Conor Flynn - Chief Executive Officer Glenn Cohen - Executive Vice President and Chief Financial Officer Ross Cooper - President and Chief Investment Officer David Jamieson - Executive Vice President and Chief Operating Officer David Bujnicki - SVP, IR and Strategy.

Jeremy Metz - BMO Capital Markets Ki Bin Kim - SunTrust Robinson Humphrey Christy McElroy - Citi Rich Hill - Morgan Stanley Nicholas Yulico - UBS Craig Schmidt - Bank of America Merrill Lynch Samir Khanal - Evercore ISI Alexander Goldfarb - Sandler O'Neill Jeff Donnelly - Wells Fargo Vincent Chao - Deutsche Bank Hong Zhang - JPMorgan Linda Tsai - Barclays.

Good day and welcome to the Kimco’s First Quarter 2018 Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to David Bujnicki. Please go ahead..

Good morning and thank you for joining Kimco's first quarter 2018 earnings call.

Joining me on the call are Conor Flynn, our Chief Executive Officer; Ross Cooper, President and Chief Investment Officer; Glenn Cohen, Kimco’s CFO; David Jamieson, our Chief Operating Officer, as well as other members of our executive team that are present and available to answer questions during the course of this call.

As a reminder, statements made during the course of the 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 the Investor Relations area of our website.

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

Thanks, Dave, and good morning everyone. Today I’ll provide a high level overview of our first quarter 2018 performance. Ross will then report on our transaction activity for the quarter and share his views on market trends and conditions. Finally, Glenn will provide details and color on key metrics and our 2018 outlook.

2018 is the year of execution for our team here at Kimco. More specifically, we are focused on four major initiatives to help position the company for 2019 and beyond. First, execute on our disposition plan. Our disposition plan is designed to improve the quality of our portfolio, fund our developments and redevelopments, and reduce debt.

Despite concerns that continues to surround retail real estate, we are enthused about the volume, pace and pricing of our sales.

And while the equity markets continue to wrestle in valuations for retail real estate, the debt markets remain wide open to finance open air shopping centers due to the strong credit tenants that are performing well in the changing environment.

While Ross will go into more detail on the dispositions and market conditions generally, I think it is worth noting here that even while we are funding projects to provide no current yields and reducing debt at rates lower than the average disposition cap rates, despite this dilutive activity, we are still producing solid results and we think earnings growth is balance sheet strength.

Second, notwithstanding our record-setting leasing year in 2017, we expect to further improve upon our leasing volume this year and are off to a strong start.

Our leasing volume is almost exactly where we were at this point last year, and for the first time in over ten years, our sequential occupancy in the first quarter improved and now sits at 96.1%. Occupancy for our anchor boxes increased slightly to 98.3% and we maintain small shops at 89.6%.

This is quite a feat for the first quarter which historically experiences elevated seasonal store closures and bankruptcies and is another indication of the healthy demand for our core markets for high quality open air shopping centers.

In terms of our leasing spreads for the quarter, new leasing spreads came in at 15.6% and renewals and options at 7.3% for a combined 8.1%. Our leasing efforts resulted in same-site NOI of 2.6%, which is our 32nd consecutive quarter of positive growth.

The portfolio continues to dramatically improve as our average base rents is up 19% to $15.69 from $13.18 in just four years. Third, continue to deliver on our development and redevelopment pipeline to create high-quality high-growth assets.

Tenants at Grand Parkway Phases I and II are now open and operating and generating above average sales for our best-in-class retailers. We are pleased to announce that Dania Phase I is now anchored by a Lucky specialty grocer to fill out a great line of retailers set to open this summer. Dania Phase I is currently 93% pre-leased.

As we have said on numerous occasions, real estate is about location and this area of Fort Lauderdale is tracking as one of the fastest growth areas across the United States.

Lincoln Square, our mixed use project in Philadelphia Center City is now pre-leasing apartments and we are excited to announce that Sprouts Farmers Market will anchor that project by retrofitting the historic train station on the site.

Our signature series projects are making tremendous progress as we continue to unlock the embedded value of our real estate allowing them to become major growth contributors for Kimco going forward. Fourth, further improve the balance sheet to enable us to reposition our portfolio for the future and provide safety for a steady and reliable dividend.

We ended the first quarter with consolidated net debt-to-recurring EBITDA at 5.7 times and only $8 million outstanding on our $2.25 billion unsecured line of credit. While we are proud to be only one of a dozen in Triple B Plus or BAA1 rated REITs, we continue to seek opportunities to improve upon this rating.

We recognize there are some challenges ahead as we move to execute on these initiatives and are confident that we’ll prepare to meet them head on.

For example, our 22 Toys "R" Us locations which represent 90 basis points of our total annual base rents and a 130 basis points of occupancy are already seeing significant demand from our list of growing retailers that are in search of high-quality locations.

In addition to the thriving categories of off-price, health and wellness, specialty grocer, home improvement, furniture, arts and crafts and entertainment, we have started to see new demand coming from co-working facilities, hospitality groups, and medical facilities.

The quality of our centers creates future opportunities to reposition or reinvest them for the highest and best use to drive long-term shareholder value. In conclusion, our team remains both motivated and focused to reach and exceed our goals.

Our high-quality coastal related portfolio combined with the strength of our platform will generate significant long-term shareholder value through numerous levers of NOI growth and a stable and safe dividend. And now, I will turn it over to Ross. .

Thank you, Conor. We are extremely pleased with our first quarter transaction activity as outlined in the related press release earlier this month. With the sale of 21 shopping centers or $210 million of Kim share, we continue to execute on our 2018 disposition goals and are well on our way to hitting our target of $800 million at the midpoint.

In line with our continued focus on owning a coast related portfolio, a majority of the properties sold were located in the Midwest. The blended cap rate was at the low-end of our expected range reflecting positively on both the quality of the centers being sold and the investor demand.

Through the first four months of the year, we are impressed by the level of activity and the profile of those bidding on our properties.

Demand for our sites is being driven by the combination of cap rates in the mid to high seven range, coupled with readily available debt capital at continued low interest rates resulting in compelling returns for the investor. On average, we are receiving five to six bids per property compared to an average of three to four in 2017.

Indeed, new capital formations have emerged to take advantage of the opportunistic yields that can be achieved. Additionally, we are seeing pass buyers who have been sidelined in recent years reemerge after being priced out of the market.

Other buyers include private regional operators with strong track records, partnering with institutional and private equity capital with significant liquidity and a desire to own retail. While supply of centers on the market has ticked up, in our experience so far this year, the demand has met the supply and we don’t envision this dynamic changing.

Within our specific portfolio, we have sold to private operators, private equity, 1031 exchange buyers and private REITs. All has been active given the strength and stability of the cash flows we are selling coupled with debt capital to match at historically wide spreads.

We currently have another $500 million plus under contracts with an accepted offer and maintain our full year guidance range for both net sales volume and cap rates. We continue to see within core major markets; there is no shortage of demand for institutional quality assets with prices continuing to achieve historically low cap rates.

Given our anticipated spend on the development and redevelopment program, coupled with our focus on improving debt metrics; we maintain our disciplined strategy of passing on new acquisition opportunities in the short-term. Bottom-line however, is that retail real estate is in demand.

Glenn will now provide additional color and insight on our financial performance for this quarter. .

Thanks, Ross, and good morning. 2018 is off to a strong start as evidenced by the level of leasing activity, same-site NOI growth and the execution of our disposition plan. In addition, solid progress has been made on our development and redevelopment projects which will further fuel our growth in 2019 and beyond.

Now for some color on the first quarter results. NAREIT FFO was $0.3 per diluted share for the first quarter 2018 as compared to $0.37 per diluted share for the first quarter last year.

The current quarter includes $7 million of transactional income comprised primarily of $4.2 million forgiveness of debt, $4.7 million of profit participations from the disposition of certain preferred equity investments, as well as $1.5 million of unrealized losses related to our marketable security portfolio.

The latter charge results from the adoption of new FASB guidance on financial instruments for acquiring unrealized gains and losses from marketable securities to be included in the income statement instead of the equity section of the balance sheet.

Also during the first quarter, we reclassified personnel cost directly related to property management and property operations from G&A to the operating and maintenance account in the income statement.

We believe this change provide a better comparability to our peers and old periods have been adjusted to reflect the change which had no impact on reported net income, FFO, or FFO as adjusted.

In terms of FFO as adjusted or recurring FFO, which excludes non-operating impairments and transactional income and expense, first quarter 2018 came in at $157.8 million, compared to $155.8 million last year with $0.37 per diluted share in each quarter.

2018 first quarter results include increased consolidated NOI contribution of $6.6 million resulting from higher minimum rent and recovery rates attributable to greater occupancy from a year ago. Offsetting this increase was higher financing cost primarily attributable to the larger level of preferred stock outstanding as compared to a year ago.

As Conor mentioned earlier, the operating portfolio delivered solid occupancy growth, positive leasing spreads, and same-site NOI growth. Same-site NOI growth excluding redevelopments was 2.6% for the first quarter 2018 compared to a comp of 2.1% last year.

This was substantially driven by minimum rent increases contributing 240 basis points, improved – tax recoveries adding 60 basis points and offset by lower percentage rent of 30 basis points and higher credit loss of 10 basis points. Our first quarter same-site results well outperformed the 1.25% level we initially guided to.

This is attributable to several positive factors including a lower level of vacates than budgeted, no leases rejected from the Toys "R" Us bankruptcy during the first quarter, and the timing related to certain dispositions. As a result, we are raising the low end of our full year same-site NOI guidance range from 1.25% to 2% to 1.5% to 2%.

On the balance sheet front, we paid off $173 million of non-recourse mortgage debt during the quarter ending the period with liquidity in excess of $2.4 billion. We had minimal debt maturities through 2020 and our weighted average debt maturity profile stands at 10.7 years one of the longest in the REIT industry.

During the first quarter, we repurchased 1.6 million shares at an average price of $15.17 totaling $24.3 million under the company’s common share repurchase program.

And as previously announced, the underwriters exercised their overallotment option in January 2018 on our Series M 5.25% preferred originally issued in December 2017 providing us additional proceeds of $33.4 million. Consolidated net debt-to-recurring EBITDA improved to 5.7 times from the 5.9 times level at year end and six times a year ago.

On a look through basis including our pro rata share of JVs and preferred stock outstanding, net debt-to-recurring EBITDA was 7.2 times. Our objectives are to reduce consolidated net debt-to-recurring EBITDA to 5.5 times and on a look through basis to 6.5 times by 2020.

A key driver to this will be the EBITDA contribution expected to come from our signature series development projects, which are at varying stages of completion with $465 million invested to-date. We are extremely pleased with the construction and leasing progress made during the first quarter.

Grand Parkway Phase II, Dania Phase I, Lincoln Square and Mill Station remain on track to begin cash flowing in the latter part of 2018 and be significant contributors to 2019 growth. Regarding guidance, we are reaffirming our NAREIT FFO per share and FFO as adjusted per share guidance range of $1.42 to $1.46.

The key to our success is continued execution. We remain confident we will deliver and with that we’d be happy to answer your questions. .

Ready to move to the Q&A portion of the call, to make it more efficient, we ask that you may ask a question with one additional follow-up. If you have additional questions, you are more than welcome to rejoin the queue. Natalia, you could take our first caller..

[Operator Instructions].

You can take Jeremy please, I guess, he is the first on the queue.

Natalia? Hey Jeremy, are you there?.

Hello, can you guys hear me?.

Yes, we can hear you..

Yes, thanks and good morning guys. So, in terms of the Toys, you have the 22 boxes here. I think last call you were talking about kind of seeing where that process shook out. It didn’t necessarily sound like you are assuming all went dark this year.

So just given the outcome here, I was wondering if you could talk about how much room this leaves you in terms of your bad debt and closing reserves, for additional closures from this point and then also if you can talk about what the mark-to-market is today on those boxes?.

Sure, it’s Glenn. Hi, Jeremy. In terms of where our bad debt reserves are, we’d remain comfortable that our 100 basis points of credit loss that we have budgeted for in our guidance is enough to support 2018 as it relates to Toys "R" Us. Again, keep in mind where we are. They have paid rents in full for all sites through April so far.

There are four sites I believe that have been rejected and those stores are closed. And we haven’t gotten rejection notices on the balance of them. Now we’ve budgeted that many of them will close in the second half of the year, but we can remain very comfortable where we are that our guidance incorporates that closure. .

And then Jeremy, this is Dave Jamieson. Just as it relates to the mark-to-market, we are seeing this as the mid-double-digits in terms of a positive comp for a spread amongst the 22.

And just to clarify, the closures we have budgeted most of them to go vacant in Q2 and in terms of the level of activity that we’ve been seeing on all these boxes, it’s significant and we have leases out for several already. LOIs working on the balance of the locations.

So, as Conor mentioned in his script we feel very optimistic about the opportunities here..

Appreciate that color. And then, Conor, just one for you in terms of the buyback. You did a modest amount here in the first quarter. The stock has clearly been under pressure. So, I am assuming it remains an attractive capital allocation option today as well.

But you still have a lot of developments you marked for ht year, so with that in mind, should we expect buybacks should remain rather minor, at least in the near-term given your current spending needs?.

Well, you are right. We do think it’s in a compelling option for us where we sit today. We are getting further along with our dispositions and that’s really what we have earmarked to match fund our redevelopments and developments.

We’ve seen nice, as Ross covered in his remarks, we have seen nice execution there and continue to see more sales closing weekly. So, as we look forward, we get more comfortable with the 5.25 that we’ve earmarked for our redevelopment and development this year.

And then look at our cost of capital, look at where our shares are trading, and continue to think that buying back of the shares is a compelling option for us. .

Thanks, guys. .

Our next question comes from Ki Bin Kim with SunTrust Robinson. .

Thanks, good morning everyone. Going back to the disposition topic, it looks like you’ve made a lot of progress already early in the year.

And I know dilution is painful and you don’t have much debt maturing, but what are the factors that are kind of stopping you from doing maybe more later in the year or next year?.

Well, I think that we are constantly evaluating our portfolio. We – as Conor mentioned, the 5.25 is first and foremost the priority in terms of spend – for the redevelopments and developments. We do want to continue to delever where we can notwithstanding the fact that there is not a whole lot as that matures in the near-term.

But we are going to continue to execute on the plan. We have a lot in the market today. Not everything will close. We have other deals that are awaiting some lease up or options to be exercised before they’ll be introduced to the market.

So, we do expect there will be some new assets that are now in the market currently that will be brought to the market in the latter part of the year, some of which may trickle over to the beginning of next year.

But we are very focused on completing our dispositions for this year and then determining where we sit as to the latter part of this year as we look into 2019. .

Okay. And, maybe a question for Glenn, if I remember correctly your lease spread definition comp floor spaces that are – that hasn’t vacant for under a year.

Is that correct? And if you have any additional color on, if you made that definition more inclusive of maybe two years or longer, how would your lease spreads look like?.

We have not changed the definition of our lease spreads and it’s been 16 months for – like ever..

Okay..

So no change,- we don’t change. .

Basically – yes, or four quarters?.

It’s right, okay. In four full quarters. .

And then, but if you made that definition a little bit longer for spaces on maybe not two years or so, would that make any kind of material difference on your lease spreads?.

No, not necessarily. I mean, I think what lease spreads is, I think we’ve communicated in the past as well, it is lumpy. It’s about the population that under renewal or seems time in any given quarter.

So you always have to keep that into consideration, but when you look at the historic trend and where we see going forward, we are pretty much right on track as that gets customary practice from what we’ve seen of our peers to utilize the four quarters or 12 months. .

Okay, thank you. .

Our next question comes from Christy McElroy with Citi. .

Hi, good morning everyone. Just going back to the same-store NOI growth, just it sounds like this is the higher Q1 number versus what you are expecting was occupancy-driven. Maybe with the Toys closures and everything happening in terms of commencement versus the vacancies that you are expecting.

Maybe you can kind of walk us through the same-store trajectory for the rest of 2018 and then, with the Toys boxes, kind of vacating mid-year and recognizing that it’s in your 2018 guidance, but how should we be thinking about sort of that growth rate heading into 2019 given that Toys has a much greater impact on next year?.

So, at least, in terms of the current projection, again, we raised the lower end of our guidance from 1.25% to 1.5% with a full range of 1.5% to 2%. We still remain comfortable at the high-end of that range even with the impact of Toys "R" Us.

Again, it’s going to be impacted on the latter part of the year and if you look at really even the first quarter, the key driver which is very encouraging for all of us, the key driver was minimum rent increases. I mean, the bulk of the increase, 240 basis points is coming from minimum rents coming online.

A lot of the lease ups and the leasing we’ve done over the last year is now starting to flow, right. Cash – same-site NOI, cash base for us the way we are doing it. So you are getting starting to get all the flows from many of these TSA boxes and other boxes that we are baking that are coming on.

Now we still have an economic occupancy versus leap occupancy gap of 260 basis points. It’s narrowed only 10 basis points. As the Toys boxes start to vacate, that gap could widen again, but there is a lot of opportunity for that gap to narrow over time. So, again, we remain very comfortable with where we are with 2018.

The impact on 2019, it’s a little early to tell you. We really need a little bit more time to see what’s really going to happen with all of these Toys boxes. Again, we don’t have rejection notices on the rest of them yet. Some of our boxes were in the – which also filed for bankruptcy recently. But they are trying to sell a lot of those leases.

So, I mean it’s possible some of these leases get bought by someone else and new tenant just continues on with no gap. So, it’s too early to really tell how much is going to happen in 2019, we’ll get there. .

Okay. And then, just, Ross, you had talked about, in terms of buyer demand, more bidders out there, financing markets wide open. One of your peers this morning, which is primarily selling assets on the West Coast and buying talked about fewer bidders out there and financing less available.

Do you think that that’s geographic in terms of the differential in what you are seeing based on what you are selling versus other areas of the country or by asset type? What do you think the differential is there?.

Yes, I don’t think it’s geographic as we are selling assets nationally even though the majority have been in the central region this quarter. When we look at the assets that we are selling, I mean, we really position them to be put on the market at a point in time where we think that they are extremely attractive to investors.

We just closed yesterday actually on a large power center in Springfield Missouri that was north of $50 million and we had a substantial amount of bidders beyond the 5 to 6 that I mentioned on average. So, I think for the right products, in the right market with good credit tenants that’s financeable. We’ve seen a lot of interest in those assets.

So, clearly with the number of assets we have, some are more attractive than others, but we are executing on a large percentage of those that we are marketing and we don’t see that trend slowing down. .

All right. Thanks for the color. .

Sure..

Our next question comes from Rich Hill with Morgan Stanley..

Hey, good morning guys. I want to just dig into G&A a little bit. I recognize that you sold assets over quarter-over-quarter and look like you have some pretty good velocity there. But it look like maybe G&A came down $10 million 1Q 2018, versus 4Q 2017. Bigger number than maybe what we are expecting.

Anything to that or any way we should think about that?.

Sure, Rich. It’s Glenn. As I mentioned in my prepared remarks, we reclassified personnel cost, specifically related to property management and operations from G&A into the O&M line. And if you look at the change in the guidance, the G&A guidance, it’s about $32 million less from where we first put it out after we do this reclass.

So, G&A is a little bit lower, but the bulk of it really is a reclass from G&A to O&M, about $8 million and you will see that consistently. Also, as I mentioned, all of the periods previously have booked and adjusted. So you can have an apples-to-apples mix..

Got it. That’s helpful. And then just, one thing coming back to the same-store NOI guide, obviously, a really impressive 2.6% this quarter. Am I thinking about this correctly that if you look at the midpoint for your revised guide of 1.75.

Then that implies that you are going to be about less than 1.5 for the rest of the year and is that really just reflective of – sort of maybe some timing in Toys "R" Us and while 1Q was a little bit better, the rest of the quarters might be some headwinds as you do get those stores back? Or how should we think about the velocity of that same-store NOI for the rest of the year?.

Well, as I mentioned earlier, we are comfortable towards the upper-end of our guidance range. We remain there. We want to play it out a little bit. Again, it’s very hard to really forecast the total impact on 2018 for Toys "R" Us, because we just don’t know how many we are going to get back. So, midpoint of the guidance overall, we’d get 1.75.

But as I mentioned, we still remain comfortable with the higher-end of our current guidance range. .

Got it. Thank you for clarity. I appreciate it. .

Our next question comes from Nikki Yulico with UBS..

Thanks. I guess, just on Albertsons.

How should we think about, if Albertsons, the Rite Aid merger doesn’t go through, how does that affect your thinking in terms of the need for more asset sales to help fund development and redevelopment in 2019?.

It really doesn’t impact us. I mean, the models that we are using internally had not modeled anything in for Albertsons.

So, if and when, and we hope it’s when, it happens, that’s just going to be upside for us and provide us enormous amounts of optionality in terms of where our cost of capital is at that point to figure out the best way to deploy the capital that is earning zero today. .

Okay. And just one other question going back to the guidance recognizing the bump at the low-end to same-store NOI wasn’t a huge change.

How come there was no benefit though to FFO guidance?.

Well, again, it’s early – and it’s really early in the year. We just put out our guidance in February. We want to again still see how Toys "R" Us plays out and we think, we better up leaving our guidance where it is for another quarter and then we’ll see where we are at the end of the second quarter. .

Okay. Thank you. Appreciate. .

Our next question comes from Craig Schmidt with Bank of America. .

Thank you.

I just wonder of the assets sold and those under contract, what percent of the dispositions will be from the Midwest?.

Yes, we’ll continue to see a majority of the dispositions coming from the Midwest. We’ll continue to prune assets out of other regions throughout the country. But we are very much focused on reducing the exposure in the central part of the country and ensuring that the coast become a more prevalent part of the portfolio.

So, we actually have an asset that’s set to close tomorrow, a power center in Chicago. I mentioned that the deal closed yesterday in Missouri. So, we do continue to make progress on exiting the central region over the course of the year. .

Great. And then, maybe this is for Dave.

On average, how long will the time be between let’s say, a rejected Toys being leased and when it’s actually occupying and paying rent?.

Sure. Yes, Craig. Yes, as each of these boxes vary in size and location dependent on what you love to do with the box, the timing itself can vary. So, you can look at anywhere from eight to ten months some time, it could be slightly sooner, it could be slightly longer. So, again, it’s really hard to tag a specific timing.

It’s really a matter of what you do with it. Do you back sell with a single tenant, do you choose to split the box and get higher rent, or does it create a new opportunity for repositioning or redevelopment and otherwise wasn’t possible unless you got the Toys back..

Great, thanks. .

Our next question comes from Samir Khanal with Evercore ISI. .

Hi, good morning guys. I guess, your same-store NOI growth in the quarter was certainly much higher and I think most people expected with – I know there was a jump in the recovery ratio and that was a benefit.

Can you provide a little bit more color around that?.

Sure. So, we’ve been on a program over the last year-and-a-half to convert more tenants to this camp versus just waiting on pro rata. And I think that’s actually starting to take hold and has some positive impact on the recoveries. .

So, as we kind of model going forward, is that kind of more of a 1Q related item, because you went from sort of 77% to 80%. So what’s sort of….

It’s probably more weighted towards the first half of the year.

Again, as you think about what happened during the first quarter, right, so the amount of landscaping that you are doing, the amount of roofing, the amount of patching and parking lots that you are doing, those are more items that are happening in the second, third, and fourth quarters when the weather is a little bit better.

So, we do benefit a little bit in the beginning part of the year from that fixed term analysis. But, I think overall, we still feel that our recoveries will be stronger than they have been in the past. And we have higher occupancy. Don’t – we also have higher occupancy. So the revolving rate is higher from having occupancy up 80 basis points. .

Right, okay. And I guess, as a follow-up, can you maybe talk a little bit about your watch list today versus maybe six months ago.

I mean, you’ve certainly highlighted sort of all the positives, but as I kind of think about growth in the second half of 2018 and even in 2019, I mean, what are the categories that could create noise or sort of be the sort of derailed growth, let’s say, in 2019, I mean there is certainly, the Petsmart, Petco come up, what are the other categories that you are concerned about?.

Yes, I think that when you look at our watch list tenants, I mean, the categories really haven’t changed at all that much. And when you look at some of the retailers that have run into a bit of trouble, it’s really sometimes debt-related, because they are overleveraged and they are running into that.

So, when we look at our sector, we continue to think that one of the biggest benefits of owning Kimco’s shares is the wide diversity we have from a tenant base. And we continue to see the benefits of that as Sports Authority and Toys are really, yes, we are getting boxes back, but it gives us an ability to mark-to-market those boxes.

The mark-to-market opportunity within our portfolio is significant and just on the anchor boxes alone we are 66% below market and when we say that over 98% occupied in our anchor boxes, those are opportunities we love to get back and we are really seeing the benefit of this transformation of the portfolio that we’ve been doing over a number of years.

And so, this is the first time we’ve actually seen occupancy uptick in the first quarter in ten plus years. So, all the hard work that we’ve been doing is starting to pay off and so, we do see that there is going to be opportunity to continue to have mark-to-market opportunities within the portfolio in the future. .

Okay, thanks guys. .

Our next question comes from [Indiscernible] from RBC Capital Markets..

Hi, my first question, so, for the 260 basis points of that spread of lease versus the occupied occupancy, how much is shop versus anchored tenants? And then, how much will – of that space will be occupied by year-end?.

We are going to have to get back to you on the break out of that 260 point spread. The majority of it – I would say is, probably anchor base, but the split, I’ll have to get details for you..

Okay. And then, on the Dania point, it looks like the cost went up by about $21 million.

Is this due to the addition of Lucky’s market and what type of return will you see on the incremental investment?.

It is key to the Lucky’s grocery store that we have added to the line-up there. We are excited to have a grocery anchor now to really benefit and round out the last anchor box in that asset.

We’ve also added a pro rata share of offsite improvements for the site into the cost and are actually returns have gone up since we’ve added Lucky’s to the pro forma. So, we are enthused about having them to be the last anchor box. .

Great, thank you. .

Our next question comes from Alexander Goldfarb with Sandler O'Neill. .

Good morning. Good morning out there. Just two for me. First, on the Albertsons, I saw that they passed the – they got passed the Hot-Scott period that expired.

What are the next hurdles that they need to go through on the merger as far as timing? And is there anything that’s come up that you think would delay anything?.

Hi, this is ready. The next step for the merger is for the S-4 which was filed about two weeks ago and the 30 day comment period by the SEC.

Once that is completed and the financials are updated, because Rite Aid and Albertsons reported new earnings and they filed it, they will file that with a proxy, probably early to mid-June with a vote we expect in July. We have no reason to think that is not on schedule at this point. .

Okay. And then, the second is, just going – if we look at the 2020 leverage targets that you have outlined, if we then look at the dividend, it still remains basically a full payout in 2019 even with the developments coming on.

So how are you guys thinking about as far as future capital plans, asset sales, as well as trying to improve the dividend coverage?.

Well, I think that the action to dividend coverage continues to improve through 2019 and through 2020 as EBITDA comes on – more and more EBITDA does come online.

Now, again, although we haven’t baked in any Albertsons transaction, to the extent that there is a monetization, those are further proceeds that would go towards some level of debt reduction or depending on where cost of capital is investment in assets that yield as well, which will either lower debt, and increase EBITDA.

So, I think you are going to see our AFFO payout ratio continue to improve once these projects will start coming online. .

Okay, thank you. .

Our next question comes from Jeff Donnelly with Wells Fargo..

Thanks, Glenn.

Actually, maybe just building on Alex’s question about the dividend, are you able to walk through maybe more specifically to the puts and takes to AFFO that could bolster that payout ratio in your favor for the common dividend? It just seems like you are making progress but there is a little bit of ways to go to get to your target and, I guess, maybe what consideration do you guys use to exploring a change in the common dividend, something that’s more sustainable as a way to fund your redevelopments in lieu of – or instead of dispositions?.

Well, we remain very comfortable that now that the dividend is clearly sustainable. And everyone does AFFO a little bit differently. And when you look at the CapEx a lot of this CapEx that we are investing in, good portion of it is revenue generating. So, it takes time for us to finish it up and get it flowing.

But we remain very comfortable that coverage is there, certainly from an FFO standpoint, it’s clearly there. And, look at our liquidity position. We have really no debt maturing.

And we are pretty optimistic about on projects that are – when you – if you go and visit these projects, whether it be at Pentagon, Lincoln, Dania, all of these projects they are getting close to completion and will start flowing.

It’s clear to us they will start flowing in the latter part of 2018 and into 2019 and that’s just going to further improve our coverage, because as we continue to execute on the dispositions, that is our funding mechanism through the development and redevelopment cost that we have. So we are not putting more pressure on the dividends. .

And then, just maybe one follow-up. I know, it might be difficult to do it in the fly, but back when you guys had rolled out the 2020 vision. You had to walk through with NOI growth to get to your – sort of I think it was about 4.5% to 6% growth, that was based on four factors, organic growth, leasing creation, redevelopment and ground of development.

I am just curious do you had to revisit that plan today, given how the landscape has changed, I guess, how do you think the composition of those contributing segments might shift? Did you think they would be as equal as they would be before? Or do you see that some have taken greater or lesser prominence?.

The one building block that is obviously changed significantly is the net acquisitions. We have obviously been a net seller this year and we’ll continue to be a net seller this year.

And because of where our cost of capital sits today, we think that the right capital allocation strategy is to sell lower growing assets and reinvested in our redevelopments and developments that are going to continue to improve the portfolio quality and improve the growth of the portfolio.

And so that’s the one piece of that that’s changed and obviously the wins against retail REITs have moved against that. .

Okay, thanks guys. .

[Operator Instructions] Our next question comes from – sorry?.

Go ahead. .

Okay. Our next question comes from Vincent Chao with Deutsche Bank. .

Hey, good morning everyone. Just going back to the comments on the private market side. Lot of the debt commentary is similarly what we’ve heard for a little while from you guys, but, the number of bids being up was encouraging.

Just curious if you had any sense of why now in 2018 there is more capital forming and what’s really driving the increase in the number of bidders here?.

I think it’s the compelling yields. While interest rates have ticked up modestly over the last few months, the spread between the cap rate and the debt that can be achieved is still extremely wide. So, it’s a compelling return.

The 7.5 to 8 cap that we are selling at are cap rates that have gotten to a point where groups that couldn’t buy high quality assets at that pricing are now excited about coming back into the marketplace. So we’ve executed on transactions with groups that we’ve sold to in 2014 and 2015 that were pretty quiet over the last couple of years until now. .

It might also be tied to some of the retailer commentary that came out recently. If you go back and look what CEOs said about the thriving Old Navy brand and how many new stores they plan to open without banner because of the traffic and the sales that are generating there.

Kohl’s CEO came out recently and said how important open-air shopping centers are to their brand and why they think they are positioning in open-air shopping centers because of the traffic. TJX and others have come out and said, they want to be very aggressive on store opening plans, because they see the traffic generating in shopping centers.

So I think the commentary it may have something to do with that, they see the value of open-air shopping centers and really the investment opportunity that sits there..

Gotcha. Thank you.

And then, just in terms of the Toys boxes, in terms of the assets you are looking to sell over the balance of the year are any of them assets with Toys in them and just curious if that’s – if the announcement has shifted to thinking on those sales or buyers or – what – how that’s changing buyer interest in those types of assets?.

Yes, there are certainly a few assets that are on our disposition pipeline with Toys or Babies. Those as I mentioned earlier are a few of the examples where we are working on leasing to backfill that, that may push an asset that was originally slated or thought to be put in the market early in the year to the latter part of the year.

So we are being very prudent about backfilling those making sure that we provide activity at a minimum letters of intent or leases for those spaces, so that we make sure that we are able to obtain value before we go and sell those assets.

So, it may delay us slightly, but based upon the activity level that we have in those boxes, it shouldn’t deter us from selling assets into the latter part of the year. .

Okay.

But no interest in selling them vacant at this point?.

No. .

Okay. Thanks. .

[Operator Instructions] Our next question comes from Hong Zhang with JPMorgan. .

Hey guys.

As it relates to your net disposition guidance, should we consider any assumptions of acquisitions throughout the year? Or is that’s – how should thorough that?.

We have no current plans to acquire assets throughout the course of this year and we are not currently working on any acquisitions. Nothing in the pipeline. So, the plan is to continue to sell and make sure that we fund all of our obligations and needs for this year on the redevelopment and developments, and delever.

So, with where cap rates are for the types of high quality assets that we would look to acquire, if our cost of capital were different, it doesn’t make sense for us at this current time. So, we’ll continue to be disciplined and execute on the dispose and see where we sit going into 2019. .

Perfect. Thank you..

Our next question comes from Linda Tsai with Barclays..

Hi, in terms of properties being marketed for sale, today’s release noted a $115 million on the market, but on the 1Q transaction activity released earlier this month, it was $330 million.

What changed?.

Yes, it’s a handful of those assets that were previously on the market have shifted into the accepted or under contract and then a few assets including the one that we just mentioned that closed yesterday has now moved into the closed transaction. So, as we made progress the numbers have shifted around a bit. .

Okay, thanks.

And then, for Pentagon, Dania Boulevard, how are you thinking about the merchandizing for these larger scale type developments? What are some of the trends to focus on?.

Well, Pentagon is a mixed use project, where we are adding in a residential tower above of the existing retail site. We think it’s going to significantly drop the cap rate on that asset. We have been extremely pleased with really the market rents in that surrounding area of the projects that are recently delivered.

So, we are cautiously optimistic as Pentagon comes online in 2019 that we are really well positioned to have that via a signature asset for the company going forward. On Dania, we really think that now with adding Lucky’s grocery. We’ve really rounded out the perfect mix of what we think the future of retail real estate really looks like.

It’s a blend of grocery and specialty grocer, especially to drive more traffic. Then you’ve got fitness, health and wellness. You’ve got really the off-price user who loves to drive traffic with these at the treasure hunt. So it’s really a nice blend as well as some restaurants as well.

So that’s really the merchandizing mix that we think drives traffic at all points during the day and repeat customers that love to come back. .

Anything on Boulevard?.

The Boulevard is making great progress too. When you look at, again, those are merchandizing mix there. We’ve got a very strong grocer that’s already executed. We’ve got a movie theater that’s going to be the entertainment piece of it. We’ve got a health and wellness and fitness component that again we like to think as a complementary use.

We’ve got an off-price user that’s going to drive that treasure hunter. We’ve got a beauty concept that’s signed up. And we’ve got a restaurant row that we think is really going to be vibrant main street for that project.

So, we are well ahead in terms of our pre-leasing there and think that in terms of the City of New York, that asset is going to be another signature project for Kimco. .

Thanks..

This concludes our question and answer session. I would like to turn the conference back over to 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..