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Text: 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.
Reconciliations of these non-GAAP measures can be found in the Investor Relations area of our website.
Also, in the event our call was to incur technical difficulties, we'll try to resolve as quickly as possible.
And if the need arises, we'll post additional information to our IR website.
I'll begin by giving a quick overview of our accomplishments in 2020, and our strategic focus for 2021 and beyond.
Ross will follow with updates on transactions, and Glenn will close with our key metrics and guidance for 2021.
For all of us, 2020 was a year that will not soon be forgotten.
COVID, the political landscape, social unrest and the responses to these events; all converged in a way that will forever change our way of life.
2020 was also a year that demonstrated in volatile times the best companies are the ones that are able to withstand economic challenges, mitigate risk and take advantage of opportunities.
In the shopping center sector, this requires a strong balance sheet; a resilient, well-located portfolio; and a superior management team.
I'm happy to report that while we are not immune to the volatility of 2020, Kimco's open-air grocery-anchored shopping centers and mixed-use assets performed well.
And we have stayed strong, confident and positive about the opportunity in the coming year.
Our portfolio withstood all that the pandemic threw at us, as our 2020 vision strategy to reposition our portfolio will validate.
Our grocery-anchored essential services and mixed-used assets concentrated in the strongest markets in the U.S. proved resilient.
In 2020, we saw continued improvement in both the percentage of ABR coming from essential retailers and grocery-anchored centers.
Growing the portfolio from 77% of ABR from grocery-anchored properties to 85% plus remains a strategic focus across the organization.
We are encouraged by the progress and the increasing level of opportunities in the pipeline we are currently evaluating.
As part of these efforts, we are pleased to share today the upcoming opening of Amazon Fresh at our Marketplace at Factoria in Bellevue, Washington.
During the fourth quarter, we executed 92 new leases, totaling 406,000 square feet, which exceeded the amount achieved in the fourth quarter of 2019.
The true test of a portfolio's quality and durability is leasing and the ability to drive rent.
At that point, new leasing spreads remained positive, rising 6.8% during the fourth quarter.
We anticipate that our range between economic and physical occupancy will continue to widen, as a precursor to future cash flow growth.
With the help of our nationwide network of relationships, tenants, brokers and our in-house team, we are experiencing robust demand from our essential retailers, who continue to take advantage of the COVID surge that allows them to boost cash reserves, invest in existing stores and expand their store portfolio to better serve their customers.
We are also laser-focused on keeping our existing tenants and continue to do everything we can to help them overcome the pandemic and to be positioned [Indecipherable].
Our tenant assistance program or TAP helps small businesses navigate the new round of PPP funding.
After successfully helping our small shop tenants navigate the first round of PPP funding, we believe we have aligned with best-in-class partners to continue to aid our small business tenants in accessing capital at their most critical time of need.
Our strong balance sheet, well-positioned portfolio and tenant initiatives are all the result of our best-in-class team and approach.
Specifically, our leasing team is proactive in its efforts to work with current and prospective tenants.
And our finance, planning, technology, investor relations and legal teams effectively navigated numerous obstacles and kept us focused without skipping a beat.
So, where do we go from here?
First, our highest priority is leasing, leasing, leasing.
The good news is we have visible growth in the portfolio and meaningful free cash flow to fund our leasing strategy.
This has provided us the confidence to provide an outlook for 2021.
We anticipate the first half of the year to remain challenging, especially for those categories dramatically impacted by the pandemic-induced shutdowns.
It is worth highlighting that our team pushed this portfolio to all-time high occupancies pre-pandemic.
And we are determined to get back to that level and exceed it.
While anticipating the speed at which we will recover NOI is challenging, we do expect rents to hold up, especially in our well-located boxes that are in high demand from categories that include grocery, off price, home goods, home improvement, furniture, health, wellness, medical and beauty.
Interesting to note, we are starting to experience a rebound in both restaurant demand and value fitness retailers.
Finally, on our long-term strategic focus.
We continue to believe that streamlining the portfolio over the past five years will result in meaningful long-term value creation for our shareholders.
We are focused on the highest and best use of our real estate and believe the 80-20 rule applies to our assets and gives us tremendous flexibility and adaptability to create value in the future through our entitlement initiatives.
Specifically, 80% of our real estate consists of parking lots, that are not generating any revenue; and 20%, the single-storey buildings.
With our focus on clustering our assets in dense areas with significant barriers to entry, our assets are in an ideal position for growth as the surrounding areas have gone vertical.
Our entitlement team is sharing our ESG accomplishments with all local municipalities, as part of our efforts to show that we will be good stewards of their neighborhoods and that we want to work together to make sure our assets continue to evolve alongside the community.
We believe it is important that our approach to real estate evolve with changing circumstances, because that is exactly what our tenants are doing.
The best-in-class tenants are looking at their real estate differently.
And in many cases, their real estate team is now integrated in the entire supply chain.
Distribution, fulfillment, e-commerce and store decisions are all integrated on how to best service the customer.
The store which is optimized for distribution and fulfillment continues to shine as the most economic way to get goods and services into customers' hands.
Best Buy CEO, Corrie Barry, at the CES Conference, was very clear when she said, physical stores are expected to play a massive role in the company's fulfillment efforts.
Target also stated that more than 95% of sales are fulfilled by the stores.
I continue to share the words from our largest tenant; the role of the physical store is poised to become broader than ever with the location serving as fulfillment epicenters that quickly and easily get customers whenever they need.
Put another way, the convergence of retail and industrial is accelerating and we are positioning the Kimco portfolio to take advantage of this new utilization by partnering with our retailers to ensure that Kimco assets are optimized to gain market share and to make the stores of Kimco even more valuable.
In closing, Kimco's open-air grocery-anchored portfolio provides consumers a safe and easily accessible destination for goods and services.
Our diverse tenant mix and targeted geographic presence in the strongest growth markets, supported by our well-capitalized balance sheet and our entrepreneurial approach, positions us to unlock value for all stakeholders in the years to come.
As Conor discussed, 2020 was a challenging year.
But there are signs of life in the transactions market with deal flow starting to pick back up.
The overall transaction volumes from March through year-end were down close to 85%, but there were several late 2020 deals that showcased the general theme we have seen occurring.
The majority of transactions have been with the essential-based retail anchors, notably grocery.
For the most part, size is good.
But too big can result in the inability to finance the large or non-essential based tenancy, thus requiring a much bigger equity check to those deals.
For the smaller grocery assets, the financing community has remained resilient.
But again, rolling cash flow uncertainty for the chunkier assets have made those a bit more challenging.
Multiple grocery-anchored deals have transacted at sub 6% cap rates in Denver, South Florida, California, Washington DC, North Carolina and throughout the major primary and secondary markets in the U.S. While we are bullish on that asset side, which represents the core products within our portfolio, there is no shortage of capital chasing those deals.
As we discussed on last quarter's earnings call, the limited supply of attractively priced high-quality assets versus our current cost of capital has led us to tailor our investment program.
As it relates to our structured investment program, we made two small investments on a pair of very high-quality shopping centers during the quarter.
A $25 million mezzanine financing on a strong South Florida shopping center and a $10 million preferred equity investment on a densely located center in Queens, New York; both of which will generate an accretive return versus our cost of capital, with a chance to possibly acquire in the future.
Additionally, as we have done many times, recently, we were able to leverage our strong tenant relationships, particularly with those that are real estate rich, to uncover another unique investment that represents significant dislocation in value.
To that point, we completed a sale leaseback transaction in which we acquired two Rite Aid distribution centers in California for approximately $85 million.
These distribution centers service all 540 plus stores for the pharmacy chain in the State of California.
Rite Aid is releasing these back on a long-term basis with annual rent bumps and zero landlord obligation.
This investment will provide an attractive return with an IRR well in excess of our cost of capital and enhance the NAV for the company.
We continue to evaluate new opportunities selectively and believe our tenant relationships, flexible structuring and conviction in our product type puts us in an enviable position to capture upside in a period of dislocation.
This is an important long-term complement to our business with the one constant being our approach of owning high-quality assets at a positive spread to our current cost of capital, while mitigating potential downside risk.
Furthermore, we believe this approach will create a future pipeline of opportunistic acquisitions with a right of first refusal or right of first offer when our cost of capital returns.
With that, I will pass it along to Glenn for the financial summary.
With our fourth quarter operating results, we delivered further improvement compared to the sequential third quarter, with higher rent collections and improvement in credit loss.
For the fourth quarter 2020, NAREIT FFO was $133 million or $0.31 per diluted share as compared to $151.9 million or $0.36 per diluted share for the fourth quarter 2019.
The reduction was mainly due to rent abatements and increased credit loss of $21.2 million and lower net recovery from a $5.7 million.
This reduction was offset by lower preferred dividends of $3.1 million and a $7.2 million charge for the redemption of preferred stock in the fourth quarter of 2019.
Now, although not included in NAREIT FFO, during the fourth quarter 2020, we did record a $150.1 million unrealized gain on the mark-to-market of our marketable securities, which was primarily driven by the change in value of our $39.8 million shares of Albertsons stock.
Our stake in Albertsons is valued in excess of $650 million today.
For the full year 2020, NAREIT FFO was $503.7 million or $1.17 per diluted share as compared to $608.4 million or $1.44 per diluted share for the prior year.
The change was primarily due to increases in rent abatements, credit loss and straight line reserves, aggregating $105.8 million and the NOI impact of disposition activity during 2019 and 2020 totaling $24.7 million.
In addition, during 2020, we incurred a $7.5 million charge for the early extinguishment of debt.
These reductions were offset by lower financing costs of $15.7 million and an $18.5 million charge for the redemption of $575 million of preferred stock during 2019.
Although we continue to be impacted by the effects of the pandemic, our operating portfolio was showing signs of improvement, as Conor discussed earlier.
All our shopping centers remain open, and over 97% of our tenants are open and operating.
Collections have continued to improve.
We collected 92% of fourth quarter base rents, and this compares to third quarter collections of 90%.
The furloughs granted during the fourth quarter were just under 2%, down from 5% during the third quarter.
At year-end 2020, 8.2% of our annual base rents were from tenants on a cash basis of accounting.
And 50% of that has been collected.
As of year-end, our total uncollectible reserve was $80.1 million or 46% of our total pro rata share of outstanding accounts receivable.
Now, turning to the balance sheet.
We finished the fourth quarter with consolidated net debt to EBITDA of 7.1 times.
And on a look-through basis, including pro rata share of JV debt and preferred stock outstanding, the level was 7.9 times.
This represents further progress from the 7.6 times and 8.5 times levels reported last quarter, with the improvement attributable to lower credit loss.
On a pro forma basis, if our Albertsons investment was converted to cash, these metrics would improve by a full turn to 6.1 times and 7 times respectively.
Levels better than we began last year.
We ended 2020 with a strong liquidity position, comprised of over $290 million in cash and $2 billion available on our untapped revolving credit facility.
We have only $140 million of consolidated mortgage debt maturing during 2021.
And our next bond does not mature until November 2022.
Our consolidated weighted average debt maturity profile stood at 10.9 years, one of the longest in the REIT industry.
In addition, our unsecured bond credit spreads have improved significantly.
By way of example, our 10-year green bond issued in July 2020 at 210 basis points over the 10-year treasury is currently trading in the area of 90 basis points over treasury.
This spread is the lowest among all our peers.
Regarding our common dividend, we paid a fourth quarter 2020 common dividend of $0.16 per share.
As such, we expect our Board of Directors to declare the common dividend during the first quarter of 2021, reflecting a more normalized level that at least equals our expected 2021 taxable income.
While the pandemic and its effects on certain of our tenants continues, we are comfortable establishing NAREIT FFO per share guidance for 2021.
Our initial NAREIT FFO per share guidance range is $1.18 to $1.24.
This is also a wider range than we have historically provided, taking into account the potential variability of credit loss levels due to the ongoing pandemic.
Other assumptions include flat to modestly higher corporate financing costs and G&A expenses, as well as minimal net neutral acquisition and disposition activity.
This 2021 guidance range assumes no transactional income or expense, no monetization of our Albertsons investment and no additional common equity issued.
Lastly, keep in mind that our 2021 first quarter results will be relative to a pre-COVID first quarter in 2020.
Notwithstanding the expected optics of the first quarter results, our NAREIT FFO per share guidance range of $1.18 to $1.24 reflects growth over 2020 at both the low and high end of the range.
Before we start the Q&A, I just want to let you know that the line up for people in the queue is very deep.
So, in order to make this efficient, again, just a reminder, that you may ask a question and then have one follow-up.
With that, you can take the first caller.

user
compname posts q4 ffo per share $0.31.
q4 ffo per share $0.31.
sees 2021 nareit ffo per diluted share of $1.18 to $1.24.

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