Kimco Realty Corp (KIM) 2012 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Kimco's first quarter earnings call, 2012. Please be aware, today's conference is being recorded. As a reminder, all lines are muted to prevent background noise. After the speakers' remarks there will be a formal question and answer session (Operator instructions). At this time, it is my pleasure to introduce your speaker for today, David Bujnicki. Please proceed, Mr. Bujnicki.

Thanks, Vicki. Thank you all for joining Kimco's first quarter 2012 earnings call. With me on the call this morning is Milton Cooper, our Executive Chairman; David 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 represent the Company and management's hopes, intentions, beliefs, expectations or projections of the future, which are forward-looking statements. Is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained in the Company's SEC filings.

During this presentation, management may make reference to certain non-GAAP financial measures that we believe help investors to 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 questions so that all of our callers have an opportunity to speak with management. If you have additional questions, please rejoin the queue. With that, I now turn the call over to Dave Henry.

Good morning and thanks for calling in today. We are very happy with our first quarter results and we believe that they represent continued progress on our strategic goals and objectives. Key items are highlighted in our earnings release, but I would like to provide a general high-level economic overview together with updated information on our disposition activities.

The shopping center industry as a whole and in our portfolio continues to show solid signs of improvement. The latest RBC research report on retailer expansion activity shows a slight increase in store opening plans with more than 70,000 new stores expected to open over the next 24 months. It is fascinating to note that 2000 Dollar Stores alone are expected to open in the next 12 months. The restaurant industry is also showing renewed health with major store expansion plans plan for Subway, Five Guys, Quiznos and many others. At the risk of repeating some of our earnings call highlights, I would like to emphasize our very strong first quarter operating and leasing metrics, including same-site NOI growth of 2.9%, representing eight straight consecutive quarters of positive increases, new leasing spreads of 39.8% and renewal an option leasing spreads of 4.2%.

In general, the benefits of positive GDP growth, virtually no new retail construction and an increasing population are more than offsetting growing e-commerce sales and struggling local stores in certain geographic areas. In most markets, effective rents are increasing, and our retail portfolio vital signs continue to improve. We are focused and we are making great progress on the key elements of our business strategy, selling our non-strategic shopping centers, reducing our non-retail investments, leasing up our Latin American development properties, selectively acquiring high-quality retail properties and strengthening our balance sheet. Our timing on our new preferred stock issue was great. Thank you, Glenn.

Specifically, with respect to our non-retail portfolio, another $28 million of investments were sold in the first quarter. From $1.2 billion in early 2009, we are now at $485 million as of March 31, representing 4.2% of total assets. The largest single non-retail asset remains our InTown Suites portfolio. And, as an update, we are now in the second round of a formal auction marketing process with the three well-qualified potential purchasers performing additional due diligence, property inspections and management interviews. We remain cautiously optimistic that we will be able to conclude negotiations favorably with one of the three potential buyers in the near future. At the property level, InTown continues to perform very well with RevPAR and other financial metrics increasing substantially.

I would also like to emphasize the strong success of our recycling initiatives. Since our investor day in September 2010, Kimco has sold 53 nonstrategic retail properties while acquiring 37 high-quality shopping centers, almost all located in our long-term core markets. For example, in our home market of Long Island, we acquired last year Independence Plaza, a 245,000-square foot center anchored by Home Depot and a large King Kullen grocery store. As another example, we recently purchased our institutional partner's interest in Towson Place, a 680,000-square-foot landmark asset located in suburban Baltimore and anchored by Target, Wal-Mart, T.J. Maxx, Marshall's, Bed Bath and Beyond and a Weis Market.

Quarter by quarter our portfolio is improving and being upgraded significantly as we concentrate and focus on superior properties in markets where we have scale, physical presence, retailer relationships and strong demographics.

Internationally, our Canadian portfolio is maintaining its very high occupancy and excellent leasing metrics. We were pleased to add an attractive 110,000-square-foot grocery-anchored shopping center in Ottawa to our portfolio during the first quarter. And yesterday we acquired a 140,000-square foot grocery-anchored shopping center in Edmonton, the capital city of Alberta, Canada. The anchor tenant is Sobeys, Canada's second-largest food retailer with 1300 locations.

In Mexico the country's GDP is healthy with a run rate at 3.5% to 4% and our development properties continue to achieve our lease-up targets. We hope to be at 90% overall by year-end.

Our largest South American projects, Vina del Mar in Chile, is now 95% leased only three months after completion with tenant sales above expectations. The project is very attractive and I encourage everyone on the call to visit Chile and our project if you contemplate a South American trip.

As we move into May, we are very happy with our results. We are confident that 2012 will be a good year for Kimco, and that we will have success in growing our FFO, improving the profile of our shopping center portfolio and maintaining our very strong balance sheet. We are proud to be one of only 11 REITs rated BBB plus or better.

Now I would like to turn to Glenn to discuss the financial details of our first quarter, to be followed by Mike and Milton. It is interesting to me to note that the four of us have now been doing these calls together for 11 years.

Thanks, Dave, and good morning. 2012 is off to a very solid start with positive same-site NOI growth, strong leasing spreads and further improvement in balance sheet metrics with a strong liquidity position. We were productive in all aspects of our strategy from leasing to nonstrategic shopping center sales to further monetization of non-retail assets. In addition, we opportunistically tapped the capital markets and sourced select acquisitions. Let me provide some additional color.

Beginning this quarter, we will use the term FFO as adjusted to represent recurring FFO, as we will be including headline FFO and FFO as adjusted in SEC filings. FFO as adjusted was $0.31 per diluted share for the first quarter as compared to $0.30 last year. FFO as adjusted excludes $7.4 million of transactions income related primarily to preferred equity and other promotes received during the quarter and $7 million of acquisition transaction costs and severance-related expenses.

Our headline FFO was also $0.31 compared to $0.30 last year. The improved performance results from increased recurring retail contribution provided at the operating property level.

Now, while not included in either FFO number, we had gains on sales totaling almost $20 million and impairments of about $10 million from the sale of 13 non-strategic shopping centers and two joint venture operating properties, providing total proceeds to us of $110 million. The shopping center portfolio metrics continue to exhibit improving performance with US same side NOI growth of 2.8%, the eighth consecutive positive quarter and the highest growth rate in four years. The combined same-site NOI growth, which includes Canada and Latin America, was 3.6% before currency impact. This metric was negatively impacted by 70 basis points due to currency, bringing the combined same site NOI growth to 2.9%.

Leasing spreads including new leases, renewals and options were up 10%, and gross occupancy came in at 93.1%, up 30 basis points from a year ago. We continue to chip away at the non-retail investments, monetizing another $2 million this quarter, bringing the remaining balance to under $485 million. We expect to bring the nonretail investment balance down under $300 million by the end of the year, representing less than 3% of the gross assets.

We redeployed the proceeds from the non-retail and nonstrategic asset sales by acquiring four US shopping center assets in our target markets, a series of parcels net leased to restaurant operators and one shopping center asset in Canada for a total of $190 million including debt assumption of $59 million. During the quarter we opportunistically capped the perpetual preferred market, issuing $400 million at a 6% coupon, representing one of the lowest coupons in the industry REIT industry. We intend to use the proceeds to redeem our 7.75% perpetual preferred when it becomes callable in October, later this year.

In addition, subsequent to quarter end we closed on a new $400 million unsecured term loan priced at LIBOR plus 1.05%. This facility has an initial term of two years and we have three one-year extension options at our election, effectively giving us five years of term. The proceeds from this term loan will be used to repay upcoming bond and mortgage maturities in the next nine months with interest rates ranging in the 6% range. The negative impact of these pre-fundings will be approximately $0.03 for 2012.

Our balance sheet metrics continue to strengthen with net debt to EBITDA as adjusted now at 5.4 times and solid fixed charge coverage of 2.6 times. We are ahead of schedule on our capital plan, and our liquidity position is in great shape with over $2 billion of immediate liquidity available. Thus, barring a major transaction, a trip to the capital markets is not needed in the near-term.

With regard to guidance, we are very pleased to reaffirm our FFO as adjusted guidance range of $1.22 to $1.26 per diluted share, even with absorbing the $0.03 of dilution associated with the early funding of the perpetual preferred issuance and the term loan. The FFO per share guidance does not include transaction income or expenses or non-cash charges for the redemption of preferred stock. Our guidance assumptions do include combined same-site NOI growth, expected at 1.5% to 3.5%, an increase in combined portfolio occupancy of 50 to 100 basis points and a decrease in the non-retail contribution due to the continued monetization of these assets.

Now I'll turn it over to Mike for his report on the shopping center portfolio.

Thanks, Glenn. 2012 has kicked off with some pretty good momentum with respect to portfolio health and performance. Compared to last year's fourth quarter, total gross opportunity was a 30 basis points and the US gross occupancy up 50 basis points, and that reflects both an increase in net absorption and the positive effect of the disposition activity. There was a modest decline in occupancy from the fourth quarter of 2011, but this is actually a good news story. The driver of the decline was 100,000 square feet of space taken back from the Syms bankruptcy, which affected location at Manhassett in Long Island and Kendall Lakes in Miami, and we expect to release both of these boxes by the end of the year at least rates it's better than Syms rents.

Also encouraging is the gross occupancy of space less than 10,000 square feet, which actually held steady at 83% from the fourth quarter. There was positive impact on the sales of properties, but even on a net absorption basis, the negative for these smaller spaces was less than 100,000 square feet, which is the smallest post-holiday season net decline since prior to the recession. This comes on the heels of a full year 2011, which actually ended with a slight positive in net absorption over that 12-month period.

As we discussed in our calls, addressing small space vacancies remains a key objective of the operating team. You probably have seen the recent announcement of a program in California to support new business and entrepreneurs as well as our fast-track franchising concept. We are also exploring mobile and other technologies that can help drive traffic to our centers and provide added value to our tenants and to shoppers who visit the centers. We made strong inroads this past year in using social media to elevate awareness of the Kimco brand and to communicate with potential and current tenants and the industry general.

Back to the operating metrics, the leasing spreads continue to be a good story. And for this quarter, the new leasing spreads look off the charts due to the impact of a lease signed with Target at a property in Staten Island. Even without this lease, new deal spreads were positive 9.2%, and for renewals and options the spreads were positive 4.2%. For this latter metric, we've continued to show steady progress over the past five quarters and, I believe, underscored the fact that we are working through a good part of the necessary mark to market on rental rates signed at the top of the market about five years ago.

And as to velocity, again it was encouraged by the rate of activity. After trending slowly for much of January and February, we ended the quarter with 523 deals for almost 5.5 million square feet. This compares to 459 deals in the first quarter of 2011 for 3.7 million square feet. These numbers are gross square footage, not pro rata, as reported in the release. You've probably heard enough times of the past year and a half, we continue to see good demand from the stronger players in most categories, not only from box retailers, but also for certain grocery chains such as Whole Foods and many of the food and personal service type franchise concepts.

You also heard the US and composite same-site NOI numbers. Two biggest drivers in the US number was a positive effect on recoveries due to significantly less snowfall in 2012 than in 2011, particularly in the Northeast, as well as the combined effect of higher rents and improved credit experience. Also recognize that the first quarter this year was impacted by the Borders vacancies as most of the new deal signed are not flowing rents yet, or the result would have been better by about 50 basis points.

As we reported earlier this month, two of the 50 stores announced by Best Buy for closure were at Kimco locations, one of which we owned in full and one in a joint venture that has quite a bit of term left on the lease. We continue to work with Best Buy to assist in downsizing efforts with the three locations in Missouri and Texas at or near execution with new tenants signed up for the 10,000 square feet taken back.

In Canada, the retail focus remains on Target, particularly as we are getting close to the time many Zellers stores will close for up to nine months to prepare for the store conversion. While we expect some drop-in foot traffic in the short term, we're eagerly anticipating the increased draw once the Target stores open at nine of our centers in 2013.

We were pleased to increase our Canadian investment position over the quarter, not only through the acquisitions of the grocery-anchored center in Ottawa that Dave mentioned, but we also increased our ownership position in two the existing properties jointly owned with our partner, Anthem Properties.

From an operational perspective, the results remain wonderfully boring with high occupancies, double-digit leasing spreads and a 4.6 same-store NOI, even with a negative effect of exchange rates for the period.

Mexico is on plan. We've picked up 90 basis points in composite occupancy since December, including the properties not yet stabilized, up to 85.3%. Overall NOI growth on a local currency basis grew about 11%, but this time through we were knocked around by a weaker peso, which was down about 10% from the comparable first quarter of 2011.

From a leasing production perspective, the pickup in activity appears sustainable, which reflects the positive economic pace in the country. Leasing velocity is expected to accelerate throughout the rest of the year with numerous package deals in discussions for junior box users in addition to advanced negotiations on 250,000 square feet with department store's Liverpool and [Colacia de Jiero].

With that I'll turn it over to Milton.

Well, thanks, Mike. When I reflect on our results, the word that comes to my mind is quality, quality in our portfolio and quality and our people. Permit me to comment on my definition of quality for our portfolio. Quality depends on a safe, growing cash flow from tenancies and a growing residual value. We continue to monitor our portfolio for that metric, and when we perceive risk, we move with dispatch to sell that property.

Quality does not necessarily equate to high rents. For a long time we have trumpeted the inherent value in having low contract rates that are substantially below market. We have had the evidence this quarter of the reality that value can be embedded in long-term below-market leases. For years we have had a net effect of annual rent of less than $100,000 per annum on a 100,000-square-foot store in Staten Island. A new ground lease has become effective for the same facility to a large national retailer at an annual rental of $2 million a year. I think you get our point.

Now, permit me to list four items to add some additional color on our portfolio and on our business. One, 10% of all of our rents are derived from properties in the New York metropolitan area, which has large barriers to entry and relatively low retail per square foot capita and high disposable income per capita. Over the next 10 years, it is anticipated the New York metropolitan area will grow by an additional million people.

Two, we have just over 750 spaces in which we own the land and where tenants have expended all of the funds to build buildings, complete the site work, lighting, etc. I'm referring to our ground leases. These ground leases, for the most part, have escalations in rent. It's a wonderful, safe, quality investment despite rents being low when compared to store leases.

Three, we are uniquely equipped because of decades of experience where distressed retailers with [food] real estate [may] create profitable opportunities. Some examples have been Hechinger, Aames, Montgomery Ward, Strawbridge & Clothier, Venture Stores, Gold Circle, Frank's Nursery, Service Merchandise and others.

Four, our size and national presence makes us unique and allows us to pursue opportunities when they arise.

Now, as Mike alluded in his remarks earlier, we recently launched the keys program in California, an innovative [incubated] program for aspiring entrepreneurs seeking to launch their first retail venture. Kimco will work with entrepreneurs from the initial planning concept, selecting locations, obtaining occupancy permits from the city and advise them on the different stages of building a business. Kimco has formed alliances with colleges, universities and business organizations that will provide or support the future business owner before, during and after the startup process. I just love this initiative.

Now, we are mindful of the risk that the Internet poses to bricks and mortar. We monitor the category of retailers that are most vulnerable -- electronics stores, bookstores, etc. We focus on those tenants that are relatively immune from e-commerce competition. In that category are restaurants, service businesses, warehouse clubs, supermarkets, medical facilities and fitness centers.

There's also quality in our people, our off-balance-sheet asset. In addition to my partners, Dave, Mike and Glenn, we have energetic regional Presidents -- Conner Flynn in the West, Rob Nadler in the Midwest, Paul Puma in the Southeast and Tom Simmons in the Atlantic and Northeast divisions. Each of them has experience, passion and entrepreneurial floor in what they do. There is a support team of dedicated staff who make all of us product.

We are our own special creation and we do not follow the fads of the time. We have a talented team that can seize opportunities and we have liquidity of over $2 billion and will provide the capital available from our team to seize the opportunities. We own quality real estate and we have an opportunistic bent that has and should over time exceed the expectations of our constituencies.

And with that, we are delighted to take any questions.

(Operator instructions) R.J. Milligan, Raymond James.

Good morning. I was wondering if you could give a little bit more color on the leasing spreads in terms of is there a specific geography or types of tenants were it's easier to push rents or ones that are more sticky?

I'll take that one. I wouldn't say that there's any one specific geography or type of tenant that we experienced this year. What we saw was a continuation of a general pattern over the past 12 to 15 months where most of the positive spreads were coming from the big box and junior box positions. On the smaller stores, it has been somewhat of a push with roughly an equal number of new leases that are positive versus negative. And when you get into the smaller stores arena, the differences can still be seen in certain of the tougher markets in Florida and in California and in Arizona, again, reflecting the fact that at the height of the market, those were the ones that had the highest rents.

And more the barriers to entry markets in the New York metropolitan area, the DC markets and certain pockets in South Florida, we are finding the strongest activity. But, again, that's in the smaller spaces.

Okay, thank you. And can you give us an update or a little bit more detail on the InTown Suites portfolio sale, how the hotels are doing on the performance metrics?

The performance metrics are really excellent and we are very, very pleased with what's going on there. Year-over-year, numbers are up substantially. The hotel business is measured in what they call RevPAR, so those metrics are looking very, very good. In fact, this morning I just got April's results. Year-to-date occupancy, average room rate, RevPAR are all up consecutively 2.2%, 5%, 7.3%, all respectively. So we're very happy with what's going on at the property level. And as I mentioned, in terms of the sale process we are into a second round now with three qualified buyers doing more extensive due diligence and spending their own money to pursue this transaction. So we're cautiously optimistic. It's been a long road, but you have to understand we are selling a company here. It's not just a number of hotel properties, it's an entire organization and company headquartered in Atlanta. So there's complexities when you're selling a company in addition to real estate.

Christy McElroy, UBS.

Hey, good morning, guys. Mike, I'm wondering if you can comment on where you are seeing acquisition cap rates versus the non-core retail dispositions, what the spreads have been between grocery and good centers and power centers. And given that market cap rate compression has continued for the good-quality, well-located assets that you would want to buy, are you increasingly talking to any JV partners about buying interest in properties? I know you've done some of that.

I'll touch upon the acquisition versus the disposition cap rates. As we and others have said, that there continues to be downward pressure on cap rates for the highest quality properties. A preponderance of what we acquired over the past 15 months has been a grocery-anchored bent or at least with a significant food component. And most of those assets are going off in anywhere from the low 6s to the 7 cap rate range. And the reason why that range is pretty wide is that we have very much focused on negotiated transactions as we think we've got a little bit of a benefit, so to speak, in terms of the going-in cap rate. This contrasts and compares within our disposition program, as we've said, the lesser quality assets that, as a general matter, these dispositions are averaging in the 9-ish handle terms of exit cap rate.

So those are the differences in terms of what we've seen, and there continues to be an increasing amount of interest across the spectrum, but particularly with the higher-quality properties in the better markets, a lot of demand. And it's not -- it's reasonable to expect those cap rates to continue to remain low or get lower. Dave, you might want to comment on the joint venture side of the equation.

Institutions of all shapes and sizes continue to come back into the real estate market -- pension funds, life insurance companies, sovereign wealth, so forth. They see real estate as hard assets, and inflation hedge and good cash yielding compared to alternative investments these days. So we continue to see lots of institutional investor interest in working with us to acquire some of these properties that are very high-priced. And for us, when we look at these acquisitions, we do look at them in two respects. One is if we do it ourselves, and secondly if we use an institutional partner to enhance our yield.

Quentin Velleley, Citi.

Good morning, it's Michael Bilerman with Quentin. I don't know who wants to take this, maybe Dave. Can you spend some time just talking about this net lease restaurant portfolio you bought, just the tenants, the credit, the locations, what real opportunity there is? Is this just sort of flat leases or is there a sort of redevelopment play? Are they master leases? What sort of yield did you go in at? And then maybe just step back and just talk about the bigger picture of how this fits into your -- it has really been very successful in terms of refocusing the Company as well as investors and analysts on the core shopping center business in terms of disposing a lot of what I would say non-retail, but single-site assets. Is it really worth it to buy 63 individual net lease restaurant and devote capital and energy to it, relative to shopping center business?

Sure. I think there's lots of questions embedded in there, but let me start at the very highest level. As you know, Michael, we have hundreds and hundreds of restaurant leases of all shapes and sizes in our portfolio, both ground leases where the restaurants have been built on our net lease sites and store leases. As a general category, restaurants are doing very well these days as more and more people eat out, and they are also relatively immune to the threat of Internet and e-commerce. So we like it as a tenant category.

In this particular case, we were able to purchase on a negotiated basis and what we think is a very opportunistic basis these 63 net leases from a financial institution that wanted to sell them. The cap rate was just under 9%, and it's a very high quality restaurant portfolio. We have, as you know, with 50 years of experience in underwriting these types of tenants, so we were able to look carefully at the real estate and be very comfortable with what's going on in this portfolio of restaurants.

So we don't see this as a huge program. But, as you know, we've always had an opportunistic culture. And we look at opportunities as they come up. It is retail real estate, it is -- we can underwrite, many of these properties are in shopping centers. They are no different than the out parcels we already have that are leased to restaurant. So it fits very nicely with what we have.

These leases in many cases have nice escalators built into these net leases. And from a timing management standpoint, net leases are always a lot simpler. You're collecting checks monthly, and the tenant's worried about almost all of the needs, including capital needs of the property. So we like the business in general. We like the category. Please don't look at this as a whole new transformation of the Company, because it's not. It's just one individual opportunistic investment that we made at an accretive cap rate.

Well, can you share a little bit more details on how many different tenants? Is it one tenant? Are they master leased? And I understand the restaurant business has been relatively stable. But you have a lot of bankruptcies going back through the recession, whether it be Friendly's, [Real Mix], Fuddruckers, Applebee's, IHOP -- there was a laundry list of restaurants that sort of went bankrupt the last few years.

Sure, I'd be happy to give you more color. And remember, we carefully underwrote this package. And I will make the point that we started with far more than 63. We whittled it down to the 63 that we felt were the best 63 of this very large portfolio we had an opportunity to take a look at.

They are located in 24 different states, great spread of risk, 20 different brands. 61% of the rent comes from corporate owners, the franchisor, if you will, whereas 39% comes from franchisees. So there's a spread there. The cap rate, as I mentioned, is just under 9 at an 8.8%. The average price we paid is $1.1 million. 36% of the revenue comes from shopping center pad site, as I mentioned, our parcels. 32% of the revenue comes from very high traffic interstate locations where you get off at exit, for instance, and you have a Wendy's or something like that.

The largest tenant, with 12 locations, is Wendy's, followed closely by Burger King with nine locations. The biggest geographic concentration is Texas with 17 locations. We like Texas long-term a lot, the demographics and so forth. So hopefully that gives you a little flavor. The average rent per location is about $102,000.

I look forward to the property tour. Thank you.

(laughs) we'll start with the Wendy's.

Ross Nussbaum, UBS.

Dave, I hate to even ask this question. But I'm wondering if you have any comments on the Wal-Mart allegations down in Mexico and if Kimco had conducted any reviews, maybe not so much of your local Mexico employees. Maybe my concern is more toward JV partners to make sure that they're operating to the same high ethical standards that Kimco has already operated toward.

Yes. Obviously, we anticipated this question, so permit me to be very, very specific in a response, and I'd like to make the following points.

One, the extent of what we know about the Wal-Mart actions is what we read in the New York Times article, the same way you did. We are not aware of any Wal-Mart improprieties with respect to any of our Mexican properties or any of our Mexican operating partners. The acquisitions and development of the Wal-Mart projects in our portfolio occurred in 2005 or later, and this is a year after the activities that were described in the article occurred.

With respect to all of our Wal-Mart projects, the developer obtained the building permit, not Wal-Mart. We employ a third-party consultant to oversee the construction process. There's a construction manager in many cases right on site that reviews and approves every payment we make on these development projects. We also have our own Kimco employees provide asset management and oversee the project construction and approve the individual payments. As part of our normal operating procedures, all of our local Mexican development partners execute letters certifying to us they are not aware of any kind of improper payments. We have a very comprehensive FCPA policy, foreign corrupt practices act policy, it Kimco that includes extensive training for all of our employees that are directly or indirectly involved with any international projects. The training includes members of senior management and our Board are taken through this training on an annual basis.

And then I just have to zoom up to the highest level. From the very beginning, when we went to both Canada and Mexico and then South America, we really tried to set the right tone because we've always emphasized that we are a public company and as a public company we adhere to the highest ethical standards and we expect that all of our local operating partners to also meet those standards. So that gives you the highest level of flavor I can give you at this point.

Much appreciated, thank you.

(Operator instructions) Rich Moore, RBC Capital Markets.

Good morning, guys. A question for you, Dave -- urban retail, street retail has gotten a lot of press and it's gotten kind of hot. There's a landlord that are interested. You guys have some that I know you have been selling down. But I'm curious; do you continue to sell that down? Do you maybe turn around and try to identify some of your own acquisitions in street retail that might be interesting?

Well, you really have to differentiate when you say that. We continue to be in some very urban locations with our typical property type, and we like that and we plan to stick with it. What we have been selling down are generally these mixed-use development properties that we acquired several years ago in Philadelphia, New York, a couple in Boston and a couple in Chicago. These generally were -- the first story could be retail, but second, third, fourth, fifth story to be either apartments or office or other property type. And we just really didn't have the expertise or the right partner to develop these properties out. It's not our core expertise.

So street retail in of itself remains something we would be happy to look at in markets that are our core markets. But in terms of significant mixed-use development activities, where we are putting office or residential on top of retail, that's just not what we are about. And that's what we've been selling.

Paul Morgan, Morgan Stanley.

Hi, good morning. On the core, your guidance for the year is 1.5% to 3.5% same-store NOI. You're pretty constructive, it sounds like, in terms of what you're seeing in leasing and the momentum at least for small shops. You reported 2.9 in the first quarter. Is there any reason to keep you sort of cautious that that low end is still realistic? Or based on the trends that you reflected from the first four or five months of the year, you think the high end is sort of a more reasonable target both in terms of occupancy but especially kind of the same store NOI number?

Well, in fact, I would make a very general comment. Like everybody else, it's an uncertain environment today. We are cautiously optimistic that the economy will continue its recovery, but it certainly is very soft and very fragile. And there are some items out there in the world that make us want to be conservative as we project out.

Also I wanted -- just take a look at the first quarter. Currency definitely has an impact, especially as we continue to leasing up in Mexico and the other countries that we are in. We had a 70-basis-point negative impact. Without that, we would have been 3.6%. So the reason we have that range and its wide and 1.5% to 3.5% is we just can't predict currency. So it is clearly a part of it.

Yes, so it sounds like more macro or foreign exchange that's driving the range rather than -- or just based on what you are seeing on the ground from a core perspective, it would be narrow and higher?

I think that's fair. We are pleased with what we are seeing on the ground today.

Vincent Chao, Deutsche Bank.

Hi, guys. Just had a question on the volumes -- very strong renewal volumes this quarter. I was just wondering if you could tell us what the retention ratio was there and whether or not you think that can hold for the rest of the year. And then on new leasing volumes, it looks like a trailing 12 you had about 3.5 million square feet. Just wanted to know if that's how you're thinking about it for this year or if that goes up relative to the last 12 months.

Yes. This year on the renewal side, I think it's about a 90% retention rate. There was a significant amount of lease-ins that we were able to renew. And I think that, in effect, reflects a on a macro level the availability of other locations or lack of availability of certain locations for existing tenants to prospectively move. So there was a lot of value and it's very, very high retention rate. And that has been higher than what we've seen historically. So I think that's the good news in the equation. And as for the full year, volume, the 3.5% or so that you mentioned, that's probably rough order adjusted is the right number. That is baseline our leasing plan for 2012.

Okay, thanks.

Cedrik Lachance, Green Street Advisors.

Thank you. Given appetite from joint venture capital and institutional capital at this point, is selling a stake in some of the properties you currently wholly own in order to form a joint venture and harvest the income -- is that a possibility at this point for you?

I'm sorry; I missed part of that.

So, given appetite from institutional sources, have you contemplated packaging a number of wholly-owned properties that you currently own and put that into joint venture in order to derive fee income and in order to enhance your joint venture partnership programs?

Yes. I think you've seen today, matter of fact, RioCan announced a new joint venture with Kimco where we sold them an 80% interest in one of our original merchant development projects in Texas. So that's an example of a continued activity we have in the joint venture program. And yes, we are selectively looking at opportunities to expand joint ventures and feed those joint ventures with some of our existing assets. But in general, institutional partners want to go side-by-side with you on new acquisitions. So that's generally where the institutional appetite is.

But as I mentioned in the very beginning, we looked at acquisitions, and that includes our own portfolio, selectively. And we look at opportunities as we talk to these institutions to have the right mix of institutional partners and our own capital being put to work. We have had the benefit of having capital to put to work as we sell our nonstrategic assets and our nonretail properties. That's given us some capital that we can redeploy and purchase some 100% wholly owned excellent-quality assets for the long-term.

Okay, thank you.

Nathan Isbee, Stifel Nicolaus.

Hi, good morning. Mike, just focusing on the leasing spreads, even without the Staten Island lease, they were still up double digits. Were there any other specifically leases that were driving that, or it that pretty strong across the board?

Yes. Without, Nate, it was 9% positive and there wasn't any one big driver. To an earlier question that was raised, we got the most traction in an assortment of mid box, junior box type anchors and turnover as opposed to the small stores, which was -- I think it was a mild negative, but it was imperceptible. So really it was driven by a series of boxes, including a couple -- and I don't have the information in front of me -- a couple of the Borders re-leased boxes. In earlier calls, I had mentioned that we were pleased with the pipeline of users on the former Borders locations and a couple of boxes that helped push the numbers lower.

Do you have any other of these Target-like deals coming up?

Yes, we do, but not next quarter (laughter).

Yes, don't put it in your model next quarter, but the benefit of being around for 50 years is we have lots of leases that are very low rents that finally reached their maturity and finally reached the last of their extension options. And this particular quarter we saw one of those. We have many like that embedded in our portfolio.

All right, thanks.

Alexander Goldfarb, Sandler O'Neill.

A question for Glenn -- looking at your debt schedule, you guys are pretty light beyond 2020. And just given your opening comments about limited capital markets activity, just sort of curious what your thoughts are for taking advantage of the current strong bid for corporate credit, extending duration even if it means tendering for stuff early and taking a charge. And also just want to get your thoughts on doing the preferred -- great pricing, but again, if you get unsecured 10-year debt inside of that, the trade-off in your view, of preferred versus unsecured.

I think it's all about balance of how you look at the overall capital structure of the company. We knew we wanted to replace our preferred. It's at 7.75, so it was a good ARM. The reality is, at 6%, 30-year debt for us at the time we did it was virtually on top of that. So using a preferred instrument, really that's not callable, it's permanent capital, we thought made a lot of sense in the overall capital picture. You are right that we are light as we go further out because of where our debt maturity stack is. And the reality is, when we go to the next bond issuance, a new 10-year do is going to fit into an area where we have no debt maturity. So as we've done for a long time, we keep a very well staggered debt maturity and try to take advantage of the markets where we can.

And that's kind of what we did with this term loan, giving ourselves five years of term where there's -- there's just a very big disconnect today between the bank market and the bond market. So we'll continue to look and continue to be opportunistic.

But what about tendering early for bonds?

We watch it real closely, but the cost of doing it is pretty expensive. We look even at trying -- look at the bonds that mature in November and January. And the prepayment penalties -- they're somewhat prohibitive. So we'll watch it and take advantage of it where it makes sense.

Thank you.

Michael Mueller, JPMorgan.

David, I think you mentioned -- I think it was you mentioned after the InTown sale and you look at the non-core asset sales that are -- non-retail asset sales that are planned to happen this year, you will probably have about 300 left, 300 million left or a little bit less than that. What's the time, do you think, the best estimate, to cycle through selling that? And then when you look at the non-core retail holdings, where are you in that process, like how far through it in terms of disposing of what you want to ultimately sell?

Well, in terms of the non-retail portfolio, I think by the end of next year, we will be down to 1% to 2% of our total assets and we will be very happy. There are some longer-term non-retail assets that will probably hold for a while. But we're very hopeful at that point, with 98% plus of our assets being shopping centers, that will go away as an issue. And we realize the InTown suites is the big driver of all that. And we are committed to making that happen.

In terms of the nonstrategic retail, Mike, you might want to give an update there.

Michael, what I said in last quarter's call is that this is going to be continuous. I don't think I'll ever stop in terms of recycling. But from a realistic perspective in terms of the 100-plus assets that we have labeled nonstrategic for external disclosure purposes, I think that's going to be a two- to three-year cycle. And we are happy with the acceleration of what's happening in the market now, selling what we sold in the first quarter. And just for some stats, right now, we have another 14 under contract, 14 more that we've not accepted offers. We are negotiating a contract, and 21 more that are in the marketing phase.

So I think that's the steady diet of activity that you would expect to see us have that's going to be happening over the course of the next couple of years. And I'll also tell you that, as we look, we continue much more aggressively to re-look at the portfolio and make some decisions about keep versus sell. And that's really why, in the disclosures to you all, we talk about one set of occupancy numbers, one set of leasing spread numbers. We do disclose separately the nonstrategic, but I don't want to get into a pattern of saying just pay attention to the, quote-unquote, strategic assets because we are going to continually look to recycle capital, and where we feel value has been extracted to the maximum degree possible we will continue to use that as a capital source. And then I'd just add that in the process of execution the market is -- what we see is getting a little better for the B assets, both in terms of the interests of those types of buyers as well as some available debt capital coming from the debt funds that are out there in the marketplace. So, all in all, we think that that has a good story attached to it as well.

Okay, thanks.

Quentin Velleley, Citi.

Hi, good morning. Just an opening remarks, Milton, just in terms of you commented on some of that experience you've had with distressed retailers and also the national presence of your platform and ability to work on very large transactions. What are sort of some of the opportunities that you are seeing today? And is there anything imminent that we should be thinking about?

Well, this is a continuing process for us, and distress is not as available as it once was since there have not been new development and you really don't have the oversupply and the issue with retailers, there's abundant capital. But we do look for opportunities. We were involved in the Albertson's transaction that has turned out to be successful. We are exploring the possibility of other transactions with the Albertson people where there may be real estate that can be available at attractive prices. So we're constantly watching that.

And by definition, it's a very lumpy business. But we are on the case, and we do want to make sure that the market is aware that this is part of our business model and it's something we've done very well over the years, and we continue to talk to retailers about the opportunity for us to do opportunistic transactions with their retail real estate.

Thank you.

Nathan Isbee, Stifel Nicolaus.

Could you just give a little detail in terms of how much you've committed to spend to this keys enfranchise program and how long you are committed to it?

The cost, Nate, is primarily in funding the training seminars and other related activities that are mostly going to be conducted through the California Small Business Development Corp. So, without disclosing specific numbers, the cost is relatively nominal, and that's going to be our primarily financial cost of doing so. We will, in fact, help participate and a few of our California leasing and asset management team associates are going to participate in those training sessions. But that's really -- it's not going to be a heavy dollar amount.

We do give a year free rent as a startup company, so there is that contribution.

Right, there's that opportunity cost for year one. (multiple speakers) on a series of alliances with various forums, colleges, business development corps to really get leverage, if you will, in bringing entrepreneurs on board.

We hope to have the next Google come to us.

All right, thanks.

At this time we have no further questions. I'll turn the conference back over for any additional or closing remarks.

Thanks, Vicki, and to everybody that participated on our call today. As a final reminder, our supplemental is posted on our website at www.KimcoRealty.com. Thanks so much and have a good day.

And that does conclude today's teleconference. Thank you all for joining.