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Good day and welcome to the Kimco Realty Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to David Bujnicki, Senior Vice President of Investor Relations and Strategy. Please go ahead.

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 the course of 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 make reference to 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. Also, in the event our call was to incur technical difficulties, we'll try to resolve as quickly as possible, and if the need arises, we'll post additional information to our IR website. And with that, I'll turn the call over to Conor.

Thanks, Dave, and thanks everyone for joining us this morning. I'm going to lead off today with an overview of the macro environment, summarize our operating performance for the quarter, and provide an update and some color on our strategy for navigating through these uncertain economic times. Ross will cover the transaction markets and Glenn will close with our financial metrics and updated guidance. Despite the headwinds of high interest rates, some high profile tenant bankruptcies, shaky debt and equity markets, and the on-again, off-again predictions of an impending recession, underlying shopping center sector fundamentals remain robust. More importantly, our portfolio continues to produce strong operating results, as we have been able to nearly overcome, from an FFO perspective, over $0.06 of non-cash accounting related headwinds relative to last year. In an environment marked by virtually no new supply, strong demand from new, recurring, traditional, and non-traditional anchor and small shop tenants, along with the resilient consumer, we continue to produce strong operating results. Indeed, our third quarter results were stronger than anticipated, enabling us to raise our outlook for same site NOI, while raising the bottom end of our FFO guidance for the remainder of the year. A few more third quarter highlights. We signed 457 leases totaling 2.1 million square feet during the third quarter. Our small shop occupancy reached an all-time high of 91.1% as demand for our portfolio continues. Our strong positive leasing spread was 34.9% for new leases and 8.8% for renewal and options reflects the pricing power of our high quality portfolio. Of note, our combined spread of 13.4% is the highest in six years. As anticipated, our anchor occupancy dipped 50 basis points, quarter-over-quarter to 97.2% due to the recapture of the remaining Bed Bath & Beyond boxes. We released seen Bed Bath boxes this quarter at a positive spread of 54%. Our remaining 12 Bed Bath boxes are all in negotiation and continue to benefit from the favorable supply and demand dynamic for well-located retail. Our overall occupancy is off only 30 basis points to 95.5%, notwithstanding the headwinds described. We are encouraged by the continued push by tenants to secure the right real estate with the right landlord. This continued strong demand is perhaps best evidenced by our signed, but not open spread, which actually widened out this quarter to 320 basis points, representing about $52.2 million of rent that is not yet cash flowing. It is these operating dynamics in our own portfolio that continue to build our team's enthusiasm for the pending RPT transaction. While we remain excited about our portfolio, the headwinds I noted earlier cannot be ignored. As a result of the dramatic rise in the 10-year treasury due to persistent inflation in all likelihood, we will remain in a higher-per-longer interest rate environment for the foreseeable future. To mitigate balance sheet uncertainty and maintain a stance of de-risking our exposure to market forces, we do not [Technical Difficulty] continue to prioritize generating free cash flow. We are laser focused on expediting store openings and rent commencing dates, while reducing expenses that are not income producing. Free cash flow growth will allow us to be self-funding and help produce strong organic internal NOI growth as we move ahead. In summary, we continue to build a company, team, and portfolio that is resilient and able to drive growth in challenging times. We believe we are well positioned to execute and take advantage of the additional opportunities that will inevitably arise as we continue to work to optimize shareholder value. Ross?

Thank you, Conor, and good morning all. It was a busy quarter for Kimco on all fronts, including the transaction side of the business. While the macro backdrop continues to be volatile, the dislocation that has begun to emerge clearly benefits well-capitalized owners and operators. Those with the scale and liquidity to not only weather challenging times, but take advantage of them. With rates continuing to rise and financing more difficult to obtain, creativity and utilizing unique advantages is how to win in this environment. To that point in August, we capitalized on an opportunity to acquire a dominant grocery anchored lifestyle center in one of our top markets. Stonebridge at Potomac Town Center is a 500,000 square foot trophy asset in Washington DC Metro with all the attributes we look for in a property, starting with the best-in-class grocer, in this case Wegmans, with exceptional sales. The market also has excellent demographics with over 115,000 annual household incomes and over 110,000 people in a three mile radius that also pulls from a trade area that stretches upwards of 40 miles, due to the tenancy and regional location. The property will allow us to layer in our platform to create additional value and cash flow growth, both from upgrading specific tenants and rental levels over time. Additionally, the asset includes over 50 acres of land, providing us with the optionality to densify with mixed use in the future. Historically, this is an asset that every institutional owner would be chasing and would likely have a premium cap rate attached to it due to all the positive attributes. However, with financing tight and for a large deal size, Kimco stood out with its ability to close all cash on the $172.5 million purchase price, which allowed us to negotiate a cap rate north of 7% for our newest Signature Series asset. During the quarter, we also announced the merger with RPT Realty. This is another clear example of utilizing our platform to negotiate a highly favorable cap rate for a well-regarded portfolio of primarily grocery-anchored centers. Similar to the timing on the Weingarten transaction, we view this as another unique window during which the competition is limited and we can take advantage. As it relates to structured investments, there has been a noticeable uptick in discussions and potential opportunities in the past 30 days to 60 days. Admittedly, we expected these conversations to ramp up earlier in the year, but it seems to be happening at a more significant pace as of late. Conversations are taking place with operators facing debt maturities, groups looking for capital to transact on unique one-off opportunities, as well as institutional investors facing redemptions that are looking at recaps. We're being very selective in where we participate, so we expect this part of our business to grow as we move forward. All in all, we are excited about the activity during the quarter and our ability to utilize our position and sector-leading liquidity to remain active when others are sidelined. We will continue to be extremely judicious with our capital, but be ready to move opportunistically. And now off to Glenn for the financial highlights of the quarter.

Thanks Ross and good morning. Our third quarter results continue to demonstrate the strength of our high quality operating portfolio, highlighted by robust leasing spreads and positive same-site NOI growth. Importantly, our strong liquidity position and leverage metrics position us to effectively handle the macroeconomic headwinds resulting from stubborn inflation and the higher interest rate environment. Now for some details on our third quarter results. FFO was $248.6 million, or $0.40 per diluted share, as compared to last year's third quarter results of $254.5 million, or $0.41 per diluted share. Our third quarter results produced an increase in pro rata NOI of $3.3 million. The key components of the increase were higher consolidated minimum rent of $12.6 million offset by lower LTA income and straight-line rent of $4.7 million. In addition, bad debt expense was higher by $2.8 million as the current period had a more normalized credit loss level, compared to last year, which benefited from $600,000 of credit loss income due to reversals of reserves. Overall, credit loss was at 71 basis points as a percent of revenues for the nine months at the favorable end of our 75 basis point to 125 basis point credit loss guidance assumption. Pro rata interest expense was also higher by $10 million comprised of $8 million from the consolidated portfolio and $2 million from our joint ventures. This was due to lower fair market value amortization resulting from the early repayment of Weingarten bonds in the third quarter of last year and higher interest rates on the floating rate debt in our joint ventures. Also included in FFO for the third quarter 2023 are $3.8 million of costs incurred in connection with the announced RPT merger and a net benefit of $4.8 million associated with the final liquidation of the Weingarten pension plan. Moving to the operating portfolio, leasing activity remained brisk throughout the quarter as Conor mentioned. Same-site NOI growth was positive 2.6% for the third quarter. And if we excluded the impact of prior period collections it would have increased to 3.1%. The primary drivers of the same-site NOI growth are higher minimum rents contributing 290 basis points and other rental revenues adding 40 basis points. These increases were offset by a more normalized level of credit loss impacting same-site NOI growth by 90 basis points. Overall, these results demonstrated the continued strength of our well-located portfolio and brings our year-to-date same-site NOI growth to 2%. Turning to the balance sheet, we ended the third quarter with consolidated net debt to EBITDA of 5.5 times. On a look through basis, including prorata JV debt and perpetual preferred stock outstanding, net debt to EBITDA was 5.9 times, the same as last quarter and 0.4 times better than a year ago. Our liquidity position remains very strong at over $2.4 billion at quarter end. This was comprised of more than $400 million in cash and full availability of our $2 billion revolving credit facility. In addition, we have our remaining Albertsons shares which have a value of over $320 million. Subsequent to quarter end, we issued a new $500 million long 10-year unsecured bond which is scheduled to mature in 2034 at a fixed coupon of 6.4%. As we are all aware, interest rates have risen dramatically over the past year and further rate increases are not off the table. As such, we felt it was prudent to address our upcoming 2024 unsecured bond maturities which come due in the first quarter of next year. Tending the maturity, we have invested the proceeds in high-quality instruments to mitigate a large portion of the dilution. Now for our outlook for the remainder of 2023. As Conor noted earlier, we began the year facing a non-cash headwind of $0.06 per share totaling $36 million, compared to 2022, stemming from the anticipated lower fair market value amortization from the early repayment of the Weingarten bond and the normalization of credit loss. In addition, we reduced our 2023 lease termination income assumption by $10 million or $0.02 per diluted share in the first quarter. As a result of the strong performance from the operating portfolio, we have clawed most of this back. Our ability to overcome these headwinds speaks to the stability and strength of our operating portfolio. Based on our year-to-date results and our expectations for the fourth quarter, we are again tightening our 2023 FFO per share guidance range to $1.56 to $1.57 from the previous range of $1.55 to $1.57. This includes improving our full-year credit loss assumption to a range of 75 basis points to 100 basis points from the previous range of 75 basis points to 125 basis points and increasing our same-site NOI assumption to 1.75% to 2.25% from the previous level of 1% to 2%. In addition, based on our full year expectations, our board has elected to increase the fourth quarter common dividend to $0.24 per share, representing an increase of 4.3%. As a reminder, we received a $194 million special dividend from Albertsons earlier this year, which is considered ordinary income for tax purposes, but not included in FFO. We continue to evaluate the amount of special dividend needed to satisfy our redistribution requirements. The Board is expected to declare the amount of special dividend in November and we expect to pay it by year-end. Looking ahead, we plan to provide our 2024 outlook when we report our fourth quarter results. We anticipate it will be inclusive of the RPT merger being completed early in the year. And with that, we are ready to take your questions.

Before we begin Q&A, one additional item of note, today's call will be focused on Kimco’s third quarter earnings results and outlook as a standalone company. Today's discussion may also contain forward-looking statements about the company's pending merger with RPT, which remains subject to customary closing conditions, including the approval of RPT shareholders. As such, our responses around this pending transaction are limited. The information that is already publicly available, including the transaction announcement, the S4 and the merger agreement, which can all be found in the investor relations section of our website. With that, now we can begin the Q&A.

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Michael Goldsmith with UBS. Please go ahead.

Good morning. Thanks a lot for taking my question. You purchased an asset in the quarter, you sold assets in the quarter, you're presumably in the market for selling some of the RPT assets for when you acquire the company. Can you kind of provide an update of the transaction market with a particular emphasis on how things have changed since the 10-year rate increased? Thanks.

Sure, happy to address that. So, yes, you're right, we had a very active quarter, as I mentioned. We were very excited about the acquisition of Stonebridge Center. It's going to be a long-term hold where we can create some significant value. The dispositions on the Kimco side were fairly limited. There's one transaction which I would note that we sold out of one of our joint ventures, a grocery anchored shopping center in Southern California at a very low cap rate and the low-5s, which I think showcases still the strength of the market and that there is significant capital, particularly for core grocery centers. That being said, we're being I think very cautious in this market in terms of the fourth quarter and our expectations. There's essentially nothing in the pipeline on the acquisition side between now and year-end and on the disposition they continue to be limited to a couple of select land parcels and a few smaller joint venture assets that we're exploring. So I would tell you that the market is still active, although transaction volumes are down plus or minus 70% year-to-date. There is still is capital that is being put to work. Just recently there were transactions that very aggressive sub-6 cap rates in Southern California aside from the one I mentioned that we sold as well as in Miami. We've seen grocery anchored-centers as well as power centers in Chicago and other parts of the Midwest that are trading in the 6s and the 7s and in some cases low-8s. The financing is still available albeit at higher rates than what we've seen in the last 12-months or so which is obvious given where the rate environment has gone, but LTVs can still be obtained from private owners or investors in the 50% to 60% range. So there's still activity out there. We're encouraged by what we see in the fundamentals of the business, as we've talked about. And we believe that we can selectively execute it at the appropriate time.

The next question comes from Juan Sanabria with BMO. Please go ahead.

Hi. Thank you. Good morning. Just hoping to pack up on the back of Michael's question with regards to targeted RPT dispositions, presumably that would be focused in the lower growth Midwest markets. Just how committed are you to trying to prune that part of the portfolio, if at all? And how should we think about cap rate spreads or differences between, kind of, typical primary gateway markets versus more secondary, maybe Midwest or rest Belt type markets?

Sure, we are going to save the specifics of the RPT strategy for once we close the merger. That being said, I would tell you that there is still activity out there, as I mentioned. We've seen transactions in the Midwest, as well as in the Sun Belt and other parts of the country. So investors are still looking at all parts of the country and all formats of retail. There's a significant amount of capital that is currently sidelined that is waiting for the appropriate opportunities and frankly for more supply to hit the market as it's been a pretty stable and static amount of supply that's been introduced. So we'll be very selective. We're going through the integration process, the pre-merger integration process right now. So we're formulating our strategy, but we're very encouraged by the direction of the RPT portfolio and what we're seeing. And as we get to the merger and beyond it, we'll be much more specific about the strategy and plan there.

The next question comes from Jeff Spector with Bank of America. Please go ahead.

Great. Good morning. I guess just to push on that a little bit, just given the year-to-date stock performance, the market is clearly not appreciating the opportunities or the market is too concerned over the risks on these opportunities and it sounds exciting you're seeing more opportunities to come. I guess is there anything else you can share today to alleviate maybe some of these concerns that, you know, Kimco is executing the right strategy to be opportunistic.

Jeff I'm happy to take that one so I think when you see in our results and that the numbers speak for themselves clearly we are very focused on executing our strategy and having that result in strong operating results, strong FFO, we raised our dividend, we raised our guidance, we raised our same-site NOI guidance, the all-time high occupancy for small shops is reflected there, six-year high on leasing spreads. So we believe we're executing and we're showcasing it and letting the numbers speak for themselves. Clearly we're in an opportune time, you know, with the dislocation in the financing market, we try and be, you know, opportunistic. And I think that's what Kimco is known for. And so obviously it's a show me story and we believe we've executed in the past and we know we're only as good as our last deal and so we're going to make sure that we continue to put up the numbers that speak for themselves. And when you look -- and I know we've been very vocal about the health of our industry, but when you look at the supply and demand side of the shopping center sector, with the demand, the store openings of what we track over 6,900 new store openings for this year, the supply of 0.5% of existing stock of new construction, which is the lowest amongst all commercial real estate categories, and the vacancy levels for the whole entire open air sector. Depending if you look at Cushman and Wakefield or CBRE, it's the lowest sense of ever been tracking. So between 16-years at Cushman, 18 years at CBRE, this is the lowest vacancy rate the country has ever experienced. And so we're in a good spot. We see that opportunity. We think that the RPT transaction is exactly that. It's a high quality portfolio with all the wind at its back. So we can crystallize the GNA synergies very quickly. And what gets us most excited, obviously, is the OpEx margin that we can believe we can execute on quickly and bring it up to a Kimco level and block and tackle and showcase what the platform can do.

Great. Thank you.

The next question comes from Craig Mailman with Citi. Please go ahead.

Hey, guys. Just maybe coming at things from another angle on RPT here. Just the 10-years up called 70 bps since you guys announced the transaction, you guys just did the debt deal at [6.4] (ph), you have to refinance the under $80 million. Could you just talk about, given where rates are, where they could go, what the optimal mix of cash versus new debt could look like to take that debt out, and maybe how the accretion math has moved since the deal was announced just given the higher financing costs.

Yes, hi, Craig, it's Glenn. Again, rates obviously have moved a little bit, but we do have a full mix and we have a fair amount of optionality. We have cash, obviously, that is on our balance sheet. We also have our Albertsons investment that we would expect to be able to monetize in the beginning part of the year. So between that, our access to capital, the revolver, we feel pretty comfortable with taking, you know, refinancing the debt at prices relatively close to where we targeted. Rates are up a little bit, but I think from a full standpoint, we still expect the transaction to be FFO-accretive in the first year. We have, again, the revolver is fully available. We're sitting with the significant amount of cash on the balance sheet, and Albertsons I think those give us the flexibility to take down what we need to do.

The next question comes from Haendel St. Juste with Mizuho. Please go ahead.

Hey there. Good morning. I will not ask a question on RPT, I wanted to ask about leasing spreads. My question for you is on leasing spreads, the Bed Bath spread in particular, which were stronger I think than many of us expected. So maybe can you shed some more color here? Are you perhaps offering a bit more TIs? Are you cutting up boxes? And maybe some color on how the conversations are going to backfill the remaining boxes and expectations for spreads on those? Thanks.

Yes, appreciate the question. I think it sort of dovetails part of what Conor mentioned about the supply demand and the demand factors that are very much in our favor right now with no new development supply. It's really the existing inventory. And so, similar message to what we've communicated previously is a lot of these retailers are looking for opportunities to grow their store count. They have to hit their growth projections over the next several years and so they've always seen the Bed Bath inventory as one of those clear opportunities. So in terms of the commitment they've made, you have multiple players at the table looking for a similar space that actually helps you push rent northward, which helps drive the spread. When you look at the cost side, the costs have been pretty much in line. All of these have been single tenant backfills, so we aren't splitting boxes yet. When you look at the balance of the 12, we still have a handful of those that are going to be occupied most likely by single tenant users. There may be a couple in there that we anticipate splitting, but that was to be expected from the very beginning and we still see very healthy spread margins as well for those remaining boxes. So again, all looks fairly comparable right now.

The next question comes from Samir Khanal with Evercore ISI. Please go ahead.

Yes. Hi, good morning. Maybe a follow-up to the Bed Bath sort of comment earlier. I guess how much -- how should we think about the downtime with those boxes? I mean, I'm trying to figure out, you know, the downtime and how long it'll take to get kind of the rent back online with new tenants as we think about growth for next year, you know. So, you know, on the one side you have the headwinds from higher interest rates, net interest expense, but on the other side I'm just trying to understand how much of a sort of a pick-up from rents you'll get sort of as a tailwind for next year? Thanks.

Yes, sure, absolutely. So we have 14 boxes that were executed three of which were assigned those 14 boxes are accounted for currently in our snow pipeline, which you spend a 320 basis points, $52 million in total. For some perspective on timing, we do actually have our first two Bed Bath boxes that were backfilled starting to flow this quarter, and so that was under a 12-month window. Obviously, timing will vary box-to-box on what needs to be done. The balance of that is baked into our snow pipeline, of which we anticipate seeing about 50% to 60% of that flow through the course of 2024.

The nice part, too, about the releasing of the Bed Bath boxes is, again, there have been individual tenants taking the whole boxes, which usually compresses the buildout time and the rent commencement date. So that's what we're already starting to see some flow this year.

The next question comes from Dori Kesten with Wells Fargo. Please go ahead.

Thanks. Good morning. With respect to your push for higher annual escalators, are you finding there's any incremental pushback or would you expect to be able to continue to push upward to the near-term?

Yes it's market driven obviously you know we'd say the Sun Belt markets have been you know areas of opportunity where we can push further north on the increases, but it's really a case-by-case conversation with all the retailers. Obviously, everything's in negotiation, so there's a lot of discussion on the table, but we felt we have been confident in our abilities to push it northward, and right now it seems to be holding pretty well. With the small shop occupancy at 91.1, obviously matching our all-time high, again, that supply-demand balance is still working very much in our favor.

Okay, thanks.

The next question comes from Connor Mitchell with Piper Sandler. Please go ahead.

Hey, good morning. Thanks for taking my question. So, sticking with the lack of supply and strong tenant demand, I guess thinking about how you guys are having conversations and discussions with your acre tenants. So, traditionally, the acre tenants are able to drive leasing terms on deals. But now that the availability is dwindling. How is Kimco able to regain leverage in those discussions and maybe curtail some tenant-friendly terms?

Sure. Yes, I mean, outside of the economics, you're looking at, you know, co-tenancy provisions, exclusive provisions, all of which you can start to rebalance, loosen up, create more flexibility for us. Obviously, repositioning and redeveloping our centers has been a core principle of ours, so having that flexibility to do so. I also think we continue to grow into a data-driven market where you have a better sense of the impacts and you see tendencies or understandings change. Former principles about the impact of fitness long ago was sort of dispelled by the reality that people go to the gym, and then they actually go and shop elsewhere afterwards. And so retailers have come to appreciate that. So I think today, more than ever, it's very much a partnership, looking to build the best community for the shopper and the customer. And our retailer partnerships are very, very strong. And they're willing to explore new opportunities that work for both sides.

The only thing I would add is I think you're seeing retailers become more flexible with store footprint, which again opens up a lot more opportunities. The days of sort of having their prototype and that's it, it seemed to be in the past. And so that may not be a lease term specific item, but it is an optionality that creates more demand for spaces that might be more tweener sized. And that's what you're seeing with some of the Bed Bath opportunities.

The next question comes from Floris van Dijkum with Compass Point. Please go ahead.

Thanks, good morning guys. Thanks for taking my question. You know, I'm a little bit surprised that you know in some ways on the reaction from the market on your increasing scale at a time when the fundamentals of the shopping center industry are probably the best we've ever seen. But maybe if you could put into context some of the -- your historical occupancy and leverage ratios. And in particular maybe highlight also maybe if you can talk about what your shop occupancy is at record levels already, but are there big regional differences and how much more can you push that? Maybe comparing, for example, your New York or Long Island shop occupancy versus your national, obviously there are market differences here, but highlight to the market a little bit on what the upside potential, additional upside potential is here in terms of occupancy. And also, obviously, as that snow pipeline comes online, what that would do to your already, I believe, record low leverage ratios?

Sure. Happy to start, Floris, and we can pass the mic around, but you're spot-on. We're obviously encouraged by the supply and demand dynamic that we're experiencing in our portfolio. We're using a lot of data analytics to understand that there's virtually no new supply on the horizon and that we feel like our portfolio is well positioned for growth as the signed, but not open pipeline continues to build, as you saw expand further this quarter, which indicates future NOI growth. And we're trying to maintain a portfolio and strategy that allows us to grow regardless of the environment that we're facing. And so keeping leverage levels at all-time lows for us is important. You saw us be proactive and really sort of push out any near-term maturities with our recent bond offering. We continue to think that the small shop occupancy is going to be a bright spot for us as we've just reached all-time highs and we're continuing to think there's more to push there. The demand drivers are multiple, and they're more, as I mentioned earlier, there's traditional and there's non-traditional. And you continue to see the use cases for shopping centers evolve, because it's all about value and convenience. And almost everything you can think of benefits from value and convenience. And so that's why the shopping center continues to evolve to be, I think, the place of choice for whether it's a service use, whether it's a medical use, whether it's a pure retail use, you name it, it continues to evolve as the spot where people want to start businesses. And that's why I think it gives us a lot of encouragement, as well as the fact that we have all of this underutilized parking that we think has future outside in the long-term. So we always want to think long-term. We entitled over 800 units this quarter alone in the portfolio. We continue to think that the shopping center will evolve to include multiple uses, primarily multifamily for us. But we position the portfolio for long-term growth. We've been on a roller coaster of retail. As you know, there's been retail apocalypse. There's been the COVID pandemic. There's been all things we've faced in terms of challenges. And we feel right now we're in a really good spot, hopefully be the bright spot of commercial real estate, because Kimco is well positioned, I think, to be opportunistic and showcase that when times when people are nervous, if you have the capability to execute, you should be able to make generational deals. And we feel like that's what we're intending to do at Kimco going forward and into the future.

The next question comes from Greg McGinniss with Scotiabank. Please go ahead.

Hey, good morning. I'm just curious how you're thinking about spending on acquisitions versus redevelopments at this point, where you see the bigger opportunity? Given the size of and growing size of the portfolio, whether or not you expect to see some increase in the redevelopment opportunities or whether the accretion yields there due to the cost or whatever it might be are just not worth the squeeze?

Sure, I'm happy to address that. Cost of capital is paramount in doing deals that are accretive to that cost of capital. It is something that we discuss and evaluate as a collective committee on a daily basis. To your point, acquisitions in this environment, at least one-off sort of third party acquisitions will be very challenging for us in the near-term as cap rates have not moved nearly at the same speed that interest rates and our cost of capital have moved. The bright spot is that redevelopments, particularly sort of the bread and butter retail redevelopments within our portfolio, continue at very high clips, double-digits on average. So that is an investment opportunity that we will continue to pursue and activate across our portfolio. And to your point, as the portfolio continues to grow, those opportunities grow alongside it. So we do believe that leasing and redevelopment -- retail redevelopment will continue to exceed our cost of capital and be where we put a significant amount of our available cash flow. And then we'll be opportunistic with the structured investment program, which also has double-digit returns requirements for us to proceed. And we'll prioritize each and every opportunity with that thought process in mind.

The next question comes from Anthony Powell with Barclays. Please go ahead.

Hi, good morning. I got a question on where do share repurchase has been into the capital allocation, I guess the matrix? I think you have about $224 million left in your authorization. How are these -- how does that compare to a structured investments and other opportunities you have?

I think it's a similar conversation. I think every investment opportunity that we look at is judged based upon our cost of capital and what is accreted to that. I think that we talked a little bit about our leverage being at the lowest levels historically that it's ever been, which gives us a lot more optionality to consider anything that's on the table. So we'll look at every single investment opportunity, acquisition, leasing, redevelopment, structure investment, stock buybacks, whatever the case may be, and prioritize it based upon, you know, through that lens. So that's where we sit and that's how we consider it.

The next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.

Hi, good morning everyone. Conor, you talked about small shop occupancy as a bright spot. Could you talk about what types of tenants you're seeing that interest from, like local versus national, what industry? And also the timing, I feel like we hear that macro uncertainty is lengthening the time it takes to sign leases and other property types. So I'm wondering if you're seeing that at all in your property type?

Sure, from a small shop perspective, I think it's definitely a bright spot. When you look at the uses, you know, restaurants, specialty foods, like those types of users still dominate sort of the percentages of new leases that we signed this quarter. And then when you go past that, it's really sort of the health and wellness and beauty category. That continues to evolve. You used to be dominated by sort of the old bus of the world. Now we're seeing Sephora and a number of others continue to evolve to have open air shopping centers as a key component to their growth strategies. You know, when you look at the services category, that continues to evolve. We always have had hair and nail salons as a key component of the shopping center sector. But when you add in all the medical uses that continue to evolve and want to be closer to the consumer and come out of the hospital, I think that continues to evolve as well. And then you're seeing sort of these franchise-driven concepts that continue to be the growth driver. The mom-and-pop retailer today very different than it was even five years ago. And a lot of what's being -- what's going on is they're buying these franchises with a proven business model, and that's how they're starting the business. And I think when you look at the franchises that we're doing deals with, you can actually improve the credit profile there, again, the corporate guarantee on it. And so as we evolve our leasing strategy, and we talked about the increases that we're getting on small shops, continuing to improve the growth of the portfolio, all these things are adding up, obviously, to an enhanced growth profile.

The next question comes from Alec Feygin with Baird. Please go ahead.

Hi, there. Thank you for taking my question. I kind of wanted to dig into the structured investment conversation. You guys have mentioned that the conversations around those have been picking up lately. Can you guys provide us some more details about the return criteria on those and what we can expect that book to grow to?

Sure. Yes, the conversations are picking up and we do anticipate there's going to be more optionality with that program as we enter 2024, continuing with the theme of cost of capital. As our hurdle rates increase, the quotes that we're providing to potential borrowers of our capital have increased as well. So what was previously 8% to 9% with some back-end participation potentially is now double-digit as a starting point. So the blended average of our structure right now in terms of the rates that we're obtaining in the current position are in the mid to high-9s. And we expect that anything going forward will certainly start in the double-digits. But we think that will ramp up. We have just under $200 million outstanding on the book right now within the program. So we'll continue to be mindful of that, but we think that there's room to run there.

The next question comes from Linda Tsai with Jefferies. Please go ahead.

Hi. You reduced your credit loss outlook as you're trending at the low-end. Given the record low supply environment you're operating in and your improved portfolio quality in terms of better credit tenants, do you think it's premature to say credit loss will be a step function lower in the coming years?

Again, we're happy with the improvement that we've seen. I think you've seen credit loss coming back to more normalized level similar to what we saw pre-pandemic. It's a little early to put it into the guidance for next year. But as a run rate, if we're in that 75, 100 basis point range, I think you're back to pretty normalized levels.

The next question comes from Mike Mueller with JPMorgan. Please go ahead.

Yes, hi. Going back to the structured investment opportunities, are they all tied to real estate? Or are you evaluating some operator opportunities as well?

Yes. I mean the core program is looking at operating real estate in our core markets with strong demographics, the tenancy that we're looking for, high-quality sponsors, and as we've talked about in the past, having that right of first offer, a right of first refusal is a critical component of that program. Now that being said, we do have our Plus business that has been active historically. And as there are retailers that are real estate rich that have capital needs, we believe that we're typically 1 of their, if not their first phone call. So those conversations will continue and where we can be opportunistic and helpful with retailers that have a significant amount of owned real estate, we'll always look at those opportunities as well.

The next question comes from Paulina Rojas with Green Street. Please go ahead.

Good morning. Price of interest rates, of course, has been unprecedented and introduces the question of how will retail our balance sheet and look after a company starts facing that maturity. So when you think about the future, how do you feel about potential tenant fallout? Do you think it will be -- or that it's reasonable perhaps to think about above average tenant failure given everything that is happening with interest rates?

It's a good question, Paulina. I think when you look at the rate environment and how it impacts all industries, really the retailers that have near-term debt maturities are going to be facing higher interest expense and the refinancing, just like other industry. I would say that [Technical Difficulty] for Kimco has never been smaller when you look at the retailers that we continue to track from a credit perspective. And when you think about the supply and demand dynamics that I talked about earlier, we feel very comfortable with the credit loss reserve that we have today. Obviously, we just improved that this quarter and continue to be proactive on showcasing spaces that are not available today, but may be available in a year or two or even five years’ time. And that's what we're doing right now is we're showcasing not our current vacancies. We're showcasing what may be available in the near-term or in the long-term to line up the best-in-class tenants. Because of the lack of supply, retailers are engaged in that knowing that it's going to be hard to fill their promised pipelines of net new store openings in the current environment. So they have to align with folks like Kimco to try and fill that and see where they can add where they wanted to fix to build their needs.

The next question comes from Ki Bin Kim with Truist. Please go ahead.

Thanks. Good morning. To follow-up on that last question. Just given the rise in the cost of capital for your tenants, do you see that eventually weighing on their expansion plans? And second question, your active mixed-use developments, the yields went up pretty noticeably. Just curious what drove that.

Yes. Kevin, great for questions. So with the first one, we maintain a very close dialogue with our big retail partners, and they're looking through, I think, the short term impacts and continuing to try to grab market share where they can appreciate in that, that inventory is limited. And if they don't get it today, there might not be new inventory available tomorrow. That said, every retailer has a different capital strategy, and that probably evolves most likely as ours evolves as well. So something that we stay very, very close to them. But as I can say right now, it doesn't seem to be slowing the pace of growth the majority of those retailers. And as it relates to the mixed-use pipeline, yes, I appreciate the question. So what you see there is you see four projects, three of which are ground leases and the fourth one being Colter which is the 1 that we identified as our preferred equity structure. That was the first of its kind that we're doing. So this quarter, we felt it was appropriate to actually show what the real returns are related to the Kimco invested capital and the preferred returns related to those projects. Obviously, that yields a higher or accretive growth profile than if you're just to invest all the capital yourself. So that's what it's reflecting, that's the change.

The only thing I would add on the retailer demand side, in, and what we're seeing is because of the rate environment because of the construction costs a lot of these tenants that used to do ground-up development and then sell those assets as sale leasebacks are now looking for second generation space versus the ground-up development side. And so they're looking at how do they absorb existing inventory versus net new development, because of that lack of financing availability. And so that should drive more demand to the existing spaces, as well as that first-generation ground up development has really dried up.

Thank you.

The next question comes from Juan Sanabria with BMO. Please go ahead.

Hi, thanks for the second shot here. Just a couple of questions. One, just on -- going back to the RPT merger where we started. So what are you guys assuming in terms of the debt that needs to be refinanced. So that's part one. And then part two, if you could just give us an update on the Rite Aid exposure and what you're seeing or expecting there for the space that they've deemed that they're going to get back in one form or another.

So in terms of the debt to be refinanced for RPT, if you look at the balance sheet at 9/30, they're sitting with bank debt, both revolver debt and term loan debt of about $350 million and then they have about $511 million of private placement notes. So that's the magnitude of what we're looking at and then obviously, there'll be merger plus that go into that. So it's around $900 million in total. And as I mentioned, we have a variety of options about how to fund that from our Albertsons investment, cash on the balance sheet, aligned, obviously, access to the capital markets and other things.

Yes. And as it relates to the Rite Aid exposure, right now, we know that three of our leases have been rejected in day one. That's about 5 basis points of occupancy right now. So a de minimis impact, there are another two that we expect to close this quarter. So in total, that's about 8 basis points of total occupancy on the impact. And right now, we have good activity in terms of hitting our retailer list and box size is appropriate for a lot of the mid-box users, and so the larger, sort of, small shop operators as well. So we're very encouraged by the activity. We have one that has drive-through locations. So again, there's good attributes, good components here that we feel pretty confident we can backfill those quickly.

Thank you very much.

The next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.

Hi, good morning. Again I had originally tied to just sneak in a second one, but then we didn't get to it. So here I am. And maybe it's a little bit of a follow-up to Ki Bin's question. But so we hear that macro uncertainty is lengthening the time it takes to sign leases in like office and industrial, so I'm just wondering if you guys are seeing this at all, like how have your tenant sense of urgency on signing leases evolved over the course of the year? And like have they changed? Or have you, I guess, avoided that?

Yes. It really -- it hasn't changed. Not anything related to the macro environment. We're tied for negotiating certain deal points that may add some time, but that's normal course of business. If anything, people are looking to get leases signed quickly so they can get open sooner and they can start booking that growth within their portfolio. So there's been no real material change in terms of time of execution.

Okay, thanks.

Next question comes from Libby Bakken with Bank of America. Please go ahead.

Hi. This is Libby Bakken. Yes, just a follow-up. So -- do you think you could clarify the bridge or the walk from 3Q FFO to 4Q just based on the guide, it looks like it implies like a $0.01 to $0.02 step down into the fourth quarter. So just curious on what's driving that.

Yes. Again, we have a couple of onetime things that are in the third quarter. As we mentioned, there's some of this impact from the Wingard pension plan that was liquidated during the quarter. And there's a few other onetime things. But again, we feel very comfortable with the guidance range and we're at the upper end of the range that we set out for the year. Again, coming back, we made up a lot of headwind that we had going into the year, driving towards that high end of the range today. So that's really the driver.

There was a big one-time item as Glenn mentioned, the pension income we recognized was about $8.7 million. That's what's in that other income line. You back that out, you're back to a more normalized level.

Got it. Thanks.

The next question comes from Anthony Powell with Barclays. Please go ahead.

Hi, thanks for the follow-up. I saw the lease summary that landlord worked first square foot went up to close to $8 in the quarter. I'm assuming that's related to the Bed-Bath Beyond lease, but I wanted to confirm that and maybe talk about TIs and landing work trends going forward?

Yes, sure. So there's a couple of components. Let's start with the first and new leases side. So the new lease side, is slightly higher, driven by primarily three deals. If you left those deals out, the total work for TI and landlord work would go from 51 down to 40 which is at the lower end of a more normalized rate. The returns on the deals were in excess of 20-plus percent. So very accretive and the mark-to-market on those is between 80% and 116%. So very, very accretive deals. But again, back those out, you get down to the $40 range. In terms of the overall, where you include new leases, renewals and options, it is elevated because of the weight of the number of new leases executed and we'd also did ‘24 anchor deals that quarter -- this last quarter. First, the number of renewals and options, if you see those are a little bit lighter. So obviously, when you blend it together, the weighted component of the new deals grow that number up a little bit. But from a cost standpoint, as you can see, the renewals and options are pretty much in line as well. So that's just the nuance difference between this quarter and prior quarters.

This concludes our question-and-answer session. I'd like to turn the conference back over to David Bujnicki for any closing remarks.

We just appreciate everybody that participated on the call. Enjoy the rest of your day. Thank you so much.