Good day and welcome to Kimco’s Fourth Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to David Bujnicki. Please go ahead.

Thanks, Steven. Good morning and thank you for joining Kimco’s fourth quarter 2016 earnings call. With me on the call this morning is Conor Flynn, our President and Chief Executive Officer; Ross Cooper, the Chief Investment Officer; and Glenn Cohen, the CFO. In addition, there are other members of our executive team that are also available to address you during the conclusion of our prepared remarks, including Milton, Dave Jamieson and Ray Edwards. As a reminder, statements made during the course of this call maybe deemed forward-looking. It is important to note that the Company’s actual results could differ materially from those projected in such forward-looking statements due to a variety of risks, uncertainties and other factors. Please refer to the Company’s SEC filings that address such factors. During this presentation, management may make reference to certain non-GAAP financial measures that we believe help investors better understand Kimco’s operating results. Examples include, but are not limited to funds from operations and net operating income. Reconciliations of these non-GAAP financial measures are also available on our Web site. With that, I’m going to turn the call over to Conor.

Good morning and thank you for joining us. Today I will provide a progress update on our 2020 vision, as well as our view of the current retail environment. We will also provide an update on our portfolio activities, and Glenn will cover our fourth quarter and full-year results, as well as provide color on our 2017 guidance and outlook. 2016 was a very productive year for Kimco and the team has been executing on our four key strategic goals, which are to, one, significantly improve the quality of the portfolio. Two, unlock the embedded growth. Three, strengthen the balance sheet, and four develop and motivate employees to further strengthen our team. In line with our 2020 vision to create a high-quality major metro focus portfolio that is U.S centric, we undertook and completed a large disposition program during the year. We were able to divest assets at an opportune time when rates were hovering near all-time lows and demand for open-air centers was at an all-time high. At our December 2015 Investor Day, we outlined a five year strategy, recognizing that our path to achieve our 2020 goals may not be linear. As you saw in our press release, the sale of our lowest quality in international properties will have a short-term impact on our FFO in 2017. Glenn will cover this shortly. Our portfolio of high-quality shopping centers is now tightly concentrated in the best markets in the U.S. And our signature series of redevelopment and development projects are progressing. Regarding redevelopments, we completed $160 million in projects during 2016, including our fixed -- our first mixed-use property, producing an incremental return on investment of 9.6%. We’ve positioned our portfolio to be defensive in nature with long-term leases that have significant mark to market opportunities upon lease expiration…

Thank you, Conor. Overall we had a very productive year on the investment side, with over $1.5 billion of transactional activity. This was highlighted by the accelerated exit of our Canadian investments, the sale of 31 asset in our U.S portfolio for $410 million, and select third-party and JV acquisitions totaling $457 million Kimco share. of: On the acquisition side, we acquired two former JV assets in California with longer-term redevelopment opportunities and strategic locations in the San Francisco, Oakland MSA, as well as the Los Angeles Anaheim MSA. In addition, we acquired a sprout anchored center in Temecula, Southern California. This center included a vacant Sports Authority box, which provide the solid immediate upside opportunity, which we are in the process of finalizing. This was one of only two assets we bought from the open market all year, evidencing the discipline we employ when evaluating our investment decisions. We are pleased with the investment execution for 2016, which was consistent with the expedited portfolio transformation strategy we initiated in 2013. While the nature of these sales has had a dilutive impact on the overall portfolio growth profile for the coming year. We are confident that it was the correct decision resulting in the core portfolio we have today. On the investment landscape, we continue to see a bifurcation in pricing between high-quality core markets and those outside the major institutional focus. While cap rates on the best of the best assets remain sticky and at all-time lows, the non-core secondary and tertiary assets, particularly those without a grocery component, continue to rise. We are in the fortunate position of having significant redevelopment and selective ground-up opportunities to help grow our portfolio, which allowed us to be patient as we look for strategic investments that are accretive and enhance the portfolio. In January, we acquired Plaza Del Prado, a high-quality grocery-anchored center in Chicago, Illinois. The asset is located within a high income, high barriers to entry submarket anchored by a jewel supermarket. This center was developed in 1978 and contains original tenants both in line and on out parcels with leases that are coming due with no further options. This will allow us to push rent significantly in the next few years and maximize value. Our Albertsons relationship also provides an opportunity to create now parcel, which will be mutually beneficial to both tenant and landlord. For 2017, we’re providing for a range of $300 million to $400 million of acquisitions and $250 million to $350 million of dispositions, making as the modest net acquire for the year. Glenn will provide additional color and insight on our guidance and financial performance for the quarter.

Thanks, Ross, and good morning. We finished 2016 with solid fourth quarter and full-year results, bringing to a close our first year execution on our 2020 vision strategy. We now have a high-quality portfolio of assets in our key markets, which will produce strong cash flow growth and future upside from our development pipeline and select ground up developments. We’ve dramatically simplified our business by exiting essentially all our foreign investments and reducing the number of joint ventures. With over 85% of our total NOI is now coming from consolidated assets. We’ve also strengthened our balance sheet by reducing leverage and extending our debt maturity profile as we strive to upgrade our secured debt ratings to A-/A3. Although these strategic initiatives have a muting effect on 2017 FFO growth, we’ve set the foundation for our future growth as lease up continues, the low market leases are recaptured and redevelopments and development start generating cash flow. Our vision is clear. Our team is focused on execution and we remain confident about our future. Now to some details on our fourth quarter and full-year results and further color regarding our 2017 guidance. NAREIT FFO per share was $0.38 for the fourth quarter. Included in NAREIT FFO is $5.3 million of impairment charges related to land parcels sold during the quarter and under contract. These charges were more than offset by gains from the extinguishment of debt related to three properties. NAREIT FFO per share for the full year came in at $1.32, achieving the upper end of our guidance range. The 2016 full-year results include charges of $0.20 per share related to the third quarter 2016 strategic initiatives to prepay $350 million of Canadian denominated debt, $428 million of US debt, as well as the merger of our taxable REIT subsidiary into…

We are ready to move to the Q&A portion of the call. Due to the large volume of participants in the queue, we request a one question limit with an appropriate follow-up. This will provide all the callers an opportunity to speak with management. If you have additional questions, you are more than welcome to rejoin the queue. Steven, you can take the first caller.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Christy McElroy with Citi. Please go ahead.

Hi. Good morning, everyone. Just, Glenn, following up on some of your comments on guidance, just with the pressure on box occupancy that you’ve seen from the closures, as you work to release that space, what -- what’s sort of your outlook for 2017 bankruptcies and store closing? You mentioned an appropriate reserve, as you monitor the retail environment, but within your same-store NOI growth forecast, what sort of assumptions are you embedding to try to capture that risk and as you work to release the space, what should we start to -- we start to see more pressure on releasing spreads at all.

No, I don’t think you will see pressure so much on releasing spreads. I mean, some of the assumptions that are in the same-site NOI growth is we do expect a similar impact from the Sports Authority bankruptcy in 2017, so around 70 basis points as well. And we also have a higher credit loss reserve than we’ve had in the past a little bit. We usually use somewhere between 50 and 75 basis points. Part of our guidance has had 75 to 100 basis points to account for what’s going on in the current retail environment.

And so what would you target in, in terms of that higher credit loss reserve? What are you looking for in terms of additional retailer store closings and bankruptcies? And are there any retailers that you’re specifically thinking are at risk?

I think you’ve seen recently, Christy, that a number of retailers have come out with mixed results and you’ve seen a couple of them actually have some credit rating downgrade. So, when we look at our retail rolodex, there is some healthy retailers that are driving a lot of growth and have some healthy numbers for new store openings. And there are some that are obviously still fighting the fight in terms of trying to figure out the omni-channel approach. So, for us, we figured it was the best approach to increase the bad credit loss for this year and as we look forward, we think the improved portfolio will shine.

And Christy, the reserve that we do said is not a specific reserve. It's more of a general reserve that we used to monitor just over the course of the year.

Thanks, Flynn.

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

Thanks. Good morning, everyone. Could you just talk a little bit more about the Costco anchor loss and your Dania Pointe project? Maybe give a little more background into what happened as that changed over the past quarter?

Sure. So originally we actually had the Dania project as a power center line up and as you’ve seen we actually change Phase II to a high density live work play mixed use development. Now Phase I we had an executed lease in place with Costco and as part of that lease there were some framework on site level cost contribution by both parties which we were trying to finalize. At the same time, the demand from other junior anchors to be a part of Phase I really exceeded what we could accommodate with the Costco being in place. So with this knowledge, we felt we wanted to change direction and now it would be the best time, because the junior anchor line up really would be more complementary to Phase II and offer us better economics than if we went with the flat ground lease with Costco, who mutually agreed to allows us to move in this direction.

And -- but doesn’t losing a Costco have a -- maybe a rolling impact on the demand for the other junior anchors?

Costco is really a destination oriented tenant and I think because of the strength of this real estate. We felt that originally they would be a great lead anchor for our power center development. But because of the strict location, the freeway visibility from I-95, the demand from the junior anchors really actually ticked up regardless of this Costco as a part of the development.

Okay. Thank you for that. And the second question, I noticed your tenant allowances for new leases, I know that includes some redevelopment projects, but it seems to have ticked up kind of pretty noticeably to maybe about 50% of rental value. Just curious, you can make any comments around that?

Sure. As you probably saw in one of our press releases, we did execute a Lifetime Fitness and West Elm leases at our Suburban Square. That is a very TI intensive redevelopment part of the program there. So actually over half of the TI that you see in that line item is really tied to redevelopments and that were not -- was obviously a big piece of it.

Okay. Thank you.

And just a reminder to please limit your questions to one question and one follow-up. The next question comes from Jeremy Metz with UBS. Please go ahead.

Hey, good morning, guys. In terms of the dispositions, you didn’t quite hit your 2016 targets of $1.1 billion, $1.2 billion. So is some of that stuff that you wanted to or plan this on 2016 rolling into 2017 and therefore maybe a little front end loaded and is that also perhaps having an impact on a cap rate range that you provided? I guess it would have thought that going forward at this point, the assets you are selling are of better quality and therefore would command a lower cap rate and we’ve been seeing now that you’ve gotten rid of call it the non-core assets.

Yes, I think that’s an accurate statement. And you know we're very pleased with the fourth quarter and the full-year execution on the dispo program. But as evidenced by the relatively modest activity in Q4, we did experience a little bit of a pullback from buyers, particularly the last two months of the year with uncertainty regarding policy change in interest rates and things of that nature. So a few of the year end deals were delayed, which we expect to bring forward the first half of this year. That being said, pricing on those deals that we did close met the high-end of our value expectation. So, we do have pretty good clarity on the first half of this year and so we're comfortable with the stated guidance for '17. But it is definitely true that the quality of the assets that are within that pipeline going forward is significantly higher than what we've seen in years past, so we're comfortable with the expectation that we set forth.

All right. And then, just one for Glenn. Can you walk us through what sort of capital raising is in guidance? Should we assume, you look to pre-fund some of that $450 million of secured debt that’s coming to -- with a bond offering here sometime early in '17 and then what should we think of beyond that? Thanks.

Yes. You’re pretty spot on that. We will probably do a bond, late first quarter or early second quarter, depending on market conditions and deal with the refinancing. We have plenty of liquidity. Renewing our credit facility has given us a lot more dry powder, so we’ve flexibility to pick the right spot when we want to go the bond market and there is very, very modest equity. There is really nothing that’s really in there other than expectations of stock options and equity awards that go into our equity numbers for the year.

Thanks.

The next question comes from Paul Morgan with Canaccord. Please go ahead.

Hi. Good morning. Just on the FFO range, I’m trying to kind of triangulate where you ended the fourth quarter $0.38. If you just annualize that, you get to the midpoint of your range, you’ve got occupancy growing in same-store NOI growth from 2.5%. It would seem like -- just could you maybe clarify what’s offsetting the same-store to keep, kind of your midpoint around where you ended the year?

Well, part of it is when you look at G&A in the fourth quarter, that is not -- you can't use that as I mentioned in my opening remarks. You can't use that as a run rate. There is some seasonality to that and the G&A number in total is a little higher as you go through the quarter. So if you really annualize that, you might have been closer to $0.37. So that’s part of your issue. Financing costs, depending on the assumptions you use to refinance the debt is in there as well, so that's another component when you look at overall guidance. And we do have the impact of there -- all these foreign contribution is really all gone. So, the growth that’s coming the 2% to 3% assumption of same-site NOI growth is offsetting really the foreign and the Canadian contribution that we had in the previous year.

Also if you factor in that, when you’re doing your guidance range, you do some sensitivities, so when we set out our acquisitions and dispositions range. As Ross said, some of it could be more front end loaded, especially dispositions with acquisitions on the back end side. So it plays into that.

I would also just note that some of our redevelopments that are becoming off line, specifically three of them. One in Highland, Boulevard add up to almost $4 million of rents that’s coming offline in '17.

Okay. That’s helpful. And then just with -- on the same-store side of the guidance, you talked about kind of the 70 basis point hit from Sports Authority and your kind of the range for the full-year. Should we expect a ramp up towards the back end of the year as more of that space comes back online? I mean or is it -- this is kind of more of steady throughout the year?

No, it's definitely you’re going to start to see, especially if same-site is cash based. So the team is doing a good job getting leases signed, but you need the cash to start flowing for it to start coming into the same-site numbers that we report. So clearly it will wind up in the latter part of the third and the fourth quarters and start fueling what happens in 2018 and beyond as well.

Your see that in the physical, the economic occupancy.

Yes, it's about 230 basis points of a spread, the physical versus the leased occupancy, rather the leased versus economic occupancy. So that expanded a little bit during the quarter and probably over the course of the year shrink down.

Right. Yes, so the occupancy would also kind of ramp, obviously you’ve got an occupancy increase in the guidance there, but that will be kind of second half of the year mostly?

That’s correct.

Yes.

Okay, great. Thanks.

The next question comes from Alexander Goldfarb with Sandler O'Neill. Please go ahead.

Good morning out there. So, first question for you. Glenn, have the rating agencies or how have the rating agencies changed as far as you guys going for credit upgrade at the same time you have the redevelopment program, but now they’re added news headlines of retailers having issues, bankruptcies, etcetera. So have the rating agencies changed the goal post for you as far as what you need to achieve for the upgrade based on the retail environment, or is it still the same that it was when you talked about at your Investor Day last year?

I mean, I would say on the surface it's the same. They haven't really changed, but the rating agencies also watch the macro issues, so I’m sure that will be part of the conversation with them. But I think it really comes down to us meeting the balance of the metrics that thereafter, which is really trying to bring the net debt to recurring EBITDA down into that, low 5 range. So we’ve a little bit more work to do there, but when we look at all the other metrics that the agencies look at, we really need them from size of the company, equity market cap, consolidated NOI coming from the portfolio, clearly the simplification of the business with no foreign investments and no currency exposure. They’re not really concerned really about our development or redevelopment pipelines either, because relative to $18 billion of assets, it's fairly modest.

In the debt maturity profile.

Okay.

Right, and debt maturity profile has been dramatically improved as well.

Okay. And then just as a follow-up, when you talked in your guidance about the 75 to a 100 basis point buffer for bad credit versus historic -- I think you said 25 to 50. Does that mean that if you guys suffer store closings that that credit loss both absorbs in guidance, both the impact of lost rent and the downtime of the closings, or is that just the reserve for any rent that is -- that maybe due to you, but hasn't been paid yet and not anything perspective for the balance of the year?

Well, again it’s a general reserve, so it will account for some portion of the lost rent, but not -- if you lost some in January for the full-year, on a lost scale, it wouldn’t encompass that.

Okay. Thank you.

The next question comes from Steve Sawka with Evercore ISI. Please go ahead.

Thanks, guys. I wanted to focus a little bit on the small shop leasing and just try and get a little bit better handle on where you think that number can go over the next 12 to 24 months? And just maybe give us a little bit of flavor for the discussions that you're having for tenants and how you are thinking about leasing the space that is vacant today may be versus what you were doing over the last year or two?

Sure, Steve. We finished up the year at 89.9%. Our target for year end was 90%. We actually came 9,000 square feet short of that target. So, if you're willing to lease the 9,000 square foot vacancy, we have one available for you. But going forward, we clearly think there's more run room there, small shop activity has been very strong for us. Just in terms of last quarter of the 107 deals we did, 27 of them were with restaurants, 21 were with personal care services, 12 were with medical uses, 5 are with mobile operators. So you see that the fitness, the services in the restaurant and food components really are the driving force behind the occupancy lift there. And small shop optimism I think when you look at it from a business perspective with the new administration is actually near all-time highs. So when we look at our pipeline of opportunities there, we think we can push it to 90.5% and hopefully push that even higher. Our all-time high was 90%, so clearly if we can push that up to the 91% range or even higher, that will be fantastic.

Okay. Thanks very much.

The next question comes from RJ Milligan with Baird. Please go ahead.

Hey, good morning, guys. You mentioned a pullback of buyers in the fourth quarter leading to a little bit later disposition activity. I was curious, are you seeing any movement in cap rates, especially within the big boxes given some of the retailer weakness? Are you seeing any change in the spread between big box and grocery anchored centers in terms cap rates?

Yes, we have seen certain private buyers exercise a level of caution over the past few months, especially as interest rates have risen close to 75 basis points during that timeframe. The secondary and tertiary market buyer typically requires leverage, so it definitely has an impact on pricing. And we have seen the spread between the core product that we and other institutions are trying to buy and those that are non-core, the spread is widened, particularly, for the non-grocery product. I would say that at one point in time, the beginning of last year, the spread between power and grocery was minimal as low as maybe a 50 basis point range. We’ve seen that widened to at least a 100 basis points for similar quality location. So we're very pleased that we're in the position that we’re in that we have executed on the fair majority of our disposed, and we will continue to clean up a few assets, beginning half of this year and through the balance of the year, but that's how we see the marketplace today.

Excellent. Thank you.

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

Yes, good morning. Let me see what’s left on my list here. Glenn, I guess a question for you. So, recently we saw an update from FASB and NAREIT will once again allow for REITs to capitalize acquisition related expenses after having to expense them for the last seven years. And clearly this has been one of the reason for the offshoots of the different NAREIT FFO definitions, including FFO as adjusted, which is a term that you guys use, so while the new rules become effective for REITs this December, there is an early adoption clause. So I’m curious on what’s your view of the new standard is and when you plan to adopt, especially in light of the amount of transaction activity you have outlined for this year.

We are happy that they’re going back to the old ways and allowing you to capitalize them, because it makes much more sense and we are planning to early adapt it. So, one of the reason -- its actually good, because it doesn’t narrow that difference between what would be NAREIT FFO and what FFO as adjusted would be.

But you did say you plan to early adopt, so there is nothing in the current numbers and when or are you willing to discuss when that will be?

We are planning to current adopt effective January 1.

Okay. So you’re saying that the number that we will see from you guys over the next couple of quarters will reflect the new standard, okay.

Correct.

All right, guys. Thank you.

The next question comes from Rich Hill with Morgan Stanley. Please go ahead.

Good morning. Thanks for taking my phone call. Hey, just quick question. I know you’ve talked a little bit about shadow supply and I applaud your transparency on that. Going back to, maybe the operating metrics that you reported, it look like your new leasing spreads were quite impressive, while your -- while the new renewals were a little bit more stable to maybe slightly declining. I’m just curious if you could maybe give some color as to what you're hearing from tenants in terms of the renewal, are tenants sort of concerned about the shadow exposure that you’ve been talking about, and what's driving that the pretty impressive new lease spreads?

On the new leasing spreads, we clearly think that below market leases is where Kimco shines and we have that as our acquisition thesis for a long, long time, having great real estate with low market leases. So as you know, these leases are long in tenure and they take a long time to get at, but when they do come to maturity or we are unable to recapture them, that’s really when we can unlock the value and mark those leases to market. So a few of the deals that we talked about already, Lifetime Fitness will end at replacing the Macy's at Suburban Square, and some of our other former Kmart boxes that we were able to reposition, really were the drivers of our new store lease spreads there. Renewal spreads are healthy as well, because they actually include options. So options actually are usually a little bit below what our normal renewal spreads are, so when you lump those two together, that’s actually a very healthy renewal on option spreads for us and when you combine that with new leasing spreads, obviously its where you get to our double-digit combined leasing spreads. From a retail environment standpoint, location is key. Everything is very much a local level decision for retailers. When they look at the opportunity set or what’s available in the market, typically we think our product is actually insulated from the shadow supply that we’ve been talking about. Many times our retailer base doesn't necessarily want to deal with having an interior entrance, they just preferred to have an exterior entrance and a big field of parking. And they also like to have that co-tenancy with the best-in-class open-air shopping center retailers and the visibility from the street. So, all those things combined we clearly think that our reposition portfolio is in good shape and should continue to produce solid spread results.

Got it. And as you're looking forward -- and that’s really helpful. Thank you. As you’re looking forward, I know we’ve discussed in the past that you’ve done a really good job of mitigating any exposure to maybe some store closures, but there's things that you can't control. Maybe you can speak about -- maybe you can speak to just quickly about maybe trying to renew leases mixed in them and your ability to do that prior to any store closure if that might be coming, maybe using Sears as an example?

Yes. The key obviously is, with supply and demand is that a huge flood of supply doesn’t hit the market at the same time. So what we've seen so far is that there has just been a steady drift of supply and that actually is relatively healthy for us as we are able to recapture boxes that are below market and reposition them with best-in-class retailers. So if there were a large-scale bankruptcy that changes that dynamic, clearly that would have pricing pressure on both new leases and renewals. So we have been looking at our portfolio and making very local decisions on if we think now the time to renew a tenant and lock them in longer term, then we do engage them with that conversation. As you’ve seen with our occupancy, it continues to tick up. As you see with our spreads, we continue and are able to produce solid spread results. So, so far the supply and demand is in our favor, especially since we're repositioned in the best markets in the U.S.

Great. That’s helpful. I will jump back in the queue.

The next question comes from Vincent Chow with Deutsche Bank. Please go ahead.

Good morning, everyone. Maybe just following up on that last question, I know you have done a good job of selling off a lot of the higher risk assets or properties that may be impacted by shadow supply, but as you think about the expiration schedule over the next say two years, if there is more than just a trickle that we’ve seen so far, I guess what percentage of your portfolio would you characterize that as that risk is currently?

I think when you look at our anchor lease expiration schedule, its relatively modest over the next few years and we do conduct regular portfolio reviews with our tenants. And the nice thing about the portfolio reviews we’ve been doing not only with the ones that are continuing to expand, but the ones that have pulled back on their store opening is there portfolio health with us is extremely hot. And so we continue to think that the reposition portfolio gives us good insight into the retailer quality we have. And even the ones that maybe are on our watch list, the stores that we have with them are actually performing quite well. So that gives us some good insight into how we can perform over the next few years, if there is a dislocation in terms of supply.

I mean, you look at the leasing expiration schedule, we note historically that somewhere around 75% of the leases that have option to exercise. So if you take that into account, you’re only looking at somewhere between 2% and 3% a year of real true roll to deal with.

Right, right. I guess that dynamic could change though, if there's a lot of the choices out there, but I get it -- I got you. Okay. And then just in terms of the …

The only thing I would add to that is if there is an option opportunity for retailer and their leases below market, there is usually a higher percentage chance if they’re going to take that.

Okay, that’s good point. And just the other question is just in -- with regard to the tough environment that we've been talking about and the increase in the credit reserve. I guess as we think about the trajectory of the occupancy being higher by the end of the year, as we think about the typical seasonality or typical drop-off we see in the first quarter, I mean, should we be thinking about that as something greater than we’ve seen in the last couple of years?

I think it will be relatively consistent in the first quarter. We do see some seasonality there and obviously there is some retailers that did not perform over the holiday season. But we think that over the year we will be able to have a modest increase in occupancy, both in small shop as well as anchor boxes.

Okay. Thank you.

The next question comes from Jeff Donnelly with Wells Fargo. Please go ahead.

Good morning, guys. Conor, I just want to go back and say I recognize that the 2020 plan isn't linear, but the guidance that you guys gave was a little bit behind the pace that you had outlined in that plan. I'm just curious, in your mind is that a function of timing around development or redevelopment, is it conservatism on your part or is it may be indicative of the fundamentals of just starting off a little bit softer that maybe was anticipated when that plan was authored?

No, it really is about timing. I think we still are very confident about delivering the 2020 vision. We realized we had a lot of work to do to get to where we are today. I'm really happy with the execution. I think timing wise on the disposition program, I think we hit that window and we're able to really execute on it at a -- probably at a pace even faster than we anticipated. And this year when you look at what we're trying to do, we obviously want to grow FFO, while reducing leverage and usually those two things are very difficult to do and we were trying to make sure we hit that when we look at our 2020 vision. We’ve finished off the heavy dispositions. We’ve started to ramp up our redevelopment and development spending, which clearly is not yet flowing, but we -- when we look at '18, '19, and '20, that’s where we see the growth coming, that’s where we see a lot of these projects coming online and continue to think that that's where we're headed.

That’s useful. And maybe just one for Glenn. In regards to the 2017 guidance the 2% to 3% same-store NOI, do you have that broken out for, I guess, I will call kind of core organic NOI growth and the redevelopment contribution separated?

Yes, the redevelopments should contribute somewhere between 20 and 40 basis points. And then the balance obviously is coming from the organic, which is lot lower than it was last year, that we had 70 basis points being contributed in 2016 from the redevelopments. And it's really attributable to -- there is more projects that are actually coming offline that are going to fuel growth in '18 and beyond.

Great. Thanks, guys.

The next question comes from Michael Mueller with J.P. Morgan. Please go ahead.

Thanks. Hi. You obviously had the new developments going on, as well as the residential tower, but looking at the consolidated redevelopments, it looks like you’ve four projects for about $70 million that are coming on in '17 and '18. I guess, how do you see the average pipeline size there and what the investment could be annually over the next say 3 to 5 years?

Yes, the redevelopment projects we were outlining for '17 are actually back loaded. Many of those projects are delivering in Q3 and Q4. And so that’s why again it doesn't necessarily flow through the full-year, but we do see the flow in the '18 pickup and continue to think as we deliver those projects there as you’ve seen we’ve been able to promote more projects into the active pipeline from the shadow supply. So when we look at our shadow pipeline, the key for our team is to really pull those forward as quickly as possible, so we can continue to grow that active pipeline. And we’ve been successful in doing that and continue to think we're just getting started on a redevelopment plan.

Okay. Thank you.

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

Great. Thank you. I had a question on the redevelopment, sort of a follow-up question, I guess. I know you still have 20 Sears leases in your portfolio. One of them is disappearing this year, I guess at Highlands, so there will be 19. But I was curious about the Shadow department store exposure you guys have and in your acquisition guidance for the upcoming year $300 million to $400 million, do you have any acquisitions in there of some of those potential shadow anchor boxes that you might want to take back in your portfolio?

When you look at our Kmart and Sears exposure, we’ve been obviously salivating to get those back for a long period of time, and a lot of those are coming due without any more options remaining. So we’ve been able to actually put redevelopment plans in place for every single one if and when they come back early or if we were able to strike a deal to recapture boxes early. So, the plan is still in place to redevelop those boxes and continue to show the mark to market of over 300% for that portfolio. So we obviously are watching that closely. In terms of recapturing and having that in our acquisition target, there is no acquisition baked in for recapture of those boxes. We have constant dialogue with all of our retailers, especially ones that have assets that are way below market and continue to try and see if there is an opportunity for us to recapture early, but in our guidance there's nothing baked in for that.

Great. Thanks, guys.

The next question comes from Chris Lucas with Capital One. Please go ahead.

Good morning, guys. Glenn, a quick question for you. You have a fair amount of or actually fairly significant amount of preferred that I think are redeemable this year. How do you think about the opportunity there, particularly given the spread that they currently yield relative to where you’re able to issue 30-year bonds?

Well, relative to 30-year bonds, the savings at least on the first preferred debts are going to be available to be redeemed would be in March is a 6%. We are probably somewhere around 4.5, 4.125% [ph] if we did a 30-year bond today. So there's some potential. However, that's not baked into our guidance. Again, we’re focusing on net debt to recurring EBITDA on a consolidated basis. So we’ve to just watch carefully where it makes sense to do that. The other two coupons are 5.5% and 5.125% [ph] that become callable later in the year. Again, nothing baked into guidance in terms of redeeming those, but again at the right point those could be an opportunity.

Okay. And then just a quick follow-up on an earlier question about the same-store bucket for this year. The 20 to 40 basis points redevelopment contribution, is that a net number so is that adjusting out for some of the de-leasing that you are doing for redevelopment, or is that a gross contribution on a positive side, excluding the de-leasing that you would do in prep for redevelopment?

That’s the net of it together.

The net of it together. Okay, great. Thank you. Appreciate it.

[Operator Instructions] The next question comes Linda Tsai with Barclays. Please go ahead.

Hi. You mentioned that some of the hurting retailers still did reasonably well at your centers. Was there also a regional bias to that in terms of geographies that performed the best?

No, when we looked at the portfolio with our retailers, they typically have a national platform with us and when you look through the assets that we’ve and where they were located, there was not really a regional bias, they just went -- we went asset by asset and talked about the store performance and each one seemed to be an outperformer for them. So that gave us confidence.

Thanks. And then in terms of traffic, in your earlier comments, I think you said that cap rates have widened for centers without a grocery component. Is that directly tied to the idea that the grocery component is more internet resistant so you are seeing a divergence in traffic for those centers with a grocery versus those that don't have one?

Yes, that can certainly be a part of it. I think that the institutional investor has been a bit more active on the grocery side. But even that being said, so long as it's within the core market we have seen some power centers with or without a grocery component still be attractive to investors. It really depends on the location, the quality of the real estate and making sure that within a power center there's not too many retailers of which are on a watch list or not considered Internet resistant. So it is a little bit of a side-by-side analysis in that regard. But we're just continuing to be careful and make sure that those assets that we look to acquire, particularly if there is not a grocery anchor sort of fit the parameters that we’ve set out which is below market rents and making sure that we consistently see upside or value creation opportunities within those assets.

Thanks.

The next question comes from Jeff Donnelly with Wells Fargo. Please go ahead.

Thanks, guys. Just a follow-up. I was curious, General Growth made a comment on their earnings call that retailers are increasingly channel agnostic between sort of online malls and shopping center distribution. Are you seeing more, I guess, call them nontraditional retailers appear on your leasing prospect lists or and I guess how many of those ultimately may be moved to leases? Just curious what you might be seeing out there.

We always look to try and expand our rolodex of retailers in our shopping centers and we are seeing more in terms of entertainment, as well as service and fitness and that’s our first Lifetime Fitness deal that we have in the portfolio, that’s our first West Elm deal that we have in the portfolio. So, but you’re -- I think when retail starts to blends in terms of all the different channels, I think that’s accurate. We’ve been talking about that for a while.

Nothing specifically like mall based tenants or maybe even with outlet based tenants that are kind of knocking on your door?

Sephora is probably the one that comes to mind where they have been actively working with us to expand and talk about the open-air center as their real growth vehicle going forward, because they’re already in all of the A malls. So when you look at the portfolio of retailers in malls that would fit with some of our centers, you really got to pick the best-in-class, because you want to be careful there.

Maybe one last question. You are about -- I think about 65% preleased across your both phases at Grand Parkway, I’m just curious, is some of the challenges in Houston's economy impacted leasing economics there or maybe leasing pace or has it been pretty resistant?

That really -- that site -- and again its probably site-specific, but where the location is, it's almost like a perfect hole in the doughnut where there is really no retail in any real area about 5 miles radius wide. So we’ve seen -- regardless of where oil is and regardless of some of the issues that have been hitting Houston, the retailer demand has been very, very strong there and target is set to open in just a few months. So, all the junior boxes in Phase I are spoken for. The restaurants are starting to lease up now and the small shops are starting to fill in nicely. So, we really haven't seen any pullback at all there.

Okay, great. Thanks guys.

The next question comes from Paul Morgan with Canaccord. Please go ahead.

Hi. Just a quick follow-up on Albertsons. I know it's not in your guidance, but any update on kind of what you are thinking about in terms of -- obviously there is kind of the IPO route to monetization, but you’ve also alluded to the possibility that you could look at other ways to capitalize on your position, and maybe on the real estate side or private market, is there anything going on right now?

No, I think you saw that the S1 has been updated. We continue to look at all opportunities there. We still think it’s a phenomenal investment for the Company long-term, and continue to see how we can either monetize a portion of it or work with the real estate. So that is a continued ongoing effort for us.

I think the Company is watching closely to see how and when and how quick is the deflation impact start to subside, which will really help the business and that should lead to other opportunities.

Okay, great. Thanks.

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

We will just end it on that. So thanks everyone for participating in the call. And just a reminder, additional information for the Company can be found in our supplemental on the Web site. Thanks so much.

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