Kamdem from Morgan Stanley. Please go ahead.
Great, thanks. Let me try to sneak in two really quickly. Really appreciate the cash flow statement you put in the supplement. I think you guys are one of the only ones that do that, so it's really helpful. I see cash from operations here at $861 million, and presumably that's being held back by the large tax bill that you sort of incurred this year. You can maybe get to a $900 million number. When I'm thinking about sort of sources and uses, you know, you've got a dividend that you got to pay out $550, maybe another $150 million-$200 million for CapEx.
Am I thinking about it right, that presumably next year you're in the $150 million-$200 million range of just free cash flow that you could use for whatever? Is that the right thinking? Is number one. The second was just, would love an update on your thoughts on Albertsons Kroger. Thanks.
Yes, I'll take the first part for sure. Yeah, the free cash flow expectation is around $150 million for 2024. Again, you kind of hit on all the points. I'm sorry, for 2023. You know, you kind of hit on all the points, right? We have really the free cash flow after dividends, CapEx, TIs and leasing commissions. That's based on the current dividend level at $0.23 a quarter or $0.92 a share for the common. You're right on track with that.
Then your question about the Kroger Albertsons merger. You know, we're watching it just like you are. It's an interesting, you know, process that they have to go through. Clearly there's still some hurdles to get over, but it seems to be tracking and continues to move forward. We'll watch it as closely as we possibly can. You know, you've seen the earnings results from both. They're very strong. They both have, you know, very complementary portfolios. You know, it's one that if the merger were to go through, I think it's a net-net win for Kimco and our shareholders. If it doesn't go through, obviously, they're both very well capitalized, strong performers, good grocery operators.
we're watching it closely and it's, you know, it's not necessarily clear yet what's gonna happen there.
The next question comes from Alexander Goldfarb from Piper Sandler. Please go ahead.
Morning out there. If I could just give an end of towards the end of two-fer. Two-part. One, Conor, I think you mentioned 12% rent spreads on the Bed Bath. I think some of your peers have been more like 25 or 30, didn't know if that's mixed. Second, Glenn, what gets you to the bottom end of the range? It seems like you guys have baked in a ton of bad stuff into your guidance already, which I'm assuming is more the midpoint. Just sort of curious what gets to the bottom end of the range.
Hey, Alex. On the first question on the 12%, that's on the 6 that we have visibility, where we are lining up leases to backfill all of those individual users to take the entire box. On the entire Bed Bath portfolio, you're right, it's a bit higher. We have a 15%-20% type of range. Again, some of those, you know, might be opportunistic and we can reposition those boxes.
Yeah, I mean, in terms of getting to the bottom end of the range, again, more credit loss above what we've baked in could potentially get you there. I mean, you know, the high end of that credit loss range of being in that $22 million range. You also have some timing issues, right? You know, timing of when we would monetize our Albertsons investment and the redeployment of that cash comes into play. You also have the retention of, you know, tenants versus vacates. There's a whole assortment of, you know, potential timing issues that kind of come into play. If everything happened later or vacates happen faster, you could wind up more towards that bottom end of the range. That, that's kind of how you'd get there.
The next question comes from Wes Golladay from Baird. Please go ahead.
Hey, good morning, everyone. I usually have a follow-up on that Bed Bath question on the 12% spreads. Is there any box splits on that? Is that a reason why they're potentially a little bit lower spread?
No, not right now. There's no box splits on those. You know, spreads are a product too of like the vintage of the box, right. Maybe some of the older boxes that we have in the balance of the portfolio are older leases started at lower rents. Some of them are slightly newer, so it does range. I think you have to take it, you know, a broader view on spreads in general on where you see opportunities. I think, you know, deferring back to Conor's comment about that, you know, 15%-20% over the entire portfolio. This is just a small subset of that.
Our next question comes from Anthony Powell from Barclays. Please go ahead.
Hi, good morning. Question on your 2025, I guess, goal of 2.5% same-site NOI growth? You're doing a minimum rent growth of 4% and higher given kind of the strong lease spreads and whatnot. What gets you from that 4+ to 2.5? It seems a bit conservative now, given the strength of the business.
To your point, you know, we've actually been running ahead of that, of that goal. You know, traditionally this business has run around a 2% growth profile. You know, clearly, obviously with the transformed portfolio and a lot of the last mile retail reinventing itself using online as a way to connect to more customers and getting more value out of the last mile store, I think is the game changer. Your point is well put. I mean, we've been obviously running ahead of that. It's one that we thought a 2.5%+.
That's the target, not 2.5, 2.5 plus. Again, exceeding that is our goal. That's what we've been doing so far. You know, cycles are constant in real estate, and so you've got to make sure that you recognize that over a longer term, you know, we obviously experienced a Covid rebound that really generated outsized results. As we go through another cycle, it'll be, you know, in my opinion, we should probably reset the bar a little higher. We'll have to wait and see how things play out. So far so good on that.
Our next question comes from Michael Mueller from JP Morgan. Please go ahead.
Yeah. I'm curious, are you seeing any UPREIT opportunities at this point, or was the, I guess, the change, just some longer term planning?
In terms of the UPREIT conversion, it really is intended to be an additional tool in our toolbox. It's a bit early in terms of finding opportunities to utilize it as we just recently converted. As you saw with the Long Island portfolio that we acquired last year, we have utilized, you know, tax strategy and tax-deferred units as a way to differentiate ourselves in a competitive marketplace. We do anticipate that there will be opportunity to utilize it. We'll be selective with it because it is still a form of capital that needs to be accretive when we utilize it. It is something that we've considered for quite, you know, some time now.
It was previously a bit cost prohibitive, but things have changed in terms of some of the transfer taxes in certain states. It was, we felt, the appropriate time to do it now versus in years past.
Our next question comes from Paulina Rojas Schmidt from Green Street. Please go ahead.
Good morning. Can you please remind us where the CapEx per square foot of retenanting a box stands today? I understand that every situation is different. If you could provide some ranges, maybe framing it as either a single tenant replacement or a box split, it would be very helpful. Thank you.
Yeah. I mean, unfortunately, it is every case is different. Whether or not it's doing an as is and you're handing it over, issuing them a TI check, or if you're actually doing a build to suit, it's gonna range vastly between a, you know, a single tenant use, a box split, or an expansion to actually combine two boxes together for a larger tenant. All has implications. Related to, you know, electrical roofing, façade renovations and whatnot. I would say is that, you know, it's been consistent, you know, over the course of several years. Obviously, we've had inflationary pressures that we've had to navigate through, issues with switchgear, HVAC, et cetera, that's add some pricing to your overall conversion of a box. Fundamentally, it hasn't changed all that much.
Our next question comes from Tayo Okusanya from Credit Suisse. Please go ahead.
Hi. Yes, good morning. I just wanted to go back to a question that Haendel asked, just about the transactions market. Again, the color you provided about looking at deals at sub-6 cap rates is helpful. Just trying to understand the $100 million of net investment that you guys do have in guidance, exactly what does that comprise of? you know, how do you kind of come up with that number and within the context of how you're thinking about the transactions market and your current liquidity?
Sure. Yeah, the $100 million net acquisitions, it's a baseline number that we're starting the year with. As I mentioned in the response to Haendel's question, you know, we feel that we're in a wonderful position where we're not forced to do anything. We're waiting for the market to really come to us. When you have a motivated seller, we can move ahead on that transaction. So we started with a modest guidance that we think that we can certainly achieve. As we see further opportunity as the year progresses, as we showcase our ability to monetize, the Albertsons investment and reap the benefits of that additional cash, we're confident that we'll be able to use it.
For now, we've kept a relatively modest guidance range that we'll look to update as things progress over the course of the year.
Our next question comes from Linda Tsai from Jefferies. Please go ahead.
Hi. Thanks for taking my question. Ross, can you give us color or anecdotal data regarding private REITs opportunity funds and pensions seeing redemption requests and withdrawals? You know, are opportunities coming to market? From past cycles, is there a tipping point where you'd start to see a wave of opportunities?
That's a great question. It's well publicized, as we've all been reading about. I would say that it's a bit more nuanced in the sense that each individual company has their own strategy as to how to obtain that liquidity that they're seeking. We do anticipate in having conversations with a lot of these different groups that there will be some assets that get shaken loose in the process. You have to realize that a lot of these companies are generalist investors that own all asset classes. I think they're going through their own internal analysis as to where they deem, you know, most appropriate to look to move certain assets. Whether open-air grocery sort of aligns with that strategy, is yet to be seen.
As I mentioned in my prepared remarks, there are certain asset classes that have been extremely aggressive in terms of the cap rates that they've commanded. For those companies that have recently acquired, you know, multifamily or industrial or self-storage, chances are that they're not looking to move those assets today at a price that is, you know, lower than what they obtained those assets, you know, just in the last 12 or 24 months. On the opposite end of the spectrum, there's other asset classes that are much more challenged in terms of an investment profile and the ability to move those assets. We do expect that open-air grocery is a asset class that has retained its value as well as any.
That's what we're sort of waiting for. Those are the conversations that we're actively having each and every day.
That is all the time we have for today's question and answer session. I would like to turn the floor back over to David Bujnicki for closing remarks.
Just like to thank everybody who joined our call today. Otherwise, enjoy the rest of your day. Thank you.
Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.