Kimco Realty Corporation (KIM) Q3 2013 Earnings Report, Transcript and Summary

David F. Bujnicki - Vice President of Investor Relations & 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 Conor C. Flynn - Chief Operating Officer and Executive Vice President Milton Cooper - Executive Chairman and Chairman of Executive Committee

Michael Bilerman - Citigroup Inc, Research Division Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division Craig R. Schmidt - BofA Merrill Lynch, Research Division Andrew Schaffer Jason White - Green Street Advisors, Inc., Research Division Richard C. Moore - RBC Capital Markets, LLC, Research Division David L. Wigginton - DISCERN Investment Analytics, Inc Brandon Cheatham - SunTrust Robinson Humphrey, Inc., Research Division Michael W. Mueller - JP Morgan Chase & Co, Research Division Ross T. Nussbaum - UBS Investment Bank, Research Division Samit Parikh - ISI Group Inc., Research Division Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division Christopher R. Lucas - Capital One Securities, Inc., Research Division Luke McCarthy

Good morning, and welcome to Kimco's Third Quarter 2013 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to David Bujnicki, Vice President of Investor Relations and Corporate Communications. Please go ahead, sir.

Thanks, Laura. Thank you, all for joining Kimco's Third Quarter 2013 Earnings Call. With me on the call this morning are Milton Cooper, our Executive Chairman; Dave Henry, President and Chief Executive Officer; Glenn Cohen, Chief Financial Officer; Conor Flynn, Chief Operating 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 and it's 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 factors, risks and other uncertainties. 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. Finally, during the Q&A portion of the call, we request that you respect the limit of one question, so all of our callers have an opportunity to speak with management. If you have additional questions, please rejoin the queue. With that, I turn the call over to Dave Henry.

Good morning and thanks for calling in this morning. We are happy to report another strong quarter of financial results and progress on our key goals and objectives. Glenn and Conor will provide the details but, in general, our operating metrics are excellent and reflect the continued strength of the neighborhood and community shopping center industry. Leasing activity continues to be robust with increasing rent and excellent leasing spreads. National retailers remain committed to significant expansion plans and almost all geographic areas are reporting improving trends and very little new construction activity. Coupled with population increases and positive, if not, strong GDP growth, we expect our key metrics and recurring rental revenues to remain solid as we enter 2014. As an interesting and encouraging data point, shopping center industry NOI growth has reached a post recession high, according to a database maintained by the NCREIF, the National Council of Real Estate Investment Fiduciaries. It is clear that the fundamentals of our business continue to look very positive. With respect to our results for the quarter, we are making great progress on our major objectives. In Latin America, we have now sold, over the past 2 quarters, 24 shopping centers and 84 industrial buildings, aggregating a gross sales price of well over $1.06 billion. We also expect to sell our remaining 7 properties in South America by year-end and we're actively negotiating the sale of 27 additional shopping centers in Mexico. While many of these sales involve multiple joint venture arrangements, we believe, we will have largely completed the sale of most of our remaining Mexico assets by early next year. Our Canadian portfolio remains a strong and important contributor to our earnings. Portfolio occupancy continues to be very high and many U.S.-based retailers are continuing to expand into Canada with…

Thanks, Dave, and good morning. Our solid third quarter results are highlighted by the excellent performance of our core operating portfolio delivering positive same-site NOI growth for the 14th consecutive quarter, positive leasing spreads and increased occupancy levels. In addition, we have been very active on the capital recycling front with the accelerated monetization of our Latin America assets and redeploying the proceeds to acquire high-quality U.S. shopping center assets in our key markets, with demographics and household income levels greater than the national average. Now to some specifics about the quarterly results. As we reported last night, FFO is adjusted, which represents our recurring FFO and excludes transactional income and expense in nonoperating impairments was $0.33 for the quarter as compared to $0.31 last year, a 6.5% increase. The key drivers of the growth rate, $10 million increase in NOI produced by the operating portfolio and reduced preferred stock cost of $7 million, offset by the lower nonretail income of $10 million primarily attributable to the sale of In Town Suites and other non-retail investments during that period. FFO is adjusted for the 9-months is $1 per diluted share. And based on our year-to-date results, we are tightening our FFO as adjusted per share guidance range to $1.32 to $1.33 from the previous range of $1.31 to $1.33. Headline FFO, which represents the official [indiscernible] definition, came in at $0.34 per diluted share as compared to $0.29 last year. Current quarter headline FFO includes transaction income of $15 million from the profit participation on the disposition of a portfolio of nonretail preferred equity investments, offset by a $7 million net of tax non-cash equity loss recognized from the additional Albertsons investment made earlier this year. We remain positive on the initial trends and future potential upside from the Albertsons…

Thanks, very much, Glenn. Our third quarter performance continues to evidence the consistent strength of the battle-tested Kimco portfolio, even during unsettling economic times, and highlights the safety of our recurring FFO due to our industry-leading tenant and geographic diversity. Our goal is to make Kimco a pure play North American retail real estate investment company that can provide best-in-class margin of safety and produce consistent and increasing dividends with above-average same-site NOI growth through leasing, redevelopment and accretive acquisitions. I wanted to provide updates on the 3 major strategic initiatives I mentioned on our last call. All of which are aimed at upgrading our core U.S. portfolio. First, we continue to actively scour the portfolio for sale opportunities. Since June 30, we have completed the sale of 12 U.S. centers for an aggregate gross sales price of $205.9 million at an average implied cap rate of 7.6%. Year-to-date, we have executed on the sale of 25 properties for an aggregate gross sales price of $287.9 million with an average implied cap rate of 7.9%. We have an additional 14 properties currently under contract. We believe that the extended low interest rate environment and the strong demand for cash flowing assets makes for an optimal time to pare down our portfolio in a meaningful way. We have identified an additional 60 assets that we are now moving to our disposition list and targeting for sale in 2014. We have identified these assets as low growth or average properties and are below Kimco's average demographics and major metrics. We see opportunity to continue to reshape, redevelop and rethink the future of Kimco. The second update relates to our $800 million redevelopment initiative. Reinvesting in our high quality assets through redevelopment is critical to our future growth in achieving a higher net…

Well, thanks, Conor. Conor's passion and enthusiasm for our business is contagious to all of us. I'm pleased with our overall progress. Our focus continues to be on quality, core markets and simplification. We're trading from Mexico to Massachusetts. The upgrading of our portfolio is in full swing. We have sold over $1 billion of shopping centers since our last Investor Day in 2010. Our investments in SUPERVALU and Albertsons continue to proceed according to plan and we expect that there will be very substantial creation of value. And we also continue to execute on our plan to simplify since the beginning of 2012. The number of properties held by joint ventures has been decreased by 133. The GLA in the joint venture decreased by 19.5 million square feet and our gross investment value in real estate joint ventures has decreased by $1.7 billion. Finally, I can never say enough about the quality and depth of our team. I believe, it's a key differentiator for us. Our 4 U.S. regional presidents manage portfolios so large they can each be independent REITS. Their industry reach and experience is second to none. Collectively, they have 111 years of experience in the industry and 47 years with Kimco. They are working on our portfolio, increasing value and delivering results. It's a very, very exciting time for Kimco. And now we'd be delighted to take any questions.

Laura, we're ready to move on to the Q&A portion of the call.

[Operator Instructions] Our first question will be from Michael Bilerman of Citi.

Dave, can you just go through some strategic rationale in terms of, I can understand Latin America in terms of exiting and simplifying as investors can have their own choice to invest in that market through listed players. As much I love Canada, being a Canadian, couldn't you make the same argument about Canada and just becoming a U.S. pure play and sort of how you think about that dynamic?

You could certainly make that case, Michael. But we have such a wonderful portfolio up there that's driven very strong earnings and, we believe, there's upside in the portfolio as it stands today, that the market up there is so strong and the rents are going to grow even further than they are today. I mean, our occupancy there, I think, has never been lower than 96%, and it's been a very strong contributor of earnings. And quite frankly, the sale in Canada would trigger taxes that are much more meaningful than the taxes we have in Latin America. So there is a tax consideration, long-term. We also have wonderful public company operating partners up there, such as Riocan and Plazacorp, and both of them are wonderful partners and have created enormous value, over time, above what we've bought. So we consider Canada, those assets, very high quality. Most analysts give us very high marks for our Canadian portfolio. We see continued upside up there. And many of our U.S. tenants are also there. So whether it's Target and Walmart and Home Depot and others, we share a common platform with them for Canada. So you're right in terms of your thesis but, I think, for now we consider it part of our very high-quality international portfolio.

And then this decision to completely exit Mexico, because we've heard, over the years, Dave, the same thing about, look, there's U.S. tenants and it's U.S.-based leases with U.S. dollar-denominated leases for a lot of the anchors. I guess, why then, now, completely, deciding to exit Latin America then?

I would say, twofold. One is despite our passion for the long-term prognosis of Mexico, and what's going to happen there, we were really never able to convince the investor and analyst community of that. And our assets there were valued at a discount. And our multiple, I think, suffered a bit in terms of our -- in Mexico. And then we got hit with everything from drug violence to the Great Recession, which took some of the big loss off of Mexico. Secondly, it's a wonderful time to exit. The capital markets, after many years of being very silent in Mexico, have exploded. And in terms of the valuation of assets, and we have great assets down there, in terms of the number of companies that are either public or want to go public, they're trying to aggregate assets. So we think the timing is good in terms of selling and disposing of the assets. And since we were able never to make a compelling and convincing case, even though we still are strong believers, long-term, in the prospects for Mexico. I don't want anybody to think that this means that we don't think Mexico is a wonderful country with wonderful, long-term growth prospects. It's just that, for us, as a public company, we never really got credit for being there. And it's a good time to go home.

And the next question will come from Jeff Donnelly of Wells Fargo.

Just a follow-up to that. Can you talk about the net proceeds you expect to realize in total from the executed as well as pending sales in Latin America, and what assumptions you've made in your guidance for next year for the timing and, maybe, yield on reinvestment of those proceeds beyond just the New England purchase you've announced?

Sure, Jeff. In total, you'll probably see around $900 million, in total. You've seen what we've already produced so far. And proceeds will be used to really buy U.S. shopping center assets. So you have things like the Boston portfolio plus many other assets that are currently under contract that total about $575 million.

And redevelopment, I think, the redevelopment pipeline is a target for us to really reinvest and it's a great use of our capital at this point.

Just to clarify. Were those net proceeds you're saying or is that the -- that's the gross figure you expect to realize in the...

Those will be our net proceeds.

That would be our share.

Our share.

That's right. And then those reinvestment opportunities, do you think they're are more front-ended in 2014?

Well, I think, you have about $260 million that will close in the fourth quarter of this year and then probably about another $300 million -- $350 million that will close in the beginning first quarter of next year.

And our next question is from Craig Schmidt of Bank of America.

Because my question is on the Boston portfolio, I wonder if, Conor, you could characterize when you can start to capture some of those below market rents when they rollover and then how soon you can start pursuing redevelopment projects on that portfolio as well?

Yes. No problem. We actually are pretty excited about the lease rollover in that portfolio. It's got above average growth. When we were underwriting the portfolio and touring the properties, we were pretty excited about the repositioning opportunities. There's a few significantly below-market grocery stores as well as office-supply users that are coming up to the end of their lease term and we believe that we can either reposition the asset with a best-in-class grocer at a significant market rent increases. In addition, we see that the small shops have been relatively flat versus markets. So we think that there's upside in the small shops as well. It's a highly occupied portfolio, so it is going to be over the next 5 to 10 years when leases mature that we'll see that growth. But it's a play for us to really see long-term value creation. And that goes for the redevelopments as well. There's a few larger projects that we think are achievable because of significant density that could be added to our urban properties in that portfolio. But then, there's also smaller redevelopment potential that outparcels to a number of properties. So it's a little bit of everything in the property portfolio that we're excited and can't wait to dive into.

And the next question is from Andrew Schaffer of Sandler O'Neill.

It's good to see the continued progress in selling out of Mexico and Latin America. But looking at the $190 million of combined losses, potentially taken, I was wondering what controls have been put in place for you to kind of avoid future non-core investments as you put the $400 million of cash towards -- that's currently on the balance sheet.

Well, you have our commitment to maintain the strategy we have in terms of focusing on core retail in the U.S. and in Canada. Honestly, we actually made a lot of money in the nonretail assets as well. I mean, it is not all a bad news story there. But we recognize that, as a company with a 50-year history and expertise in retail, that's where we want to be going forward. And over time, we want to emphasize our key markets in the U.S. where we have scale and relationships, long standing. We want to emphasize larger scale properties, which can unlock opportunities to redevelop and expand those properties. We're going to become a little more urban than suburban, because that's where the jobs are going, the population growth, that's where the retailers are more productive and that's where they want to pay higher rents. So we do have a strategy that we're committed to long term. And that's where we're going.

And the other thing that I would add is when you look at what will remain subject to currency translation, it's really all -- would all be in Canada. And in Canada, we are naturally hedged because we have issued all Canadian-denominated bonds that match our equity portion. So that risk is gone. And we did that somewhat in Mexico. We have MXN 1 billion unsecured facility that is a minor hedge of what's there, but that's what was used.

And the next question is from Jason White of Green Street Advisors.

Just wondering when you look at your U.S. portfolio of 700 and some odd assets and you look at your activity over the last few years of -- from a disposition front, how much of the portfolio do you consider kind of non-core? If you could snap your fingers today and sell a portion, what percentage of the portfolio would that entail?

Today, it's less than 10%. And we're really focused on growing into the larger assets, the core markets, so we have broken up our portfolio to see where the juice is, where the growth is. And we have over 550 assets that we deem as really strong, long-term core assets with above-average growth. So the lion share the portfolio is, of today, is what we determine as core. That said, we did add another 60 assets that I mentioned to our disposition pipeline. And we're going to continue to be an active portfolio manager. I think, that's now become really, going forward, a big change for Kimco. And once we move through this next 60, it will probably be less transactional volume. But still -- we'll still be actively managing the portfolio looking to see where the retail nodes have shifted, where the demographics have shifted and where we perceive a risk and can exit out of properties that we think may have negative growth.

Are there any themes sort of vintage of the properties you've been selling or are they just kind of property that have been acquired throughout time and there's no real rhyme or reason to any chunk of those?

It's been a very detailed process. We've gone back through each region and talked about tertiary markets, where we have to either don't have scale in a certain market, where we only may have 1 asset or 2 assets in a certain market, and we see that the growth isn't up to Kimco's standards. Again, if the retailers that are anchoring that property are not producing high sales, we consider that a risk and think that it's time, potentially, to exit those properties. We also look at the trade areas. We want to see where the growth is coming from in demographics. So it's been a very detailed approach. And so, each time we go through the disposition pipeline, we also take a look at the existing portfolio to see, should we consider adding more or should be consider taking away more.

And our next question is from Rich Moore of RBC Capital Markets.

I'm curious, on the Boston portfolio, it sounded like you're saying you had some street retail in there to in addition to what you characterize as urban. And I'm just curious whether you do or you don't, I would, of course, like to hear that, but what do think of the street retail concept. It's obviously gotten very hot here recently and is that something you guys are looking at or would consider looking at going forward?

It is hard to describe if it's street retail, because it's -- it is urban because it's located in the Boston metro area, but it does has have its own parking fields. Really, the 2 most urban properties would be the Trader Joe's that's really has its own parking field as well as the Whole Foods next to Boston College, which also have its own parking field. So we typically like to have control over the parking fields, so it enables us to create larger redevelopment potential. Street retail, I think, is very limited in terms of your opportunities to create value, long-term. It's really more of just a releasing effort on street retail. So we enjoy having urban properties but that have critical mass that'll allow us to create value over time.

And the next question is from David Wigginton of DISCERN.

Just following up on the earlier Canada question. I wanted to get a sense of how you view the high and continually, I guess, rising Canadian household debt levels in the context of your strategy for the market. And I guess, do you think the embedded growth you mentioned is potentially at risk as a result of that?

Well, the Canadian economy is actually holding up quite well. And does not have some of the long-term issues that the U.S. has, particularly in the real estate area. It's under retailed by metrics that you would look at for the U.S. that has about half the retail per capita that the U.S. has. It's very difficult to build in Canada at the end of the day. And so for the future, we see continued demand exceeding supply up there. And we continue to see Canada as an attractive expansion market for U.S. retailers. You're seeing a whole slew of retailers go to Canada and have a wonderful expansion opportunity Nordstrom, among others, going up there recently. So we're excited about where Canada is going. We're excited about our own portfolio, which is very high quality and if you're ever in the area, we'd be happy to take you for a tour. They're good long-term properties. There've been great performers. We were very fortunate to buy them at a time when cap rates were very high and the currency was weak. So we have some very large embedded gains in our Canadian portfolio and it's producing very strong earnings, very strong FFO for us. And that growth should continue.

How does the tenant base there compare to sort of your U.S. tenant base?

They're similar properties. These are largely open-air properties. We do have some enclosed properties, but they're largely open-air, both grocery-anchored and big-box centers spread across, as you know, Canada has 6 major cities and they're primarily located in these 6 areas. But it is a national portfolio. And as I mentioned, we've got some very wonderful operating partners that are very good at what they do.

And our next question is from Brandon Cheatham of SunTrust Robinson Humphrey.

On the capital recycling plans, for the net proceeds you expect to get from Mexican assets. Just on the acquisition front, given where cap rates have come over the last 3 or 4 months, are there any markets where you're hesitant to enter into and kind of how do you expect to add value with those proceeds?

We look very hard at acquisition opportunities. And I think, Conor hit it on the head when he said our first preference is off market and negotiated opportunities that had come from long-standing relationships and the size of our company, we do have -- we do look at an awful lot of things. And then, we screen these opportunities on a couple of factors: One, whether these are markets that we're already in and we like the long-term demographics and trends of those markets. And then, we look at the properties themselves, whether we believe that there's great embedded growth of the NOI. And whether there's redevelopment possibilities and other things that can really drive some earnings for those properties. So we know, it's a good time to be careful. And we are trying to be careful in underwriting in depth these opportunities. But we do see a lot, and we're fairly confident that we can redeploy that capital into high quality properties with some upside.

The other advantage we do have is the regional framework that we've set up. So we have all these people on the ground in their particular regions, who are scouring and talking to brokers, private property owners, and the like and that's when we've been able to source many of the deals both on a -- whether it be broker or a private negotiated stand [ph].

So I guess, overall, uses of those proceeds -- expectations haven't changed.

Right. We do believe we can redeploy this capital at good long-term NOI growth patterns.

Plus the redevelopment pipeline.

And next we have question from Michael Mueller of JPMorgan. Michael W. Mueller - JP Morgan Chase & Co, Research Division: I think you touched on this a little bit earlier with specific transactions slated to close later this year. But if we're thinking about 2014 as a whole and thinking in terms of your pro rata share of, say, acquisitions and dispositions, do you think you're a net acquirer in 2014 or do you think it's a wash or do you think you're still a net seller?

Michael, I think you're going to see us be a net acquirer by somewhere in the $150 million range, when we put it all together.

Net acquirer in the U.S.

Yes, net acquirer in the U.S. Yes. Michael W. Mueller - JP Morgan Chase & Co, Research Division: In the U.S. -- what about overall though, if we're thinking about that?

Overall as well. We're going to take the proceeds from the Latin America sales, as well as the sales from the U.S. assets we're selling and redeploy them, primarily, into the U.S. assets that we've already earmarked.

And free cash flow.

Yes.

And next we have a question from Ross Nussbaum of UBS.

Can we talk a little more philosophically about your investment management program and I'm wondering if you think just as though the market never really gave you full credit for the Latin America investment, do think that the market doesn't fully recognize the benefits of the investment management program? And I know you've already been reducing some of that exposure. But is it reasonable to assume that over the next couple of years, particularly as you have -- a number of those relationships, where the debt is maturing, that you're going to step into 100% ownership and continue to take full ownership and simplify from that perspective?

Yes. I'll take them one at a time. Yes, I do believe the market doesn't give you full credit and does give you a bit of a discount, depending on the amount and the magnitude of the joint venture. I think, you've got some of the highest quality companies in the REIT world that do have specific joint ventures. In our case, we have awful lot of them. We have over 2 dozen institutional partners in various forms and we have all sorts of programmatic joint ventures and commingled funds and we recognize that, perhaps, we have much too many of them and you have seen us reduce that number and you will continue to see us reduce the number of joint ventures and partners over time and we think that's a good thing. That doesn't mean we think joint ventures are bad, joint ventures can lead to opportunities and, certainly, has helped us in terms of incremental earnings from fees and from notes and things like that. Secondly, there is that intangible that we have found and discovered, that certain partners want out at certain times. And we are able to take advantage of that and get, what we believe is, a discount with them owning a partial interest and saving on brokerage fees and assumption costs and things like that. So we're able to take advantage of that. And UBS is an excellent example. Because our cost to buy back a bigger share of that portfolio, cap rate was over 7%. And those assets would trade we think as 100% owned assets, a 6% or even lower than a 6%, so there was value created through the acquisition of that portfolio. So those opportunities, we continue to look for and we're proactive about finding those. And we've done a good job, I think, finding those opportunities. So over time, philosophically, you'll see us have less joint ventures and we believe that will help in terms of the multiple and so forth.

And in terms of dollars, I mean, we're talking here, I mean, there's over $10 billion of assets at play of which you've got, in some cases, 15% stakes in or 33% staked in. I mean, are we going to be talking over the next couple of years here of $5 billion plus of what would effectively be acquisitions from that built-in pipeline?

No. No. In the first place, out of that 10, Kimco probably owns more than 40% of that 10 to start with, on average. And you have the debt, obviously, to boot. So to start with our average ownership being 40%, you take out the debt and so forth. And we do have partners that we value very highly, such as GE Pension and Prudential, which have made it clear that they are long-term holders, they're not interested in buying out. And some of the larger ones that have expressed an interest, such as UBS and, several years ago, DRA, we have consummated those transactions. So the future opportunities, I think, are going to be smaller but we're working at that. And again, I think one of the goals is to take those 2 dozen institutional investors down to perhaps 5 or 6 for a longer time period.

And the next question is from Samit Parikh of ISI.

Hate to keep asking about the transactional activity next year and how it relates to your guidance. But just to clarify, so if you said $900 million of net proceeds and $150 million of a net acquire, you're probably acquiring a little bit of $1 billion here. But given the lower cap rates on the acquisitions, it's probably a net push on the transactional activity, relating to NOI. Can you sort of go over the other drivers that get you to the guidance range to next year. Internally, what you're thinking, since you have to deal with dilution of the hotel portfolio completely coming off and other dispositions earlier this year?

Right. So, Samit, we're going through our final review of all of our properties. But embedded in there will be redevelopments that come online, contractual rent funds [ph]. Interest cost savings from the refinancing that we've done as well as bringing these acquisitions on at a particular time. So we think when we put it all together, we're comfortable with this initial guidance range that we put out. But as I mentioned, we will give you more detail on our next call, when we have finalized the review of our 800 properties.

And I would just add, historically, we haven't had the large dilution you might have expected when you take into account that we have sold nonretail assets that were not producing income such as our large urban portfolio in Philadelphia and others. So as we sold those assets, we got cash in that wasn't earning for us. Secondly, as we've wound down our preferred equity portfolio, we've been fortunate, including this quarter, to get large profit participations, which is real cash, which can be used to buy new properties and offsets that dilution. And then, the third, over the last couple of years, the home run investment in Albertsons produced quite a bit of distributions to us that was real cash. And that goes into the kitty as well. And then we have our free cash flow of $100 million or so a year. So you put all that in the blender and you don't quite have the dilution you might think about on paper when you're selling at 8-ish and buying at 6-ish.

Okay. So just to clarify the last question, that the 136 to 140 range next year, that include probably some promotional income activity from some of these sales?

No. There's no transaction income or expense in those numbers. This is purely coming from the operating portfolio and the management of G&A costs and interest costs.

My point was we've gotten cash that we have now used to invest [indiscernible] income producing assets.

And our next question is from Nate Isbee of Stifel. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: Dave, just going back to that discussion about unwinding some of your joint ventures. You are marketing a small portfolio here in the mid-Atlantic that seems to be, what I would call, real high-quality core assets, they are joint ventures. And is that property-specific issues? Are -- is that the pricing disagreement with the seller and are -- as much as it's been an opportunity for you in past, is it getting harder to come to an agreement with some of your joint venture partners?

No. I think -- the specific ones, you were right. You're referring to our -- is a situation where we've agreed with a partner. It's probably best just to put them on the market. There was a bid asked on several of them and there was an asset that we didn't want to buy. So it's -- we agreed to put those on the market. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So I mean, it's not like you did the DRA, you did the UBS and as you get farther in this process, you're trying to get more detail?

No. In some cases, you have a partner that does want to go home, but you can't quite agree on price. And so, those properties are market. But at the end of the day, you have one less venture and one less institutional partner. And I think, part of it is you'll get some nice price discoveries out of this too. And you'll see that these things are going to trade at a very low cap rate.

And our next question is from Chris Lucas of Capital One.

David, just a basic question about the transaction environment, which is, could you just give us some color as to how cap rates have trended over the last 6 months and what the opportunity set has looked like in terms of the change in volume of deals available?

I would make 3 points in general and then open it up to others. The very high quality properties continue to be very competitive. If anything, cap rates continue to go down notwithstanding the [indiscernible] rise in interest rates. Ever since May, there's been no fall off [indiscernible] Competitive nature for [indiscernible] quality properties. Secondly, in terms of the B properties within [indiscernible] perhaps markets, there has been pick up in [indiscernible] unable to buy the A properties and the yields are a little higher [indiscernible] very positive leverage available. And as more debt [indiscernible] for B properties, so see the assets that we've been selling good assets, call it 8.5 average down to 7.5 average or so cap rate [indiscernible] down on the B assets [indiscernible] Third point, I wanted to make is, I think, beginning in May, with a prospect [indiscernible] sellers think, maybe the train's starting to leave the station, though I think a few more properties are coming to market [indiscernible] in the market as people try to make sure that they catch these high prices. But I think, they'll see the number of assets in the market continue to go up [indiscernible] that lead for [indiscernible] opportunities, that said, the demand side remains high, the pension funds [indiscernible] life insurance companies, sovereigns, the REITs and so forth, real estate is back in favor. [indiscernible] assets, whether it's cash yield [indiscernible] costs, still at historic lows. The NOI is down. Cap [indiscernible] still seems reasonable compared to [indiscernible]. I think you're going to see a good dynamic [indiscernible] in both for buyer or seller.

We have our next question from Luke McCarthy of Deutsche Bank.

I know you just talked a little bit about in your early comments that, I guess, in general, across the board, at least domestically, things are very strong geographically. Can you just talk about where you're seeing relative softness and is that where we should expect you to focus your dispositions. And then, secondly, given what you just said about cap rates and that potentially making things, I guess, a little bit more challenging on a deal-by-deal basis as an acquirer, can you talk a little bit about the sustainable level of redevelopment we should expect from you guys as you kind of recycle that capital moving forward?

Sure. Why don't I start with the first part? We see the highest growth recently in the Northeast and the Mid-Atlantic from a same-site NOI growth perspective, and that's really why we're so excited about the recent Boston portfolio. It's because we've got a track record. We've got boots on the ground. We've got a Boston office and we've always wanted to expand that portfolio. It's just been very hard to find accretive acquisitions in that territory. So that area, I think, is one for us that we've earmarked as a very high growth potential and we see it consistently, quarter over quarter, producing significant results. The next portion of the question, on where we're targeting dispositions? It's really going through each and every region. The regions are very large. So it's hard to give you a specific territory that we're exiting. But in general, what we're doing is we're focusing on the core MSAs that are healthy, that are growing and we're looking to see, okay, where are those assets located better? No longer in the growing markets that we see as potential downside risk and then exiting those markets. So you'll see us exit out of areas where we think there's a tertiary market or if our retail sales have started to either flatten out or go negative and we'll continue to prune the portfolio in that regard.

I would just add one comment on the redevelopment side. As we've mentioned earlier, as rents start to jump, and they are jumping. They're not going up 2% or 3%, they're going up $1, $2, $3, more redevelopments become financially feasible or viable. And that's what's triggering a lot of this. Redevelopments that didn't make sense 2 or 3 years ago now makes sense because the retailers are hungrier, they're willing to pay higher rents. And so we are optimistic if that trend line continues, you will unlock other redevelopment in our portfolio with 900 properties. We have a lot of inventory and when rents get to the right level and the demands gets there, it triggers even more redevelopment opportunities for us.

And the next question is from Michael Bilerman of Citi.

Glenn, yes, there's been a lot of numbers thrown out, on all the transaction activity. I'm just wondering if you can just be a little bit specific in what you disclosed in the press release in terms of what's been sort of announced the $230 million of sales, the $270 million that's under contract in Boston, call it, $400 million of Mexico and Lat Am. Conor talked about 60 assets that are part of the disposition plan. You also talked about $610 million of acquisitions, of which I assume $270 million is Boston. Maybe, you can just be very specific in terms of what is your net share of acquisitions and dispositions in the fourth quarter, and how much is embedded for next year? Because obviously, that plays into sort of where numbers will shake out. And then just secondarily, what top down assumption have you used for same-store in coming up with the forecast of 136 to 140?

So first, let me just clarify the $900 million of proceeds from Mexico. $400 million of that will be in 2013, of which over $325 million of it is already closed. So the balance will come -- $500 million or so will come in 2014. As I mentioned, also, we will close on about another $260 million of acquisitions in 2013 during this quarter. There's another $350 million of properties that are under contract, including the Boston portfolio. But net-net, when you look to 2014, we're looking at somewhere, in total, around $800 million of acquisitions, of which we've already identified $350 million of it. So that's there -- and as far as a same-site NOI growth level, as I mentioned, we're going to give you that at the next call, because I want to finish doing it and we want to give you a very good, accurate number. But I am very confident that it will be positive and remains positive.

So from a transaction activity then, if you're -- you have $500 million left to go, either later this year or into next, but then from an acquisition perspective, you have $1.1 billion that's left to close. Am I not thinking about that the right way? I'm trying to think from the...

In total, yes. In total, you're right. We're going to close $260 million this year and around $800 million next year.

And you are only getting in $500 million...

Of which more than half is already identified.

Right. But you're only getting in $500 million in net cash. So you're going to be spending $600 million...

No, we also have about $300 million or so of retail assets that are part of the 60 assets we announced that we would be selling, that's going to come in as well.

So in addition to the $500 million...

But we still have a little bit left of the nonretail.

A few nonretail assets that we expect to close some before year end. We have free cash flow, so we have other sources of cash.

And we have some more closings of sales in the fourth quarter as well. So you'll get to the net-net, Michael, of roughly a $100 million of a net buyer when you're all said and done, $150 million of a net buyer.

From this point, from basically fourth quarter through '14, $100 million of net, which is easily funded through free cash flow.

Correct.

And our next question is another follow-up from Samit Parikh from ISI.

I wanted to see if you could comment on the economic situation in Puerto Rico and what your thoughts are on if that could have an impact on sort of, midterm, maybe next 3 to 5 years, consumer demand and what impact that could have on sort of your exposure out there?

Well, I'll give you just high-level to start with, I mean, Puerto Rico has been in an official economic recession for almost 5 years now. And notwithstanding that, because the island is so under retailed and because, culturally, the Puerto Ricans just love to shop, our retailers have done well. Our shopping centers have done well. And the rent growth is real there. And the list of retailers that want to open up in Puerto Rico notwithstanding the economy and the fiscal situation of Puerto Rico. The tax proposals that would have meaningful -- meaningfully impacted both landlords and tenants have been muted and taken back off the table recently. So that dark cloud seems to be not as dark as it was. So I think, longer term, we're very happy with what we have in Puerto Rico. And we feel good that retailers will continue to do well. And occupancy will continue to be high. And it will be a good contributor to earnings.

Do think that there's any [indiscernible] increased income taxes and maybe sort of crackdown on the -- taxing some of the underground economy over there and what that could do to disposable income?

Again, some of the more Draconian proposals have been tabled. So that was what the niche group were afraid of, whether they're successful cracking down of [indiscernible] that's very difficult to do, [indiscernible] Mexico or other places. And I think, embedded in the culture of Puerto Rico, [indiscernible] love to shop and the tenant [indiscernible] as well. So yes, it's certainly something we watch and we monitor and we participate in the industry lobbying efforts to make sure that the movement [ph] doesn't hurt us too bad. But I don't think there's anything meaningful that [indiscernible] there that [indiscernible] to be fair.

And this does conclude our question-and-answer session. I would like to turn the conference back over to David Bujnicki for any closing remarks.

Thanks, Laura, and to everyone that participated on our call today. As a reminder, Kimco will be hosting an Investor Day on December 12 in New York city. Details for this event are available on our website at kimcorealty.com. We look forward to seeing you there. Finally, additional information for the company can be found in our supplemental that is also posted on our website. Have a good day.

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