Kimco Realty Corporation (KIM) Q3 2012 Earnings Report, Transcript and Summary

David F. Bujnicki - Vice President of Investor Relations and Corporate Communications David B. Henry - Vice Chairman, Chief Executive Officer, President, Chief Investment Officer and Member of Executive Committee Glenn G. Cohen - Chief Financial Officer, Executive Vice President and Treasurer Michael V. Pappagallo - Chief Operating Officer and Executive Vice President Milton Cooper - Executive Chairman and Chairman of Executive Committee

R.J. Milligan - Raymond James & Associates, Inc., Research Division Jeffrey Spector - BofA Merrill Lynch, Research Division Paul Morgan - Morgan Stanley, Research Division Michael Bilerman - Citigroup Inc, Research Division Cedrik Lachance - Green Street Advisors, Inc., Research Division Michael W. Mueller - JP Morgan Chase & Co, Research Division Andrew Schaffer Richard C. Moore - RBC Capital Markets, LLC, Research Division Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

Good morning, everyone, and welcome to the Kimco Realty Corp. Third Quarter Earnings Conference Call and Webcast. [Operator Instructions] After today's presentation, there will be an opportunity for you to ask questions. [Operator Instructions] Please also note that today's event is being recorded. At this time, I'd like to turn the conference call over to your moderator, Mr. David Bujnicki, Vice President. Sir, you may begin.

Thank you all for joining Kimco's third quarter 2012 earnings call. With me on the call this morning is Milton Cooper, our Executive Chairman; Dave Henry, President and Chief Executive Officer; Mike Pappagallo, Chief Operating Officer; Glenn Cohen, Chief Financial Officer, as well as other key executives, who will be available to address questions at the conclusion of our prepared remarks. As a reminder, statements made during the course of this call may be deemed forward-looking statements. 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 that could cause actual results to differ materially from those forward-looking statements. During this presentation, management may make reference to certain non-GAAP financial measures that we believe help investors better understand Kimco's operating results. Examples include, but are not limited to, funds from operations and net operating income. Reconciliations of these non-GAAP financial measures are available on our website. [Operator Instructions] With that, I'll now turn the call over to Dave Henry.

Good morning, and thank you for dialing in today. Hurricane Sandy has given us an exciting few days, and we are glad it has moved on from our area. We are pleased to report strong third quarter results, continued progress on our key objectives and a significant increase in our annual dividend. Glenn and Mike will provide details and color. But in the main we continue to see steady and sustained improvement across our portfolio in terms of our key metrics and retailer demand for space. Despite the soft economy and weak employment and housing, consumer spending is holding up and national retailers in particular are again pursuing aggressive expansion plans. Discount and value-oriented anchors of all types have announced increased store counts for 2013, 2014. And this bodes well for our portfolio, especially in the context of very limited new development or supply of retail space. Although market rents remain substantially below peak levels and while certainly not a landlord's market, effective rents are increasing in most areas. We are even beginning to see occupancy improvement in our local stores basis, which has been our primary issue over the past several years. During the quarter, we made solid progress reducing our non-retail investments, selling our lower-quality, non-strategic properties, leasing up our Latin American development properties and strengthening our balance sheets. We are also thrilled to be able to discuss the fully executed purchase and sales agreement with an affiliate of Starwood Capital Group for the purchase of our InTown Suites investment. We've been working through the sales process for an extended period of time due to the complexity of selling both the corporate entity and the real estate assets. The closing timeframe is also expected to be prolonged due to the loan assumptions required and other closing details. However, all parties involved are proceeding as expeditiously as possible, and the underlying investment continues to perform very well. I would also like to take a moment to discuss our concentrated efforts to transform over time our large shopping center portfolio into one that is well recognized and described as "best-in-class." In addition to the disposition of nonstrategic and lower-quality retail assets, we have purchased many terrific new shopping centers, and we continue to expand, devote resources and invest capital in many of our very best retail properties. We recognize that the key to our success will be a dedicated focus on Kimco's primary core markets, which in general are highlighted by strong demographics, barriers to entry, limited retail per capita, larger-sized properties and higher population densities. The New York City metro area, where we have more than 70 shopping centers, and the Baltimore-Washington Corridor, where we have more than 40 shopping centers, are 2 good examples of Kimco primary markets, where we already have scale, long-standing tenant relationships and premier retail properties. We will remain fully national in scope, but we will continue to refine and focus on certain key markets. With respect to our international markets, Canada remains a strong, improving contributor to our company with a long-term, very favorable outlook. Mexico, our other large international market, also has a strong economy with 10 straight quarters of year-over-year economic expansion and a strong resurgence of international capital in the real estate sector and increasing property values. For us, lease-up of our development portfolio remains paramount and the 130 basis points occupancy increase in aggregate in our Mexico properties during the quarter is gratifying and shows promise for the rest of the year. Overall, our Latin American stabilized portfolio now exceeds 90% occupancy. Now I would like to turn to Glenn to discuss the financial details of the quarter, to be followed by Mike and Milton.

Thanks, Dave, and good morning. It's been just over 2 years since we outlined our back-to-basics strategy focused on the operation and ownership of retail shopping centers, the growth of recurring retail operating cash flows from the continued lease-up of the portfolio and redevelopment opportunities and our commitment to monetize our non-retail investments and dispose of non-strategic retail assets, all while strengthening the balance sheet with reduced leverage and significant liquidity. Our strong third quarter results are further evidence of us getting it done. We continue to generate positive same-site NOI growth, increases in occupancy and positive leasing spreads. We have made further progress on the monetization of the non-retail assets and have ramped up the capital recycling program and further improved our leverage metrics. Let me provide you some specifics on our progress. As we reported last night, FFO as adjusted, our term for recurring FFO, came in at $0.31 per share, an increase of 3.3% over the same quarter last year. Our recurring FFO included positive NOI growth of $16.6 million, of which 40% was attributable to organic growth from lease-up, positive leasing spreads and redevelopments coming online within the portfolio and the balance from acquisition activity. Occupancy is up 70 basis points from the year ago to 93.7% on a gross basis and 60 basis points to 93.4% on a pro rata basis. U.S. leasing spreads are up 13%, 40.2% from new leases and 4.3% from options and renewals. In addition, combined same-site NOI was positive for the 10th straight quarter at 2.6%, excluding the impact of currency. Currency had a negative impact of 100 basis points, bringing same-site NOI to 1.6% overall with U.S. same-site NOI growth coming in at 2.5%. Mike will give you more detail on the portfolio performance in just a moment. Headline FFO came in at $0.29 per share as compared to $0.33 last year. The current year headline number includes the impact of $0.02 per share related to the noncash preferred redemption charge of $6.2 million and acquisition-related costs while last year had net transaction income of $11 million or $0.03 a share. Based on our 9-month results of FFO as adjusted per share of $0.93, we are maintaining our full year 2012 guidance of $1.24 to $1.26. Again, this guidance range does not include transaction income and expenses or noncash charges for the redemption of preferred stock. Over 96% of the contributions are provided from the retail operating portfolio. As I mentioned, our capital recycling program has gained momentum. We had a very active quarter selling 9 non-strategic retail properties for approximately $95 million and generating net non-FFO gains of $7.4 million, and then another 14 properties subsequent to quarter end for another $70 million. We redeployed the proceeds from these sales by acquiring 6 fully owned assets in our core markets for a gross purchase price of $154 million. We continue to chip away and monetize the non-retail assets reducing the balance by another $30 million and announcing the execution of a contract to sell InTown Suites, the largest remaining non-retail investment. We're actively working on the disposition of other non-retail assets. Once completed, the non-retail investments will be under $300 million or less than 2.5% of gross assets. Including the activity mentioned above, we have sold 86 non-strategic retail assets with gross proceeds of $530 million and non-retail assets of approximately $400 million since our 2010 investor day. During the same period, we acquired 47 properties for a gross purchase price of $985 million. The assets acquired have a combined occupancy of 94.2%, an average base rent of almost $14 a square foot and average household income of over $95,000. Contrast this with the assets sold, which have a combined occupancy of 83.4%, an average base rent of $8.35 and average household income of $61,000. We've made demonstrative progress in upgrading the overall quality of the portfolio and have had only minimal dilution from it when combined with the non-retail assets sold. The [Audio Gap] identified non-strategic retail assets remaining represent only 6.5% of the total portfolio today, and we continue to aggressively run through our recycling program. We continue to be proactive on the balance sheet as well. During July, we completed a new $225 million perpetual preferred issuance at a coupon of 5.5%, among the lowest coupons ever issued for this type of capital. We used the proceeds to redeem our $175 million 6.65% perpetual preferred stock in the middle of August. In addition, subsequent to quarter end we redeemed our $460 million 7.75% perpetual preferred stock. We used the proceeds from our $400 million 6% preferred issuance completed in March and the balance of the July issuance to fund the October redemption. As a result of these capital transactions, we will save approximately $11 million on an annual basis and further improve our fixed charge coverage. We expect to end 2012 with a net debt to recurring EBITDA of just under 6x in line with our expectation. I also want to point out that we have been successful refinancing the maturing mortgages in the joint venture programs. We have closed on 24 individual mortgages totaling $628 million at a weighted average rate of just under 4% and have term sheets signed for 6 more for another $160 million. We continue to lower the leverage in the joint venture programs as well. In total, we have refinanced over $1.9 billion during 2012 at significantly lower rates. As we look forward to 2013, our debt maturities are very manageable and we have already begun working on them. Now in keeping with our tradition, we are introducing initial FFO as adjusted guidance for 2013 of $1.28 to $1.33 per share, bearing in mind we have not yet completed our bottoms-up property-by-property forecast process. Again, this guidance range is solely based on recurring flows and does not include any transaction income or expenses. Using the midpoint of the 2013 guidance range yields an increase in recurring FFO per share of about 4.5%. The range is dependent on the timing of our capital recycling activities, including the sale of InTown Suites -- which we assume mid-second quarter to complete -- the impact of fluctuations in foreign currency rates and the timing of lease-up, leasing spreads and redevelopments coming online. Over 98% of the contribution is expected from recurring retail operations. We will provide more specific guidance assumptions, including same-site NOI and occupancy targets on our year-end earnings call. Last but certainly not least, we are pleased to announce that based on our 2012 performance and the expectations for 2013, our Board of Directors has approved an increase in the quarterly cash dividend of $0.02 per common share to $0.21 per quarter, an increase of 10.5% on an annualized basis. Our FFO payout ratio remain conservative at a level of about 40 -- 64%. And with that, I'll turn it over to Mike.

Thanks, Glenn. I'll start by going off script. There are many questions surrounding the impact of Superstorm Sandy on the Kimco portfolio. The good news is that the impact on the portfolio is relatively tame considering the devastation that the storm brought to the area. Now recognize between Kimco's Northeast and Mid-Atlantic portfolios, we have over 200 properties. It's about 22 million square feet. And remarkably, most of it escaped pretty well. Now our Mid-Atlantic region, essentially untouched, all but 5 centers have full power. New York metro, a little bit more impact, mostly canopies, facades, some roof damaged on a few centers but very few issues that are shutting down the centers. In fact, although there is a significant amount of power loss in the area, most of the major tenants are open for business through the use of their own generators. Our crews are out. Cleanup is already underway, so there's very little impact. The one area that we have not been able to gain access to is Staten Island because of the issues surrounding that particular area. But we hope to get out there this morning and assess the situation in that market. Most -- all of our properties will be fully covered by insurance and we have a very low deductible, so there's certainly no economic impact on that. And again, with respect to our tenant base, the majority of the tenants are open and operating, so we don't see any significant issues coming out of rental revenues. We will keep everyone posted as conditions warrant. So that's the update on Hurricane Sandy. And I do need to give a full public acknowledgment to our property management teams in the Northeast and Mid-Atlantic, who are doing an incredible job of getting out to the properties and making an assessment as we go through this process. Okay. Back to the standard stuff. The third quarter operating metrics and trendlines remained solid. And I think they underscore the strengthening of our portfolio base and the overall improving environment. Both the U.S. and overall occupancy levels improved again in the third quarter. The U.S. portfolio occupancy increased by 20 basis points sequentially. Interestingly, the uptick was due solely to smaller-space lease-up, and it's certainly been a while since we've been able to say that. The occupancy of spaces under 10,000 square feet jumped 60 basis points to 83.9% with 2/3 of the increase attributable to positive leasing activity and the balance that benefited from the dispositions. Peeling back the onion a bit more, the overall non-anchor space occupancy has jumped over 2% in the past 12 months, and we're experiencing increases in both the true small-space leasing of under 5,000 square feet, as well as the larger mid-shop spaces. Consistent with prior quarters, this shift is towards national and franchise concepts with the 2 drivers being food and service offerings. On the anchor leasing side, we did experience some important new lease signings, but it was mostly offset from a couple of vacancies from the bankruptcy of RoomStore. With respect to those new deals, the eye-popping 40% positive spread underscores the ongoing trend of improvements in rental rates, periodically turbocharged by a below-market anchor box space brought up to market. In this case, it was a location in Pompano, Florida, in which Kmart was replaced by Whole Foods and Sports Authority. And I'd also like to point out that the meaningful increases were captured in releasing of spaces made available from the Borders and A&P bankruptcies, including Nordstrom Rack at our center in Manhasset, New York, and LA Fitness in Farmington, Connecticut, and a strong regional specialty supermarket replacing a Waldbaum's in Huntington, also along Long Island. Our U.S. same-store gross number landed at 2.5%. And I was quite pleased with this result knowing that the rent commencements for some of our replacement deals for those Borders and A&P boxes wouldn't kick in until the fourth quarter and thought we might get nicked a bit on the comps for this reporting period. However, our renewal experience was better than expected and credit loss experience continues to improve, underscoring the overall upgrade in tenancy and portfolio composition over the past year. And as a result, the U.S. same-site numbers have averaged at roughly to 2.5% handled through the 9-month period. So we are pleased with direction, velocity and recovery of rental rates, leasing spreads and NOI growth. But we are not losing focus as there's still a lot of hard work and creativity needed to manage through some of the downsizing initiatives on certain formats, the inevitable retailer bankruptcy and recognizing changing demographics and consequent demand in best tenant fit at our centers. That said, we're aided by increased demand for space, conscious that it's the stronger retailers that are taking market share rather than the general economic rising tide lifting all boats. It is the retailers that demonstrate operational excellence and/or focusing on differentiation, often by catering to specific targets, be it high-end or specialty or value or ethnic or other differences that are carrying the day. And as mentioned earlier, for smaller-space users, services and food products and restaurants across the spectrum are filling the gaps. Recognizing that over the long term, the primary driver in demand for space and strong pricing at a property will remain its location and market, we continue to push through our portfolio recycling efforts. We accelerated the pace of dispose since the begin of the third quarter with a total of 23 properties and 2.7 million square feet exited over the past 4 months. Because of these moves, we were able to consolidate our 2 Ohio offices into a single one and generated over $116 million for reinvestment into our existing property base and purchases in our target markets. We currently have deals set on 15 more properties and another 20 are in the market. And we expect that pace to continue through the next couple of years. Finally, looking outside the U.S., as Glenn noted, currency movements did not help the cause for our Mexico and Canadian comparable results this quarter. But in local currency terms, we're still trending well and expect 2012 to end with an NOI level ahead of budget both in local currency and U.S. dollar basis. Latin America, we executed a little under 200,000 square feet of leasing since our last earnings call and overall occupancy continues to increase. As Dave mentioned, in Mexico, we reached the 90% mark on our portfolio of stabilized properties. And when adding in those still in development and lease-up, the overall Mexico occupancy rose to 86.9%. Demand levels have continued to increase. And our operating team there has noted an increased interest from U.S.-based apparel retailers to enter the Mexico market. I think this has been helped by the reduction of tariffs against the wide variety of Chinese-made goods, including shoes and textiles. Canadian market remains healthy with an ever-growing roster of retailers expressing interest in opening stores north of the border. Most recently, Nordstrom announced its intention to open full -- 4 Full-Line Stores over the next 2 years and they'll continue to pursue additional opportunities for both more Full-Line and Nordstrom Racks. That's my report. And now for concluding comments, if Milton is still on his cell phone, I'll turn it over to him.

Yes, I am. Well, thanks, Mike. Our business is to be the premier owner of retail real estate. And the keyword is real [ph]. We own real estate and retailers are our tenants. We have consistently pointed out that our retail tenants may come and go, but our real estate remains growing in value over time. Some retailers will continue to face challenges. To mitigate those challenges, we focus on 3 things. One, retailer who sell nondiscretionary items, such as food, supermarkets and warehouse clubs, as well as discounters [ph] [Audio Gap] That offer value in all economic [indiscernible]. Tenants with good credits. Three, tenants who have below-market rents. Our list [indiscernible] by TJX, the off-price apparel retailer. The company has an [Audio Gap] of $30 billion. [indiscernible] market [indiscernible] have 2 largest tenants as well, with a 250 [indiscernible] our excellent investment rate credits. [indiscernible] we handled 8,000 tenants representing almost 15,000 leases. No tenant represents more than 3% of our annual base. This highlights how diversified our portfolio is and how we have spread the risk in our portfolio. We have diluted [ph] [indiscernible] cash flows and dividends and repeatedly seized the opportunity [indiscernible] but have a good real estate. Now we may be facing headwinds in the economy, but on a relative basis, our retailers should fare better than most. And we're so gratified by the positive metrics in our portfolio and our return to core real estate. And with that, we're happy to take any questions.

Operator, we're ready to move on to the question-and-answer portion of the call.

[Operator Instructions] And our first question comes from R.J. Milligan from Raymond James. R.J. Milligan - Raymond James & Associates, Inc., Research Division: Mike, you touched on the leasing spreads a little bit. And I was wondering if you could give us a little bit more detail on the TI side, which was up considerably from, I guess, the trailing 12-month number. So just how that dynamic is working.

Sure. The overall TI did go up. I think it was in part due to the Pompano deal that I did mention because even though the footprint was the same, it was a pretty significant rebuild of the existing location, as well some of the deals that I'd also referred to in terms of new tenants at the former bankruptcies of Borders and A&P also had more cost to it. So in this quarter, I think the activity and the rents -- excuse me, the activity and the number of leases did uptick the average spending a little. That said, the rent dollars did support it. So on a net effective rent basis at those spaces, we were still well ahead of the previous NER.

Our next question comes from Jeff Spector from Merrill Lynch.

I wanted to see -- I don't know if you've done this analysis or provided it, just thinking about as you discussed your efforts in pruning noncore assets but specifically, your -- what you've labeled as noncore retail assets, have you quantified the improvement, what you expect in demographics in the portfolio?

Jeff, we haven't come up with specific quantitative targets on where we want it to go. And I think that's in part because, as Dave's comments, as his prepared comments indicated, we are going to remain and we find great value in being a national company. So in being a national company, just by definition, we're going to have more blended macro statistics with respect to demographics than say someone who may be just regionally focused in one particular area or not. All that said, without a specific target, I would refer back to some of the points that Glenn had made and also what you see in our published materials and presentations that the acquired sites -- again, using it as a national footprint, is somewhat representative of where we are looking to go both in terms of household incomes, densities and population. In addition to that, we're going to look on a very specific basis on a given property as to barriers to entry or a particular attribute, or series of attributes at the location that would prevent competition and give us more pricing power. So when you blend all of those forces together, continuing on a national footprint, I think what you will see over time is a continuing improvement towards the demographic numbers that you see on our more currently acquired sites.

Okay. That's helpful. And then I wanted to see if Dave or if you could, Mike, give a little bit more color on Dave's comment at the opening, talking about you're seeing an increase in store counts from discounters in '13 and '14?

We have continued to see the demand increasing from the national and regional players, as again as well as some of the franchise concepts. It cuts across the board. As we've said in different forums that retailers are expanding. I think the expansion plans though are what I'd call more intelligent expansion than perhaps in the heyday when it was just open x number of stores because Wall Street wanted it. And in certain formats, I think the realities of not enough available space are coming to the fore because retailers aren't necessarily going to open in any and all markets. There still is a bias towards those markets where they can estimate sales pretty well. They're generally in fill [ph] existing population areas, not a lot of greenfield. So you put all those things into play, the demand is still there, but the supply continues to shrink.

I would just add this. There's a Pricewaterhouse study of proposed openings of different categories. And the 2 highest number of openings belong to the discounters and the warehouse clubs.

Our next question comes from Paul Morgan from Morgan Stanley.

In terms of the guidance, so you provide the breakout in the South [ph], and I just wanted to try to -- I mean, you can sort of triangulate it, but maybe if you could just provide what you have as the net dilution from the sale of InTown in the guidance? I know you're incorporating some -- I mean, you are obviously incorporating the interest expense savings and the loss in income. But any reinvestments or anything else in sort of mid-second quarter, is that what I heard you say?

So Paul, as I mentioned, we are expecting to have a closing. And in the assumptions, it's mid-second quarter. InTown will provide this year a little over $0.06, so we've modeled in about $0.02 for next year. So we have about $0.04 of dilution that will come from it. Part of the guidance range, again depends on when that timing occurs. So if it doesn't happen until the end of the second quarter or the middle of the third quarter, you'll get further toward the higher end of the range, among other things. But you still have a very solid increase from where we are, right? We're expecting midpoint 2012 $1.25, midpoint of the new guidance is $1.31, so you're looking at 4.8% up.

So the $0.06 per share of FFO drop from non-retail is -- that's $0.02 of that is InTown, and then there's other non-retail that's comprising the other $0.04?

$0.04 of it is InTown. The other $0.02 are the other things that we've sold off during the year and the repayment of certain mortgages and the other assets that have been monetized.

Okay, great. And then my second question is just on your acquisitions and dispositions activity in the retail side. You talk about cap rates, the spread between what you're selling and what you're buying and where they are today for your targeted markets.

Yes. As we mentioned before, 2 things are occurring -- for us, anyway. The high-quality properties we're buying are in the 6s today and sometimes drift a little bit south of that, and that's an indication of the high demand for high-quality shopping centers in primary key markets. That's where the highest demand is. On the other side of the coin, B properties in secondary markets, there's still at least a couple of hundred basis points difference in cap rate. Although activity in those secondary markets and B properties has picked up, there's still a wide difference between those 2 categories. Luckily, in our case, because we are also selling certain non-earning, non-retail assets such our buildings, our urban buildings in New York and Philadelphia and Chicago and Boston that we've sold over time, those buildings were purchased years ago as redevelopment assets. And today, they produce no earnings. So when you blend the sale of those assets with our non-strategic shopping centers that we're selling in the 8 and 9s and aboves, the blend equals basically no dilution for us. It's about an average of a 7% cap of what we've been buying and about a 7% when you look at all the dispositions we've had. So for now, there's very minimal dilution on our dispositions.

And the one thing I would add though is that as we go forward and as we successfully eliminate those non-earning, non-retail assets, we will be confronted with, I think, some mild dilution because there will be a spread on what we're buying and what we're selling. But in many respects, I've spoken with many of you on the sell side, and the advice that I've constantly heard from you is that, "Don't worry as much about FFO. If you're recycling the portfolio and upgrading the portfolio, you should get more than enough value creation and more than enough benefit in your multiple." So whereas we recognize that there might be a nick in the short-term FFO dilution -- or FFO estimates, certainly, I think that the research community would understand and embrace that relative to the recycling program that we've begun.

And is that nick included in the 2013 number at all?

Yes.

Yes.

Our next question comes from Michael Bilerman from Citi.

Just sticking with the transaction activity for a moment. Dave, I think in your opening comments, you talked about concentrating on those core markets and you talked about New York and D.C., where you already have a big presence. I guess, as you execute that plan, does that incorporate perhaps buying out any of your joint venture partners? Or is all that new incremental assets to the marketplace?

From time to time, we certainly have been buying out partners, where we really like the properties and the markets longterm. And we will continue to do that over time because some of these institutional investors prefer to go home or need to dispose of certain assets. So that's certainly part of our acquisition strategy. It's much easier to buy out a partner in a property that we've been managing for years than it is to bid for a property on the open market. So that's certainly part of our strategy.

And were you trying to infer that there'd be actual near-term activity that would be boosting some of these markets? Or were you just saying it more as a long-term goal?

More as a long-term goal.

Okay. And then just, Glenn, quickly just in terms of the guidance, in terms of the core retail FFO, so the $2.29 to $2.36, so that's up $0.07 to $0.12 relative to what's you're going to produce this year. How much of that is being driven just by sort of the core effective same-store versus the investments that you've made in terms of buying assets or the redeployment of some of the proceeds out of InTown? Just trying to understand the differential between really what is internal versus external growth in that number.

The majority of it today is internal. If you look at -- just use the midpoint because it's just easier to work from, you're looking at 4.5% growth of the total retail line. Most of that is internal from the existing portfolio and from the assets that we've acquired and the growth rates that are in there. And again, the guidance range, it's early, it's only October, but the guidance range is going to be somewhat dependent on how well leasing spreads go, the further lease-up occupancy and the growth in those same sites. But we've modeled it enough where we're comfortable with this range. And we think 4.5% growth at the midpoint is pretty solid for a retail portfolio that has lots of long-term leases.

And to add a tack [ph] on my earlier points, Mike, I think as we look at the recycling, we will get the benefit, the full year benefit of things we acquired in 2012, but we also will continue that recycling for 2013. So the net acquisition -- to Glenn's point, the net acquisition disposition activity is not going to be a meaningful adder to that. Most of that is being generated from in-place, existing property base.

Right. And then InTown is completely in the non-retail line. There's no -- the debt that's on InTown is not in the corporate finance? That's not why that's going down. That's just being driven by your positive refinancing, correct?

Correct. Spot on.

Our next question comes from Cedrik Lachance from Green Street Advisors.

There's a number of small strip center REIT companies out there that have low market cap and high G&A burdens, no evidence of ability to grow over time. What's your appetite to take out some of these companies? Or what's your appetite for public-to-public transactions?

Well, first of all, certainly Kimco has a history of acquiring other public companies. I think we bought 5 over the last 12 years, so we're certainly experienced and constantly look at that opportunity. But that said, as we mentioned, we are very determined to focus on these primary key markets and very high-quality assets. So in some cases, that will knock out the attractiveness of acquiring some of these smaller companies. So we will look at this. But again, we're much more determined to make sure that we upgrade our portfolio over time by sticking to these key primary markets for us.

And I'll squeeze a second question since it's a bit of a trend. I noticed you bought back about $30 million of your shares so far this year. What's the thought process behind that?

That simply was just keeping the amount of share dilution down from option exercises and any restricted stock that was issued.

Our next question is from Mike Mueller from JPMorgan. Michael W. Mueller - JP Morgan Chase & Co, Research Division: First, a clarification. Glenn, for 2013, outside of InTown, are there any acquisitions, dispositions in that number? Or is it just nothing beyond InTown and what's been done so far?

Well, in terms of -- again, from a capital plan, it's not finalized yet, but the initial capital plan is pretty much what we've been doing. It's recycling. So to the extent that we're selling assets, both non-retail and retail, we're redeploying that capital into other shopping center assets. So we're pretty much net on it. We're probably modestly a net buyer but very modestly. Michael W. Mueller - JP Morgan Chase & Co, Research Division: Okay. And then post InTown, if we're just looking at the remaining non-retail assets, I know the yield on that is going be lower. What's the effective NOI yield post InTown?

It's really small. It's like very low single-digit because what's left are our Philadelphia -- at the bulk of it, it will be our Philadelphia assets, which there is virtually no yield on. And we have a small amount of marketable securities that has a small dividend yield on it, but that's a longer-term play. So it's very small. It's probably in the 2 percentage range.

Our next question comes from Andrew Schaffer from Sandler O'Neill.

One quick question. I was wondering if you guys have seen any slowdown in the small tenant leasing within the last 30 to 45 days.

No, we have not, not within the last 30 or 45 days. It's been a continuous process of slow and steady increase in demand, again with a bias towards the smaller national chains.

And then thinking bigger picture, as the election and fiscal cliff are coming up, do you see any slowdown on the larger national [indiscernible] tenants, as well? Or this is probably [ph] across the board, you guys are seeing slow progress?

Yes. I'll take the bigger tenants. There is a momentum to these national chains, and they're fully into this. There's been no slowdown at all. They establish their capital plans years in advance, and so they're going forward. There's no "capping on the breaks" that we can tell on these national retailers.

Our next question comes from Rich Moore from RBC Capital Markets.

On the Latin American front, same-store NOI was down, I think, because of currency exchange rates. Are spreads down as well because of that, number one? And then number two, I noticed you split out the industrial portfolio in Mexico as a separate line item in the joint venture category, and I'm curious if anything special is going on there, like maybe a potential sale of those assets?

I'll answer the first part of the question. The spreads in Mexico actually for new leases this quarter were mildly positive on new deals. The disclosure shows that the renewals were negative, which was outside of what we've normally seen and that really is just a restructuring of one particular account, where we had a multiple tenant account, that in exchange for a rent shift closer to the market, we extended the term of the leases. But in general, Mexico leasing spreads over a period of time, even though they represent a very small population to the total Mexico portfolio, have slowly but surely improved, although you have seen negative spreads in those -- for that very small population.

And I'll just add a little color to Mike's comment on this one restructure. These were leases that are U.S. dollar leases. So it particularly hurt that retailer because his income was in pesos and his obligation to us was in dollars -- relatively unique for our portfolio. We have very few retail leases that are in dollars. This one did, and it was part of the gives and the gets of extending certain leases and renewing them. And that's why the leasing spreads in this particular case were still negative.

I'll take the second part of your question. Just on Page 6 of our supplemental, which is our NOI disclosures, we have always showed the Mexico industrial portfolio. And there had been a lot of requests from you and your brethren on disclosing it more on the joint venture side. So we just broke it out to help you guys tie the thing back. That's all. Nothing else going on there.

Our next question comes from Nathan Isbee from Stifel, Nicolaus. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: Just going back to the leasing activity, Mike, maybe you can break out what the new lease spreads would have been without the Pompano and Manhasset leases?

They would have been a -- I'm doing this off the top of my head, Nate, I believe a high single-digit number, somewhere in the 8% or 9% range. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then if you look at the lease spreads for the spaces below 10,000, how would those look?

They actually were positive as well, similar rate, much less impact. And that's been the encouraging side of the equation over the past few quarters is where they -- when we report leasing spreads in smaller spaces a year ago, it would've been negative, [indiscernible] it down. And they flattened out earlier this year, and now they are net-net positive. Also in terms of the number of leases that are positive versus negative have increased, and actually are the majority now. And I think a lot of that has to do with the fact that most of the fallout and most of the recycling, if you will, and rollover of some of the toughest spaces, the toughest rents, particularly out West, have really for the most part run through the system. I'd still give it a little bit more time before you really mark the entire West Coast portfolio to market. But outside of that, most of the other regions are strongly positive. And so net-net, you wind up with a mid- to high single-digit positive leasing spread.

Nate, part of the advantage of the size of our portfolio and the age of our portfolio is things like Pompano do happen and we have those opportunities in a lot of cases, just where we had it in Staten Island. And there's more of those to come over time, so I think it's one of the benefits of the size and age of the portfolio. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: Right, okay. And Mike, you just mentioned in your prepared remarks about some rent commencements moving into the fourth quarter. Can you quantify what that was and what type of pop we might see in the same-store numbers in the fourth quarter?

Well, yes, in the normal planning process, I had attributed about 25 basis points on -- 25 to 30 basis points of same-store growth, just focusing on the bankruptcies and when the leases were signed, when the rents were going to commence. So whereas I'm not rolling out an official fourth quarter same-site NOI, I knew that, that number was going to benefit the fourth quarter. Hopefully, that helps.

Our next question comes from Jeff Donnelly from Wells Fargo.

Anything [ph] for Mike. I recognize that capital might ultimately belong to their high net worth clients. But one of the investment banks you're teamed up with on a significant JV has been in the press recently about derisking their balance sheet and reducing capital obligations. Does that news have any potential to impact the buy-hold decision on that JV? Because I noticed your square footage was down there about 8% to 10% year-over-year.

If you're talking about UBS's very public statement and downsizing, UBS has made it clear that they would like to exit over time. And we've made no secret of taking a look at that and talking to UBS about either increasing our [indiscernible] or acquiring the balance of UBS's portfolio there. It's been a long process as they've hired advisors to help them value their share of our joint venture. But that is certainly one institutional partner that is looking at exit.

Dave, do you think that could be accelerated into next year? Or do you still think that's kind of a longer, more drawn-out process?

The UBS thing, I suspect, is a shorter-term timeframe.

Our next question comes from Jeff Spector from Merrill Lynch.

Just one additional question on the food retailing category. It sounded like from Milton's comments, it's an area of focus going forward. And just curious to hear your latest thoughts on the category, specifically Walmart's continued push. And as you said, the increase in discounters growing their store count but also increasing their presence. How do you see that impacting your plans?

Milton, would you like to comment on that one?

Well, we've always pointed out that the conventional supermarket, by and large, is under attack by warehouse clubs, Walmart superstores, Target superstores, ALDI's, Trader Joe's, Whole Foods -- you name it. So the conventional supermarket has had difficulty and will continue to have difficulty. And that's what we see in what we call the traditional supermarket.

So I think to just further that point, Jeff, you have seen pretty significant expansion from Whole Foods. They're dealing with a particular subgroup. On the low end of the value, ALDI's made a more aggressive expansion. The dollar stores are trying to increase the food component in their footprint, warehouse clubs are doing well. So it does cause us to take a good -- a close look at the "conventional supermarkets", the ones who are catering to the middle and don't have a particular niche. That doesn't necessarily mean to say that they're all in trouble. But as we evaluate the portfolio, the viability of some of these larger supermarkets and just the sustainability of the property as a supermarket location that potentially other supermarket chains may take over, those are the things that we put into the calculus. Food will always be an important dimension of a shopping center portfolio. It's just a question of being really ahead of the game and understanding a lot of the dynamics and macro forces that are affecting food retailing as we go forward.

From our point of view, what we have to be careful about is the traffic generated by the supermarket and the issue of how many local stores can exist based on that volume. We have maintained that many of the supermarket locations have too large a number of local stores and they can't keep their occupancy up.

Sorry, I would just add one more point. It is interesting to note that some of the private grocery chains are healthy and alive and cooking. The Wegmans of the world, the H-E-Bs, the Publix, they're doing quite well and still expanding.

And so at this point, you haven't concluded yet whether it's going to be one traditional plus the rest you discussed. You're still trying to figure that out.

Well, we watch all of these companies and the specific real estate very carefully. As we acquire properties, we make sure that we can get a replacement grocer, that the rent is below market, that the store is right-sized and a good location and so forth. So we underwrite all these aspects of our grocery-anchored properties, and we're trying to be proactive as possible, given that it is a very thin margin and competitive industry facing some challenges.

Okay. And then I thought it was interesting, I guess, given all the comments about the larger grocers. Did you say on the small shop side though, you're actually seeing some successful small shops in the food category? And if so, I mean, what are they doing? What are they offering?

My comments associated with smaller concepts were generally many of the food chains, everything from the traditional fast food and the McDonald's to the Burger King to some of the sit-down restaurants to the Chipotles of the world to the Five Guys Burgers, the comment was made generally to say that as we think about the utilization of smaller spaces, the 2 recurring formats that we see that are adding space, that are adding to our occupancy are things that cut across the food spectrum, as well as on the other side, more service orientation. And that can be -- just throw out a name, a Massage Envy, as one example, or the Weight Watchers centers as another. But just to give you a perspective of the smaller spaces are being filled, that interestingly enough, are things that are -- the old "You can buy it on the Internet", and that seems to be where the dynamic is. Milton's point was about generally with supermarket-anchored centers is depending on the traffic that we want a reasonable amount of small stores to complement the supermarkets. And one of the problems that our industry has had during the heyday of development is too much small store space was added to a grocery-anchored center. And when the recession hit, many of those fell by the wayside, the dynamics of the shop couldn't support those business concepts.

And our next question comes from Rich Moore from RBC Capital Markets.

Just one more question. Any interest in SUPERVALU?

SUPERVALU. It's one of those situations where they need to reassess their whole business model and they need to consider all the alternatives. Acquiring SUPERVALU in whole or in part is probably more the business of a financial buyer like a PE firm or maybe another supermarket operator. We have been involved in some of those transactions over the years, such as Albertsons, but we've been involved essentially for our real estate skills. So at this point, Rich, from the SUPERVALU situation, I just wouldn't speculate as to our involvement there at this point.

And at this time, this concludes today's question-and-answer session. I'd like to turn the conference call back over to management for any closing remarks.

Thanks, Jamie, and to everyone that participated on our call today. As a final reminder, our supplemental is posted on our website at www.kimcorealty.com. Thanks so much.

Ladies and gentlemen, that concludes today's conference call. We do thank you for attending. You may now disconnect your telephone lines.