Good morning, and welcome to Kimco's First Quarter 2021 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to David Pozhniki.
Please go ahead, sir.
Good morning, and thank you for joining Kimco's 1st 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 keep this call focused on Kimco's Q1 earnings results and outlook as a standalone company, With more information forthcoming when the merger 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 is important to note that the company's actual results could differ materially from those projected in such forward looking statements due to a variety of risks, uncertainties and other factors. Please refer to the company's SEC filings that address such factors.
During this presentation, management may make reference to Certain non GAAP financial measures that we believe help investors better understand Kimco's operating results. Reconciliations of these non GAAP financial measures can be found in the Investor Relations area of our website. Also, in the event our call was to incur technical difficulties, We will 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.
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 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 models. 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 continued 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 5 year first quarter average for new lease GLA of 506,000 square feet and new lease spreads finished at a positive 8.2% pro rata.
We closed the quarter with 2 37 renewals and options totaling 2,200,000 square feet with GLA exceeding the quarter sequentially and the prior year quarter. Renewals and option spreads finished at 6.4 percent pro rata. 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 limited new supply, market rents never adjusted down in any meaningful way. So when the demand snapped back, we generated positive spreads. While our occupancy dipped slightly from year end to 93.5%, it strengthened as we move through the quarter. It is our intent to continue expanding occupancy And we are encouraged by multiple demand factors playing to the strengths of our last mile locations. Our job is clear, focus on the blocking and tackling of leasing, Work with best in class retailers, enhance the merchandising mix and let the numbers speak to themselves as we strengthen the resiliency of our cash flows.
Our first, second and third priorities are leasing, leasing, leasing. And we continue to believe we are in the early innings of this reopening and recovery. In addition to leasing, we are prioritizing our smaller redevelopments that average double digit returns to create an additional organic growth driver. Long term, we believe our entitlement program will continue to create shareholder value as we unlock the highest and best use of our real estate. The pandemic has both validated and strengthened our conviction in our strategic vision to concentrate our Open Air grocery anchored and mixed use portfolio In the top MSAs across the country, tenants no longer look at the last mile store as simply a retail destination, Rather, its value to retailers is now viewed holistically, providing distribution, fulfillment and retail.
In valuing a location, retailers assess their ability to integrate e commerce and bricks and mortar to give the customer what they demand. Convenience, value and a fulfilling experience continues to point to the last mile shopping center as mission critical for both consumers and retailers. Are to further gain market share and to make Kimco even more valuable to all of our tenants. In closing, Kimco's open air and grocery anchored portfolio, Diverse tenant mix, targeted geographic presence
in the strongest growth markets
in the country and improving balance sheet provide us with a long runway for growth as we move ahead. Needless to say, the entire organization is generally energized by our efforts to build shareholder value. With that, I'll turn the call over to Ross.
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 building from retailers, consumers And real estate investors at the highest level since the pandemic began almost 14 months ago. Specific to the transaction front, Industry volume, while still off nearly 40% in the Q1 of 2021 compared to 2020, have seen a meaningful uptick from the back half of twenty twenty. The conviction in 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 life 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 type.
We anticipate bidding to become even more aggressive as the spread of cap rate to 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. 2 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 last mile infill locations and future densification opportunities that investors are excited about. On the financing side, an 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 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 Q4 last year continued into the Q1 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 Q4 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. Now for some details on Q1 results. NAREIT FFO was 144,300,000 were $0.33 per diluted share for the Q1 2021 as compared to 160,500,000 were $0.37 per diluted share for the Q1 of the prior year. The reduction was mainly driven by lower pro rata NOI $13,600,000 due to COVID related rent abatements 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 $5,500,000 one time benefit from lease terminations.
Also impacting NAREIT FFO was $5,400,000 of higher G and A and interest 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 our tenants are operating. With the strong leasing velocity, as Conor discussed, our lease versus economic spread has increased to 2 30 basis points, Representing a total of $27,000,000 of pro rata ABR, which is an excellent indicator of future cash flow growth. As expected, same site NOI decreased 5.7% for the Q1 as it comped 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 was mainly attributable to lower credit loss. We collected 94% of pro rata base rents build during the Q1 of 2021, up from 92% for the Q4 last year. Our cash basis tenants represent 8.9% of ABR and we collected 70% from these tenants during the Q1. In addition, our deferred rent payments have been strong as we collected 84% of deferred rents billed for the Q1, With $34,100,000 of deferred rent remaining to be built.
Turning to the balance sheet. Our metrics Continue to improve and our liquidity position is in excellent shape. At the end of the Q1, consolidated net debt EBITDA was 6.7 times and on a look through basis, including pro rata share of JV debt and preferred stock The level was 7.4 times. This represents further progress from the year end 2020 levels 7.1 times for consolidated net debt to EBITDA and 7.9 times on a look through basis. In addition, Moody's has affirmed our Baa1 unsecured debt rating with a stable outlook.
From a liquidity standpoint, we ended the Q1 with over $250,000,000 of cash and the full availability on our $2,000,000,000 revolving credit facility. In addition, our Albertsons marketable security investment is valued at over 750,000,000 Our debt maturities remain minimal as we have only $125,000,000 of consolidated mortgages maturing this year, which will be repaid in the Q2. As a result, we will be unencumbering an additional 23 properties. Our weighted average debt maturity profile stands at 10.7 years, one of the longest in the entire REIT industry. Based on the Q1 results and expectations for the remainder of the year that includes same site NOI turning positive in the second quarter Along with further improvement in credit loss during the second half of the year, we are raising our NAREIT FFO per share guidance range to $1.22 to $1.26 from $1.18 to $1.24 previously.
As a reminder, our increased guidance range is on a stand alone basis and does not incorporate any impact from the pending merger with Weingarten. In addition, the guidance range assumes no transactional income or expense and no monetization of our Albertsons investment. And with that, we are ready to take your
questions. Before we start the Q and A, I just want to offer a reminder That this call will focus on our Q1 results and request that you confine your questions and comments to these results Not the announced merger with Weingarten. To maintain an efficient Q and 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.
We will now begin the question and answer session. At this time, we will pause momentarily to assemble our roster. The first question comes from Rich Hill from Morgan Stanley. Please go ahead, sir.
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 for the cash based 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 ex 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 $7,000,000 collected that related to a prior period From last year. So those came in during the Q1. So if you added if you didn't have those, that would have an impact on same side Of about 3 20 basis points.
Got it. That's really helpful. I appreciate that. And 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, Rich, it's Kathleen. 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 B and K 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. That seems like a 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 tailwinds 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 Connor. 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 if 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 And our job is to beat that number. And obviously, we think we're in a good spot to do that in the near term.
Great. Thanks, guys.
The next question comes from Katy McConnell from Citi. Please go ahead.
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 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 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 starts to take hold, they are still A net 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 pigeonholed in 1 square footage category. So grocers right now Spread from the bigger boxes to the junior boxes to even the midsized boxes of like 10000 to 12000 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.
And a quick follow-up. Could you comment on your strategy around some of the Albertson investments? Just comment on
So as it relates to Albertsons, the lockup burns off 25% each 6 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 The firms that become callable in 2022.
Got it. Thanks, guys.
The next question comes from Derek Johnston from Deutsche Bank. Please go ahead.
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 based retailers throughout the country, they have been operating and doing well throughout.
So we are still seeing a significant amount of in the Northeast, whether it be the New York suburbs, Boston, Philadelphia, etcetera. And when you think about the migration demographics, obviously, there A lot of headlines about the Sunbelt in Florida and the Carolinas in Texas, but 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, etcetera. So there is an uptick still happening in those suburbs, and we think that there is 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 5 to 7 years and where the
Okay, 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 our elevated bankruptcies Possibly in the rearview mirror at least for a while.
Yes, this is Dave.
In terms of our watch list, it's obviously The categories are most greatly affected through the pandemic, the theaters, the fitness, etcetera. We continue to watch and they stay there. There hasn't been much Change beyond that. Obviously, Q1 was a muted bankruptcy season. Historically, that's usually where It is a bit elevated.
And when you look at those that went into bankruptcy in 2020, a lot of those reemerge 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. We'll continue to closely watch and monitor the health of all of our tenants, really looking 2 years out as we start to get to a new normal and stabilize And this surplus of cash that 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 the debt for equity swap, but There's still some opportunities, I think, there for us to upgrade tenancy in the long term, and we're watching those tenants closely.
Thanks, guys.
The next question comes from Alexander Goldfarb from Piper Sandler. Please go ahead.
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 just supporting local economies, small business, etcetera, 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 benefit that physical retail has in promoting ESG.
Yes. So it's a great question. And if you have to take into consideration all the different constituents that go into making up the shopping 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 retailer 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 in which they're trying to solve for their own unique problems. And there 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 stall for 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 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 of 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 suite of 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, as I say, cursory things like solar panels, I would just say that there's a lot of untapped Data that you guys can provide to the investment community to really highlight the benefits of Finnacle. Yes, we agree
by the way. The only thing I would add is that I think we're going to coordinate with ICSC and others to I think the voice is louder when we And combine all of our efforts. And so I think there's 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 that 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, we when we come into a community and showcase that we're in it for the long term 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 of the real estate.
Okay. The second question is just on rent collections. Almost all your categories have really rebounded, but fitness, personal services and restaurants Still lagging. 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's going to hinder the recovery of those 2 categories?
I think the biggest holdback is the capacity, right? I mean despite there being some great success stories Parts of the country where capacity levels have increased substantially, there's other parts of the country that are still a little bit behind, and they're just 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 have been hindered by that. And the summer should show quite well for that hopefully. There's also been with those operators on fitness, there's a number of operators that haven't reopened or won't plan to reopen.
So when you think of the Supply level is coming down a little bit. We do anticipate the demand side to build people wanting to get out Their at home gym or the garage, wherever they've been working out for the year, wanting to get back into some sort of facility where there is some social engagement in community, so that should help as well.
Thank
you. The next question comes from Craig Schmidt from Bank of America. Please go ahead.
Thank you. I wonder 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 continue 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 5s, in some cases, It's sub 5%. And a lot of that just has to do with some of the other dynamics of the demographics.
Obviously, which Tennant 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 rate 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 increased its appetite to investors and with so much capital on the sidelines, it 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 another 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?
Moaney, when you say not participating, meaning those that have still remained closed? Yes. Not only that, but they don't want
to open. I mean, we're 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 category I assume is participating equally in the reopening Period. And I just wondered if you had some insight into which ones aren't.
Sure. No. All the industry Sectors are reopening at some capacity. It's and 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 locals And municipalities are inhibiting that or rolling back restrictions again?
Or it's 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 Yes. 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 to going back to work is the dry cleaners. They obviously got hit very hard As people were working from home and they might be beneficiaries of going back to work in the summer when offices reopen.
Great. That makes a lot
of sense. Thanks guys for the answers.
The next question comes from Juan Sanabria from BMO Capital Markets. Please go ahead.
Hi. This is Lily Peng with 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 have Plan to change release per ton, what's fixed versus CPI based?
We
continue to work on a percent increase basis versus a fixed dollar amount increase. So typically with those percent increases In base trend, that tends to trend well with inflation.
Thank you. Just a quick follow-up. I think you mentioned the payments this quarter were partially offset by some changes in reserves. Could you please break out these pieces? What's the amount reserved in the period?
Sure. So during the quarter, we recognized $8,900,000 in abatement And about half of that was related to prior periods for which there was a significant reserve on those abatements.
Thank you. Appreciate it.
The next question comes from Caitlin Burrows
Sorry if I missed 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 upcoming maturities, lease maturities, do you think occupancy may have troughed or do you think there is still more downside risk?
Yes, it's a great question. So we've been messaging previously that we anticipate Q2 most likely to be the trough of occupancy for 'twenty one. We continue to make great progress and headway with our lease philosophy, obviously, in Q1, and we started to see a net benefit 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 the occupancy in Q2, so that is going to have a bit of an impact. But on the flip side, it also start to expand our lease economic occupancy, so it will help continue to fuel cash flow growth through the back half of 'twenty one and into 'twenty two.
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 Point 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 I was wondering if you could give some detail on the amount of NOI currently being By these properties versus what's still to come and kind of over what time frame we should expect that to happen?
The NOI you'll see the stock ramp up towards The second half of twenty twenty one and for the Boulevard, it should stabilize towards the end of 'twenty two. Dania, I would say you also probably towards the end of 'twenty two, you'll have stabilization of Phases 23.
Okay. Thanks.
The next question comes from Ki Bin Kim from Trist. Please go ahead.
Thank you. Good morning. Can you just talk a little bit more about the 2,800,000 square feet of leases that you signed this quarter? I'm curious how much of this is Truly additive versus some shuffling of tenants around spaces or simply reducing space that might be currently occupied, but may be set to expire. And if you can help us understand what type of tenants are actually driving this activity and the Credit quality as it compares to like a pre COVID environment.
Sure. Yes. So we did 121 new lease deals. So that's Just roughly about 570,000 square feet 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 off price guys are obviously very aggressive. We did sign a few grocery deals Well, five point zero zero has been very active. Alta small shop 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 fixedurized 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 We're seeing a lot of the great demand through our leasing.
I see. So just to recap that, Is there much reshuffling of tenant spaces that makes its way into leasing activity 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 in 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 back That's based at a higher rent, so 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's anything that's new or different than what's normal course of business.
Got you. And then just to follow-up on the Damien Point question. The leasing stat didn't change much. I know it's just 1 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 'twenty one here, we did have Urban and Anter that did open in March and they exceeded their plan on the opening, which was excellent. And We do have the hotel operators, the 2 Marriott flags that will be opening summer of this year, and then we're continuing to see active construction, A handful of new tenants as well. Regal is targeting 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 complement and add to what Urban Answer are currently doing.
Okay. Thank you.
The next question comes from Sorensen Dwyikom from Compass Point. Please go ahead.
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 $5,300,000 of lease term, which is $5,000,000 approximately $5,000,000 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 $5,300,000 could you just sort of restate that? I'm trying to understand.
Yes. So you recognized 5,300,000 Of lease term fee this past quarter, last year, I think it was $400,000 So you had basically a $5,000,000 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 at what drove that large increase? And then maybe talk about some of Are there regional differences in that lease term fee that you saw?
Sure. Yes. So the sorry, there's the lease termination agreements, the LTAs. Yes, a portion of those were related to tenants that want to vacate early. And so we're able to structure arrangements that were opportunistic to free them of their liabilities while getting the net 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 wanted to make sure to call them out. And those do happen Periodically throughout the course of our business, it just happened 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 bit more color on that. We did have a Lucky's grocery store, which was a ground lease 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 terminate the ground lease with us, which was in that number, and we were able to backfill that space with the Sprouts Grocery store, that's Dania actually.
So it was a net win for us there.
Yes. Flora, this is Nicky. I'd also remind you that as you pointed out, the LTAs are purely transactional. And so by no means would this Q1 be reflective of a run rate 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 would be great.
Sure. As you mentioned, leasing costs were relatively stable. We do in terms of the scope and the demand and the requirements of the tenants, that really hasn't Change, so it's more about material pricing. That could have an impact on costs on a go forward basis in the interim. Obviously, there are we're still working through some supply constraints And distribution as a result of the pandemic.
So you have seen some increase in pricings for material costs, whether it Lumber, HVAC, etcetera. That could be short term in nature as the distribution channel start to relieve 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 of 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, it's if you're doing split box value 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, our big focus is on grocery right now. So you could seal 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 working out pretty well.
So in summary, I guess one of the fears that investors had is during the downturn, it 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, So extreme, so fast. The recovery has been almost just as quick. So it's been more of this V shape. So you haven't really seen an adjustment or a reset of market rents.
What we're seeing, especially on the anchor side, is that there's a short window of opportunity for those 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, 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, where the lack of supply, so it's been decades since we've seen any uptick in new supply, It's really benefiting us when we're focused on these last mile locations. It looks 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.
Thanks guys. Appreciate that.
The next question comes from Tami Fick from Wells Fargo. Please go ahead.
Hello, good morning. Conor, you mentioned in your opening remarks about enhancing merchandising mix 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 starts obviously with our grocery initiative. We really do believe that, 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 still 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 coffee or 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
We have historically paid off Any mortgage debt 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 2 large cross collateralized pools, And they're prepayable 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.
Okay. That makes sense. Thank you.
The next question comes from Linda Tsai from Jefferies. Please go ahead.
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, a continued 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 We do constant portfolio reviews with our retailers to make sure that if there is a relocation opportunity, At 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-up. The tenants looking to terminate early, you gave one example involving Sprouts. Was that the bulk of the $5,300,000 And then, do you expect elevated lease term fees for the remainder of 2021?
So it was Lucky that terminated.
Right. It was Lucky that, that terminated and The replacement tenant will be Sprouts, and I think as Conor mentioned, that was Adania. We had 2 other lease terminations. They were actually with One was with Lidl, actually 2 of them with Lidl and then a bank pad as well. But we don't really anticipate a whole lot more for the rest of the year, Maybe another $1,000,000 to $2,000,000 for the balance of the year.
Okay. Thank you. The last question for today's call comes from Greg McGinnis from Scotiabank. Please go ahead.
Hey, good morning. Glenn, for the $7,000,000 of Repaid rentbillable amounts from the cash basis tenants, are those tenants now fully current on rent or is there more Ode from those tenants. So obviously, I'm just trying to get a sense for additional one time or non recurring benefits that we might see this year.
No, there's still more owed from them. As I mentioned, we collected about 84 And of the deferred billings that we sent out, but there's still more that is still due from those tenants. They're all not fully current yet. And then the same thing if you look in the Q1, 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 $8,000,000 that's not been collected yet.
So we'll have to see how that plays out through the rest 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, I understand that some still aren't paying the full amount. Just curious if of that $7,000,000 for those tenants that did pay back rent, if those tenants are fully current 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 or over. So we evaluate it On a constant basis, but it will 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 full footing back.
Okay. And final question for me. Guidance is up $0.03 at the midpoint, which largely Seems to capture the non recurring payments in Q1. In the opening remarks, you mentioned improvement in credit loss for the second Same store NOI turning positive, so becoming more positive in general, it feels like and plus with 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 back half 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 Yes. In the guidance, there is still elevated credit loss for the Q2. But I would tell you that the revised guidance that we're more biased Towards the upper end of the range right now based on what's happened.
So we are feeling good and we will take it quarter by quarter.
Great. Thanks, Glenn.
There are no more questions so far.
Okay. Thank you very much. I appreciate everybody for joining our call today. If there's any follow-up questions, you can go to our website in 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 can may now disconnect. Goodbye.