Kimco Realty Corporation (KIM) Q1 2013 Earnings Report, Transcript and Summary

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

Christy McElroy - UBS Investment Bank, Research Division Quentin Velleley - Citigroup Inc, Research Division Paul Morgan - Morgan Stanley, Research Division Craig R. Schmidt - BofA Merrill Lynch, Research Division Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division Vincent Chao - Deutsche Bank AG, Research Division Samit Parikh - ISI Group Inc., Research Division Cedrik Lachance - Green Street Advisors, Inc., Research Division Richard C. Moore - RBC Capital Markets, LLC, Research Division Ross T. Nussbaum - UBS Investment Bank, Research Division Michael Bilerman - Citigroup Inc, Research Division

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

Thanks, Sue. Thank you, all, for joining Kimco's First Quarter 2013 Earnings Call. With me on the call this morning are Milton Cooper, our Executive Chairman; Dave Henry, President and Chief Executive Officer; Mike Pappagallo, Chief Operating Officer; Glenn Cohen, Chief Financial Officer; as well as other key executives who will be available to address questions at the conclusion of our prepared remarks. As a reminder, statements made during the course of this call may be deemed forward-looking statements. It is important to note that the company’s actual results could differ materially from those projected in such forward-looking statements due to a variety of risks, uncertainties and other factors. Please refer to the company's SEC filings that address such factors that could cause actual results to differ materially from those forward-looking statements. During this presentation, management may make reference to certain non-GAAP financial measures that we believe help investors better understand Kimco's operating results. Examples include, but are not limited to, funds from operations and net operating income. Reconciliation of these non-GAAP financial measures are available on our website. Finally, during the Q&A portion of the call, we request that you respect the limit of one question so that all of our callers have an opportunity to speak with management. If you have additional questions, please rejoin the queue. With that, I'll turn the call over to Dave Henry.

Good morning, and thanks for joining us today. We are pleased to report very solid first quarter results as well as continued progress on our key goals and objectives. As usual, Glenn and Mike will provide details and color and Milton will close with some general observations. Perhaps due to the recovering housing market and record stock market highs and fund inflows, the consumer continues to spend despite the sequester and the ongoing fiscal stalemate in Washington. Retailer store opening plans have reached the 5-year high and, when coupled with virtually no new supply of retail space, effective rents are beginning to escalate in many geographic regions. Most industry analysts believe that retail development will remain limited for several more years, which bodes well for continued improvement in shopping center metrics including occupancy, same-site NOI and leasing spreads. Looking at first quarter results. We are particularly happy with the same-site NOI growth of 4%, a 5-year high and our 12th straight quarter of positive same-site NOI growth. Leasing activity was also strong, with close to 700 new leases, renewals and exercise options and leasing spreads of 13.5% for new leases and 2.7% for renewals and options. Small store occupancy also continues to recover, with certain regions like the Northeast especially strong. With respect to some of our key goals for 2013, the InTown sale remains on track for a late May, early June closing, following a lengthy loan assumption process. Yesterday, we also sold the New York City nonretail property for $7.3 million. And we have another New York nonretail property under firm contract for $38.5 million, which should close in June. In addition, we anticipate selling in the second quarter several of our large remaining nonretail properties in other geographic areas. In Mexico, one of our joint ventures has executed a firm contract with closing subject only to Mexican government antitrust approval to sell 9 of our existing shopping centers for a gross price of approximately $271 million, representing a substantial gain to Kimco. As mentioned on our last earnings call, the real estate capital markets in Mexico have surged and we are taking advantage of sharply higher prices to sell some of our assets. We anticipate additional sales if the markets remain strong. In South America, regarding our portfolio of 15 properties, we have reached either a tentative agreement to sell our equity interest to local operating partners or we have retained third-party sales agents to market the properties. We expect disposition activities will be completed by year end with a modest aggregate gain. Our reasons for selling remain as discussed last quarter: lack of scale and expensive tax structures limiting our economic returns. In the U.S., our joint venture with Blackstone to acquire the UBS Wealth Management - North American fund position in 39 high-quality shopping centers is scheduled to close over the next 30 to 60 days. We are also very pleased with the closing of the Cerberus-led SUPERVALU transaction, which reunited the Albertsons stores our venture already owns with the Albertsons stores formerly operated by SUPERVALU, while also purchasing 4 other supermarket branch: Acme, Jewel, Shaw's and Star Market. And making a direct investment in SUPERVALU in its post-closing operations including Save-A-Lot stores. We are pleased to note that our SUPERVALU shares have materially appreciated since the closing. Other U.S. investment activities since the beginning of the year primarily involved opportunistic purchases of joint venture equity interest from 5 different institutional partners, totaling $53 million. As Milton has mentioned, our third-party asset management portfolio, totaling roughly $10 billion, remains an excellent reservoir of off-market opportunities to acquire full interest and control of high-quality retail properties. During the quarter, we also acquired the second phase of our large grocery Anchorage shopping center complex in the high income community of Wilton, Connecticut. Owning both bases of the property provides us with maximum flexibility to renovate and expand the property. We also remain committed to upgrading our property portfolio and transitioning towards larger properties in more densely-populated Kimco core markets, where we expect superior job growth and higher retailer productivity and rent. Our scorecard, since the fall of 2010, consists of the disposition of 112 properties totaling $854 million and the acquisition of 64 properties totaling roughly $1.5 billion. The market continues to improve for B properties and secondary markets and we expect to close numerous additional sales over the balance of the year. Finally, and given its importance to our tenants in the shopping center industry, I would like to comment on the Main Street Fairness legislation. After passing 2 test votes, the Senate has scheduled a final vote on the legislation for Monday at 5:30 p.m. Unlike the cloture vote, which required 60 votes to advance the Main Street Fairness bill, Monday's vote requires 51 votes to pass the Senate and move on to the house. We are cautiously optimistic but, again, respectfully request the kind word of support from anyone who has a direct relationship with a U.S. Senator. Putting our retail tenants on an equal footing with e-commerce retailers is simply long overdue. Now I would like to turn to Glenn to discuss the financial results to be followed by Mike and Milton.

Well, thanks, Dave, and good morning. We are very pleased to have 2013 start off the same way 2012 ended, on very positive footing. Our first quarter results are a clear product of the execution of our business strategy, focused on improving metrics at the property operating level, further recycling of capital to acquire up quality assets and maintaining a strong balance sheet with plenty of immediate liquidity. Let me provide some color on the first quarter results. As we reported last night, FFO as adjusted per share came in at $0.32 as compared to $0.31 for the same quarter last year, in line with our expectations. FFO as adjusted excludes $5.2 million of transaction income, primarily from a disposition of a nonretail preferred equity position and $2.5 million of transaction costs primarily related to the acquisition activity. As a result, our headline FFO per share came in at $0.33 per share versus $0.31 per share last year. The operating team kicked off the year with above-plan results. We delivered combined same-property, net operating income growth of 4%, including a positive 20 basis point impact from currency. Our U.S. same-property NOI growth was 3.7%. This is our highest quarterly increase in same-site NOI in over 5 years, fueled by an improving economic environment and the upgrading of the portfolio. In addition, we continue to see positive results on the leasing front, evidenced by the strong leasing spreads delivered. Although U.S. occupancy was modestly lower by 20 basis points from year end, the result of the typical flow out of the holiday season, occupancy remained at a solid level of 93.7%, 90 basis points higher than a year-ago. We spent a good portion of the first quarter teeing up transactions as we continue to pursue capital recycling. We expect to conclude the InTown Suites sales during the second quarter, netting proceeds to us of approximately $90 million. The impact of this anticipated sale has already been incorporated into our guidance range. We have other nonretail dispositions in the works and expect that by the end of 2013, the nonretail asset discussion should be a thing of the past. We have continued to work the retail shopping center portfolio as well, signing contracts for the sale of 14 properties for an aggregate sale price of, approximately, $111 million. And as Dave mentioned, our contract for the sale of our interest in 9 assets in Mexico, which is expected to yield proceeds of $94 million in the substantial non-FFO gain. Proceeds from these sales, totaling close to $300 million, are anticipated to be used to reduce debt and acquire assets in our key target markets. As you know, another of our stated objectives has been to further simplify the business model. To that end, we have acquired the remaining interest in 4 more properties in our key target markets from our various joint venture partners and increased our ownership percentage in another JV program. We expect to continue to explore opportunities to acquire properties from the joint venture programs over time. On the capital front, we have made a significant progress on the refinancing of maturing debt both on the consolidated balance sheet and in the joint venture programs. We refinanced our 8.58% $1 billion peso facility to approximately USD 80 million, with a new 5-year floating rate peso facility at a spread of 135 basis points over the Mexican 28-day rate, which today equates to an annual rate of, approximately, 5.7%. This loan is prepayable without penalty at any time, giving us plenty of flexibility. In addition, we paid off a $100 million 6.125% bond, leaving us with just $175 million of U.S. bonds maturing this year and a CAD 200 million bond which matures in August, which we expect to refinance in the Canadian bond market later this year. On the nonrequest mortgage front, we have closed 6 transactions and have executed term sheets on 9 more deals, totaling over $513 million. The weighted average interest rate savings is approximately 170 basis points compared to the debt being replaced. Our liquidity position is strong, with over $1.2 billion of immediate availability. As a result of the positive operating performance delivered for the first quarter, we are increasing our same-site NOI growth expectations by 25 basis points, bringing it to a growth range of 2.75% to 3.75%. In addition, we are increasing the lower end of the 2013 guidance to $1.29, bringing the FFO per share as adjusted guidance range to $1.29 to $1.33. At the midpoint of the $1.31 per share, this represents a 4% growth rate compared to 2012 and, as I mentioned, incorporates the sale and impact of InTown. Please keep in mind that our guidance range does not include transaction income or expenses. And with that, I'll turn it over to Mike for a more in-depth look at the shopping center portfolio.

Thanks, Glenn, and good morning. The first quarter portfolio performance reflects the combination of solid market fundamentals in our sector but also the specific actions we've taken over the past couple of years through recycling of the portfolio and investments made to create value in our core asset base. The U.S. same-site gross number of 3.7% was driven essentially by growth in minimum rents as leases signed over the past year began to hit the books as our tenants opened for business, as well as improved overall credit loss across the portfolio. The occupancy levels, in total, were 70 basis points higher than a year ago and 90 basis points in the U.S. That movement reflects the combination of positive absorption, the aggressive disposition of underperforming assets and selected acquisition activity. On a U.S. same-site basis, the occupancy rose 30 basis points with the balance being the effect of the acquisition and disposition activity. As Glenn stated, we saw a marginal decline in the leased occupancy since December of 20 basis points, a similar first quarter pattern over the past few years. I would note that, for the space under 10,000 square feet, half of the fallout was due, not from mom and pops, but the closure of 9 Fashion Bug stores as a consequence of Ascena Group's acquisition of their parent company and decision to shut down that chain. Overall, small shop trends continue to improve, albeit slowly. We're encouraged that the new deal spread, even for the smallest spaces between 0 to 5,000 square feet, has turned positive this past quarter. Overall, the new leasing spread again posted double digits and renewals and options also remained sturdy with the overall 3.8% increase. With overall leasing spreads positive for 7 straight quarters, it's apparent that we're in a self-sustaining recovery in rental rates. All of these metrics reinforce a much more favorable leasing and operating environment. That isn't new news for the best properties and best markets, yet where I'm more encouraged is the pickup in action for assets that have had little since the slower emergence from the days of the financial crisis. And one example is our center in Anchorage, Alaska, one of the last developments from our former merchant building program. We secured a Bass Pro Shops lease for a new 75,000 square-foot store that will scrape and replace over 58,000 square feet of existing vacancies. Retailer demand continues to be strong and is now advancing for opportunities to come out of the ground with new projects. While Dave points out that new retails development will remain limited by historical standards, we do have a couple of opportunities that seem to be coming together. One a Phase 2 land of a property we built in Boise, Idaho years ago; and another at a prime location in Christiana, Delaware near the mall. Things aren't fully baked but are getting there. And I offer this examples simply to indicate that well-positioned real estate in established retail corridors is getting the attention of retailers as in-place inventory is filling up. That said, the focus continues to be what we can do at existing properties in terms of redevelopment and expansions and investments there still yield the highest relative return. One other type of investment we're making is strengthening the operational backbone of the business and thinking creatively about the future. Some of the initiatives are described on our website, including the energy management and sustainably programs and leasing programs, such as the KEYS and a fast-track finance program, as well as social media outreach. But we've drilled it down even further. And we're thinking how we approach the management of properties and tenants with new standards for property visits and capital planning, tenant communication practices and better internal coordination. We're also piloting a Wi-Fi deployment and data analytics that will support tenant strategies and enhance our prospecting tactics at certain of our larger centers. Lastly, as Dave reported, much of acquisition activity in the first quarter involved either partner buyouts or the purchase of adjacent GLA of existing shopping centers. In effect, investing with a much lower degree of risk due to our knowledge -- in-place knowledge of the asset. And while it may appear that we took a breather on the disposition side, we have closed 2 property sales since the end of March. And between the 14 others under contract and 4 accepted offers, we also have an additional 22 in the market today. And with that, I'll turn it over to Milton.

Well, thanks, Mike. I would like to comment on several distinguishing Kimco attributes to wit: size, tenant mix and geographic diversity. These attributes provide downside protection and upside opportunities. We are a national company with a national platform. We are the largest landlord to Home Depot, Target, Costco, Walgreens, TJX Companies, just to name a few. With such a large number of leases, retailers are inclined to review our portfolio to possible expansion opportunities and work closely with us. Through our geographic diversity, the bulk of our revenues come from locations at the top 30 MSAs in the country which have strong demographics. Our national platform also helps us underwrite transactions in any part of the nation. As a result, we are a valued real estate partner in the SUPERVALU transactions and other ventures because of our ability to evaluate assets quickly throughout the country. I continue to be optimistic for our SUPERVALU investment and feel confident that the management team can replicate the remarkable success of our original Albertsons investments. And now I'd like to comment on cap rates. There's a wonderful blog entitled, "Look Ma, No Inflation" by that REIT seer, Ralph Block. Ralph postulates that gold, silver, oil and other commodities are selling far below the February 2012 peak. Future inflation is likely to be in the 1% to 2% range rather than 2% to 3%. And if inflation declines by 1%, cap rates should similarly decline by 1%. And the softening in prices should help the consumer and certainly help retail real estate. Now what defines quality real estate? My definition of quality real estate is real estate that has a safe, sustainable, growing cash flow over an extended period of time in good markets. With the 12 straight quarters of positive same-store NOI growth, improving leasing spreads and occupancy levels, our portfolio has outstanding quality and should warrant low cap rates. As I've said before, I believe the REIT is nothing more than a common stock that must comply with certain tax requirements. And in evaluating common stock, the most important metric is management, management, management. And management must understand the importance of maintaining a balance sheet that always has access to capital. And through our improved fixed charge coverage, net debt-to-EBITDA level, strong liquidity position, we have accessed debt and preferred stock at reduced costs. Secondly, we have to be fast on our feet-work to seize opportunities. And this has always been part of our DNA. And third, to continue to strive to be a low-cost provider. We treat the shareholders' money as though it were our own. And I believe our culture continues to meet all of these fundamental tenets. We're gratified by the first quarter results and feel confident that we can continue to create value for our shareholders. And my thanks go to a superb team of associates. And with that, we welcome any questions.

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

[Operator Instructions] Our first question comes from Christy McElroy of UBS.

Just wanted to follow up on the comments about the more frequent buying in of joint venture interest in properties. Is this an active strategy where you're sort of approaching your partners to communicate that you're a willing buyer for the right properties and the right price? Or will we just continue to see someone one-off occasional, opportunistic purchases? I'm just kind of looking for some color on how aggressively you're pursuing these purchases.

Christy, we are trying to be proactive. And as we've noted before, over time, management changes, strategies change of our institutional partners and many have expressed their willingness to reduce their investment in some of these joint ventures. For us, it's an off-market, opportunistic opportunity for us and there's a win-win in many of these transactions. We manage these portfolios now, so we know them very well. And an opportunity to do a purchase on a negotiated basis is a wonderful thing for us and it simplifies our platform.

Our next question comes from Quentin Velleley of the Citi.

Just on your relationship with Blackstone, they purchased Valad and you had advised them on the Centro deal and, obviously, they had just recently purchased the UBS stake. There's been media speculations on discussions that you had for purchase of the Brixmor portfolio earlier this year. Can you maybe comment on that speculation?

Well, I loved Milton's response to the Wall Street Journal reporter, where he said we talk to lots of people. And, in fact, there are not many retail REITs we haven't talked to over the years. And that's about all we want to say right now.

Our next question comes from Paul Morgan of Morgan Stanley.

With SUPERVALU done, could you talk a little bit more about the transaction and kind of how you expect your role to play out near term? And kind of whether maybe contrast it with the Albertsons experience? And kind of maybe what your role near-term versus kind of a longer-term perspective will be?

Well, the SUPERVALU transaction is very exciting to me. I'll just take a moment, Paul. There are 2 pieces of real estate, just as an example, that SUPERVALU has. One is a Star Market in Boston on Boston Street. By the way, that Star Market stayed open all night to serve food and refreshments to those injured in the Boston Marathon. That site in Boston, a successful store, but there were offers in excess of $25 million by people who want to build a high-rise apartment house. A second illustration is a Jewel store in Chicago in the Gulf Coast. And there is a huge multi-use retail office and apartment complex planned. So there is a business that's turning around that has been more abundant and some of the results were very encouraging with, I think, increases in the meat department, Ray is with me...

Yes, 18% in certain stores just by improving the meat department and bringing people in.

So that I feel very excited about what the ultimate result is. And as I said, I feel we can replicate the fantastic result we had in monetizing Albertsons.

And I would just point out. That of the 900 stores that we acquired under these 5 banners, 45% are either owned or long-term ground leases. So it is real estate rich from an owner's perspective.

I mean, I just -- also, one thing I'd point out is we have 26 locations: 19 under the Albertsons, Jewel banner and then 7 or 8 of that are SUPERVALU. That we think are going to directly benefit from the new ownership and the operations. So our 26 shopping centers directly will benefit in our -- and have a better credit and the tenants do better in those locations.

Can you monetize the real estate, while at the same time trying to optimize the recovery in the brand? I imagine a lot of those stores are also some of the most productive. To what extent can you be aggressive on the real estate at the same time as...

Well, I think what happened in '06's acquisition was it wasn't until '09 and 2010 that we monetized it. And the reasoning was we wanted to prove the case out in how we are going to increase the value of the stores. Because as the operations improve, the ability to monetize that real estate increases dramatically. So at this point, they're just focused from the company to improve the operations right now.

The next question is from Craig Schmidt of Bank of America.

I guess this is a question for Mike. The leasing activity and the spreads at Kimco seem to be peaking at a time that's later than a lot of your peers. Is there any thought on why that is?

Craig, it's tough for me to marry it up against other -- our peers in trying to do a relative analysis. But from our perspective, we -- our spreads are very often driven by the larger locations or available spaces that are substantial REIT below market. And what we are finding is that in the natural rolled -- rollover of leases that we are -- seem to be finding an increasing number of opportunities where we are capturing below-market rents in our process. So I don't know if it's necessarily peaking, but we are continuing to see, to some degree, an acceleration of these recaptures of below-market rents. And that, I think, in turn, reflects that fact that the retailer demand is increasing. There is more opportunity for us to rollover very positive rates.

And Craig, one other point. We have over 1,000 leases, where the contract rents were entered into over 20 years ago. That's a built-in natural base to increases over time.

There's something to be said for age?

Not much.

Our next question comes from Alexander Goldfarb of Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: This is a question for Dave. Dave, you've been pretty vocal for quite some time on the Internet sales tax. And while it certainly make sense for large retailers, the Amazons of the world and folks like that, when you think about it, whether the future of retail is incubating new concepts, whether they open up as a temp tenant or perhaps start online and then grow and then, hopefully, take space in one of your centers. Why would the bar be set so low, at $1 million, versus a $10 million threshold just given the complexity of dealing with -- complying with all the various tax jurisdictions across the country, whereas a local operator in one of your centers doesn't need to compete for that. Wouldn't you guys want to promote more incubation of more retailers that, ultimately, do cross the threshold, have to pay tax and move into one of your centers?

Let me challenge the assumption that the benefit of this would be mainly the national retailers. The small mom and pops have been absolutely devastated by competition from e-commerce. You'll see it in the occupancy statistics of all of us public retailers REITs, our vacancy factors are much higher in small stores. And that's directly the result of e-commerce competition. As an example, for instance, if you are a small jewelry store and somebody comes in and prices an engagement ring and you have to charge the sales tax and, meanwhile, they get the color, the carat, all of the quality stuff and go dial up Blue Nile and they can save literally hundreds of dollars. And it's another cut to that local jewelry store. I can't tell you how many local small businesses have been impacted by both this concept of showrooming, where people come in, for instance, a children's footwear store, where mothers will ask the clerks to measure the shoe sizes of their children and then look at the merchandise and write down serial numbers. And then leave and go order it from Groupon or one of these other e-commerce things to avoid paying the tax. ICSC has statistics about shoppers, when they go online, if that Internet retailer is beginning to charge sales tax for whatever reason, they will shift to another. And so it is very important to the local stores. The startups will do just fine. And the -- our local tenants would love to have $1 million exemption on the first million dollars they sell. I think it's, quite frankly, too high, but it's a compromise in terms of the legislation to get it done. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. But the -- I mean, the Groupons the Zappos, those guys are already big enough that they would have to pay the sales tax. I'm thinking about a small start-up selling whatever wears. For them, it is costly. That's why the millions seems very low, $10 million seems a bit more appropriate, so...

It's not that costly. As part of the legislation, software will be made available for these people to very easily do it. Amazon already offers a service to collect the sales tax for Internet e-commerce guys. So it's just making a level playing field. Why should an Internet seller located in some other place that's selling to a state that collects sales tax not have to pay that sales tax on the residents who purchase it? Remember, this isn't a new tax. They are already obligated to pay a use tax, the purchaser. So it's just that nobody pays it. So there's an obvious advantage. So yes, we feel very strongly about it. All of us, retail landlords, feel very strongly. And if you think I feel strongly about it, call up Mr. Simon. It's just long overdue.

The next question comes from Vincent Chao of Deutsche Bank.

Just a question on the development commentary about the supply thing. Well -- but also trying to tie that back to sort of the comments about the retailers opening stores at a faster pace than in quite a while. And also the improving B market. I mean, from all those comments, can we just reasonably assume that retailers would prefer to move into a B quality asset or a secondary market at this point versus paying up for development in maybe a better market?

I'd still -- I personally believe that is the case. Because many retailers were hurt with these development projects in the last recession, that were partially built, bankruptcies, foreclosures, that they weren't able to deliver the projects on time. And this time around, retailers simply don't want to wait several years while these projects get entitled, arrange for construction financing, do preleasing. And rents have not returned to the previous levels necessary to make the economics work that well. So I still believe it's going to be quite a few years before you will see any kind of significant ramp up of activity. And the retailers are looking for space that either retailers are struggling with and are willing to give back or, perhaps, a secondary location just to get open right away and meet their store count right way.

Okay. So it sounds like it's more of a speed kind of issue. And, obviously, they had some history with the development projects, but speed-wise, that's just meeting their needs more. I mean, because, obviously, you have another set of risks associated with secondary and B class properties, different from development risk. But so it sounds like they're still preferring that. Okay.

The next question comes from Samit Parikh of ISI.

Just wanted to reference back to something you said earlier, the 1,000 leases that are very low rents with upside. Can you quantify sort of what percentage of your ABR those 1,000 leases represent?

Don't have the answer at our fingertips, Samit, but we can certainly get back to you with that.

Okay. Can I get one more in, then?

Absolutely.

Yes. I think we already get granular on these calls, right? Go ahead.

Glenn, just a question for you on the financing. What's your -- how are you -- are you leaning towards, at all, sort of calling some of your bonds that are maturing later this year and early next year that -- where you can probably issue a new tenure at -- on a low mid-3s? And looks like you guys don't really have any maturities in the corporate bond area beyond 2019.

I don't see us calling our bonds. I mean, again, the make holds and yield maintenance that go with them, it's very, very expensive. It's real cash that's got to come out of our pockets. And if you look at our overall coupons, outside of the bond that we issued in 2010, we don't have a coupon that's got more than a 4 or 5 handle on it. So I think we're going to take it out as they come. As I mentioned, we have $175 million of bonds that mature this year. We have a lot of activities that we've all talked about in the pipeline in terms of disposition. We want to let the capital plan come together a little bit more of a -- have a better feel over the next 90 days or so. And then we'll make determinations about when and if to tap into the U.S. bond market.

The next question comes from Cedrik Lachance of Green Street Advisors.

I'll try a multi-part question on Mexico. In regards to your disposition that you just completed, could you share with us if you explore or if you have explored a public exit over all Mexico? What was the cap rate on this transaction that you just completed and -- I'll start with these 2.

Yes, a multiple-part question. Well, let me take the second one first. The cap rate was a 7%, 9% on actual 2012 NOI. So that's one aspect. As we looked at what's going on in Mexico and as we mentioned on the last quarter, the surge of capital market activity and the increasing value of our real estate has generated a number of discussions here. We did look at maybe joining the crowd in terms of taking our platform public. But as you know, we are not an operator in Mexico. We are an investor, if you will. We have multiple operating partners. And so we feel the best execution, to the extent that prices stay this high, is to sell into these public companies or people that want to become public. So it's just an excellent window of opportunity for us if the markets continue this strong.

And are your partners potential buyers of your assets?

Yes.

The next question comes from Rich Moore of RBC Capital Markets.

Just to follow up for a second on Mexico. You've obviously chosen the course for how you want to monetize these assets. Does this particular buyer that you are selling the 9 assets to, is that buyer a potential buyer for more assets? Or was that sort of a group in the portfolio that was picked maybe out of the total of 52 by these guys?

They are an active opportunity for other purchases.

Okay, Dave, does it -- one of the things I'm curious about. Does it make it hard to get rid of the entire Mexican investment if you piecemeal it sort of, I mean, this guy picked 9 interesting projects, but that leaves you with maybe 43, I think, if my memory serves me. And then maybe somebody else picks some others. I mean, does it make it hard to get out of everything if you don't just do this sort of maybe more all at once?

No. It's working just fine. And the level of interest is quite amazing. And once this deal closes, we can give you more color on who the buyer is and who our operating partners are that joined us in the sale here. So but the answer to your question is no. We have an opportunity to sell in whole or in part to multiple interested buyers. I'd like to -- if I could just interject a previous question about how many leases, the 1,000 leases over 20 years in age. It's about 14% of the gross annualized base rents that we disclosed.

[Operator Instructions] Our next question comes from Christy McElroy of UBS.

It's Ross Nussbaum here with Christy. Dave, a question on the Latin America asset sales. You referenced the lack of scale and the expensive tax structure as some of the reasons why you're looking to dispose. And, I guess, the question I have is, weren't the tax structures known going in? So, I guess, what changed with respect to your understanding of the tax structures that would have motivated the sale? And the second part is, how did the tax structures that you had in Latin America differ from what you have up in Canada? And why isn't that an issue up in Canada?

Okay. First of all, Latin America is 2 parts. South America is what we've referenced in terms of the reason we're going home as we don't have scale and the taxes are tricky and expensive. And quite frankly, the development returns are not as high as originally projected. So the rents have come down a bit. The costs to develop have not. And the taxes are quite significant. If you take a country like Peru, it's about 29% on the actual gross revenues after expenses. So it makes your return. So if you thought you were developing towards 13, you're really developing to a 10 or a 9. And then you take the country risk on top of that and the currency risk and so forth. So it's just, we couldn't ramp up because the risk reward wasn't there. And we don't have scale. And so we decided to really focus on other aspects. Mexico does not have that same level of tax issues. And it's much more comparable to Canada, where we pay very little in terms of tax on current income. There is a capital gains tax on the way out that's quite substantial in Canada, a little less so in Mexico. But, again, the returns in Mexico have certainly justified that -- or the after-tax returns have justified the investment in Mexico, whereas South America, they did not.

The next question comes from Quentin Velleley of Citi.

Yes, it's Michael Bilerman. Mike, so that 15% of those leases 20 years and older, what's sort of the mark-to-market, then, if we were to look at that 15% of NOI and you were to mark them to market, how much upside, or how much NOI upside would there be?

The -- it's a pretty wide range. But what I'd suggest is if recent history is a guide and I recognize it's 40% of rents and there is going to be -- there are generally renewal options in many of these longer-term leases. But we would suspect that these larger longer-term deals have anywhere from, say, 10% to 30% uplift on the existing load and maturing base rent. That's what we've been experiencing in the last 2 or 3 years as these older lease rates roll off and we put new tenants in there. So the question for us, or the challenge for us, isn't so much the uplift. It's regaining, recapturing the space and gaining liquidity. Sometimes bankruptcies and early terminations, paying off the existing tenant to get the new tenant in is one strategy. Other times, it's sitting and waiting. Other times, it's of a particular tenant [indiscernible] wants to downsize because of a strategic change in their business has also an opportunity. So these are the -- those are the primary drivers or primary things that cause us to capture these below-market rents earlier than their contractual maturity.

Michael, just as one small illustration. We have 100,000-foot lease at probably $2 of rent in Staten Island, expires in 2017. We will get probably $2 million a year on that instead of a couple of hundred thousand. And there are other illustrations. And it's with a more dynamic tenant.

Quentin and I will make sure we have that in the model.

Put it in. Put it in. Count on it.

[Operator Instructions] Since there are no further questions, this concludes our Q&A session. I would like to turn the conference back over to Mr. Bujnicki for any closing remarks.

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

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