Earnings Call Transcript
KIMCO REALTY CORP (KIM)
Earnings Call Transcript - KIM Q2 2024
Operator, Operator
Good day and welcome to the Kimco Realty Second Quarter 2024 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 this event is being recorded. I would now like to turn the conference over to David Bujnicki, Senior Vice President and Investor Relations Strategy. Please go ahead.
David Bujnicki, Senior Vice President and Investor Relations Strategy
Good morning and thank you for joining Kimco's quarterly earnings call. The Kimco management team participating on the call today include Conor Flynn, Kimco's CEO; Ross Cooper, President and Chief Investment Officer; Glenn Cohen, our CFO; Dave Jamieson, Kimco's Chief Operating Officer; as well as other members of our executive team that are also available to answer questions during the call. As a reminder, statements made during 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 reference certain non-GAAP financial measures that we believe help investors better understand Kimco's operating results. Reconciliations of these non-GAAP financial measures can be found in our quarterly supplemental financial information on the Kimco Investor Relations website. If there are any technical difficulties during our call, we'll try to resolve them 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.
Conor Flynn, CEO
Thanks, Dave, and good morning. I will begin with an overview of the Kimco consumer, provide an update on the favorable supply and demand environment for our business, and then share some highlights of our strong operating results, all of which will underscore the resiliency of our high-quality, grocery-anchored, and mixed-use portfolio. We'll also cover the current transaction environment, and Glenn will provide additional financial metrics, report on our balance sheet position, and provide our updated outlook. We continue to navigate an economy that gives off mixed signals. A recent Bloomberg report noted that American consumer savings have declined, with the excess savings cushions built up during the pandemic used to offset rising prices that are no longer available. On the other hand, the labor market remains strong, reflecting both job growth and wage growth in areas situated in our portfolio. This has led the consumer to remain resilient, as they've tempered spending but not retrenched. As JP Morgan recently reported, the consumer is now rotating towards staples and seeking value at Walmart, Costco, and off-price retailers who are gaining market share. As such, we've benefited from the needs-oriented nature of our portfolio, as over 83% of our annual base rents come from grocery-anchored, open-air shopping centers. It is also why traffic at our properties has increased both sequentially and year-over-year. This has positively translated to our operating fundamentals, as our leasing team is firing on all cylinders. Demand for our well-located product remains strong, as tenants seek to retain existing space or add new locations. Our retention levels are near all-time highs, with heavy competition for any vacancies generating increasing rents, better credit, and higher valuations. Nationally, store openings are outpacing closings, and the lack of quality retail is positively impacting tenant bankruptcy auctions, as leases are being acquired by healthy tenants striving to meet their expansion goals. In terms of new retail supply, the outlet remains in our favor. It has been well-documented that shopping center development, currently standing at approximately 0.2% of existing inventory, remains exceedingly low. The shopping center sector has been sub-1% since 2010 and has provided a meaningful tailwind to drive record-low vacancies across the country. More importantly, we don't see this dynamic changing anytime soon. As we have previously noted, rents would need to increase upwards of 35% to make new development investment worthwhile. This assertion was recently validated by a notable equity research firm, which calculated that the range of rent increases required to stimulate creative development in the top 50 markets needed to be between 35% to 55%. All of this highlights the strength and unique position of our portfolio. With our focus on grocery-anchored necessity-based off-price retail, we are able to generate solid results in all kinds of economic weather, including uncertainty from national elections, potential policy shifts, and predictions of hard or soft landings. Our company, which features a resilient, well-located portfolio, a solid balance sheet, and a best-in-class team, stands out. To further illustrate this point, let me touch on a few operating highlights. During the second quarter, we signed 144 new leases totaling 669,000 square feet of pro-rated GLA with rent spreads of 26.3%, our 11th consecutive quarter of double-digit new leasing spreads. Renewals and options continued their positive trend, with 338 renewals and options completed at a spread of 9%. Overall deal volume totaled 2.3 million square feet with combined rent spreads of 11.7%. Leasing velocity and retention drove pro-rated occupancy higher by 20 basis points sequentially to 96.2%. Pro-rated anchored occupancy increased 30 basis points from last quarter to 98.1% and was up 40 basis points year-over-year. Small shop occupancy increased 20 basis points sequentially to 91.7%, matching our all-time high set in Q4 of 2023 and representing an increase of 70 basis points year-over-year. Of note, we continue to derive meaningful outperformance from the RPT portfolio, validating our acquisition thesis. We executed 9 new leases in Q2 with comparable rent spreads of 146%, driven by a grocery anchor replacing a furniture store and a strong fitness operator replacing a weaker fitness credit. We also executed 24 renewals and options during Q2 at a 17% average spread. Year-to-date, we have executed 19 new leases at former RPT sites with spreads of 87%, and 46 renewals and options with spreads of 14%. The former RPT portfolio also produced same-site NOI of 4.5% for the quarter and 3.7% year-to-date, meaningfully outperforming our underwriting. We also increased our cost-saving synergies to be realized this year as well as additional future revenue opportunities stemming from increasing the RPT small shop portfolio, which currently sits at over 400 basis points below Kimco's. Additional growth in ancillary income will also be generated by our specialty leasing program. In closing, we are enthused by the performance of our team and our portfolio, resulting in increases to our FFO and same-site NOI outlook. The growth profile of our portfolio continues to trend up, and our team continues to look across the investment spectrum for new growth opportunities, all while remaining vigilant on costs.
Ross Cooper, President and Chief Investment Officer
Thank you, Conor, and good morning. I hope everyone is having a wonderful summer. On last quarter's call, we talked about the solid fundamentals of the open-air retail format. We further discussed the volatility in the capital markets and how it has tempered the transaction environment. While those same themes continue to persist, we are positioned to take advantage of dislocations within the market to invest accretively, given our favorable access to capital and multiple investment platforms. We continue to see unique opportunities on both the structured investment side and via targeted acquisition opportunities for larger format open-air centers. In the second quarter, we funded several new structured investments that all have unique attributes but share a general theme of high-quality real estate, accretive yields, and a right to acquire if they are marketed for sale in the future. I'll touch on three of the more significant transactions. We provided $8 million of mezzanine financing for an infill core Giant Foods grocery-anchored regional center in the dense market of Alexandria, Virginia; $10 million of mezzanine financing for the acquisition of a Sprouts grocery-anchored center in Atlanta, Georgia; and we also funded a senior loan at The RIM in San Antonio for $146 million at a 9% interest rate. We also converted our existing $50 million preferred equity position in The RIM to mezzanine financing, giving us greater control of the capital stack on a trophy asset that is one of the most visited properties, not just in Texas, but all over the U.S. On the acquisition side, we are encouraged by the deal flow and possibilities as pricing is moving closer to our hurdle rates. Neighborhood grocery-anchored centers in our core markets remain aggressively priced in the 5% to 6% cap rate range, while larger format assets in similar geographies, with solid demographics and densification opportunities, are trading at higher cap rates due to their operational dynamics and the larger check sizes. These unique attributes align well with the Kimco platform and represent a differentiator that we believe allows for a better risk-adjusted return for our shareholders. We remain confident in achieving our 2024 acquisitions range of $300 million to $350 million, inclusive of structured investments. As it relates to dispositions, following the completion of the $248 million RPT asset sales in the first quarter, we have substantially completed our 2024 plan. Any dispositions in the second half of the year will be very modest and at a much lower cap rate. Therefore, we have reduced our disposition guidance for this year to a new range of $300 million to $350 million, which is net neutral with our 2024 acquisition target with a slightly lower blended weighted average cap rate. Now on to Glenn for an update on the financial aspects of the quarter.
Glenn Cohen, CFO
Thanks, Ross, and good morning. Our high-quality operating portfolio generated strong second quarter results as we maintained a strong balance sheet and enhanced our liquidity position. Highlights for the second quarter include continued positive leasing activity, producing increased occupancy, another quarter of double-digit leasing spreads, and solid same-site NOI growth. Now for some details on our second quarter results. FFO was $276 million, or $0.41 per diluted share, as compared to last year's second quarter results of $243.9 million, or $0.39 per diluted share, representing per share growth of 5.1%. We produced $387.9 million of total pro-rata NOI in the second quarter, an increase of $45.8 million over the same period in the prior year. This growth was driven by $38.3 million of pro-rata NOI from the RPT acquisition, $12.8 million from higher minimum rents, and $1.6 million from higher net recoveries from the balance of the consolidated portfolio. These consolidated NOI increases were impacted by lower percentage rent and other income of $3.5 million, which was mostly due to timing, and higher credit loss of $1.4 million. Our credit loss for the first half of the year was 86 basis points, the midpoint of our bad debt assumption. The net NOI increase was offset by greater pro-rata interest expense of $14 million due to the higher interest rate on the $500 million bond issued in the fourth quarter last year related to refinancing lower coupon debt, $510 million of additional debt in connection with the RPT acquisition, and lower fair market value amortization related to the payoff of a Weingarten bond. The operating portfolio continues to produce strong results as Conor outlined. Same-site NOI growth was positive 3% for the second quarter. The primary driver was higher minimum rents contributing positive 3.4%, driven by quicker rent commencements from the signed not-open pipeline, which compressed 10 basis points from last quarter to 320 basis points. At the end of June, the signed-not-open pipeline represents 426 leases and $63 million of ABR, of which $30 million is expected to commence in the second half of the year, generating $8 million for the remainder of the year. For the six months of 2024, same-site NOI growth was positive 3.4%. These results demonstrate the continued strength of our well-located portfolio. Turning to the balance sheet, we ended the second quarter 2024 with consolidated net debt to EBITDA of 5.5 times. On a look-through basis, including pro-rata JV debt and perpetual preferred stock outstanding, net debt to EBITDA was 5.8 times. These metrics would have been one tick better if we included the full quarter of income from the $146 million structured investment in The RIM Shopping Center made in late June. Subsequent to the quarter-end, we increased the size of our $200 million term loan by an additional $300 million. The term loan has a final maturity date in 2029, and we swapped the $300 million to a fixed rate of 4.78%, including our credit spread for the full term. We used the proceeds to repay $220 million outstanding on our $2 billion revolving credit facility, which had a borrowing coupon of 6.19%. The balance of the funds was invested in an interest-bearing account earning in the mid-fives pending use for investment. Separately, we achieved the high end of our sustainability goals by surpassing our required scope one and scope two greenhouse gas emission reduction targets. As a result, the borrowing spread on our $2 billion revolving credit facility and our $310 million term loan is reduced under the green pricing feature. The reduction is 4 basis points from the stated credit spread for both facilities, and we get a one-basis-point reduction in our facility fee on our revolving credit facility. Now for an update on our outlook. Based on our strong first half results and our expectations for the balance of the year, we are again raising our FFO per diluted share range from $1.56 to $1.60 to a new range of $1.60 to $1.62. Our increased FFO per share guidance range incorporates the following updates to our full-year assumptions: same-site NOI growth of 2.75% to 3.25% from the previous level of 2.25% to 3% and is inclusive of the RPT assets and a credit loss assumption of 75 basis points to 100 basis points. Full-year cost-saving synergies from the RPT acquisition are improving to $35 million to $36 million. Interest income is expected to be between $13 million to $15 million and lower disposition guidance of $300 million to $350 million. Our other full-year guidance assumptions remain intact. I want to thank all our associates whose efforts significantly contributed to our outstanding results. We are well-positioned to deliver growth. And with that, we're ready to take your questions.
Operator, Operator
We will now begin the question-and-answer session. Our first question comes from Michael Goldsmith with UBS. Please go ahead.
Michael Goldsmith, Analyst
Good morning. Thanks a lot for taking my question. My question is on the guidance. And you took the FFO guidance higher to $1.60 to $1.62. And that was supported by both the higher same property NOI expectations as well as some other moving pieces. Can you just walk through how much of a contribution of the FFO guidance is driven by the same property NOI? And what are the other pieces that are driving the forecast higher?
Glenn Cohen, CFO
Sure, Michael. The primary driver really is the operating portfolio. Again, our rent commencements have been quicker than what we had originally forecasted. That's a major driver. And that also drives same-site NOI growth because it's cash-based. Expense control is another piece. We've been really very focused on expense control both at the property level and the G&A level. Those are the primary drivers, but it's really coming from the operating portfolio.
Conor Flynn, CEO
Yeah, I would also say, Michael, that as we talked about, it's also the RPT. We've had better execution than planned. So that's doing well for us as well from the guidance increase.
Michael Goldsmith, Analyst
Just as a related follow-up here, you've done same property NOI of three, four for the first half of the year. The guidance assumes that decelerates in the back half. Can you kind of walk through what are the factors that are going to drive that deceleration in the back half of the year?
Glenn Cohen, CFO
We've increased the guidance range for same site twice during the year. Again, the portfolio is performing very well. We do have a tougher comp in the third quarter of last year based on some one-time things that were in there which has a little bit of an impact. But overall, we feel very comfortable with the revised guidance range that we've put out.
Conor Flynn, CEO
Yeah, and we look at same site as an annualized number. There's always, as Glenn mentioned, noise quarter to quarter, timing of expenses, recoveries, et cetera. It really is always intended to be an annualized number. So when you look at the annual outlook and we've increased that guidance, it's a good indication of the direction we feel we're going.
Michael Goldsmith, Analyst
Got it. Thank you very much. Good luck in the back half.
Operator, Operator
Our next question comes from Samir Khanal with Evercore ISI. Please go ahead.
Samir Khanal, Analyst
Good morning, everybody. Hey, Conor, you spoke about the RPT portfolio, the 400 basis point spread and shop occupancy. I was just trying to understand kind of the ability to close this gap. I mean, what's the timing on this? Considering that I would imagine some of that is probably harder to lease space, right? You need some capital spend on that for anchor repositioning. So help us walk through kind of how to think about that closure of the gap over the next several years. Thanks.
Conor Flynn, CEO
Yeah, happy to, Samir. We look at that vacancy as real upside. So when you look at the signed-not-open pipeline of the former RPT portfolio, that's really getting compressed. So we were driving that the first two quarters. That's why you saw over 4% same site NOI in that portfolio for the second quarter. Now, as those anchors start to come online, that's when you're going to start to see the pickup in the small shop leasing. Because typically, you want to have an operating anchor that's easier to fill around where you can mark to market those rents around the former vacancy. Previously, if you have a vacant anchor box, it's a lot harder to lease the small shops around that vacancy. So we anticipate, because we've seen it in our own portfolio, the small shop leasing continues to show strength and acceleration. We are very focused on driving the small shop occupancy in that portfolio because that's where we see upside, and that's really sort of the investment pieces that we continue to focus on and execute on.
Operator, Operator
The next question comes from Dori Kesten with Wells Fargo. Please go ahead.
Dori Kesten, Analyst
Thanks. Good morning. The Strip had a nice run earlier this week. Based on your discussions with private equity peers, how would you describe interest in the Strip today versus six months ago? And then how are you viewing your own NAV today versus where you're trading?
Conor Flynn, CEO
Thanks, Dori. We've been pretty consistent this year that capital formations continue to accelerate for open-air shopping centers. I think when you look at the recent transactions that have been announced, Cohen & Steers obviously coming in a joint venture to buy a grocery-anchored shopping center. The amount of capital formations from institutional investors and private equity clearly shows that the supply and demand we've been talking about is starting to come into focus because it's showing up in the numbers and is producing significant growth. I think the other big piece of it is that the cap rates for the product are still relatively attractive when you look at other sectors. I think that is really driving a lot of interest because of the lack of new supply on the horizon.
Ross Cooper, President and Chief Investment Officer
I would just add, we have a pretty strong purview given the joint venture partners that we have, which are all diverse and have different views on retail. What we're seeing across the board is a lot of private equity and other formations have gone from, I would say, retail curious to retail active. That really is something that we think is going to push both cap rates activity and investment in the back half of the year and beyond.
Operator, Operator
And the next question comes from Juan Sanabria with BMO Capital Markets. Please go ahead.
Juan Sanabria, Analyst
Hi, thanks for the time. Just curious on the structured investments, if you can comment on the types of opportunities incrementally you're seeing in the market yield expectations. And you mentioned as well, maybe more opportunities for some bigger centers and how we should think about incremental deal flow in the second half and going into 2025.
Ross Cooper, President and Chief Investment Officer
Absolutely. The structured investment is a unique product that every deal is a little bit different. I indicated three of the transactions that we closed on in the second quarter; it was a combination of a recap of an existing owner. One was acquisition financing. And then, of course, The RIM was an exciting, unique opportunity where we have the ability to further strengthen our position in a dominant asset that has a tremendous amount of equity embedded in it and ultimately could become an acquisitions target. So whatever the outcome of that asset investment is, it's going to be a positive for Kimco. I think that on a go-forward basis, as we look at the third and the fourth quarters, our expectation is that our investment activity will be more heavily weighted towards core acquisitions as some of the structured investments have been completed. They're sort of one-off and unique in nature. But there's definitely a place for our capital within the stack, whether it be repositioning, financing, new acquisitions, as we've seen volumes start to increase and a lot more optimism. As the rate environment shows an expectation that the cuts might be coming, there just seems to be a bit more stability and optimism in the environment. I think the back half of the year is going to be positive for Kimco.
Operator, Operator
And the next question comes from Greg McGinniss with Deutsche Bank. Please go ahead.
Greg McGinniss, Analyst
Hey, good morning. Ross, just to better understand the acquisition guidance, the 7.5% blended cap for the year on midpoint $325 million of investment seems to imply a 0% cap rate on the remaining $80 million. It sounds like you're talking about core assets, but are we missing something on the map there? Or is there a plan to buy land?
Ross Cooper, President and Chief Investment Officer
It's certainly not a land plan. I think when you look at the guidance, it is a blended spread between our structured investments and our core activity. As you've seen clearly, the first half of the year has been heavily weighted toward structured investments. We anticipate that in the second half of the year, there's going to be more activity on core acquisitions. So as we have a little bit more color and clarity on the specifics of the deals we're looking at now, we'll certainly update that guidance in that range. But with where we sit today and what we know is in the pipeline, we're comfortable with where we sit.
Greg McGinniss, Analyst
Okay. And on the development side, Coulter Place seems to have pretty limited investment this quarter. Is there a slowdown to development happening there? Any color would be appreciated.
Conor Flynn, CEO
Right now, we've poured the foundation for the parking, the subterranean parking, and then the ground floor retail, construction's underway. Just as a reminder for us, it's a preferred equity structure, so our capital investment is limited.
Glenn Cohen, CFO
As a matter of fact, I'll just add that our capital is actually fully in, so you won't see any increase going forward.
Operator, Operator
And the next question comes from Craig Mailman with Citi. Please go ahead.
Craig Mailman, Analyst
Hey, guys. Just to go back to The RIMs a bit, you guys are about $200 million of the capital stack now. Could you give us a sense of maybe what the LTV of that overall property is? Given the 9% rate, it seems like, and versus what others are getting for high-quality kind of Strip and open air that seems kind of a high coupon it is? I know you alluded to you guys always look from loan to own, but is this something in the near term you guys could get an equity stake in? How should we kind of think about this particular investment?
Conor Flynn, CEO
Sure. Happy to. Yeah. The RIM is really an exceptional asset. It performs really well. Our partner/borrower has executed on the business plan exceptionally well. Leasing is strong. We're right around 100% occupied there. Our expectation in terms of recent valuations is that there's at least $50 million of equity in that deal. So when you're looking at it from our position, being just under $200 million from an LTV standpoint, we're right at that 80%, which is really where the structured investment program is intended to cap out. We feel very comfortable with where we sit. Whether we get repaid and keep our position in the deal or ultimately own it, I think either outcome would be a fantastic one for Kimco. You are correct that the coupon is fairly high. It is intended to be relatively short-term, while I think the borrowers consider what the next step is there, whether it be a refinance or sale or otherwise. There are some moving pieces there, but we're in a really strong position.
Operator, Operator
The next question comes from Alexandra Goldfarb with Piper Sandler. Please go ahead.
Alexander Goldfarb, Analyst
Good morning. I'm still Alexander Goldfarb. A question for you. On the small shop, because that's where a lot of the juice is coming from, not sure if you've quantified it, but maybe you could. The impact to FFO or NOI margin as the small shop leases up, becomes occupied, paying rents, you mentioned 400 basis points lower small shop occupancy in the RPT versus Kimco. Can you just give some framework around what the earnings benefit is as the small shop takes effect, maybe every 100 bps of small shop occupancy versus the larger boxes? Because I've got to believe that the earnings impact is superior, just given the better economics.
Ross Cooper, President and Chief Investment Officer
Yeah, great question, Alex. Doing the math quickly, you have about 25 million square feet of small shop space. If you take 100 basis points of that, it's about 250,000. Average rent for our small shops is around $32 a foot. So multiply the two, you get around $8 million of ABR from that, and that excludes any recovery benefit you would get from that as well. So if you take that, quantify it into the FFO gain, there's obviously significant upside. When you look at how we've been trending, on the small shop activity for Kimco, and what we anticipate we could potentially do on the RPT side, we see real benefits going forward. On the SNO pipeline, that's $63 million. On the non-anchor side, it represents about 47% of that total $63 million. So you're starting to see meaningful contribution from the small shop growth.
Conor Flynn, CEO
Small shops also typically take less time and less capital to come online. So really, it's a focus. Clearly, we understand the upside, and we continue to ride the momentum.
Operator, Operator
And the next question comes from Floris van Dijkum with Compass Point. Please go ahead.
Floris van Dijkum, Analyst
Hey, guys. Following up on the small shop concept, obviously it's a huge earnings driver and upside potential. I know you guys are around 49% of ABR from shop space today. Where do you think, once the portfolio stabilizes, that percentage of ABR from shop space goes to or can go to?
Conor Flynn, CEO
It's a good question, Floris. I think we are laser-focused on driving that small shop occupancy. Obviously, we're in uncharted territories because the drag that the RPT portfolio had on Kimco's small shop occupancy. We’re setting records this quarter, so we have the ability to continue to push. We don't see any hurdles in front of us that should derail the momentum we're seeing. Our focus is to generate as much growth from the small shop side as possible. The occupancy on the anchors is over 98%. There’s still a lot of demand there, as I mentioned earlier. A lot of leases in bankruptcy auctions are being acquired because they can't find good quality retail space. They're acquiring it out of the bankruptcy process. I think when you look at the small shop occupancy side, we're not sure how high we can push it, but we will push it as hard as we can to all-time highs.
Operator, Operator
The next question comes from Jeff Spector with Bank of America. Please go ahead.
Jeff Spector, Analyst
Good morning. Conor, just based on your opening remarks around the economy, mixed signals, the consumer, what are the marching orders to the leasing team at this point? Are you changing your leasing strategy or staying at the pace? Thank you.
Conor Flynn, CEO
Thanks, Jeff. It's pretty consistent. I think when you've got the advantage that we have in terms of the advantages of scale, we try to be proactive and work with our partners, our retailers, to try and make sure that we are the first call and looking out two, three, five years even for their growth strategy. The benefit of Kimco's portfolio is that many of our retailers are regional, and some of them have yet to even consider some of our target areas where we have phenomenal portfolios. When you look at some of the retailers that have done quite well recently, like Sprouts or Farmer’s Market, they haven't really penetrated some of our markets. We did five grocery-anchored leases this quarter; five. We feel that demand is still accelerating. A lot of our strategy is to utilize the platform and the team to unlock more value by adding groceries to it. There's a lot of momentum here. The focus is on executing. We have a lot of tools at our disposal; we just designed a brand-new interactive site plan that we're really excited about that links to all of our data. It's a unique tool that allows our field team to use it in the field with the retailers to generate more leasing opportunities. So, everything is clicking on all cylinders right now, and obviously, you can tell we’re super excited to continue the momentum.
Operator, Operator
And the next question comes from Ronald Kamdem with Morgan Stanley. Please go ahead.
Ronald Kamdem, Analyst
Hey, just got two quick ones. One on the RPT. Just looking at the slide on the deck, which was really helpful, I think we talked about the 420 basis points, small shop occupancy. But can you hit on just the Mary Brickell Village redevelopment, just the timing? I know it's farther out, but how is that sort of progressing? How are you thinking about executing on that would be question one? And then the question two is just on the breadcrumbs on same store and why? It seems like you're going to continue to gain occupancy from here. The portfolio is pretty full. With similar bad debt assumptions as this year, as last year, is there any reason you can't do another sort of 3% long-term going forward? What are the puts and takes there? Thanks.
Conor Flynn, CEO
On the Mary Brickell side, you're right. There’s a tremendous amount of opportunity there. Right now, the reinvention of the merchandising plan and the releasing opportunities are significant. You're seeing rents go from the 40s up into the triple digits. Our focus right now is on near-term opportunities to re-merchandise and reposition healthy portions of that asset. And that will be the focus in the near term. As it relates to your other question...
Glenn Cohen, CFO
As it relates to the same site, again, we are very comfortable with the guidance range that we have, doing 2.75% to 3.25%. Our intent is to continue to drive same site growth as much as we can. But again, it's an annual number. Quarter by quarter makes it a little tricky, but the team is incredibly focused on generating leases quickly and getting those tenants open as fast as we can. We’ve dedicated a lot of resources to help our tenants get those stores open and get the rent commencement as quickly as possible.
Ross Cooper, President and Chief Investment Officer
The only other thing I would add about Mary Brickell Village is you've probably seen a lot of the news headlines of all the development going up around Mary Brickell Village. The demand from retailers continues to accelerate. Market rents continue to accelerate. Mary Brickell Village was obviously part of the RPT portfolio. The price per square foot for the whole portfolio was $165 a foot, which included Mary Brickell Village.
Operator, Operator
Next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.
Caitlin Burrows, Analyst
Hi, good morning. Maybe just a little bit more on the leasing side. It feels like the environment's been pretty good for a while. What are some of the key steps you guys use to gauge leasing interest and activity, like the size of the pipeline, number of lease proposals, et cetera? How are they trending? And has there been any change to who the active tenants are?
Ross Cooper, President and Chief Investment Officer
First, start with retention. Our retention rates right now are about 90%, which exceeds our historic highs over the last several years. So the demand for existing tenants to remain in place and want to renew and continue to operate their business with us has been really encouraging. On the new lease side, both the anchor and small shop activity are accelerating. The all-time highs reflect this strong demand. You're retaining and growing. In terms of who’s looking to expand into the portfolio, we’re seeing a lot of ethnic grocers being very proactive in the sector right now. They're looking not only one to two years but really three-plus years out for their planning. Because as we mentioned earlier, there is no new development supply on the horizon in any meaningful way to create new inventory. So it’s all about second-generation space. All these retailers need to hit their marks and achieve their growth strategies. So they're being proactive with us, and we're being proactive with them. You see strong partnerships with all of our retailers, resulting in both of us having to be creative to achieve our collective goals.
Operator, Operator
And the next question comes from Linda Tsai with Jefferies. Please go ahead.
Linda Tsai, Analyst
Hi. Two-part question. You mentioned SNO (signed not opened) getting open faster. Is there any way to quantify how much more quickly this is happening? And do you think you have the ability to move it even faster?
Conor Flynn, CEO
Sure. In the first part of this year, we anticipated our SNO contribution at $25 million to $30 million. We're now at the upper end of that range, so $30-plus million for the year. About $8 million is expected to come online for the second half. Looking ahead, about $30-plus million will start to come online in 2024, and another $20-plus million in 2025. That's almost 85-90% of that SNO pipeline starting to flow over the next 12 months. We're actively working with our teams - tenant coordination, construction, leasing, and property management - to solve problems and open these stores sooner. That's how we’re doing it.
Linda Tsai, Analyst
And then just to follow up on the transaction environment, how much have cap rates compressed since the beginning of the year, and what's the level of compression you might expect over the next 12 months?
Conor Flynn, CEO
In the first half of the year, it's been fairly consistent. As we've discussed, transaction volumes have been lower this year compared to 2023, but the deals that are getting done continue to be at aggressive rates. We haven’t seen much movement in terms of comparable product in the cap rates they’re trading at. That said, there's a fair amount of optimism that the second half of the year going into 2025 will see more capital coming from the sidelines, ready to invest with the expectation that the rate environment is stable or even moving lower. This anticipation may gradually push down cap rates over time.
Operator, Operator
And the next question comes from Wes Golladay with Baird. Please go ahead.
Wes Golladay, Analyst
Hey, good morning, everyone. It looks like just under 30% of the anchor leases expiring through 2025 have no option. It looks like their older leases, about a 40% mark to market. How should we think about retention here? Do you look to force move-outs to get more relevant tenants in?
Conor Flynn, CEO
You're right. It's about 52 leases rolling with no options in 2025. We've resolved or are in the process of resolving about half of those already. It's a combination of identifying new opportunities to backfill space at higher rents and retaining existing tenants in place at market rent. We look at the merchandising mix and what is best for the asset long term to drive shareholder value and best support the shopping center's needs. We feel good about the outlook.
Operator, Operator
And the next question comes from Paulina Rojas with Green Street Capital. Please go ahead.
Paulina Rojas, Analyst
Good morning. As you described, the sector's background is clearly very solid. Based on your experience, what level of year-over-year rent growth should these solid fundamentals translate into if you think about the next 12 to 24 months? And how is your negotiating power evolving with anchors? It seems to me that most of the rent growth is coming from the shop side of the business. Thank you.
Conor Flynn, CEO
I think you've seen that the trajectory of same-site NOI growth continues to improve. A lot of this has to do with retention because we are highly occupied. As retention rates remain high and we are getting incremental growth from new leasing, you see the continued growth reflected in our numbers. When you look out, it's hard to pinpoint exactly what the glide path looks like. Historically, our sector has produced around a 2% same-site NOI growth profile. We're trending towards higher than that. We're focused on execution and looking at future opportunities. We believe the small shop opportunity will play a big role in our numbers going forward.
Glenn Cohen, CFO
On the anchor side, we break it into three broad categories. Obviously, on the terms you mentioned growth, we’re continuing to push rent escalations in both the primary and option periods ensuring that we retain as much control as possible into the future. When we look at space, I mentioned this previously; flexibility comes from accommodating space that they're willing to occupy. If you show flexibility and modify prototypes to get them in place, you also get the halo effect benefit from a tenant opening and operating. We’re seeing evolving conversations across these categories.
Operator, Operator
The next question comes from Haendel St. Juste with Mizuho. Please go ahead.
Haendel St. Juste, Analyst
Hey, good morning. First question I have maybe for you, Ross. I guess I was surprised a bit in the reduction in the dispositions here. I know it's not a sizable amount; you're not in a position to need to sell assets, but we've heard of scarcity premiums and increased buyer interest. Can you add more color on why you're pulling back here? You're not getting the demand or pricing you want? Are the assets perhaps better than you appreciated? Are you preferring to keep the cash flow? What are we not appreciating or what's changed since you first contemplated the sale of a greater portion of these former RPT assets? Thanks.
Ross Cooper, President and Chief Investment Officer
Sure. It’s just looking at the outlook of where we are right now. The First of August, we completed the majority of the dispositions planned. We’re excited with the execution on the RPT dispose. When looking at the performance of our portfolio right now, there’s no need for further disposals. We have access to our full credit facility; liquidity is in the best shape it’s been. We do have several assets in our joint ventures currently in the market. We’re unsure if a few or any may transact, but if they do, they’ll certainly be at significantly lower cap rates than where we’ve been. This combination optimistic outlook for our portfolio performance makes us feel good. We’ll revisit where things shake out when we go through the budgets for 2025, but through the end of 2024, we feel comfortable.
Operator, Operator
The next question comes from Mike Mueller with JPMorgan. Please go ahead.
Mike Mueller, Analyst
Hi. Just a quick one on bad debts. For the 86 basis points that you had in the first half of the year, can you talk about the makeup of that? How concentrated or diverse was it? Types of tenants, anything notable there?
Conor Flynn, CEO
Yeah, thanks for the question. The credit loss for the year to date is at 86 basis points. There's really nothing concerning inside that number that would make us stray from our projected credit loss guidance of 75 to 100 basis points. For the quarter, timing impacts come into play, as we bill a majority of our CAM and real estate tax bills during the second quarter. For cash basis tenants, you have to reserve 100% right away. Overall, we’re not seeing anything concerning in accounts receivable or year-over-year levels; everything is pretty stable and flat. We’re comfortable with our guidance of 75 to 100 basis points. Next question.
Operator, Operator
And the final question comes from Michael Gorman with BTIG. Please go ahead.
Michael Gorman, Analyst
Sorry if I missed it, but can you just talk for a minute about the occupancy cost ratio that you're seeing as you're out there doing the new leasing? I guess the reason I'm thinking about this is that from the traditional real estate supply-demand perspective, there's a lot of strength. I'm just wondering how much continued strength and rent growth the tenant environment can support? Has there been any shift in the tenant thought process in terms of how much of their cost structure can go towards rent and towards real estate?
Conor Flynn, CEO
The occupancy cost ratio varies from sector to sector and retailer to retailer because it’s a culmination of how they run their business and the product margins they sell. It’s a continued dialogue between overall costs associated with our leases, both on base rent and CAM. It’s a negotiating point; having multiple bidders allows us to push rents higher. We’re mindful of this, and as a result, we’re still seeing strong rent growth compared to historical levels.
Ross Cooper, President and Chief Investment Officer
Don't forget that most brick-and-mortar retail is now used as a distribution and fulfillment point. The occupancy cost of the old days focused on just the four walls has dramatically changed. We’re just beginning to scratches the surface regarding the store's value proposition and the true occupancy cost; the margin increases if you can run e-commerce through that store, which is why many retailers are allocating more capital to expansion goals today.
Conor Flynn, CEO
It's a great point; retailers are now viewing the trade area in its entirety, understanding how much market share they can grab from an entire trade area. Their perspective has shifted significantly from the old four-wall EBITDA growth mindset to a broader view of the market potential.
Operator, Operator
This concludes our question-and-answer session. I would like to turn the conference back over to David Bujnicki for any closing remarks.
David Bujnicki, Senior Vice President and Investor Relations Strategy
I'd just like to thank everybody that participated in our call today. We hope you enjoy the rest of your day and the rest of the summer. Thank you so much.
Operator, Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.