Conor Flynn - CEO Glenn Cohen - CFO Ross Cooper - President and Chief Investment Officer David Jamieson - EVP and COO David Bujnicki - SVP, IR and Strategy.

Craig Schmidt - Bank of America Merrill Lynch Samir Khanal - Evercore ISI Ki Bin Kim - SunTrust Robinson Humphrey Jeremy Metz - BMO Capital Markets Christy McElroy - Citi Rich Hill - Morgan Stanley Alexander Goldfarb - Sandler O'Neill Greg McGinniss - UBS Haendel St.

Juste - Mizuho Michael Mueller - JPMorgan Wes Golladay - RBC Capital Markets Chris Lucas - Capital One Securities Christian Russell - Wells Fargo Michael Bilerman - Citigroup.

Good morning and welcome to Kimco Realty Corporation Fourth Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to David Bujnicki, Senior Vice President. Please go ahead..

Good morning and thank you for joining Kimco's fourth quarter 2017 earnings call. Joining me on the call are Conor Flynn, our CEO; Ross Cooper, President and Chief Investment Officer; Glenn Cohen, CFO; and Dave Jamieson, our Chief Operating Officer, as well as other members of our executive team.

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 metrics can be found in the Investor Relations area of our web site.

And with that, I'll turn the call over to Conor..

Good morning and thanks for joining us today. We finished off 2017 with a tremendous effort by the entire Kimco team. Our leasing activity in the fourth quarter capped off a record year, validating the desirability of our portfolio, with positive trends and occupancy, leasing spreads, same site NOI, and recurring FFO.

Our portfolio has proven resilient, but we recognize that the goalposts are constantly moving, and that's why we continually strive to enhance the quality of our portfolio. Our primary focus in 2018 will be to further upgrade the portfolio, by disposing off assets that do not meet our long term objectives.

While continuing the development and redevelopment projects. While this will have a short term dilutive impact, that positions us for long term growth and as a leader in our space. We anticipate another year of mixed results for retailers in 2018, with store rationalization continuing and additional store closures.

To us, this means the need for continued focus on our 2020 core principles; create a portfolio of the highest possible quality, with a significant runway for growth; maintain a solid balance sheet that will continue to provide flexibility in this rapidly changing environment; and continue to run a redevelopment program that creates substantial value.

To achieve these goals, we are taking the following steps; first, further improved portfolio quality, by becoming more weighted in coastal markets and grocery anchored centers. The majority of our portfolio is becoming concentrated in New York, the D.C.-Baltimore-Philadelphia corridor, Miami, Los Angeles, and the Bay Area.

Second, notwithstanding our ample liquidity position, favorable debt maturity profile, and capacity to repurchase stock, we remain focused on strengthening the balance sheet and maximizing it's flexibility. We have already made progress on this goal, and Glenn will go into more detail on the strides we have made during 2017.

Third, we will continue to strategically recycle assets, which serves double purposes; it strengthens the overall quality of our portfolio, as we further refine our demographic and geographic mix, and improvise the growth capital to support our development and redevelopment programs. We also will provide more details on our objectives for 2018.

Fourth, maintain our strong leasing momentum and increase same site NOI. The lifeblood of the business is leasing, leasing, leasing, and we continue to see strong demand for Kimco's high quality and well located properties.

David Jamieson and the team are working non-stop to stay ahead of the changes occurring in retail, partnering with innovative retailers and service providers, and exploring ways to streamline and expedite the leasing process.

Fifth, unlock the embedded value from our existing redevelopment and development projects, both of which offer significant value creations and outsized yields.

These projects include the redevelopments of Pentagon Center and the Boulevard and the developments of Lincoln Square, Dania Pointe Phase 1, Grand Parkway Phase 2, and Mill Station, which we recently announced will be anchored by Costco. Grand Parkway Phase 1 is now open and continues to enjoy strong demand.

With respect to our Christiana development, we elected to reclassify this into land held for future development category. Given the change in our cost-to-capital and funding requirements for our other projects that are closer to being finished in generating cash flow.

And finally, we will continue to focus on our margins and improve efficiency across the company. As an example, we recently made the decision to close our Midwest office, and streamline a regional operating structure. Glenn will cover this in more detail.

We believe these steps will produce a higher quality portfolio, more flexible capital structure and long term growth. I can assure you that our management team is committed to continually improving Kimco's overall performance and is working tirelessly to achieve each of the steps I just outlined.

Demonstrated and continued confidence in our plan, the board has put in place a $300 million share repurchase program, that will serve as another vehicle to return value to shareholders. And with that, I will turn the call over to Ross..

Thank you, Conor. Overall, we had a very productive fourth quarter and full year 2017 on the investment side, with gross transaction volume close to $950 million. This was highlighted by accelerated fourth quarter dispositions, amounting to $234 million with Kim's share of $174 million.

We ended the year as a modest net seller, as a result of our strong fourth quarter sales execution. The blended cap rate on the 16 centers sold in Q4 and for all 38 shopping center sales in 2017, were in the mid-7% level.

On the acquisition side, we acquired Whittwood Town Center in Los Angeles, California, with long term redevelopment and value creation opportunities. As noted previously, this year, we intend to be substantial net sellers, totaling between $700 million to $900 million.

Any acquisitions we undertake in 2018, will focus on accretive, adjacent, or unowned anchor parcels, within our existing portfolio. On the investment landscape, we continue to see a bifurcation in pricing, between high quality core markets and those outside the major institutional focus.

Cap rates on the best assets remain sticky, and at all time lows, with recent transactions on both coasts, trading in the fours and low five range, driven by strong investor interest, whereas non-core secondary and tertiary assets, particularly those without a grocery component, continue to rise.

While each asset is unique, we see the spread between core and non-core anywhere from 250 to 300 basis points at this time.

Although there is an increase in supply in the market, related to our disposition plans and those of several peers, there continues to be plenty of interest in capital available, primarily from local regional operators, with the backing of private equity capital providers.

These buyers are finding the going in yield attractive, and are able to access the debt markets, thereby providing a healthy cash-on-cash return. Even with interest rates moving up over the first 45 days of the year, we have not seen any pullback related to the ability or cost of obtaining financing.

This gives us confidence in our ability to execute on our 2018 sales targets, and we have gotten off to a great start, with $30 million of dispositions completed, and another $300 million under contract or with an accepted offer. Additionally, we now have over $475 million of properties in the market for sale.

Glenn will now provide additional color and insight on our 2018 guidance and financial performance for the quarter..

Thanks Ross and good morning. We finished 2017 with positive operating results, a solid balance sheet and a strong liquidity position, and are now focusing on our 2018 objectives, as outlined by Conor and Ross. Now some details on our 2017 fourth quarter and full year results, and then further color, regarding our 2018 guidance.

NAREIT FFO per share was $0.38 for the fourth quarter, which include $5.2 million or $0.01 per share of severance charges, associated with the consolidation of our central region, as part of the corporate restructuring.

We are marketing many of the properties in this region for sale, which we anticipate selling in 2018, with the remaining high quality assets, having been absorbed by our other regions. For the full year, NAREIT FFO per share was $1.55.

This includes $11.3 million or $0.03 per share of transactional income, net of transactional expenses, comprised primarily of the $23.7 million from Albertsons, and a $14.8 million foreign exchange rate.

These gains were offset by early debt repayment and preferred redemption charges of $9 million, land impairments of $11.8 million and severance charges of $5.2 million just mentioned.

FFO is adjusted or recurring FFO, which excludes transactional income and expenses, as well as non-operating impairments, was $0.39 per share for the fourth quarter, $0.01 above the $0.38 per share reported last year. Our fourth quarter results benefitted from an increase in NOI of $9.5 million, including the pro rata portion from our joint ventures.

This was driven by higher minimum rents and lease termination fees, despite a $1.8 million negative impact from our Puerto Rico properties, due to Hurricane Maria. Offsetting the increase to NOI was prior interest expense attributable to the higher debt balances.

Now full year 2017 FFO was adjusted -- was $1.52 per share versus $1.50 per share for 2016. The increase is primarily attributable to improved consolidated NOI of $18.7 million and lower recurring G&A expense and tax provision of $5.4 million collectively.

This was offset by lower JV FFO contribution of $10.9 million due to assets sold and transferred, including those related to our exit from Canada. Our FFO growth has been impacted in the short run from the $402 million invested in development projects, which will begin cash flows late in 2018 and into 2019 and beyond.

Our operating metrics remain strong, as we enter 2017 with occupancy of 96%, up 60 basis points from a year ago and up 20 basis points since last quarter. Anchor occupancy increased to 98.1% and small shop occupancy finished the year at 89.6%.

For the fourth quarter, new leasing spreads were higher by 13.2%, with renewals and options rising 7.9% for a combined housing leasing spreads of 9.2%.

Same property NOI growth was 1.2% in fourth quarter, and includes a reduction of 40 basis points from redevelopment projects and a negative 120 basis points, due to the impact of Hurricane Maria on our Puerto Rico properties. Absent these items, same property NOI growth would have been 2.8%.

For the full year, same property NOI increased by 1.7%, including a 30 basis point reduction attributable to Puerto Rico. Beginning in 2018, our same property NOI population will exclude our seven Puerto Rico properties.

Turning to the balance sheet; we finished 2017 with consolidated net debt-to-recurring-EBITDA of 5.9 times and on a relative basis, including the pro rata portion from JVs and preferred stock outstanding, of 7.1 times.

In December, we issued $230 million of 5.25% perpetual preferred stock and in subsequent year end, an additional $34.5 million, as the underwriters exercised their overallotment option. During 2017, we issued 1.25 billion of unsecured bonds with a weighted average interest rate of 3.78% and a weighted average maturity of 14.6 years.

In just the past few years, we have increased our weighted average maturity profile to 10.7 years from 5.3 years. Subsequent to year end, we repaid $162 million of secured debt, leaving only $23 million of debt maturing for the remainder of 2018.

Our liquidity position is excellent, with over $2.1 billion of availability on a revolving credit facility, and just over $400 million of debt maturing through 2020. Now for some color on 2018 guidance and the underlying assumptions; as a reminder, our 2018 guidance excludes any transactional income and expense.

As such, our guidance for 2018 NAREIT defined FFO and FFO as adjusted are the same. We will incorporate transactional income and expense as it occurs. Our FFO guidance range for 2018 is $1.42 to $1.46 per share.

This guidance range takes into account the dilutive impact of our fourth quarter 2017 dispositions and the financing costs associated with the $264.5 million of 5.25% perpetual preferred stock that was recently issued. The guidance range also assumes net dispositions of $700 million to $900 million, with blended cap rates between 7.5% to 8%.

The proceeds from these sales will help satisfy the funding requirements related to our development and redevelopment projects, which are projected to total $425 million to $525 million in 2018. As a reminder, only Phase 1 of the Dania development is expected to start generating cash flow in 2018.

Any proceeds received in excess of the development and redevelopment costs, may be used to opportunistically reduce debt, redeem callable preferred stock or repurchase common shares pursuant to the common share repurchase program we have announced today. Our growth range for same property NOI is 1.25% to 2%.

The low end of the range reflects our expectation for the first quarter same property NOI level, which we believe will be the low point for 2018. This is due to several bankrupt tenants that were in place in the first quarter of 2017, but subsequently vacated.

Our range also consists the uncertainty around tenant bankruptcies and fall out [ph] for the holiday season, including Toys"R"Us.

Despite the potential negative impact of these circumstances, we are comfortable with the upper end of the same property NOI growth range, given the widespread between our leased versus economic occupancy level, which stands at 270 basis points. As a final point, our team is focused on execution, are highly motivated and confident about our future.

And with that, we'd be happy to answer your questions..

We are ready to move to the Q&A portion of the call. To make this more efficient, we ask that, you ask one question with an additional follow-up question. If you have any additional questions, you could rejoin the queue. You can take our first caller..

Our first question comes from Craig Schmidt of Bank of America. Please go ahead..

Thank you. I know Ross, you touched on it; but I thought the cap rates were going to be a little lower, given that this was -- improved assets, given the first rounds of disposition.

So just wondering about that 7.5% to 8% cap rate?.

Yeah, that's a good question, and we have seen consistency in the pricing and actually I have been very encouraged by the buyer pool and some of the new capital formations that we have seen. The bids that we have been receiving on the assets, we have been putting into the market have been pretty aggressive.

So we are certainly helpful, that we will continue to achieve the lower end of that cap rate range into the mid-7s. But we are giving ourselves, I guess, a little bit of flexibility to continue to execute on our strategy and ensure that, we hit our targets, which we are very comfortable that we will..

Okay.

And just maybe for Glenn, where would you target your dividend to AFFO payout ratio? Where would you be comfortable that being?.

Well overall, we wanted to be around 90%. Today, it's a little higher than that, but as the EBITDA starts coming online from our development and redevelopment projects, that will help drive it down..

Okay. Thank you..

Our next question comes from Samir Khanal of Evercore ISI. Please go ahead..

Good morning guys. So Conor, just on the transaction market again. I guess, what gives you the confidence that you will be able to execute on kind of that $800 million for the year? I mean, many of your peers are sort of doing the same thing.

It feels like, assets are flooding the market, and you are not getting a lot of -- there isn't much bid for anything sort of over $50 million.

So it feels like there is a lot of work to do, with the $15 million to $20 million kind of one-off assets, and I mean -- is there a risk that some of this could kind of trickle into 2019 at this point? I am just trying to get a sense of, when you think about dispositions, is it -- what's under contract and should we think of it being more sort of first half weighted or how much of that could trickle into the second half of 2018 here?.

It's a good question. I think when we look at our execution on the dispositions of the portfolio to-date, that gives us confidence, that we are going to be able to execute. So I mean, we have been able to do a one-off strategy for repositioning the portfolio significantly.

We have sold now close to $6 billion worth of real estate, to feel like we have the team in place, we have the execution ready to go, and that's what gives us confidence to be able to hit those ranges.

Ross, what do you think?.

Yeah I mean, I would just add that, over the last few months, I mean, we have had countless meetings and phone calls with investors, operators, brokers, and there really has been, I think, in some sense, a renewed interest, from some players, that really, frankly have been on the sidelines for the last few years, and are starting to reemerge, as they are seeing attractive pricing and cash yields in today's environment.

So we have $300 million under contract or with an accepted offer, with a significant amount behind that, and as you said, I mean, the average deal size for us really is in that $15 million to $20 million; maybe $25 million range on some deals,, which seems to be the sweet spot for investors.

There is no doubt, it is a significant amount of work to do it on a one-off strategy. We are talking with groups and are looking at a few smaller sub portfolios, although we think that a larger portfolio is too heavy a discount for us to take. So it's no doubt a lot of work, but our team is motivated.

Everybody is working hard to get it done, and we are confident that we will hit our targets..

Okay. Thanks guys..

Our next question comes from Ki Bin Kim of SunTrust. Please go ahead..

Thanks and good morning guys. So let's say you get everything done that you want, and $900 million of asset sales this year, it probably doesn't change your leverage ratio a whole ton, because you are using all those proceeds for redevelopment.

And I know there is a timing issue with EBITDA flowing in; but reasonably speaking, how much more could we expect in asset sales in 2019?.

It's a good question. I think when we look at our portfolio today, we really want to have a clean portfolio in 2019. So we are going to make sure that's why we have an elevated disposition plan for 2018. So that going forward, we have a clean portfolio, that's really heavily weighted toward the coasts.

That's where we see the highest growth, that's where we see the biggest barriers to entry. So that's where we are positioning ourselves going forward. We know we have to execute on that, and our team is geared up to do that. But going forward, that's our game plan..

But the question is, does the $900 million get you there, or is there possibly another round that you have to do?.

That gets us there. That really cleans up the portfolio and gets us to a run rate, where we see us continuing to be well positioned for growth into the future years..

Okay.

And just last question, when you look at the composition of things you are looking to sell, any large power centers in there, that might be a little bit from problematic?.

Yeah. The composition really is a bit of a cross section of our portfolio. So there is some grocery, there is some on anchored centers. But it is heavily weighted towards power. The deal size is primarily in that $20 million to $25 million range. There is one or two assets, that I would say are larger power centers.

One of them that we have in the market today, in Missouri, we are getting exceptional early interest. So we are confident that we are going to hit our price targets there. I think you saw yesterday announce, there was a big power center in Idaho, that was recently acquired, north of $75 million.

So there are buyers for that type of products, and we are confident that we are going to be able to move the few that we have, that are a bit larger in size..

Okay, thank you..

Our next question comes from Jeremy Metz of BMO Capital Markets. Please go ahead..

Hey, good morning.

Ross, going back to one of the earlier questions on dispositions in the 7.5% to 8% yields here, are you factoring in raising any capital from new joint ventures? Is that something we could see this year as a way to possibly raise some more attractively priced capital, in addition to selling that bottom rung in that high single digit range?.

We always look at our disposition program, in a way to try and execute and get those assets out of the portfolio. For potential new opportunities, I think we have always stated that, we have an existing JV platform. Three very strong partners that want to continue to do business with us.

We don't currently have any plans to announce today, of a launching a new JV. But again, we have that as an arrow in our quiver..

Okay. And then, in terms of the buyback, you obviously have a pretty full pipeline of spend here, nearly $500 million of redevelopment, $100 million of maturities and amortization. I think you took care of some of that already so far this year. You have also talked about delevering further with proceeds.

So trying to understand exactly where the buybacks fit on a priority scale? Would you be willing to increase bid dispositions further to fund it, and kind of what it means for your long term goals of getting a rating upgrade?.

Again, the ratings continue to be very important to us. As you know, we are BBB+, solid and stable and continuing to head towards -- over time, what would get us to that A-, AAA rating. But that really is an overtime issue.

As it relates to the buyback, first and foremost, we are focused on funding our developments and redevelopments, as we have talked about. So as with this [ph] $425 million to $525 million range. And then we have options that are really open to us. We will see where the stock is trading.

We have $575 million of perpetual preferred, that's all callable today. And then, debt reduction, we have already paid $162 million of debt already this year. So this is really not a whole of debt more than we could pay down. The next bond that we have is October of 2019, and that's at 6X and 7X [ph].

So that's another option for us to take a look at earlier on..

We do think our stock is incredibly cheap. I mean, that's the reason why we always have the share buyback program in place, and we do see that as an opportunity to really showcase the disconnect between public and private pricing right now..

Thanks guys..

Our next question comes from Christy McElroy of Citi. Please go ahead..

Hey, good morning everyone. Appreciate the color on expectations towards the upper end of the same store growth range.

Can you just give us a sense for exactly what's buffered in there for tenant fallout? Just a little bit more color on that, what you know and what you don't? And you had previously expected, I think a bit of an uplift, so higher growth rate in 2018.

What has changed exactly in the last three months?.

Hi Christy. We are still looking to see what Toys does. I mean, they are trying to reemerge from bankruptcy here. We have seen their lists, and yet they are still trying to figure themselves out if they had a very difficult holiday season, as you know.

So there are still a few things early on in the year, that have to play out, and really will determine where we fit on that guidance range in terms of same site NOI. We do like the demand we are seeing from our stable of tenants, that continue to want to grow stores with us. We see that that's very-very strong.

We are monitoring shadow supply, as we have been talking about, as we continue to reposition the portfolio, and move a bit more coastal. I think we will continue to see more demand for our centers..

Great. And then just, with regard to what you already have leased, just -- there is a big difference obviously between the leased rate and commenced rate.

Can you just give us a sense of the magnitude of dollars of leases that have been signed but have yet to commence, and sort of the timing of those commencements, as we sit [ph] through the year?.

The total dollars of what's signed is probably in the $10 million to $15 million range of what's there already. So that's going to stop coming online, as we get more towards the middle of the second half of the year, and we think that that gap should start closing, that 270 basis point gap..

You did see it close..

Right. So you saw 50 basis points tighten already. And again, we will have more leasing, and then you have ins and outs that go with it. But we expect that that will start to tighten, as we get later into the year..

Okay. Thank you..

Our next question comes from Rich Hill of Morgan Stanley. Please go ahead..

Hey, good morning guys. I want to go back to the share buyback program. Maybe focused on your comments last quarter, and what's changed? I certainly hear the understanding that stock looks very cheap in your mind, and certainly it's down, I think around $4 since last earnings.

But last earnings, you were mentioning that it didn't necessarily make sense relative to maybe debt-to-EBITDA and you thought that there were better source of capital; specifically your redevelopment program.

So I am curious, obviously, a lot of things have changed with your share price, but how are you thinking about that relative to your debt levels and your development pipeline?.

So from the first point, the share price, look where it is. You look at our FFO yield, based on earnings today, it's almost 10%. Our dividend yield is over 8%. So that's pretty dramatic shift than where we were even three months ago. So that brings into question, should we have this program available to us.

The other thing that we did was, we had ramped up the size of our disposition program. That again, is there to fund our developments and redevelopments, and then beyond that, again, we have the availability, if the price is going to be at those levels, where we could use it towards that. Keeping in mind, that our ratings is very important to us.

So we are not going to allow net debt-to-EBITDA or fixed charge coverage or any other debt metric to get out of control or be above a level that would put that at risk. But we are cognizant of where the share price is, and we have opportunities available to us..

I think that's right. I think when you look at the long term prognosis of the business, we still believe in the redevelopment being really a tremendous return on our capital. And yet, we see how cheap the price is today in our stock, and where we fit, and it is a tremendous value, and that's why we have pushed the program in place.

We still have the redevelopment as a priority for creating long term shareholder value. But again, we want to be opportunistic and take the advantage when we can, when it presents itself with the share price..

Got it. And just one more follow-up question on that; to me it sounds like you are saying it's not necessarily -- you are not comparing where you could buy back shares relative to where you are selling assets; because we see that as modestly accretive, not super accretive.

It just sounds like, relative to all of your other opportunities, this is a good use of capital, relative to three months ago, where they have been slightly less of a priority.

Is that all fair?.

That's how we allocate it..

Okay. Great. Thanks guys. I appreciate your time..

Our next question comes from Alexander Goldfarb of Sandler O'Neill. Please go ahead..

Good morning. So two questions; first, Conor, you guys had previously said you were done with a major portfolio of repositionings, and now, you are obviously embarking again.

So curious what's the decision to sell mostly the Midwest? Is it the reemergence of buyers that you guys sort of talked about, or is there something different that you saw, in the growth of the IRR profile of the Midwest versus the coastal preference that the new portfolio will be?.

It's a good question. I think when you look at the profile of the Midwest, it's heavily weighted towards bigger boxes, and we have just seen that the growth profile there, just doesn't measure up to what we have seen on our coastal properties.

And so when we look out to buy assets, and went back through the disposition targets for this year, we really wanted to clean up the portfolio, to showcase that -- really the bedrock of the portfolio is growing and substantially higher than, let's say, the Midwest was growing at.

And so when we look at that, we think that prioritizing it and pushing it out this year, is going to really set us up nicely to showcase how much embedded growth we have in the rest of the portfolio?.

Okay. And as a follow-up to that, you mentioned that you took Christiana out of the development and put it back, I think you said it was land or existing assets.

Just curious how your hurdles have changed, how Christiana compared to some of the other projects that you are continuing on with? And then going forward, on new deals, let's assume that the stock doesn't recover to today, where it is essentially.

How are your hurdles changing for new projects, or is your view that hey, this is sort of what Glenn was saying, if the stock is down here, better off to buy back stock versus proceed them to redevelopment for future..

Yeah. On Christiana, it's a site that we looked at and we thought that it was best to take it offroad, just because of where our cost of capital sits today. We still believe in the site longer term, it has tremendous frontage on I95, that sits right next to GGP's Christiana mall that does over $1,000 a foot in sales.

But it's one, when we look at our cost of capital, we had the opportunity to say, we already have a significant development pipeline.

Where the cost of capital has changed, we can then allocate that to the priorities and show that the projects that are already underway, are going to deliver significant growth, and move out on more to the land, house or development.

So it's really just being a prudent capital allocator, and understanding that our cost of capital has changed significantly. Going forward, you will see us do more of the redevelopments, that have significantly higher yields. On average, those have been between 9% and 11%. That's where we still see tremendous value to be created in the portfolio.

So that's really where we prioritize it going forward..

Okay. Thank you..

Our next question comes from Nick Yulico of UBS. Please go ahead..

Hey good morning. This is Greg McGinniss on for Nick.

Regarding the Toys"R"Us closure, were those in line with your expectations, and are you in further discussions with the retailer regarding that lease?.

Yeah, this is Dave Jamieson. It's a great question. We've been closely monitoring Toys for an extended period of time, and so when they -- coming out of their holiday season, appreciating that they had some clear challenges, we had anticipated that there would be some adjustments to our existing portfolio.

We had marked down 24, we are actually down at 23 at this point on this call today.

And we are in active discussions with them as well, as we worked through each of the leases, where we have had success, being able to restructure leases, reduce term, secure the right to recapture the box, and what that has enabled us to do, is to go back out to market with the other growth context as well, and identify new opportunities and be very proactive and preparing opportunities to back.

So dependent on how they emerge from bankruptcy today..

Right.

And so following up on that, with these anchor givebacks and potential Sears bankruptcy, how does that fit within your redevelopment pipeline, and you mentioned tenant demand, how strong is tenant demand for these box sizes?.

Tenant demand for these boxes have been extraordinarily high. We have seen it from all the off-price guys, we have seen it from the grocers, the fitness users. So we are very confident in terms of our ability to backfill these boxes.

As it relates to Sears comparatively as well, when we look at what's remaining in our core portfolio at Sears, and you look at where these are located. They are really on the coast, they are in South Florida, they are in California, they are in Washington.

And you look at the population densities on a pro rata basis, it is about 150,000 people that excludes those that are say like Bridgehampton and the Keyes, which are extremely high barrier to entry markets with very limited supply, and there is no in which you can construct anything new.

So putting all that together, that creates tremendous opportunities for our redevelopment pipeline going forward..

I would just add that the average rent on the Toys boxes is around $11 and 15% to 20% below market, when you look at the locations we have. So we feel optimistic that if we can recapture some of these boxes, we will be able to do some higher quality tenants that will drive more traffic, that will add value to the rest of the shopping center..

And sorry, just one quick follow-up here.

After the $425 million to $525 million development spend this year, how much do you expect that outlay to fall in 2019 and 2020?.

We'd probably be around $250 million and $300 million during 2019..

Great. Thank you very much..

Our next question comes from Haendel St. Juste of Mizuho Please go ahead..

Hey there, good morning. Glenn, I guess a question for you first on the FFO guidance.

Curious, what's embedded in there in terms of expectations for, distributions from Albertsons? And then, could you also give us a sense of what you are perhaps expecting in terms of insurance proceeds from Puerto Rico?.

So there nothing put in numbers at all for Albertsons. Albertsons, when and if something happens there, will just be upside to us.

As it relates to Puerto Rico, our guess is, we are probably around $2.5 million to $3 million less in NOI from the Puerto Rico properties versus last year, and then the insurance proceeds will probably get a couple million dollars, is our guess during the year. So that will upbridge that.

You got to realize, in Puerto Rico, most of the tenants that were there, are actually back up and running. The properties are performing. They all have power again. There is a lot of heavy traffic at the assets, and were just under -- I think we are 94.7% occupied today. So the properties are actually starting to perform well again..

We were actually seeing a boost in demand down there as well.

I think being a well capitalized and efficient operator in Puerto Rico, has given us the ability to get our sites open and operating quickly, and there is a lot of retailers that are coming to us, that have not been able to rebuild or have a landlord that's not well capitalized, so we get them back open and operating.

So we have actually gotten some increased demand from retailers looking to come to our centers..

Appreciate that.

Glenn, the couple of million you mentioned there, is that embedded in the FFO guidance, the Puerto Rican proceeds?.

Yes..

Okay.

And then on the same store NOI guide, what's embedded there for bad debt and refurb [ph], and what are you assuming for expense growth? And then how should we think about potential further cost savings in the portfolio if you sell another $900 million this year? Is there anything embedded in the guide for that?.

In terms of bad debt, again, we run around 1%, as our reserve on that.

What's the second part of your question, Haendel, I am sorry?.

Thinking about the portfolio, as you sell assets here, another maybe $700 million to $900 million.

Potential cost savings to the platform, as you think about rationalizing some of your costs?.

Again, part of the closing and consolidation of the Midwest region relates around selling a lot of those assets. So you will see that this is going to impact in our G&A line. I mean, if you look at our G&A, it's relatively flat, and it has been held relatively flat for several years now, with the things that we have been doing..

Okay. Thank you..

Our next question comes from Michael Mueller of JPMorgan. Please go ahead..

Yeah hi. So going back for the $700 million to $900 million that you are selling with a cap rate of 7.5% to 8%.

If we go beyond that and just think about how the balance of the portfolio is, is there another sizable chunk of assets that you would say, the cap rate is 6.5% to 7%, and we should think of it as ratably getting better or is there -- once this chunk of the portfolio is gone, a notable step-up in terms of the quality and a drop in the cap rate.

I mean, how would you size it up outside of what you are selling?.

I think your latter part there is correct, is there is a sizable step-up in quality, when we move out of the Midwest. And you look at the assets that we have up and down the coast, and we think we are toe-to-toe with the best in the business.

And so, we will have to prove it out, obviously, with our numbers and our execution and showing that the growth is there, and that's on us to make sure that it shines through. But we really do believe that there is going to be a significant jump in quality, once we execute on our disposition plan this year..

Okay.

And then just a timing question for the dispositions; how do you see that playing out throughout the year? I know you have a decent amount under contract right now?.

Yeah, we are pushing to get as much done as quickly as we can. We are confident that the first half of the year is going to be very strong, and that's definitely our game plan with continued execution through the third and fourth quarters. But we are pushing to get as much sold in the first half of the year as possible..

Got it. Okay. Thank you..

Our next question comes from Wes Golladay of RBC. Please go ahead..

Hey, good morning everyone. Looking at the existing pipeline in the supplement for development and redevelopment, looks like there is just a little over $500 million of total spend that can cause [indiscernible] share.

So how much of the development spend and redevelopment spend that you identify for 2018 is attributable to this pipeline we see in the supplement, and how much is it for committed landlord work and tenant allowances or potential new projects later in the year?.

So the $425 million to $525 million is really split between the developments and the redevelopments. The developments are about -- it's about half of it, about $200 million, $225 million of it, and then the redevelopments are about $250 million, $275 million of it..

And I would just add, that we don't plan to add any new development projects other than the existing assets that we are working on, and you will see us continue to work on entitlements for redevelopment, as we continue to think that that's got to be the priority for the company longer term..

When you think of the redevelopments of the Highland projects, it's pretty large. It's $186 million project. It's already -- in Staten Island. The project -- groundbreaking has already been done, construction is happening, money is being spent. So with that project, it is moving along pretty quickly. The same thing with our Pentagon project.

Again, you have the tower that's being built, so there is a lot of capital that's going into that project as well. So those are the two major places where the capital is coming. As you know, the developments that we have, so we are continuing to spend on Dania.

Phase one should be open by the end of 2018, so there is a lot of capital that's going into that as well..

And then Phase 2 will follow that..

Right. And we could square as well..

Okay.

And then with the dispositions, there would be a lot of mortgages tied to these properties, or should we expect a big cash drag? Maybe retire preferred later in the year? How are you modeling that in guidance?.

There is very-very little mortgage debt tied to any of these properties we are selling..

Okay. Thank you..

Our next question comes from Chris Lucas of Capital One Securities. Please go ahead..

Good morning guys.

I guess two quick ones; Glenn, and I recognize you have a real focus on looking to maintain and improve your credit rating? I guess one of the questions I would have is just, as it relates to the preferred stack, is there more capacity there? You had a really very solid execution in December, just curious is there more availability within your capital stack to do more preferred?.

There is more availability for sure. I think where we are, is there is a little bit over $1 billion. Again, it's somewhat pricing sensitive. The reality is, if you look at where pricing is today, it's probably starting to approach now, 6%.

So at the time we issued 5 in an inning [ph], 5 in a quarter, for a long data taper that doesn't have a maturity, that works really well, as you start getting into higher coupon levels, becomes somewhat less attractive.

And again, if you look at where are from a maturity profile; again, we had so little debt maturing between now and 2020, and we have really between -- with the sales, the ability to fund all of our development and redevelopment projects.

And what we are counting on, is as those projects get completed and that NOI starts coming online, that you will start to see net debt-to-EBITDA drop..

Okay. And then, just on the -- Conor, on the retailer environment. I guess, I am just curious as to how maybe you would compare where we are today versus a year ago? It feels more stable, there has been some store announcements, but the environment feels better.

Is that your sense?.

I think that's accurate. I mean, when you look at the strength of the retailers today, it continues to be in the off-price categories and the health and wellness categories, the specialty grocers. Inflation is coming back a little bit, so that should really help grocery stores. And then you look at the fitness, and what's going on there.

You continue to see huge demand for stores, and I think one of the biggest things that sometimes is missed, is retailers are starting to recognize the important of the physical store to the omnichannel network.

And I think you are going to start to see more and more retailers start to showcase sales as a combined number, rather than just an e-commerce sales number and a physical number; because, I think the race there was to show much e-commerce is growing.

When in effect, it's one big network, and I think retailers are starting to recognize how important the store is to that network, and I think that's what's really going to boost this estimate going forward, is how important it all connects together..

Right. Thank you..

Our next question comes from Christian Russell of Wells Fargo. Please go ahead..

Thank you. First off, congratulations on the latest quarter.

I am calling in as a shareholder and as a portfolio manager, and my main question is, basically, looking at or listening to the conference call today, two things really stuck out at me, and that was Ross' comments regarding the current environment from the physical assets, is that an all time low in cap rates, which translates to me as meaning all time highs in prices? And then the other comment is, from the guys that described the big disconnect from the public markets and the stock price, versus what's happening in the private market, and describe our share price has a tremendous value and incredibly cheap.

And I am just wondering to myself, have we considered, maybe that one of the best programs we could do is, with that $900 million, using it to create a fortress like balance sheet, buyback our own stock?.

I think it's a great idea. It's something that we believe in, and think that if you look at our playbook, that's exactly what we think we should be doing. So we have got a lot of execution, especially on the disposition side of it as well as on leasing.

But we want to make sure our balance sheet is in the best shape possible, and buyback shares to really showcase that disconnect between public and private pricing..

And our next question is a follow-up from Christy McElroy of Citi. Please go ahead..

Yeah, it's Michael Bilerman here, an analyst with Citi. Just question, Glenn, on the tax consideration for sales. I think back to last year, and that the acquisitions were driven in part by the tax gains that you had, that you couldn't shelter through your dividend. Obviously, $900 million is a lot more sales relative to last year.

How are you managing through that for 2018 and you know, is there a special dividend, potentially in the cards, if you can't shelter, because it doesn't seem like you are buying anything this year?.

It is a good question Michael. We have done a lot of analysis about the cash position and where we are relative to the dividend. And we feel comfortable today, that we can actually absorb all the gains. Again, if you look at the composition of our dividend last year, we did a lot of 1031 exchanges.

So you wound up with a component of the dividend being returned to capital, like 40%. So without having any acquisitions or very minimal level of acquisitions and no 1031s, you can see a very different composition of what the dividend would look like, being ordinary and capital gain..

Right, --.

We don't think we would need a special dividend. We think we can absorb it..

So you are already paying out well above the minimum relative to ordinary, so you have room effectively, to be able to cover increased capital gains without the need for a special?.

Correct. Yes..

And then, just thinking about asset sales, and I recognize a big push here is to create a portfolio that you want going forward.

Have you considered at all, sort of selling interests in some of your higher quality assets? Effectively, like the stuff you just bought in Jantzen and Whittwood or re-joint venture in Dania, once you complete the development? And I recognize you have done a lot to simplify the company, joint ventures are down to 10, 13 percentish of your company now.

But I just didn't know whether that would be an avenue to sort of highlight value across the board, in terms of more representative of your portfolio, and so interest in some of those better quality assets, and also have less dilution from being able to raise capital at arguably much lower cap rates?.

Yeah Michael, I think that's a very good point. I mean, we have lifted that, and as I said before, we do have three very large partners, the Canadian Pension Plan, Prudential and New York Common, that will continue to want to do business with us.

So we will look at that and see, if we can continue to -- as a way to access cheaper cost of capital, I think we could potentially look at that going forward. Again, if our cost of capital doesn't come back, we have that as an arrow in our quiver. So it's something that we are looking at, as a potential opportunity..

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

Thank you for participating in our call today. I am available to answer any follow-up questions you may have. I hope you enjoy the rest of the day..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines..