KIM
#I would say on the surface, it's the same.
They haven't really changed it.
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 they are after, which is really trying to bring the net debt to recurring EBITDA down into that low 5 range.
So we have a little bit more work to do there.
But when we look at all of the other metrics that the agencies look at, we really meet 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.
And they're not really concerned really about our development or redevelopment pipelines either because relative to $18 billion of assets, it's fairly modest.
The debt maturity profiles have been dramatically improved as well.
Well, again, it's a general reserve.
So it will account for some portion of the lost rent but not ---+ if you lost someone in January for the full year, on a large scale, it wouldn't encompass that.
Sure, <UNK>.
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 a 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 the 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 were with mobile operators.
So you see that the fitness, the services, and the restaurants 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 would be fantastic.
We're happy that they are going back to the old ways, allowing you to capitalize them because it makes much more sense.
And we are planning to early adopt it.
So one of the reasons ---+ it's actually good because it does, it narrows that difference between what would be NAREIT FFO and what FFO as adjusted would be.
We're planning to currently adopt effective January 1.
Correct.
On the new leasing spreads, we clearly think that below-market leases is where <UNK>co shines.
And we have that as our acquisition thesis for a long, long time ---+ having great real estate with below-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 when we are able 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 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 and option spread for us.
And when you combine that with new leasing spreads, obviously is where you get to our double-digit combined leasing spreads.
From a retailer environment standpoint, location is key.
Everything is very much a local level of decision for retailers when they look at the opportunity set of 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 prefer 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 repositioned portfolio is in good shape and should continue to produce solid spread results.
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's been a steady drip 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's 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 far the supply and demand is in our favor, especially since we're repositioned in the best markets in the US.
I think when you look at our anchor lease expiration schedule, it's relatively modest over the next two 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 openings, is their 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 if you look at the leasing expiration schedule, we know historically that somewhere around 75% of the leases that have options have exercised.
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.
The only thing I would add to that is if there's an option opportunity for a retailer and their lease is below market, there's usually a higher percentage chance that they are going to take that.
I think it will be relatively consistent in the first quarter.
We do see some seasonality there.
And obviously there's some retailers that did not perform over the holiday season.
But we think that over the year we'll be able to have a modest increase in occupancy both in small shop as well as anchor boxes.
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 were able to really execute on it 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're trying to make sure we hit that.
And when we look at our 2020 vision, we've finished off the heavy dispositions, we started to ramp up our redevelopment/development spending, which clearly is not yet flowing.
But when we look at 2018, 2019, and 2020 that's where we see the growth coming, that's where we see a lot of the projects coming online and continue to think that, that's where we are headed.
Yes.
So the redevelopments should contribute somewhere between 20 and 40 basis points.
And then the balance obviously is coming from the organic, which is a lot lower than it was last year.
Instead, we had 70 basis points being contributed in 2016 from the redevelopments.
And it's really attributable to there's more projects that are actually coming offline that are going to fuel growth in 2018 and beyond.
The redevelopment projects that you're outlining for 2017 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 2018 pick up and continue to think as we deliver those projects that, 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 our redevelopment plan.
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're 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's no acquisition bake-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.
Well, relative to 30-year bonds, the savings, at least on the first-preferred debts going to be ---+ available to be redeemed would be in March as a 6%.
We're probably somewhere around 4 1/2%, 4 5/8% 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 have to just watch carefully where it makes sense to do that.
The other two coupons are 5 1/2% and 5 5/8% 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.
That's the net of it together.
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 look through the portfolio with our retailers, they typically have a national platform with us.
And when you look through the assets that we have 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.
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.
But I think when retail starts to blend in terms of all of the different channels, I think that's accurate.
We've been talking about that for awhile.
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 are 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.
No, that really ---+ that site ---+ and, again, it's probably site specific.
But where the location is, it's almost like a perfect hole in the doughnut, where there's really no retail in any real area of about five miles radiance wise.
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 of 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.
I think you saw that the S1 has been updated and 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 quickly the deflation impact starts to subside, which will really help the business.
And that should lead to other opportunities.
We'll just end it on that.
So thanks, everyone, for participating on the call.
And just a reminder, additional information for the Company can be found in our supplemental on the website.
Thanks so much.
