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

Christy McElroy - Citigroup Inc, Research Division Craig R. Schmidt - BofA Merrill Lynch, Research Division Paul Morgan - MLV & Co LLC, Research Division Tamara J. Fique - Wells Fargo Securities, LLC, Research Division Jason White - Green Street Advisors, Inc., Research Division James W. Sullivan - Cowen and Company, LLC, Research Division Richard C. Moore - RBC Capital Markets, LLC, Research Division Haendel Emmanuel St. Juste - Morgan Stanley, Research Division Andrew Schaffer Michael W. Mueller - JP Morgan Chase & Co, Research Division Jeremy Metz - UBS Investment Bank, Research Division Ki Bin Kim - SunTrust Robinson Humphrey, Inc., Research Division David Bryan Harris - Imperial Capital, LLC, Research Division Christopher R. Lucas - Capital One Securities, Inc., Research Division Nathan Isbee - Stifel, Nicolaus & Company, Incorporated, Research Division Linda Yu Tsai - Barclays Capital, Research Division

Good day, and welcome to the Kimco Realty Corporation First Quarter 2014 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, Andrew. Thank you all for joining Kimco's First Quarter 2014 Earnings Call. With me on the call this morning are: Milton Cooper, our Executive Chairman; Dave Henry, President and Chief Executive Officer; Glenn Cohen, Chief Financial Officer; and Conor Flynn, Chief Operating Officer. There are also other key executives who will be available to address questions at the conclusion of our prepared remarks. As a reminder, statements made during the course of this call may be deemed forward-looking, and it's important to note that the company's actual results could differ materially from those projected in such forward-looking statements due to a variety of 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. Reconciliations of these non-GAAP financial measures are available on our website. [Operator Instructions] And with that, I turn the call over to Dave Henry.

Good morning, and thank you for calling in this morning. We are happy to report strong first quarter results. As usual, Glenn and Conor will provide the details. But overall, our operating metrics continue to be excellent, led by 153 new leases with an average positive leasing spread of 50.7% calculated on the comparable new leases. Our terrific leasing spreads, combined with another substantial jump in small shop occupancy, provides solid evidence of the continued improvement and strength embedded in our core portfolio of neighborhood and community shopping centers. Looking at the U.S. shopping center industry overall, consumers are spending again with March consumer spending posting the largest gain in almost 5 years. Consumer sentiment, as recorded by University of Michigan, also rose in April to 9-month high. Combined with historically low new retail construction, U.S. population growth is now outpacing the net addition of retail space by 3.5x. And a 5-year high of new planned store openings, effective rents are increasing significantly. It is also interesting to note that services now represent slightly more than 2/3 of all consumer spending, off from less than 50% in the 1960s and '70s. This is significant for the neighborhood and community shopping center sector as our properties are all about essential local goods and services. Telephones, dry cleaners, restaurants, hair salons, urgent care centers, et cetera, are all resistant to the inroads of e-commerce. In addition, 94% of all retail sales still take place in the brick-and-mortar world. And there's an increasing list of online retailers beginning to establish physical stores. Even Amazon has opened short-term pop-up stores and has mentioned the possibility of opening traditional retail and showroom stores if they can be differentiated. With respect to Kimco's key goals and objectives for the year, we continue to make excellent progress…

Thanks, David, and good morning. 2014 is off to an excellent start as evidenced by our solid first quarter results. We are actively executing on our themes from our December Investor Day, transforming our portfolio with high-quality acquisitions and disposing of slower-growth assets from nonstrategic markets, simplifying our business model with the reduction of joint ventures and a continued exit from Latin America while also ramping up our redevelopment pipeline. We remain focused on keeping the balance sheet strong and opportunistically accessing the capital markets and reducing our overall cost of capital. As we reported last night, headline FFO and FFO as adjusted each came in at $0.34 per diluted share, up from $0.33 for headline FFO last year and $0.32 for FFO as adjusted last year, in line with our expectations. The increase is primarily attributable to strong NOI growth generated from the operating portfolio. Also as I've mentioned in the past, G&A is impacted in the first quarter for our annual noncash equity comp award issuances. In addition, we incurred $2 million of severance costs. The increase in G&A on a sequential basis was offset by 2 lease terminations included in income from discontinued operations. Headline FFO includes $4.2 million of transaction income generated from a promote earned on the disposition of a preferred equity position and fees earned from the early repayment of a mortgage receivable. Headline FFO also includes $6.6 million of transaction expenses related to acquisition costs, severance related to the wind-down of our Latin America operations and a noncash equity loss from our additional Albertsons investment made last year. We remain very excited about the prospects of the Albertsons investment as the Albertsons operating team has been executing on its business plan and consistently beating revenue projections. Our Kimco operating team kicked off the…

Good morning, everyone. Today, I will begin by outlining our progress on acquisitions and dispositions, and then cover the progress on our redevelopments. Finally, I will recap the leasing and operations activity for the quarter. We continue to simplify the business model by acquiring JV interests, and most recently announced that we acquired the remaining 60.9% interest in the high-quality KIF portfolio. These assets are predominantly grocery-anchored with strong sales located in our key markets. The 12 properties totaling 1.5 million square feet for a gross price of $408 million translates to a blended implied cap rate of 5.9%. However, when considering the KIF promote we received, the effective cap rate is 6.4%. It's also worth noting that 9 out of the 12 assets are unencumbered. 2 of the 12 assets do not meet our quality and growth criteria and will be sold individually as we continue to stick to our knitting of transforming and simplifying. In the first quarter, we acquired 5 high-quality shopping centers totaling 900,000 square feet, amounting to a gross purchase price of $216 million, including $113 million of mortgage debt at an implied cap rate of 6.1%. These include the acquisition of 3 grocery-anchored properties from the LaSalle joint venture, where we purchased the remaining 89% interest. The 3 properties totaling 316,000 square feet are located in the Greater Baltimore area and have an occupancy level of 97.6% at an average base rent of $19.49 a foot. Included in this package is York Road Plaza, a Giant-anchored shopping center doing over $800 of per foot sales. In one-off transactions, we acquired 2 large well-positioned properties in North Carolina. Crossroads Plaza is the dominant power center, located in the affluent and highly educated Research Triangle of Cary. The approximately 490,000 square foot site is anchored by…

So thank you, Conor. As you've heard, we are executing on our plan to transform, simplify and redevelop. First, our portfolio transformation is in full swing, most recent example is the acquisition of the Boston portfolio, which closed on April 30. The performance of this portfolio already exceeds our underwritten expectations and we will create greater value than we projected. Now let's take a look at what we achieved so far. Since September 2010, we have acquired 123 U.S. retail properties comprising 14.4 million square feet for a gross purchase price of $2.8 billion. These properties have on a pro rata basis an average occupancy that is over 10% higher than the 158 properties we sold. The average annual base rent per square foot is over 63% higher than the ABR for our dispositions. Demographics are impressive and average household income for the acquired sites is 40% higher and the estimated population is almost 20% higher than the disposed sites. Second, we made very meaningful progress on simplifying our business by reducing the amount of joint ventures. In the second quarter of 2011, we had 552 properties in JVs. That number is now 387, a 30% decrease. This represents a reduction of more than $3.7 billion of gross investment value in joint ventures. And when you look at the amount of real estate value we have purchased from our JVs, it's comparable to buying very large and high-quality portfolios. But we are able to buy these properties with less risk, less underwriting and lower transaction costs than any external portfolio acquisition. Third, we are excited about redevelopment potential. The pipeline is increasing and the projects are perfectly aligned with our transformation to a higher-quality portfolio. We are stimulated by Conor's passion and zeal for value creation and we can't wait for these projects to come online. On the plus business, we're happy with the progress made at Albertsons and SUPERVALU. And we are excited to be a part of the Safeway consortium. The transformation, simplification and redevelopment strategy is no small feat with a portfolio of our size. And I would like to express my gratitude to Dave, Glenn, Conor as well as all the Kimco associates throughout the company, who are working so hard to achieve our goals. And now we are happy to take any questions.

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

[Operator Instructions] The first question comes from Christy McElroy of Citi.

In terms of the BIG joint venture, what prompted the split-off of properties? And why not just dissolve the JV? Why can't you either own the 6 centers within that entity? And then can you sort of comment just on how you're actively working with other JV partners to formulate an exit?

Sure. The second part is easy. Yes, we are working with other joint venture partners, the ones that would like to co-own in form or fashion. We're trying to work with them, especially the ones that have high-quality properties, we're very interested in buying those properties. Others that have secondary assets, we've convinced them to put them on the market, sell them to third parties. So we are actively, as Milton mentioned, trying to unwind a lot of these joint ventures. Not to say that these are not great partners and that we haven't built a very good business and created value with them. It's just that, at the end of the day, we had too many, too many partners, too many ventures, and we're unwinding them. And also as Milton mentioned, it's a great source of acquisitions for us. We could generally buy these at an effective cap rate higher than on the market, either using our promote as currency, or avoiding the transaction costs, assumption fees, brokerage costs and things like that. So it's very good economics. That's a good place for us to put capital. With respect to BIG, they've been a very good partner. They're building their own platform in the U.S.. They have other joint ventures. This was an opportunity to basically go through the portfolio and divide it into 3 piles. The first pile separates some of the better long-term assets into a BIG-owned portfolio and a Kimco-owned portfolio. And we negotiated the division of those assets. The 6 we're remaining together have other issues that we'll resolve together, maybe there's leasing or redevelopment to go through it or debt issues or other reasons that they're going to stay as they are for a period of time.

Are these dispositions candidates longer-term?

The 6? Yes.

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

I wonder, are we looking at a possible shift in the pickup in ground-up development in the strip category? And I know you're pursuing active redevelopments. But are you also thinking about ground-up developments?

Overall, rents still haven't recovered to the levels necessary to justify a ground-up development. You may see occasional ground-up development in places like Texas or Florida, where you have grocers that are particularly anxious to expand their footprint and are willing to pay very high rents. But as we've mentioned before, the old days of buying 100 acres of land and going through years of entitlement projects with all the preleasing that's necessary to do that just isn't on the horizon anytime soon because the economics aren't there, developers do not want to take the small leasing risk that's involved in these transactions. And the retailers themselves don't have the patience to wait for years to get new stores. They're committed to opening up in their expansion plan in the near future. So they'd rather pay a couple of dollars more a foot to get immediate access to an existing store. All of which is good for us landlords because as we've tried to say during this call, rents are beginning to jump. They're not just going up 1% or 2%. Coming out of the recession now, rents are beginning to jump. And eventually, it will lead to new construction. But for now, we have the benefit of a very constrained supply. Retail per capita in the U.S. is going down for the first time because of population growth is exceeding the new supply of retail. So all of that bodes well for us.

The next question comes from Paul Morgan of MLV. Paul Morgan - MLV & Co LLC, Research Division: Just maybe if you could provide a little bit more color about your investment in the Safeway transaction. From Kimco's perspective, what is the opportunity there? And how would you compare or contrast that with Albertsons and SUPERVALU, not exactly the same situations, and then whether you see some of the shopping centers falling out to you from that?

Well, I would say -- I'll take the last part first regarding shopping centers falling out for us. I think what's going to happen is really when the deal does close -- we had so many shareholder approvals and antitrust approval. But the deal is closed. And day 1 is going to be an operations turnaround play to merge 2 companies with 2,300 stores [indiscernible] on that. But like the transactions that we just closed in 2013 and in 2006, where you see we have an operating team in place especially for the retail operations. And from that, add value to the real estate. Right now, the real estate is kind of being used -- not kind of being used as a financing vehicle for the acquisition. But in time, we're going to work with our partners and use real estate to add value to the transaction.

If you could just please be aware, it's in an approval process now, so we're a little bit limited on how much we can say. We will tell you that the 5 brands we bought from SUPERVALU last year, the early indications are terrific. The comp sales are good and the improvements are very good. So we feel very good about what we bought and we feel very optimistic about the Safeway transaction when it closes.

The next question comes from Tammi Fique from Wells Fargo Securities.

I was just wondering if you could discuss the cap rate spread between expected dispositions and acquisitions for the year, and then maybe your use of proceeds from the incremental disposition capital.

Yes, no problem. I think the deal -- first quarter is probably a little bit of an indicator that we're going to be ramping up our dispositions, and now we think that overall throughout the year, we'll probably average out to about an 8% cap for our disposition portfolio. We do have a number of different portfolios in the market today. Some of them are in the market as a package but can also be bid on individually. The asset type ranges from, really, power center to grocery-anchored center to triple net leases. So we have been really going asset by asset and taking a deep dive throughout the portfolio to see where we can unlock value, where we can lease up vacancy and keeping that in the parent, and we think there's downside or risk or very little growth in that if we had put that on the market. So we think that overall, the cap rates will probably even out to about an 8% from year end.

Yes. When you blend it with the Latin America sales that we're doing, you're probably looking at somewhere around a 225 basis point spread between acquisitions and dispositions in total when you put it together. So the more encouraging thing is the disposition activity, that the window is still wide open. If anything, cap rates are falling faster on some of the B properties and secondary assets that you would have expected. So it's encouraging to us that there's good activity and we're doing the best we can to take advantage of it, so that 200 basis point spread that Conor mentioned is probably drifting down to what's a 150 basis spread based on current indications.

Okay. And then just the use of the proceeds from the incremental disposition capital?

Well, again, in terms of our overall capital plan, again, we -- you see the amount of acquisitions that have gone on, so between acquisitions and redevelopment pipeline, that's how we're fueling our funding requirements. So that's what's going to go.

For the moment, it's a form of recycling. Clearly, there's no excess either way for the moment.

The next question comes from Jason White of Green Street Advisors.

I was just hoping you could walk through the composition of the renewal spreads, kind of mid-4% range. If you were to understand, you're typically getting some fixed bump, sort of 10% every 10 years and obviously, a wide range. But if you can kind of walk through the composition of renewal options versus spreads on just kind of one-off renewal would be helpful.

Yes, the renewal spreads and the renewal as an options posted was 4.6% so it's really a combination of anchor leases, as well as midsize shops, as well as small shops so you're right that there's typically option increases of anywhere in that range, from 5% to 12% of a 10-year basis. But there are some leases that obviously move the needle each way, and we've made a combination, really, of the major renewals, that we've done it. So it was at Staples where they renewed at, almost double their rent in Garden State Pavilion, Marshalls at Torrance Promenade in California, we took them from close to $5.50 up to $14 a foot. Shoe Carnival is from $6 to $9, Home Depot exercise their options out at Town Center East in Signal Hill, which had a 5% increase. So we see it as a range where the -- still the growth driver is in our junior boxes and we think that, that's going to continue. There's just very little supply out there. So these retailers are holding on to the real estate they have because they realize how valuable it is.

Okay. So the non-option renewals weigh on some of those fixed option spreads a little bit and that's where you get to the kind of 4% range?

That's correct. There's a few that were -- that sometimes are rolled down. There's a few that when you average it out, it's a 4.6% spread.

The next question comes from Jim Sullivan of Cowen & Company.

Yes. Looking at your -- the large tenant list, it is pretty interesting that the Kmart exposure has dropped so significantly year-over-year from 50 locations down to 34. I know some of that is associated with sales but obviously, some of it is also associated with recapturing space and redeveloping it. And I just wonder if we could have an update on whether you expect any major movement there or any additional material recaptured. You've done some sizable deals in the New York market, but maybe, just to give us a flavor for how those discussions are going, whether there's any accelerated pace of closings to be expected there or not.

We don't see any accelerated pace of closing -- closures but what we do see is they're continuing to be active on trying to sublease positions where they think there's value. And that usually sparks the conversation of lease terminations, payments from Kimco to Kmart or Sears. We see that there's future opportunities, we've been waiting patiently for these older leases for a long time. We think that's the big differentiator for us, so we continue to be in constant communication with them and continue to negotiate on a few deals beauty where we think we can create significant value here from releasing or redevelopment.

And we also even bought an existing center with an existing Kmart lease that's has a short term left in Marathon, Florida, that's a wonderful redevelopment play. So we're not afraid of the exposure where we can underwrite the real estate very well.

The next question comes from Rich Moore of RBC Capital.

While we're on the topic of store closing, I was curious what your thoughts are on Office Depot and their notice that they're going to close 400 stores over the next several years, 150 this year. Have they notified you guys of any closings? And what do you have expiring, I guess, in the way of Depot and Max leases this year?

Yes, it's obviously been something we've been monitoring for a long period of time. When you look at the Office Depot, OfficeMax exposure, we have 67 leases, 6 that expired this year and 13 that expire 2015. But you've got to look at it proactively with the whole office supply sector because the Office Depot, OfficeMax closures will impact what Staples decides to do with their portfolio. So we've been monitoring it closely and working on understanding which assets overlap, and we do have upside in those leases that are expiring. We have 10 office supply leases expiring. In the next -- through 2017 that we believe are 69% below market. So we think there are significant upside there. We've already started the process of pre-releasing that and we think that their square footage is ideal for today's junior anchors. You can take a look at whether it's soft goods players like TJX or Ross. There's also a lot of specialty grocers in the market today that are a perfect fit for that 25,000 square foot box, It's really the sweet spot for users today. So we're cautiously optimistic that the closures, that will result in the merger. Will actually result in future outside of potential redevelopment.

And have they given you indication, Conor, of when they might notify you about this first round?

They have not yet. We've been in discussions and we know that we're going to meet with them shortly we've been in constant communications. So we have a good idea since we have a tracking system of which ones are doing well and which ones have year-over-year decline. So that we've circled which ones we think are keepers and which ones do we think are closures.

And I think what's happening also, whether it's Staples, Office Depot, OfficeMax, and it's because they know, like we do, there's a lot of interest in their boxes, that they're going to close doors now in time for them to go out there and see how they can mitigate their liability. I imagine they're getting the calls from the same retailers, that they're calling us, saying, "What's available?" I think they're going to really spend the next couple of months seeing what they think will line up and then call us up and say, "We want to close and we have XYZ for you to help reduce their cost on the long term lease. So I think it's going to be a win-win for both of us going forward.

For instance, even if they closed all 6 locations in 2014 that are expiring, it's less than 1/10 of 1% though of average base rent. It's just de minimis in the overall picture of Kimco.

The next question comes from Haendel St. Juste of Morgan Stanley.

I'd like to go back to the Safeway investment once more, but maybe from a different angle. You've made a lot of progress in the simplification of your business in the last couple of years, which is what your investors were -- clearly wanted. Can you help me understand or reconcile the recent Safeway investment with the simplification theme? I'm not questioning your ability to structure a sound financial investment, especially how well you've priced Safeway investment there, but really asking how you thought about balancing the perceptual risk of these kinds of maybe non-core investment versus your simplification goals.

That's a very good question. We have always had a basic real estate business, an A+ business, and the plus business we've had for many years on our track record has been superb. So we just see this as fitting in to the plus business, and what excites us about Safeway is that it is -- it's really part of the same consortium that did so well in the other plus businesses, Albertsons, et cetera. So in this we've had, former many, many years, it's not deviation from our simplification strategy.

And in terms of the level of capital invested in the business, it's very minor compared to the mother ship, if you will, in our core portfolio. So it's an adjunct, it's synergistic with what we do. It helps with relationships with retailers and there's an opportunity to make a little money on retailer-owned real estate. And it gives us a lot of edge, and it helps to differentiate the company, quite frankly.

And it gives us a lot of insight on the operations level. It allows us to really understand the grocery business side. This is something that they own quite a bit of real estate just like the previous transactions, and we think there's future upside there for either purchasing and redeveloping or for future developments. So we like being partners with these types of operator because it gives us a ton of information that we normally wouldn't have available to us.

And could you remind us again your exposure to Safeway Albertsons? What percentage of your portfolio that represents?

Yes, it's 1.1% of ABR. Again, relatively small.

The next question comes from Andrew Schaffer of Sandler O'Neill.

Now that the New England portfolio has closed, can you remind us the upside embedded within this portfolio and how you plan on unlocking it?

Yes, we're pretty excited about the Boston portfolio. We've obviously been going through an arduous loan assumption process, and through that process, we actually were able to take over the leasing. And the previous management team, I would say, left a lot of meat on the bone. So during that loan assumption process, we were able to actually outperform our underwriting. A lot of tenants that we had anticipated staying flat instead of exercising their option, actually, exercised their option across-the-board. We've done a lot of new leases at above rents -- that -- above rents that we thought we could achieve. And that's just on the existing portfolio. We have a potential to add 6 or more pads to the portfolio, and we're in the market now looking for pad operators to come into the site. We've also got future redevelopment potential to add significant density especially in the urban markets where these assets are located. So we think that the early indicators are very positive. The cap rate has moved even since for when we put it on a contract to when closed, so that we've actually created significant value already. And we think that's just the tip of the iceberg.

The next question comes from Mike Mueller of JPMorgan. Michael W. Mueller - JP Morgan Chase & Co, Research Division: I was wondering if you could talk a little bit about the timing of the dispositions that you see going throughout the year. And after 2014, what's implied for what should be hitting in 2015 as well?

Well, Mike, I mean, the timing is a little tricky to say the least. It's tough to predict when these things will all close. The additional amount that we've targeted to sell during the year, we expect to close more towards the latter part of the year. So it really does not have a major impact on our 2014 guidance. So we'll have to see how it plays out, kind of refers to my comments that we'll give you a better picture as we go through the year on it. But we really ramped it up. And again, same thing with the Latin America sales, we're happy that we've closed the first piece, we've had a lot of thing in play and under contracts, the timing is a little tough to predict. So it's -- the Latin America stuff is really throughout the year. Yes, Mexico in particular is very tough to predict because you have the government's involved. They have to approve all of these transactions and there's actually been a change in the antitrust commission in Mexico. And -- so just like the FTC here on bigger deals, in Mexico, even on smaller deals, the government has to finally bless it, and that timing is very uncertain. For example, we have a hard contract on 4 assets right now, it's subject only to when the government finally approves that. So that could happen next week or it could be 2 months from now. So unfortunately, it's hard on Glenn because some of this stuff is variable.

I would just add that on the U.S. portfolio that we have in the market, we have seen bids come in higher on individual assets or sub-portfolios, so that, again, is tough to time because it's -- the whole portfolio, it's trading out at a certain point in time. The sub-portfolios might trade at different times.

Yes. I mean, I think the key takeaway, really, is we are accelerating it. So if you go back to our Investor Day, we kind of laid out plans over a 3 to 4-year period. We're now -- we really pushed a lot of it into '14, so the amount of dispositions, as we go forward '15, '16, I think are going to become a little bit more tempered.

It still remains just a wonderful opportunity. The window is open, and we hope to take advantage of that.

The next question comes from Ross Nussbaum of UBS.

Jeremy Metz on, with Ross. Your lease commence kept winding out to about 250 basis points in Q1. Can you just talk about where you expect this to be later in the year and therefore, the impact that it can have on your same-store growth, which at 1.5%, started off in a little bit of a tough position versus guidance?

Sure. Currently, the spread between executed occupancy and rent flowing occupancy is, as you mentioned, close to 250 basis points. We actually think that, that's a future upside for us, and we think that a closer to 100 basis points, it's going to start flowing in Q2 and we see that there's larger redevelopment programs coming online in the second quarter as well as the rest of the year. I mean, half that we've been talking about for a while, which has been Nordstrom and DSW. Repositioning project, that's coming online later this year. At the Greenridge Plaza, out in Staten Island, we have an LA Fitness coming on later this year. Bass Pro in Alaska is coming on later this year. So we haven't changed our guidance same side NOI. Clearly, we were impacted by it. It was almost a perfect storm of snow, currency. So we obviously know that there's future growth is going to happen in the second half of the year. And that's what our budget actually -- our internal budget shows. So we feel pretty comfortable that we can perform and have some significant growth in the second half of the year.

The next question comes from Ki Bin Kim of SunTrust.

If you could just go back to Sears. I remember in your Investor Day and some other conversations that a lot of upside in your portfolio does stem from these kind of older, historic leases from Sears or Office Depot leases. Is there some kind of concern that if Sears does go this route of actively re-leasing their own space, some of this upside is inherently kind of capped by them capturing the upside? And what kind of legal or lease language protections do you have in controlling who comes into that sublease space?

I mean, the Kmart leases are pretty open for them to sign or sublet them. However, I think the issue for them is there aren't a lot of 100,000 square foot to 120,000 square foot users out there. So they got to subdivide the box how many times they need to work with landlords to do that. So I think that the opportunities for them to take their -- the tenants they have and work with them to do a deal that's beneficial for Kimco on that. It's not like we -- they can really do a lot of deals without reaching out to landlords. So I think we'll be involved in the process. We are better suited. They have 1,000 stores. They can subdivide all of these stores themselves. They have the manpower do that. So they'll be working with landlords like Kimco on sites they want to sublet.

Yes. All of the indicators show that they're not interested in becoming landlords. They're not interested in taking the headaches of the construction risk and they -- you have either sold or look to exit their leasehold positions. So we're continuing to work with them, we think there's significant upside embedded in our portfolio and a lot of the leases that we have left that we showcased in our Investor Day do not have any remaining options left. So there's really not a whole lot of term left for them to sublease to any retailer so we have some protection there where we have to be able to recapture it. So many times, they hand us the retailer that's interested in the space and we do a deal direct and have Kmart go away.

Okay. But if they do sublease it, is there a way you guys partake in the economic upside or is that...?

Well, it's not -- yes, we can definitely -- could be a big part of the economical deal. But you also have to understand is that literally come into leases where they are all under option periods. So they might have 8 5-year options but relative to the process, where you're doing a deal with a tenant, they want a 10-year lease with 2 5-year options, which might not match up with their lease, so that becomes a problem for them. So that problem is an opportunity to try to get involved in the deal and make the transaction that's beneficial for us.

The next question comes from David Harris of Imperial Capital.

After your South American and Central American sales, we're left with Canada as your non-dollar investment area. It's about 10% of the company on a number of metrics. I think -- have you given any consideration to hedging yourself against the effects of volatility at the loonie?

We -- well, we are hedged in terms of investments in 2 respects. We have Canadian dollar mortgages on almost all of the properties and then the equity that we've invested in Canada has basically been through a Canadian dollar denominated unsecured bond from Kimco. So the investment itself is hedged, the only part of it that's not hedged is the FFO or the income that comes off at every year and for most years, we've been on the plus. This year, for the first time, we've been on the negative side of that. But again, in terms of the total scope of Kimco, it's not much. And the portfolio itself continues to perform very well.

Did that answer your question, Mr. Harris?

Not entirely but I'm not sure I want to pursue it on the conference call.

We can talk anytime, David.

I don't know if you looked at the forecast -- most people's forecast for the expectations of where the Canadian dollar is going to go relative to the U.S. dollar over the next couple of years. My number is you're -- about 5% of your net assets are -- so it's actually about 10%, it's meaningful. You're not going to put currency mismatch but your Canadian exposure is not misaligned with your U.S. exposures we've seen with a number of others REITs that have mismanaged their at foreign exchange exposure. But I still think it potentially is a source for NAV and earnings vulnerability as we go forward.

Again, we've done the very best we can to match the total investment against Canadian dollars. The income, you are right, it is at risk. But we don't think it's that material.

Well, the NAV is also at risk.

But remember, if the Canadian dollar weakens more, the Canadian dollars we're paying back in U.S. dollars also weakens. So I would respectfully disagree with that. The liabilities side also is matched to the asset side because we have Canadian dollar bonds and we have Canadian dollar mortgage.

Yes. But you got more net asset exposure, gross asset exposure than your liabilities, so there is the net asset exposure here to changes in the FX.

That's true.

And at 10%, it's meaningful. I mean, if I'm right on my numbers -- let's say, just probably a discussion offline some time.

Yes. We can take that offline, David. We got a few more people in the queue that we want to get to.

Next question comes from Chris Lucas of Capital One Securities.

David, I just wanted to dig in real quick on the new lease spread. The way you describe it, it sounds like it was more than just a single lease that was responsible for the significant bump. And while I recognize that the amount of your leasing volume is relatively small compared to the overall amount of volume you guys did, I just was kind of curious as to, sort of how you're thinking about that new lease environment and specifically, whether or not we are at the beginning of seeing potentially rent spikes of consequence that are broadly based in the portfolio?

I'll take the first part. I think the new lease population here, it's relative to our peers. It's actually quite large. We have 153 new leases signed in the quarter. So compare this on our peers, that's actually quite a large population. So we are, I think, actively working towards new leasing and see the pop in terms of where the rents are going. We have replaced some of the lower -- what we like to call the vintage leases. One of them was a below market out plot or pad lease. Some of the other larger deals that we do with TJ Maxx, Home Goods, Sports Authority. We were replacing it all, Kmart box, so yes, we've been able to harvest the upside in these new leases that are replacing some very below market leases.

And I did want to highlight it in my comments because I do think it is the beginning of a spike in the market rents. Things are popping up nicely, driven by a shortage of a space available. When you combine that 35-year low of new construction with the 5-year high of planned new store openings, good things start to happen in terms of rents. So yes, we feel good about what's happening on the new lease and market rents.

The next question comes from Nathan Isbee with Stifel. Nathan Isbee - Stifel, Nicolaus & Company, Incorporated, Research Division: Conor, just going back to your comment about increased leasing to nail salons and other mom-and-pop service tenants, can you talk about how you're approaching the underwriting of these non-national tenants? And is there any change in how you're approaching it or it's just a function that you're not giving them any TIs and just, taking a flyer at them. And then, I guess, as an extension, how do you think about the mix in the -- in your centers between leasing to a more service-oriented, which might get more people to come in versus the national that could pay a higher rent?

Sure. It's a good question. We look at every small shop lease individually, and it really comes down to the tenant's financial strength. We look at in great detail on what assets are behind them. So we underwrite them appropriately to figure out what kind of TI payment we feel comfortable giving them. Many times, if it's a mom-and-pop tenant that is a first time user, we steer them to a space that's either previously built out for the same type of use. So the risk is to manage quite a bit, because most of the fixtures and the improvements are already in the space. So the cost to have them open and do business is relatively lower. That being said, there's -- we've had a wonderful track record of a mom-and-pop, especially the nail salons, the hair salons. They are tenants in our shopping centers that have done quite well and have been a good investment for Kimco and Kimco's shareholders. And when comparing and contrasting the service for our local users versus the national, it really comes down to the composition of the asset and the demographics that's surrounding asset. You've got to really put together a nice offering that differentiates yourself. You don't want to have the same type of user lined up or next to each other all the way down to little shops because it really doesn't add to the complexity or the offering that you're trying to give to the neighborhood. So you really just have to take a step back and look at a void analysis, what's missing in the market, what's currently in the shopping center, what's doing well in the shopping center, what's complimentary to the mix that's there and what you can do to actually enhance it. So that's really what we look at. It comes down to the individual tenant, when you're looking at the financial strength and then it comes down to the individual assets, the surrounding demographics when you're deciding on what's the highest and best use. Nathan Isbee - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. I mean, clearly, there's some very fine nail salons out there. The one I use is great. But I mean, you can't argue, that was -- the mom-and-ops were clearly a source of weakness in the previous downturn, so?

That's true, that's true. And the dollars invested in the pure, local mom-and-pops are significantly lower than the national. So we do have a discount rate appropriate to the risk-taking on that small shop tenant. And most of the small shops that are hurt the hardest in the last downturn, wasn't really the nail salons or the hair salons. It was more of the specialty users that were offering something that couldn't compete with the online world and the big-box retailers that just got demolished when the downturn occurred.

And I would add one comment. The community banking system is coming back and that's the source of capital for most of these small tenants. So you are the jewelry store looking for a second location, the dry cleaner looking for a second location, so that bodes well for us as well.

Andrew, we have time for one final question.

The last question will come from Linda Tsai, Barclays.

What percentage of your leases constitute vintage leases? And over the next few years, how much of an impact do you think this can have on the blended rent spread?

Linda, most of that was covered in our Investor Day, I do have that information, I'll be more than happy to share with you. At my fingertips, we don't have that right now but that's more than something I can give you immediately after the call.

Please go ahead.

Thanks, Andrew. Thanks to everybody that participated on our call today. If you have some additional questions that you weren't able to get to on the call, I'll be more than happy to take them all day today. Also, there's additional information for the company that can be found on our supplemental as well as on our website. Thank you very much.

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