Kimco Realty's Resilient Growth: Anchored by Grocers, Accelerated by Innovation (NYSE:KIM) - KIM Stock Research Report

## Executive Summary / Key Takeaways * Strategic Transformation Pays Off: Kimco Realty has successfully repositioned its portfolio to be predominantly grocery-anchored, achieving 86% of annual base rent from these essential properties, which provides defensive stability and drives consistent traffic. * Robust Operational Momentum: The company is demonstrating strong leasing velocity, evidenced by a record "signed, but not yet open" (SNO) pipeline of $71 million in future rent and all-time high small shop occupancy of 92.5%, translating directly into future FFO growth. * Innovation as a Growth Catalyst: Kimco's new Office of Innovation and Transformation, leveraging AI for lease abstraction, tenant prospecting, and redevelopment planning, is enhancing operational efficiency and creating a competitive edge in a tight market. * Disciplined Capital Allocation: With a strong balance sheet, ample liquidity, and a strategic capital recycling program, Kimco is funding high-return redevelopment projects and opportunistic acquisitions, while also returning value to shareholders through a recently increased dividend. * Positive Outlook Amidst Headwinds: Despite potential interest rate headwinds in 2026 and ongoing economic uncertainties, Kimco has raised its full-year 2025 FFO guidance to $1.75-$1.76 per diluted share, projecting over 6% growth, underpinned by its resilient business model and proactive management. ## The Foundation of Resilience: Kimco's Grocery-Anchored Dominance Kimco Realty Corporation, a Real Estate Investment Trust (REIT) with over 65 years of specialized experience, stands as a leading owner and operator of high-quality, open-air, grocery-anchored shopping centers and mixed-use properties across the United States. Since its NYSE listing in 1991 and REIT election in 1992, Kimco has strategically concentrated its portfolio in first-ring suburbs of top metropolitan markets, focusing on necessity-based goods and services that drive frequent consumer visits. This foundational strategy has proven particularly resilient in a retail landscape characterized by a severe lack of new supply—currently measured at a mere 0.3% of existing retail stock—and near-record low national vacancy rates. The company's journey has been marked by strategic evolution, notably its reorganization into an UPREIT structure in January 2023 and the launch of its Structured Investment Program (SIP) in 2020. A pivotal moment arrived with the RPT Realty (TICKER:RPT) merger on January 2, 2024, an "incredibly opportunistic purchase" with an implied cap rate of 8.5%. This acquisition significantly expanded Kimco's footprint, adding 56 open-air shopping centers and a stake in a 49-property net lease joint venture. Post-merger, Kimco swiftly disposed of ten non-core RPT properties, demonstrating its disciplined approach to portfolio quality. This strategic repositioning culminated in a significant milestone by the second quarter of 2025, with 86% of Kimco's annual base rent now derived from grocery-anchored properties—an all-time high that underscores the essential and resilient nature of its income stream. ## Technological Edge: Powering Efficiency and Growth In a competitive and evolving market, Kimco is not merely a traditional landlord; it is a forward-thinking operator leveraging technology to sharpen its competitive edge. The company formalized this commitment in Q2 2025 with the creation of the Office of Innovation and Transformation, led by a Chief Innovation and Transformation Officer. This new enterprise function integrates operational improvement, digital transformation, data, and artificial intelligence (AI) efforts under a unified leadership. Kimco is actively deploying AI in targeted, high-impact areas to reduce costs, increase speed, and support growth. For instance, AI has "significantly accelerated lease abstraction," leading to improved accuracy and freeing up internal resources. The company's teams are also "piloting AI tools to enhance small shop tenant prospecting and streamlining early-stage redevelopment planning." These applications are already generating "measurable returns" and strengthening the foundation for future performance. For investors, this technological differentiation translates into a more efficient operating platform, potentially leading to higher margins, faster lease-up cycles, and a more robust pipeline of opportunities, thereby enhancing Kimco's competitive moat and long-term growth strategy. ## Competitive Landscape: Outperforming in a Tight Market Kimco operates in a highly competitive retail REIT sector, facing direct rivals such as Simon Property Group (TICKER:SPG), Realty Income Corporation (TICKER:O), Federal Realty Investment Trust (TICKER:FRT), and Brixmor Property Group (TICKER:BRX). While SPG dominates in large-scale enclosed malls and FRT excels in high-end mixed-use properties in affluent areas, Kimco carves out a distinct and resilient niche. Kimco's focus on open-air, grocery-anchored centers in first-ring suburbs provides a defensive advantage, offering greater stability during economic shifts compared to SPG's more discretionary retail exposure. Its diversified portfolio and strategic locations enhance customer loyalty and recurring revenue. Compared to Realty Income's single-tenant net-lease model, Kimco's mixed-use assets offer broader revenue streams and adaptability to evolving retail trends. While FRT boasts strong tenant relationships and premium leasing, Kimco's scale in open-air formats and its operational efficiency in property management give it a qualitative lead in managing multi-tenant centers effectively. Against Brixmor, a direct rival in open-air centers, Kimco's larger portfolio and emphasis on mixed-use assets provide a strategic advantage in broader market positioning and adaptability. The retail real estate market is characterized by "fierce competition" and "aggressive cap rates," particularly from private capital. However, Kimco's "ability to recycle capital at higher yields and with a higher growth profile is a strong differentiator." Its Structured Investment Program, with a gross asset value of approximately $7.5 billion across its JV portfolio and structured investments, offers a "right of first offer" (ROFO) or "right of first refusal" (ROFR) on future acquisitions, providing a unique "inside track" on high-quality real estate opportunities that often don't hit the open market. This strategic advantage allows Kimco to be "paid to wait" for accretive acquisitions. ## Financial Strength and Operational Excellence Kimco's financial performance in 2025 reflects its strategic execution. For the third quarter ended September 30, 2025, Funds From Operations (FFO) grew to $0.44 per diluted share, a 2.3% increase year-over-year. Year-to-date FFO reached $1.33 per diluted share. Revenues from rental properties, net, increased by $28.20 million in Q3 2025 and $85.30 million for the nine months ended September 30, 2025, driven by increased leasing activity and growth from acquired properties.

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Operational metrics underscore this strength: * Same Property NOI Growth: 1.9% for Q3 2025 and 3% year-to-date. This growth occurred despite a 130 basis point drag in Q3 from the early recapture of anchor boxes related to Party City (TICKER:PRTY), JOANN's (TICKER:JOAN), and Rite Aid (TICKER:RAD). * Occupancy: Pro rata occupancy increased 30 basis points sequentially to 95.7% in Q3 2025. Anchor occupancy stood at 97%, and small shop occupancy reached a new all-time high of 92.5%, up 70 basis points year-over-year. The former RPT portfolio's small shop occupancy alone saw a 280 basis point increase since its acquisition. * Leasing Velocity: In Q3 2025, Kimco executed 427 leases totaling 2.3 million square feet, achieving a blended leasing spread of 11%. New leases saw a robust 21% spread, while renewals and options achieved an 8% spread. Year-to-date lease GLA is up 8% over 2024. * Signed, Not Yet Open (SNO) Pipeline: This reached a record $71 million in future incremental rent (360 basis points), with approximately 20% expected to commence in Q4 2025, contributing $2 million to $3 million in incremental rent, and 60% projected for 2026. * Credit Loss: Remained favorable at 75 basis points for Q3 and 73 basis points year-to-date, reflecting the durability of its tenant base.

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Kimco's disciplined capital allocation is evident in its redevelopment and investment activities. The company's total development, redevelopment, and mixed-use pipeline stands at roughly $600 million, targeting 10% to 12% unlevered returns. Completed redevelopment projects year-to-date have achieved a blended yield of 13.7%. Recent structured investments, including a $97 million senior loan on a Sprouts (TICKER:SFM)-anchored center and a $75 million participation loan in Family Dollar (TICKER:DLTR), are generating low double-digit unlevered returns. The company also strategically acquired a dual grocery-anchored asset in Hillsboro, Oregon, in Q3 2025.

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## Robust Liquidity and a Prudent Outlook Kimco maintains a strong and flexible balance sheet, with consolidated net debt to EBITDA at 5.3x and a look-through leverage ratio of 5.6x. Liquidity remains robust at over $2.1 billion, including $160 million of cash on hand. The company's credit profile continues to strengthen, with S&P upgrading Kimco to A- with a stable outlook in September 2025, Fitch affirming its A- rating, and Moody's maintaining its Baa1 rating with a positive outlook. This financial strength, coupled with approximately $150 million of annual free cash flow after dividends and leasing costs, provides ample flexibility for future investments. For the remainder of 2025, Kimco anticipates spending $25 million to $75 million on acquisitions and $50 million to $100 million on redevelopment and re-tenanting efforts. The company's Board of Directors recently approved a 4% increase in the quarterly common stock cash dividend to $0.26 per share, reflecting confidence in its performance and growth expectations.

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Looking ahead, Kimco has raised its full-year FFO guidance range to $1.75 to $1.76 per diluted share, representing over 6% growth compared to 2024. The full-year same-site NOI growth outlook is maintained at 3% or better, incorporating known bankruptcy impacts. The credit loss assumption has been revised to a more favorable range of 75 to 85 basis points. While interest expense is expected to be a headwind in 2026 due to $825 million of debt maturing at an average rate of 0.8%, the significant SNO pipeline (with 60% commencing in 2026) is expected to provide a substantial tailwind, contributing an estimated $24 million from the current pipeline and an additional $12 million from Q4 2025 commencements. ## Conclusion Kimco Realty Corporation is executing a compelling investment thesis, grounded in its strategic transformation into a leading owner and operator of high-quality, grocery-anchored shopping centers. The company's disciplined approach to portfolio management, robust leasing platform, and innovative use of technology are driving strong operational and financial results, as evidenced by record occupancy levels, healthy rent spreads, and a substantial pipeline of future rent commencements. Despite a competitive landscape and macroeconomic uncertainties, Kimco's strong balance sheet and strategic differentiators, including its Structured Investment Program, position it to capitalize on opportunities and mitigate risks. The recent FFO guidance raise and dividend increase underscore management's confidence in its ability to deliver top-quartile earnings growth. For discerning investors, Kimco represents a resilient and growing REIT, poised for continued success through its focus on essential retail, operational excellence, and technological leadership, making it a compelling long-term investment in the retail real estate sector.