2023 Outlook with Conor Flynn, CEO of Kimco Realty

It’s the time of year where those of us in the industry are asked to offer some predictions for the upcoming year. There’s only one thing I can say for certain—don’t believe any economist, federal reserve official, or think tank when they make predictions.?Nobody truly knows what comes next.?

Long ago, I gave up trying to predict the future.?Trying to look out 3 or 6 months, let alone a year, or five, or ten, is so far-fetched it has forced me prioritize how to?sustain?a long-term business.?Sustain being the key word, and at Kimco we believe preparing for challenging times is not a doomsday prediction, but just the normal course of business, especially in real estate.??

I think that same mindset for any business will win the marathon, not the sprint.?Building a business for multiple cycles and black swan events is not easy.?And many management teams don't get the benefit of the doubt, or the time it takes to see their strategic plan play out—which is unfortunate, but part of the world we live in.?

So, I’m sharing three of the key assumptions that we have in mind as we prepare for the year ahead, and the foundational strategies that we believe position us for success in both the near and long term in any environment:

1. The labor market will remain tight in 2023, which provides a strong backbone for the economy, but gives the Federal Reserve the ammo to keep raising rates.?At Kimco we never stop searching for the best talent, and investing in our people up and down the organization.?We focus on building the best team; we prioritize integrity where doing the right thing is second nature.?You need the right people to weather economic cyclones, and that's easier said than done.?Nobody is perfect, we all have our strengths and weaknesses, and I have found that what makes a team special is acknowledging those weaknesses, so you surround yourself with folks that have the strengths to fill the gaps.?Strengths are easy to recognize and celebrate—the secret is to focus on the blind spots all while celebrating the wins.?Building a team takes time, building trust takes even longer, and building a reputation takes a lifetime.?My point is, this is something that needs to be priority number one from day one, so that when things get challenging, this is a strength of the organization, not a weakness.?
2. Liquidity and access to capital sources for both debt and equity will continue to be challenged in 2023.?Significant amount of debt paydowns will be required for private owners looking to refinance, creating opportunity for those who are well capitalized. Liquidity is a top priority in real estate, and a lack thereof always seems to be what gets folks?in trouble.?If you have liquidity when others don't, it's not only a life preserver but a unique advantage to seek opportunities in distress and find those once-in-a-generation opportunities.?At Kimco, we prioritize a long-dated debt maturity profile, a diverse lender base (international if you can), a large line of credit, ample amounts of free cash flow, a large amount unencumbered assets, and an investment grade credit—this is how we’ve positioned the company to differentiate ourselves.?I know for some this might be out of reach, but lender relationships are critical regardless of your size and scale.?
3. While capital markets remain volatile, the fundamentals of the shopping center sector will remain vibrant.?Over a decade of virtually no new supply combined with the store being used as a last mile distribution and fulfillment point create a strong leasing environment for both retention rates and rent growth.?It’s always critical to focus on your core competency, as this is where you will see returns even in the darkest days.?The blocking and tackling of every business are slightly different, but fundamentals are mostly the same.?Free cash flow is key, remove all expenses that are not driving growth, and grind.?At Kimco we eschew waste.?I come from the operations side of the business, so understanding what drives the life blood of the business is always critical.?Never under invest in this critical aspect of the business.