Download Transcript
Spencer Levy
65 years ago, two friends with ties to the real estate industry, Milton Cooper and Martin Kimmel shook hands and established a joint venture, Kimco, that was destined to become North America's largest publicly traded owner and operator of open air grocery anchored shopping centers. Today, amid the evolving retail climate of our time, the Jericho, Long Island based REIT remains a force in the industry, and its future is still part of the family. On this episode, we sit down with the scion who is one of the leaders of the firm's strategic growth.
Ross Cooper
Oftentimes when others zig, we like to zag. We have been bullish on retail since the inception of the company in the late 1950s, but the market has ebbed and flowed.
Spencer Levy
That's Ross Cooper, Kimco’s President and Chief Investment Officer, and the grandson of one of those founding partners. With more than 90 million square feet of retail space in a national portfolio that's largely focused on major markets, Kimco has been expanding into the Sunbelt and also added mixed use properties, including more than 10,000 multifamily units currently in development. We'll discuss that strategy and much more. Coming up: holiday shopping, mixed use retail, the story and strategies of Kimco. I'm Spencer Levy and that's right now on The Weekly Take.
Spencer Levy
Welcome to The Weekly Take. And I'm delighted to be here in Jericho, Long Island, with Ross Cooper, the President and CIO of Kimco Realty. Ross, thanks for coming out.
Ross Cooper
Thanks for having me. Good to see you.
Spencer Levy
Good to see you. And Ross, we're in the midst of the holiday season, and holiday shopping always represents a huge boost to the retail industry. How do you see it and how does it impact the Kimco portfolio?
Ross Cooper
It's a really exciting time of year. Our retailers put a significant amount of emphasis on the holidays and anticipate that this will be another good holiday year as we're in the midst of it right now. Anecdotally, you know, getting some good feedback from our retailers, we think that the holidays are a very important season, a lot of shopping, a lot of spending that really sets up the entirety of the plan for a lot of these retailers for the coming year. But that being said, many of our retailers, most of our retailers, provide everyday goods and services. And so when they look at the impact and the importance, in many ways, January 5th is just as important as Black Friday. So we take every day very seriously. But it's a fun and festive time for a lot of shoppers and customers and retailers alike.
Spencer Levy
Ross, we're sitting here in Long Island right now at an asset that you lovingly called, was it the hill when you grew up here?
Ross Cooper
It was the hill growing up, yeah.
Spencer Levy
It was the hill growing up. And I think this is a great example of what might be the future of retail, because we're sitting in an office building right on the same pad as a large retail complex, and you see this everywhere. I could point to 100 developments just like this, where it's no longer the retail district, the office district, the multi district. They all kind of come together. Is that a fair way to put it?
Ross Cooper
Yeah, I think this asset is somewhat of a microcosm of our strategy and where we see the future for Kimco. What you don't see here is we also have entitlements on a piece of the parking lot to build a 93 room Marriott Residence Inn. We were all prepared to break ground on that right before Covid, and we've put it on pause for the moment. But ultimately, we anticipate that that component can be added to the center as well. So our corporate headquarters are in this office building that we own, retail grocery anchored shopping center, anchored by Whole Foods, Starbucks, the bank, the bagel store, and then ultimately possibly a hotel that we can have hotel guests staying on when they come to visit and whatnot.
Spencer Levy
Now Long Island is obviously one of the most high density, high wealth areas in the country. But you've expanded over the last several years into some of the growing areas in the southwest, southeast, etc.. Tell us about that.
Ross Cooper
For Kimco, a major important component of our portfolio composition is geographic diversification. We've always had a national portfolio. We used to have assets in 43 states. We had over a thousand shopping centers scattered throughout. And what we determined very quickly about a decade ago was that it was much more beneficial for the company, for our shareholders, for our operational platform, to be more heavily concentrated in those major markets and have clusters in those markets as opposed to a scattershot throughout. So we've really focused on those major markets. But as you just alluded to, we have grown pretty significantly in the last few years. We merged and acquired another company, one of our peers called Weingarten Realty, based out of Texas, which had a significant presence in, of course, Texas, Houston primarily, but also in parts of Florida, Phoenix, Atlanta, other parts of the Sunbelt. So that really helped us grow in those markets. And more recently, we just announced a merger acquisition with RPT, which also adds another significant amount of properties. 56 assets, primarily in Florida and Boston, with some other assets scattered throughout the country as well, but significant overlap to our major markets as well. Oftentimes when others zig, we like to zag. We have been bullish on retail since the inception of the company in the late 1950s, but the market has ebbed and flowed in terms of their receptivity and their views on the future of retail and the sustainability of bricks and mortar retail. The fundamentals of our business right now are as good as they've been, certainly in my career and I think well beyond that as well. There's been next to no new supply or development of open air shopping centers for quite some time. We don't anticipate that there's going to be any significant development anytime soon just based upon the cost basis and the rental levels that would need to sort of compete with developing an alternate use on that land. When you look at the fundamentals, when you look at the leasing demand that we have, we just announced our third quarter earnings a couple of weeks ago. Our small shop occupancy has just crested our all time high at 91.1%. We think there's room to grow there. We have combined leasing spreads for new renewals and options this quarter that were the highest in the last six years. So there's a lot of positives that are going on within our industry and we think that there is a lot of room for the company to grow.
Spencer Levy
Tell us how you approach mixed use.
Ross Cooper
It's a combination of a few different structures, but essentially we've evaluated each and every one of our shopping centers and our properties around the country. And we've put together a business plan and determined where we believe that there is additional densification that's warranted. Either the market is receptive to it or we have liquidity with the leases in place that we can activate in, call it the near to the medium term. So we've undergone a pretty significant internal analysis. We've staffed up in our development and construction team. We now somewhat quietly have close to 10,000 multifamily units, either built, operating, under construction or entitled. That should grow another 2500 or so in the next few years to over 12,000. And we very selectively and methodically activate 1 or 2 projects a year, either utilizing our own capital or contributing the entitled land into a joint venture. We've done long term ground leases. So there's a variety of ways that we can activate the projects. But we see a pretty significant symbiotic relationship between the retail and the alternate use, primarily multifamily, although there's a little bit of hospitality. We've sold off some office entitlements at some of our assets. But when you do it right and you have the retail humming as an amenity and you have the residents that live nearby, they really enhance one another. So we think that's a pretty significant part of our future.
Spencer Levy
Now let's just talk about the basics of grocery anchored retail for just a moment, because growing up in this business, grocery anchored retail was basically the grocery store paid next to nothing, and then all the money was made in the in-line strip space, which was some combination of local and maybe a few national retailers. Is that still the model or has it evolved?
Ross Cooper
It's certainly evolved. I think the grocery store as an anchor still continues in our mind to be the optimal anchor tenant. They drive more traffic than any other category. People are going to the grocery store 3 or 4 days a week. And what we've seen is that it's not just the traditional grocer anymore. There's a variety of different categories within grocery that have different offerings and appeal differently to different people. And when you look at how the formats have changed, you still have that neighborhood grocery center with the grocer in 10, 15, 20,000 square feet of shops or services. But you're also seeing within power centers more of the grocery component because they draw from that more regional shop and that might be the discounter or the specialty. So, groceries are popping up, grocery stores, supermarkets are popping up in all different formats. And one of the things at Kimco that we've been pretty vocal about over our history is we think that there is a time and a place for a variety of different formats: grocery anchored, power, unanchored, lifestyle, single tenant, out parcels. They all contribute something a little bit different to the shopping center. And our job as landlords is to curate the best tenant mix so that you have activity. You have a reason for people to come to the shopping center morning, day and night.
Spencer Levy
When you speak to mall operators, one of the advantages that they say they have is that we have relationships with every mall tenant, and they will go from mall A to mall B to mall C. It seems to me, even walking through your center here in Jericho, you've got a mix. You've got a mix of the nationals. You got the locals. How do you try to get that optimal mix?
Ross Cooper
Yeah, that is ultimately our job is, as I said, curating the appropriate mix. We have a tremendous leasing team that does a great job, that has relationships with all of the nationals, but also the locals and the regionals. And it really is important for a shopping center to have a little bit of everything. You don't want it to feel too much of a commodity. You don't want every shopping center to look like the next one. So there's something unique and special that drives that traffic, that brings that customer, that consumer, to the shopping center. As I mentioned, we’re one of the largest landlords for most of the retailers in our shopping centers. So while we don't necessarily take one tenant and say we want to place you in X, Y, or Z shopping center, we are talking to T.J. Maxx is our largest tenant and saying, we have these 15 opportunities throughout our portfolio. Where is there a good fit that makes sense for us and makes sense for you, so we can do larger portfolio reviews and do more than just one at a time? The other interesting thing that has changed a bit over the last 5 to 10 years when talking about the local shop is, you talk about small shops and people think mom and pop. And while there is still a bit of that mom and pop element, you've seen more of the nationals and the franchise driven models be the growth vehicle for a lot of these small shop retailers. So rather than open, you know, a local pizzeria, there might be a franchise that already has an established business model, an established brand that makes more sense to open that pizzeria concept versus, you know, Joe's mom and pop pizza. So it's interesting. We've added recently in our investor presentation that of our top 50 small shop tenants, 100% of them are national retailers. So it's the Chase Bank or the Starbucks or the Chipotle. So it's all brand recognized names that are primarily taking these small shop spaces. So there is a pretty strong credit behind a lot of that, even though you may think of it as a mom and pop type retailer.
Spencer Levy
Well, for the record, even though this is not a visual show, I will just tell my listeners I have a Starbucks coffee in my right hand. In my left hand, I got the coffee from your bagel shop, and they're both good. You see that?
Ross Cooper
Yeah. And we have both of them here at this shopping center, so…
Spencer Levy
So let's talk about this credit versus cool concept. And you said it yourself, Ross, you want the center to be a unique experience. So when you're making that decision between the national versus the local that doesn't have the credit, how do you make that decision?
Ross Cooper
That's part of the art versus the science. I wouldn't say that national is not cool versus local, which might be cool. So there's plenty of national, cool concepts that have credit. But yeah, I think it's really understanding the retailer. It's understanding what makes them tick. It's understanding what will resonate with the customer. If you're going to take a chance on a tenant that doesn't necessarily have multiple locations or have the credit backing them that a Starbucks does or a Chipotle does. Something that I think has really changed dramatically over the years and probably more so in this, you know, post-pandemic world that we're living in now is historically, it was a lot more about the landlord focusing on what is the tenant credit and viability. We're going to sign a lease with whichever tenant. We want to know if we're signing a ten year lease and we're making an investment in their space in terms of tenant improvement or building out their space for them that they're going to be around to honor the obligation of the lease that they sign. Nowadays, I think the retailer is doing just as much, if not more due diligence on the landlord to say, I'm making a tremendous investment to be at this center. I'm spending a significant amount of my own capital, too. I want to make sure that I'm doing business with the landlord that is going to make those investments in the curb appeal, that's going to ensure that the property is safe, that the potholes are filled, that the curbs are good, that the striping is getting done, the signage is accurate and clear. So those are all things that the retailer is now focused on more than ever, about the landlord that they're doing business with.
Spencer Levy
Let's now shift to power centers. And first, I love your definition of what a power center is as distinct from another type of retail. And then let's talk about how that's evolved.
Ross Cooper
From our perspective, power center is just another category that just showcases something that is a little bit more of a regional draw, has a larger size footprint typically than your neighborhood grocery center with just the grocer and 10 to 20,000ft² of small shops. For one reason or another over time, the power center has gotten a little bit of a negative connotation. Historically, they were built as these category killers that were able to take what the department store had once done for the mall and bring it closer to the population and create a lineup of junior anchors that had a distinct category that you were going to. Some of our best assets in our portfolio are power centers, and we've said it all along as investors have gravitated towards grocery or they've moved away from power. And we've said it many times that not all grocery is good and not all power is bad. You really have to look at the fundamentals of the real estate, of the basis, of the tendency, of the demographics. We're sitting in, I think, today, even though we have a Whole Foods anchored shopping center from our perspective, you have Marshall's next door, you have a village just adjacent to us, the Miller Gym, a catering facility. This, by all definitions, would likely classify as a power center, but it's a lot more than its categorization. And also the unique thing about power centers is typically they're on much larger tracts of land than a neighborhood shopping center. So as we talked about the mixed use and our densification opportunities within our portfolio, there's a lot more adaptability typically on power centers that have larger acreage than you have on a smaller neighborhood shopping center. Because just looking out the window where we're sitting here, I mean, you have 75, 80% of the land that we own here as single story surface parking lots that are non income producing. So over time, where can you activate density? Where can you create additional value? Typically in these types of properties.
Spencer Levy
And in terms of that adding here, and I'm sure you've looked at every potential pad here for multifamily and maybe other uses, but what is the ultimate determinant to say this is a multifamily site for retail, this isn't?
Ross Cooper
You have a lot of factors that are at play. One, you have to look at the community, the surrounding area, the municipality. You know, what is the likelihood that you're going to be able to get the approvals to do multifamily, particularly in a more commercial area? That can be difficult sometimes. You look at the liquidity within the center in terms of, what are the lease expiration schedule look like. If you have 3 or 4 large tenants that have control for the next 25 years, it's going to be very difficult to convince them to either go away or to cooperate on something that might impact their business, either short term or longer term. And then we do, you know, market feasibility studies on all of our properties to better understand the demographics, to better understand the likelihood that this would be a viable location for residents to live. And when you put all those factors together, then you can start to strategize on a plan of, this is something we think is actionable.
Spencer Levy
So notwithstanding all of the good vibrations we're having right now on retail, it's fair to say there are challenges out there, too. And let's just start with some of those challenges today, and we’ll work our way backwards. And the challenge today is clearly the capital markets. The capital markets today, the cost of debt is up and along in the short end of the curve. Prices are down across the board in all asset classes. I used to cover the REIT space many, many moons ago and there used to be some markets where REIT’s were more competitive than private owners or vice versa. How do you see the market today and your position in it?
Ross Cooper
Every investor today, every owner is dealing with the higher cost of capital. That's just the reality of the situation that we’re in, the world that we're in. We look at our cost of capital on a daily basis, and my job as Chief Investment Officer is to make investments on behalf of the company that are in excess of our cost of capital and therefore accretive. If we're doing deals that are below the cost of capital, then we're not making money for our shareholders. So every decision that we make has that backdrop in mind. And so it makes it very difficult when interest rates have moved dramatically in a very short period of time. And for all the reasons that we talked about, the fundamentals of our business, cap rates on high quality retail have not moved anywhere near as quickly or as dramatically as rates have. So how do you get creative? What other strategies do you have to continue to invest your capital at a spread? For us today, while we did recently complete an acquisition of a high quality shopping center just outside of D.C. in August, a 500,000 square foot Wegmans anchored center…
Spencer Levy
Did you pay cash for that?
Ross Cooper
…in Virginia. We did pay cash for that. That was on balance sheet and that was just north of a seven cap. We were able to very selectively buy that unique asset. But the likelihood is that as we go forward, as we sit here today, one off acquisitions are going to be much more challenging for us given where cost of capital has gone versus where cap rates are for that. So we have other lines of business, other lines of our investment strategy that we can then focus on when you're at this part of the cycle, to still be active and be opportunistic but at prices and yields that makes sense. So we have a structured investment program that we really kick started at the beginning of the pandemic. So we've been putting out preferred equity or mezz financing to borrowers and operators that own quality shopping centers that need capital for one reason or another, whether it's acquisition, financing or it's a redevelopment opportunity where the owner needs some additional capital. And we've been able to invest that in a piece of the capital stack that's junior to the senior debt, but senior to the equity. And being in that piece of the capital stack, we've been able to get more attractive returns.
Spencer Levy
And just because I could hear my producers, a ROFO is a right of first offer. A ROFR is a right of first refusal. And they are different. And there are certainly benefits to both.
Ross Cooper
Yes.
Spencer Levy
So let me go back to the cost of capital thing, because I think the cost of capital for a lot of folks is a mystery as it relates to not debt, because that's pretty much well known. This is what that costs. But the cost of equity. How do you look at your cost of equity, cost of capital?
Ross Cooper
It's something that is calculated and we have sort of an internal definition or calculation that we don't necessarily externally communicate. But at the end of the day, there's a dividend yield that we pay out that an investor is going to receive. There's an expectation of growth within the stock that any investor that buys our stock is anticipating or hoping for. But we also have free cash flow after dividends or tenant improvement allowances, leasing commissions, CapEx, that is our cheapest form of capital. So we have about $150 million of free cash flow after those expenses per year, which we can then invest, and that particular component is a much lower cost than if we were to issue stock and what we calculate that costs us. So when you sort of blend it all together, debt costs X, we have Y amount of free cash flow after dividends, and we have some expectation for our cost of equity. That's when we can determine what exactly we view as our hurdle rate or our bogey. And then my team and I have to go out and find opportunities to invest at a yield that's higher than that.
Spencer Levy
Now, a lot of REIT's, a lot are not just using their own stock, they're not just paying cash, they’re not using debt. They're doing joint ventures with large institutional investors. You yourself mentioned, Ross, in the multifamily space, you're doing some JV work. Tell us about the JV work that you do.
Ross Cooper
Yeah, and we've historically had an institutional joint venture platform. We have a portfolio management team that oversees those relationships and is essentially the liaison between our operating platform and our joint venture partners. Back in 1999, we created our first institutional joint venture, which was our Kimco Income REIT here with the New York State Common Retirement Fund that we still own a portfolio of assets with them today. When we acquired the Pan Pacific Portfolio Company in 2007, as well as some other regional portfolios, we established a large joint venture with Prudential, PGIM. We have one with Blackstone, we have one with the Canadian Pension Plan, CPPIB, as well as several other institutional joint venture partners. So that's always been a part of our business and a part of the way that we own assets that's important. There are certainly benefits to having partners in certain assets, particularly on the multifamily side, where they bring a level of expertise that we're building, but we don't necessarily have the same historical knowledge in multifamily as we do in retail. And then on the retail side, there are points in time where talking about cost of capital, where our capital costs are a bit elevated and we can team up with an institution that has a lower cost of capital, that wants to participate in open air retail and needs an operating partner that has the expertise and the history that we do. So it's a really nice combination relationship that we have. We oftentimes tend to grow the joint venture platform when our cost of capital is elevated. There are other times in the cycle where we have joint venture partners that are looking to exit or need some liquidity for one reason or another, and we may look to buy them out. So it's fluid, it ebbs and flows, but it's always going to be a part of our structure and the way that we own assets, to have partners on certain assets selectively.
Spencer Levy
We talked about challenges of today's capital markets. Let's talk about what I consider to be the primary challenge of retail going back ten years, which was the penetration of e-commerce. How do you see it today?
Ross Cooper
Omnichannel is something that has been talked about for 7 or 8 years, as the e-commerce platform a lot of these retailers were supposed to basically make bricks and mortar retail go the way of the dinosaur. Clearly, that hasn't happened. And the reason that that hasn't happened is because retailers have come to realize, as have consumers, that having options and having a physical presence is critical in addition to having an online platform. There are very few retailers today that have one and not the other. You can pretty much name in either side on one hand, the successful e-commerce only retailers and those that have no online presence. So having both is critical. I think the retailers themselves, the pendulum really swung from 2016 up until about right before the pandemic in terms of putting a lot of their free capital into growing their online brand. And they were spending a lot of money to build that up, to get market share, to provide an amenity to the customer that they thought was necessary, but not getting the return on that capital and the margins were eroding pretty dramatically. What retailers came to figure out, and I think the pandemic really impacted this in a significant way was that having a sale in your store and having the customer come to the store and actually pick up the good is a much more profitable transaction than anything else. And so now you have this relationship where the retailer is very happy for you to go online, go to their website or go on your phone and buy something on their website, but come pick it up in the store and maybe you'll see something when you're in there that you wanted to buy that you didn't realize that you wanted. Or look at the results and the returns are significantly lower when somebody comes and actually buys it in-person versus just clicking on a button, having it delivered to them and then saying, oh, it's not the right size or fit, just send it right back. And you're seeing retailers really push back on that. Return times have really shortened. A lot of retailers that were very flexible with what they would take back and when they would take it back have really truncated that time frame to make it more difficult. Serial, I would say, returners are being flagged and in some cases are being sort of blacklisted. And you've seen retailers that are now charging for delivery and charging for returns, which just a couple of years ago was unheard of. And I find it fascinating to see like, you know, commercials for Domino's, which is like the original retail delivery service now paying you three bucks to go and actually pick up your own pizza as opposed to having somebody deliver it to you. It's because it's very expensive to deliver to somebody.
Spencer Levy
Well, I still don't think Domino's takes returns, so maybe they're saving some money on that. I don't think you can return Domino's Pizza. Let's stay on the innovation topic for just a moment. I'd love to hear what you're seeing in innovation because you mentioned you're piloting some things. What are those things?
Ross Cooper
We try to be very creative and entrepreneurial with local businesses. We have a fully integrated pop up type of program that if you have a concept that you want to pitch but you don't necessarily have the ability or the wherewithal to sign a long term lease, we're happy to test pilot it, give it a shot, maybe even free rent for 90 days, and then it converts into a permanent lease, if you're doing the business that you think that you that you should or can. We have different businesses where we've had various entrepreneurs come to us and say, I want to try out a certain concept and we'll give it a go. We're all about curating new businesses, new concepts and hopefully having that grow into not just a permanent location here, but maybe something that you can open in other locations as well. So we're always happy to try out different things.
Spencer Levy
So let's talk about ESG for just a moment. So as I was driving into your center today, I noticed there were some EV charging stations here. Tell us about how Kimco's approaching the E in ESG, EV charging stations or otherwise.
Ross Cooper
Yeah. So ESG is a sort of catchall topic that means something different to everybody. We have a wonderful team here that is dedicated to ESG, whose, you know, sole function within the organization is focus to all things that are ESG. But it's very important that it's not just done in isolation in a vacuum. So the team that we have here has done a tremendous job making sure that that is sort of infiltrating the entire fabric of the organization. So as we're making various decisions, whether it's leasing decisions, financing decisions, property management decisions, it's all factored into that, whether it be EV charging stations, which have, I think, a benefit of providing an amenity. In some cases, depending on how you structure it, it might have a little bit of additional income associated with that.
Spencer Levy
Pause there for just a moment. We’ll keep going. How much are they being used? Because I have my electric car. I'm very proud of my electric car. I have never used an EV charging station because I don't need to. Are they actually being used?
Ross Cooper
I also have an electric car that I've never used the charger outside of my garage either, so I'm not using it. But I can tell you just from looking out in the parking lot, there are people that are using it, whether it be because they don't have the charger in their garage or if you're living in an apartment versus a single family home. I think that it's different for different people and their utility of it, but it is getting used. And clearly when you talk to the Teslas of the world or some of the other third parties, they see a tremendous growth opportunity with that. But going back to the ESG topic, we've been fortunate that whether we wanted to focus on it a decade ago or not, we didn't really have a choice either way, because we have a significant amount of European investors and shareholders that we give a lot of credit to that were well ahead of the curve versus the American investors, and really mandated and opened our eyes to the importance of ESG well over a decade ago. So we're fortunate that I think we've had a significant head start. We have, as I mentioned, a wonderful team that focuses on it. And in many cases, we just honestly believe that it's the right thing to do, to be environmentally focused and aware. And there are just really, in many cases, minor things that you can do that have tremendous impact. And, you know, not just to be altruistic but also benefits us as landlords and shopping center owners. We have the LED lighting that we put into all of our shopping centers that once you've installed them, are a lot less expensive and last a lot longer. You have the ability to utilize solar and actually get a return on that. Now it doesn't work in every market and certain jurisdictions are, I think, more progressive in terms of credits and whatnot, but utilizing that in certain areas has an actual monetary benefit to the company. We issued a couple of years ago our first green bond, which the funds that we received from issuing that bond have been used for the exclusive purpose of energy efficient type of development and initiatives. So there's a lot of different ways that we've been able to benefit from ESG besides just being good stewards of the community, which is obviously very important.
Spencer Levy
Property and casualty insurance doesn't get a lot of attention on these shows. The costs are going through the roof right now. How do you see it?
Ross Cooper
Yeah. So one of the fortunate components of our company, as we talked about, is the geographic diversification. So owning a significant amount of properties that are spread out throughout different parts of the country that are exposed to different elements really helps blend our costs on insurance over the entire portfolio. So we have a captive policy that while we have assets that might be in hurricane zones or flood zones or fire are also in much less risky, per the insurance company, locations. So being able to blend that over the entirety of our portfolio keeps our costs down. And again, when talking about size and scale, that's where being a large public institution that owns a lot of property is advantageous to the small one off or private investor that has a smaller portfolio that just doesn't have access to less expensive insurance.
Spencer Levy
Two more questions. Safety. You brought up safety a moment ago. We know some of the concepts we talk about: more lighting. What else are you doing? How important is this as you become, number one, has it changed, and two, what are you doing about it?
Ross Cooper
It's become arguably the most important or talked about topic with many, if not all of our retailers. Everybody's experiencing it. And while it might differ somewhat geographically or based upon certain political, you know, areas throughout the country, it is universal and it is uniform. We have, I would say, the critical part and reaction and what needs to be done, first and foremost is communication. So as I talked about with our retailers, we're constantly communicating. We're constantly doing portfolio reviews. When there's issues, they're picking up the phone, they're calling us, we're responding. We've hired a national head of security that oversees our processes and our programs across all of our assets and making sure that we have a uniform structure and process for handling issues, whether it be security, organized retail crime, homelessness, vagrancy, whatever the case may be at the property. And while the retailer themselves is typically responsible for what occurs within their four walls, we need to make sure that we are doing our part in ensuring the safety and the security of the common areas and the exterior. Now, there's only so much that we can do, particularly if you're in a location where people are stealing and they're not necessarily being prosecuted. But what we can do is do everything in our power to deter people from coming to our property. And while it may not stop crime altogether, it may push it somewhere else.
Spencer Levy
When we say security, it’s the, as you put it, organized retail theft, that's becoming a significant issue in some markets. And you're seeing in your own portfolio.
Ross Cooper
Yeah, it's all of the above. It's the goods, but it's protecting the customers as well as obviously the employees of the retailer. So we've added additional camera, we've added additional security. It might be an off duty police officer or security guard that we're paying additional to have come to our properties. And it has been the, I wouldn't say the only line item, but one of the line items in the expense for the retailer that they're very happy to contribute their pro rata share towards. Because without having that additional security or that additional protection, if the property or that shop or that tenant starts to get a reputation for not being secure and for being dangerous, then all bets are off. The retailer is not going to perform well. Our center is not going to attract the appropriate tenants we need. And we've had several instances where retailers have told us that they've closed certain locations, not within our shopping centers, but some other centers within the market because the landlord has not done their part in protecting them. And we have one particular situation that we just signed an anchor lease with a tenant that relocated from another center that specifically came to the Kimco shopping center because they liked the way that we were handling security at that property. So it is a differentiator for Kimco.
Spencer Levy
Last question: labor. In just about every show, labor has come up as a major issue. Now recognizing that this is primarily your retailer's issue to staff their own stores, how do you see it?
Ross Cooper
What we've tried to do is to be a good partner to our retailers. So, for instance, we have a new, very large development in southern Florida called Dania Point. A mixed use asset, primo right off I-95. It is the single largest investment that the company has made, and we've been able to attract a variety of wonderful retailers to the property. There's multifamily there. Spirit Airlines is building their headquarters at the property, which we'll see if that ultimately becomes Jet Blue. But in any event, one of the challenges was we were bringing on so many great tenants at one time that the retailers were having a tough time finding workers for all these new stores that were opening up. So we dedicated an entire day to having a job fair and bringing people in, helping these retailers find people to work, which also were benefiting the retailers that were open because now all of a sudden we have all this traffic on the property. So, it's being a good partner to our retailer. It's providing whatever assistance we can, but it's definitely a challenge for some of our retailers. And when you look at where unemployment is, it's understandable that it can be difficult, but it doesn't seem to be something that's stopping our retailers from expanding at this point in time.
Spencer Levy
Well, on behalf of The Weekly Take, I want to thank Ross Cooper, the President and CIO of Kimco Realty. Ross, thank you so much.
Ross Cooper
Thank you.
Spencer Levy
And a big thanks to you and our audience for tuning in. We'll have more to come as we head into the homestretch of our programming calendar. We'll look into the future of mixed use real estate with guests from Nuveen and CBRE Investment Management. And then it's our annual year in review, when we explore the major themes and trends of 2023, and also rewind some insightful outtakes that will add color and wisdom. More valuable takeaways from the great guests we featured on the air this year. For now, we hope you'll share this episode as well as subscribe, rate and review us on Apple Podcasts, Spotify or wherever you listen. Plus, check out our website CBRE.com/TheWeeklyTake, to find more information on this and other recent episodes. Thanks again for joining us. I'm Spencer Levy. Be smart. Be safe. Be well.
.jpg)
