Hey. Welcome to our Fireside Chat with Kimco. My name is Zhihan Ma; I cover broadline/hardline retail here at Bernstein. I'm joined by my colleague Aneesha, who covers softlines specialty retail here as well. It's a bit of an unusual setup. We've got two retail analysts talking about a real estate company. Kimco is very much involved in the whole retail space. I'm butchering your company profile, but very much in the open-air shopping center space, grocery-anchored shopping centers. Very honored to have Conor here joining us today from Kimco to talk about not only Kimco as a company, but also broader read-acrosses in terms of what we are seeing from a retail real estate trends perspective, why the supply-demand situation is so tight recently, and what it means in terms of the competitive landscape. A lot to dive into there. I would encourage anybody in the audience, if you have a question, to submit it using the Pigeonhole link. We will do our best to incorporate those into the Q&A. With that, Conor, would you like to start with an introduction in terms of Kimco, what you guys do, and the types of tenants you have? How do you differentiate between the anchor and smaller ones? What type of use cases have been on the rise recently? We can start from there. Sure, happy to. Thanks for having me. Appreciate being here. Kimco Realty is the largest in the open-air shopping center sector. We're in the S&P 500. We have over 100 million square feet of GLA under management. That accounts for about 550+ shopping centers across the United States. We focus on the first-ring suburbs of the top major metro markets. Our strategy has always been to find the combination of value and convenience, and that's where we think that that intersection really plays to the consumer today as well as the retailer. We've been through, I would say, quite a roller coaster in the retail evolution over the past decade-plus. Kimco has come out the other side of it, I think, stronger. When you think about the evolution of retail, you sort of start at the beginning, where it was really all brick-and-mortar, and really how softlines and hardlines were developed to be sold out of the store. You think about the onset of e-commerce and sort of that black cloud that sort of came over brick-and-mortar; was it going to be a winner-take-all one? Most people were betting on e-commerce, including most of the retailers with their free cash flow and their working capital. You look at the next black swan, which for us was COVID, right? When you think about how people were deemed essential versus non-essential retail, most people thought that would be the end of brick-and-mortar. When you combine all of those, in addition to the great financial crisis, you look at what's sort of had the staying power, and I think Kimco Realty is exactly that. When you look at how the consumer gravitates towards how they shop, when they shop, and it's that daily need, that routine. When you go to work, when you go to the office, when you go to drop your kids off at school, what's the most convenient path of travel? Typically, our grocery-anchored shopping center is right smack dab in that path of travel. Typically, our shopping center is anchored by a grocery store. We're typically the largest landlord for, on a large scale, the Walmarts, the Costcos, and the Targets. On the mid scale, sort of the traditional grocers, Kroger, Albertsons, and Whole Foods. On the specialty side, Sprouts and Trader Joe's. That is an anchor we love because it drives repeat traffic more frequently throughout the week. We also love the combination of grocery with what we call off-price, the treasure hunting category. That's really sort of the TJX and all their concepts: TJ Maxx, Marshalls, HomeGoods, Homesense, Sierra Trading Post, Ross, and Burlington. We call them the treasure hunters because every time you go in, you're not going for a specific item, you're treasure hunting, and you typically have repeat traffic that way. Then you fill in around those two anchors with really sort of quick service restaurants, daily needs, essential goods and services, medical retail or med-tail, which has become very popular, and a lot of services. The big trend that we've seen change recently is the lack of new supply. That has been the tailwind for about 13 years. If you look at it from a high level, commercial real estate sectors have, in essence, an amount of new supply coming online each and every year. For the past 13 years, retail has had 0.3% of existing stock under construction, which is the lowest of any commercial real estate sector. Then you look at the occupancy levels, and we're at all-time high occupancy levels. Then you look at, well, where's demand coming from? It's multiple drivers of demand across the retail spectrum, from the anchor side to the mid -shop to the small shop side. Then you wonder, well, if there's going to be a supply-side shock anytime soon, would new development come out of the ground? On our math, it's been sort of substantiated by a number of analysts, rents would have to rise between 40%-50% in order to see new supply come online to make the return on cost; in essence, the development cycle makes sense from a risk-adjusted return. That's why we're in this unique point in time for retail, where, I would say, for a number of years, it had been redlined because of those big, dark clouds of uncertainty. You look at what's happened since; all of a sudden, the consumer is gravitating back towards the store. Surprisingly, the younger cohort is actually preferring to shop in person versus online. You would think with all the screen time that all of our kids are having and the younger cohort is having, you would think they would be gravitating towards shopping online. It's the opposite. You look at where the retailers have been expanding. E-commerce has not been profitable. Even Walmart had just a turn of profit this past year on e-commerce after forever investing in it. Now what's happened with the rate increase is retailers are really fundamentally looking at how to expand margins, and their margins are at the store base. They're reinvesting back into their store fleet, they're expanding their store fleet, and they're finding new ways to service their customer from the store, meaning they actually can distribute the goods. If you buy them online, you can ship them from the store. That's really what's turned the profit wheel for Walmart, as sort of the blueprint for the future is because, in essence, you're closest to the consumer; it's the cheapest way to get the goods to the consumer. That's usually the store fleet that's populated in those pockets of concentration where their shoppers live. Okay, this is all really good material, and we want to go into each of these pockets. I am going to ask a little bit about the consumer. Zhihan Ma will talk a little bit more about the retailer side and the tenants. Maybe on the consumer side, we have seen across the retail landscape a pullback in traffic to malls. To big shopping malls, right? More of a mix shift towards outdoor centers like what you have. I cover the off-price retailers. They've been talking about it for more than a decade that they're getting more of the traffic. I mean, you've been at Kimco a long time, more than 20 years. Can you talk about what you've seen the consequences of that traffic shift being? Are you seeing a different type of consumer coming to your outdoor centers? Different demographics? What are the knock-on effects of that shift in traffic from malls towards more outdoor plazas? Yeah, it's an interesting dynamic. I think so far this year, traffic is up 3% at Kimco Shopping Center. We feel obviously really good about the shopping habits and how they continue to gravitate towards our product. I always thought post-COVID, there would be a pullback in traffic, and we've actually compounded up year-over-year, because if you think about the work -from-home dynamic that was existing for a while, and a lot of people were posting up as an office in Starbucks or their local coffee shop, you would think it would have a rebound in terms of we wouldn't have a continually uptick in traffic. I think what the shopping center has become is really sort of a combination of a whole bunch of things that allow people to use it in more ways than one. Traditionally it was your grocery shop; all of a sudden off-price became sort of that playground for everyone to come in and do that treasure hunt we talked about. I think there's this fundamental difference in the U.S. consumer: everyone's looking for a deal. Doesn't matter where you are on the K-shaped, everyone is fundamentally looking for a deal. I think the off-price category has captured that animal spirit of finding consumerism in everyone. I think when you look at what TJ Maxx has done, what Ross has done, what Burlington has done, and even Nordstrom Rack and some of the others, you find that the shopper base continues to widen out, and it doesn't have to be a very small cohort of the demographic profile. I remember talking to TJ Maxx for a long period of time about HomeGoods. They had a very narrow demographic profile of who their HomeGoods shopper was, and then they started testing it in different demographic areas. Turns out they had a much wider demographic spectrum. It's almost the same when you go to, we're doing deals with Sephora now. Before, Ulta Beauty was the category killer for us. They were the dominant beauty retailer that we would always try. You always try to look at your merchandising mix and have the best in class on everyone that you can possibly line up so that, again, your gravitational pull is one that drives traffic at all times during the day. Now Sephora has come into the shopping center space and realized you don't have to go to the mall. Your shopper is actually shopping at Whole Foods. It's actually shopping at Trader Joe's. With gas prices being up, with people's time being more valuable than ever, what better way to cross-shop than capturing those eyeballs when you're already at the shopping center? That's the dynamic that I think has really helped the shopping center evolve, where it can be a little bit of everything to everyone because it ties back to people's most efficient use of time. Once you get the shopper on the property, you have the ability then to have them cross-shop. We actually have really good data analytics now to showcase the traffic drivers that we can add to a shopping center that really enhance the cross-shopping ability. In essence, what you're trying to do is have every retailer succeed, so their sales go up significantly, so you can charge more rent, and you get more cash flow that way. That's the evolution of the shopping center; there have been more uses than I've ever seen before that make sense of the local grocery-anchored shopping center. It can be medical; it could be physical therapy; you name it, in terms of the med-tail, the medi-spa that's become sort of normal in everyday people's uses. It's services as well. 80% of our new small shop leases are services. What typically was more weighted towards goods has now been weighted towards services. I think that's really a post-COVID rebound where people are prioritizing services again. Do you think that the pendulum could swing back towards malls? Everything you're describing around convenience, one-stop shopping, everything in one place—that was the appeal of the mall, right? Maybe not grocery, but kind of everything under one roof, including services, including apparel and footwear, essential goods, food—all of that was under one roof. I mean, the mall has rebounded nicely as well, especially the A mall category. If you think about what's working today, it's really the luxury, high-end lifestyle type of mall. Those A malls are at all-time high occupancies and have significant pricing power. There's usually, by everyone's count, somewhere in the range of 300 to 350 malls in the U.S. I think what happened with Sephora was they're already in those 350 A malls. Where do you go? Do you go to a B mall that might become a C mall, or a B mall that might become an A mall, or do you go to a shopping center? That's the dynamic that's playing out: most of the malls that are on the fence, you have to have a very well-capitalized owner, and you have to have a visionary to be able to invest and reposition it. The challenge with malls that we've found is that we've done one mall repositioning over the last seven years, and it was a former GGP-owned mall, and it took us a while because, in essence, the mall is almost like a four-headed monster. Each of the mall anchors is typically owned by the retailer or owned by another party. The challenge with repositioning a mall is you have to own and control all the different components of it in order to tear it down or in order to reposition it. That's why it took that long to reposition that mall, and we did a Costco, we did a Lowe's, and we did a grocery anchor with TJ Maxx concepts. Seven years is a long time in the public space. It's one of those situations where it probably makes more sense for the private side to take some of these malls and reposition them. That's why the A malls are doing well because of the lack of supply and that the luxury brands are doing quite well in terms of looking to service that customer. I don't think it's a winner -take-all there. You talked a bit about the K-shaped. We obviously here as consumer analysts, we hear a lot about that from our companies, from our investors. What are you seeing in terms of it? We know that some of the retailers you talked about, that your tenants span both sides of the K, right? Sephora on top, TJ Maxx, especially HomeGoods. Average income is six figures. Burlington towards the bottom, dollar stores towards the bottom. You're kind of spanning both sides of the K. What are you seeing in terms of traffic trends? Are you seeing any difference between the top half and bottom half? Some more color on that? Right now the U.S. consumer is very strong. If you think about the backbone being the employment market, I think most people are anchored where they feel comfortable or confident that their job is not going away, and so therefore that's what's leading to the uptick in traffic. I think we can see the traffic when they come into the shopping center. We don't see the ticket sales when they go, and so where they're spending their wallet. The wallet share is something that we don't see. I do think most of your retailers will tell you that people are trading down from the lower side of the K-shaped, and they're trying to make their dollar go further. A lot of those retailers that you named have the ability to service both the top and the bottom. I think having relevance, having pricing power, and having the ability to service both in a way that doesn't ostracize any single consumer, I think is the sweet spot today. I think when you look at what Walmart has done in terms of grocery, it's apparent that they can be a consumer-friendly environment for it doesn't matter where you sit on the K-shaped. I think that's what retailers have really understood is that, again, going back to that point, your original demographic might be who you think your consumer is. If you figured out how to service a much broader base, you could actually stretch that significantly, and now's the time to do it because people are trying to either, A, trade up or trade down and make their dollar go further. Okay, last one from me. You mentioned fuel prices. You mentioned kind of the trade -down dynamic that's happening right now. Are you seeing any recent changes in trends, like recent ones, I mean, within the last quarter, like year -to-date, as fuel prices have increased, as people's wallets have been compressed, is there a shift from discretionary towards staples, or is there a pullback in some of that discretionary traffic with some of your tenants? We haven't seen it. I would say that the shopping centers that we own are really the ones that don't take a lot of gas, right? They're part of your daily routine. The destination shop is not who Kimco is. I think again, we might be benefiting from that because people are maybe not going to that extra 10 + miles to go shopping. They'd rather just do something convenient because. The one-stop shop with the grocery and. Right. You save some money on gas services, everything. Exactly. That might be a second derivative of benefit of what we're getting. I think when you look at the shopper and the habits today, we just came from Las Vegas for the ICSC convention. The animal spirits are real in terms of retailers jumping over each other for space, recognizing how little supply there is, recognizing if they don't get a space today, they're probably not going to get that neighborhood that they want for the next five years. Wow. When you are able to pre-lease space that you don't even have your arms around, so in essence, a retailer hasn't given it back to you, but you get a chance that you might recapture it, you can pre-lease that space today at 30%-40% above the rent of what the current retailer's paying. That's the dynamic. I would say that retail for a number of years was redlined in terms of an investment thesis because of all those overhangs. I think we're at a very new chapter where it's being institutionalized again. When you think about the capital being formed, Blackstone's second highest conviction is open-air shopping centers. When you think about GIC, when you think about Norges, when you think about Cohen & Steers, when you think about these massive capital deployers all having conviction in the space, yet that hasn't flown through to the publicly listed sector. It's on the private side. Usually when you start to see REIT after REIT get privatized by some of these conglomerates, that's usually what resets the actual share price to reflect the disconnect between public and private pricing in the REIT sector. Interesting. That's a good segue because I then want to talk about the supply-demand dynamics. Sure as well as the retailer dynamics. Maybe we start on the supply side of things. Of course, understanding it's a very tight supply market right now. How do you expect that to evolve in the next five to 10 years? Yeah. We get this question a lot: Where you see all this demand, why aren't you seeing more supply come online? Why aren't you seeing the development cycle pick up? I think a lot of it has to do with retail being oversupplied for a long period of time in the U.S. When you look at any metric on the retail per capita of the U.S. versus any other, this is a global audience, right? When you think about U.S. versus Europe, you think about U.S. versus Canada; you think about the U.S. anywhere; we have way more retail space than any developed country. We had an oversupply issue for a while that we had to work through. That's worked its way through that we're at all-time high occupancies, but the rents haven't picked up the pace to keep on pace with where construction costs, labor costs, and land costs have gone. When you combine those major factors, the return on cost, which is really what your development pro forma is focused on, needs to be at a spread somewhere in the range of 200 basis points over your exit cap. There's a risk-adjusted return that you feel comfortable going through the development cycle. That spread, in order for it to be there, you need to have rents be 30%-40%, sometimes 50% higher than where they are today. Wow. What little development you do see coming out of the ground is in these new pockets of household formation where there's a retail desert, where there isn't any service or retail center servicing that new area. If you think about where there's sprawl, like the third ring of Vegas, the third ring of Phoenix, and where there's a lot of population growth, like in Texas. That's where local municipalities are incentivizing development in order to support the new household formations. You can really count on one hand the number of developments that are going on there, and it's usually done by tax subsidies that make the return on cost spread to your exit cap feasible to make some development make sense. Again, that's a very, very small amount. Interesting. I do want to dive into the lease terms. Yeah and the rent side of things as well. Maybe a broader question on the demand side of things: why are retailers willing to sign some of the longer-term leases, given that there's still, of course, the overhang of which way e-commerce agentic AI is going to change how people shop in the next number of years? It's interesting. I think from our investor base, we get the opposite question. Why wouldn't we sign shorter -term leases in order to get the mark-to-market? In essence, there's no supply coming. Yeah. Whereas retailers want the longer-term lease because then they can understand. Perfectly. Right what their cost- Yeah is going to be, because real estate is typically one of their number one line items. In terms of cost structure. Yeah. From a retailer perspective, they have a lot of investment, right? They have to look at in terms of the investment horizon, how long they're going to invest in that space, and how long their control is on that space. That's why they want to sign up for longer periods of time, because in essence, all of that investment has to have a return on it for it to make sense. If it's a three-year lease, they have to make that investment back quicker, obviously. If it's a 10-year lease, they have a lot more time. I think the interesting dynamic that's occurred is you continue to see the demand cycle pick up, and the retailer is trying to figure out how to go and activate space within their storefront footprint to be able to service more online orders. The digital map of your store is going to be something that comes very quickly, and some of our largest retail partners are already doing it in order to maximize back-of-house and to be able to understand how to go about servicing those online orders. The dynamic right now that you're seeing is, and you see this with a number of retailers, is the experience of going into a shop may be hurting the consumer because there are more online pickers and servicers going through the store right now. That is hurting the customer experience. That's the big dynamic that is yet to play out: people trying to figure out how to optimize the store as a distribution point without hurting the customer experience. I would say of all your retailers, there's probably only one or two that have figured it out. That's the big dynamic that people are trying to solve for. They don't want to pay us more. Right? They want to try and keep their costs controlled on their store, all while trying to reinvent how you go about re-envisioning the front and back of house to make it more profitable. As an aside, does that involve some stores turning into dark stores? If they no longer have the traffic to justify the consumer-facing side, and then you just have a really efficient fulfillment hub. Yeah. Usually the lease has an operating covenant where they have to have the doors open to the consumer. You are starting to see more hybrid stores where I would say it's like, in essence, what would you call a Costco? Right? It's pretty much like a hybrid already. Like a warehouse in the back. Exactly. Right. If you think about what's probably going to continue to evolve, I think the back of house becomes more of a robotic warehouse where they can, in essence, service the online consumer in a way that doesn't impact the front of house. I don't think there's going to be dark stores just because the demand side is so strong; where there's going to be e-commerce fulfillment sites where you have dedicated hubs of e-com that they're going to service from, and they won't have any real customer interfacing, and that's more of an industrial play. Whereas the retailer, I think, recognizes that the consumer has to have a good experience coming through the door, or they're not going to come back. There's too much choice. Yeah. There's too much optionality. No, that makes sense. You also mentioned that rent probably has to go up 30%, 40%, or 50%. Can you talk about how much they're going up now based on how the lease terms are structured, and is there room for the upside from your guys' perspective? Yeah. We report spreads on new leases and then on renewals and options. In essence, if you get a mark-to-market opportunity for a new lease, that's where we're getting 30% + on new lease spreads consistently. When you look at the renewal and the option spreads, that's running around 10% - 12% or so. The issue is that leases are long in nature. Our weighted average lease term is over seven years, whereas you think of a multifamily apartment lease as one year. Right? They get the mark-to-market up and down every year, depending on where supply and demand are. Ours is more insulated in terms of waves of either shock. We never, even in the depths of COVID or even in the depths of the GFC, drop below 92% occupancy. That's again, primarily because our tenant base is typically credit-rated and typically a long-term nature in terms of lease. The downside of that is minimizing the upside. Right? You only get a very small slice, usually between 5% and 10% a year, that you get to mark-to-market on those new lease spreads. That's the dynamic, because retailers today recognize they will never get a better deal than what they currently have. That's why you're seeing renewal rates or retention rates be at all-time highs. That's running at over 90%. In essence, the retailer recognizes they've got to keep the store that they have because they won't find a better economic deal either in the corridor that they're in. Right. Are some retailers getting better deals than others, as in if they're more of a traffic driver or more of an ideal anchor tenant? For sure. Yeah. Every negotiation is a knife fight, right? Most knife fights in my career, the retailer has won, because of that supply-demand dynamic being more favorable to the retailer. When you look at today's environment, it's different. When you look at who has pricing power or negotiating leverage, there is very clearly a subset of retailers that still drive the most value for a shopping center. In essence, a cap rate compression. If you have the best grocer, they will drive meaningful value creation to the asset. They are typically able to drive very strong economic deals for themselves. Now, you try and make up for that by having the halo effect or the surrounding retail be able to pay for that loss leader, that anchor that's driving more traffic than the others. You know who those retailers are. They're very strong in terms of their offering. Many times, they're able to generate a—call it an economic plus deal —that they have the advantage. I will say, though, that those are few and far between today, because there are more and more competitive retailers that I would say are very close to that elite group that drives incremental traffic, maybe not to the same level, but pretty close. Got it. Last one from me before turning over to Aneesha. Is there more demand for certain types of boxes in terms of size and what capabilities they have, e-commerce fulfillment versus others? Yeah. If you think about range of square footage, you have the big box category. If you think about Costco, Walmart, and Target, you get Dick's House of Sport. You've got a number of these big box retailers, The Home Depot and Lowe's. You go category by category, and it's very healthy right now. In my career, you have had lulls in terms of different demand drivers for different square footage sizes. The big box is very strong right now. There's a lineup of tenants that would love to try and find those opportunities because, again, no new development, landing an aircraft carrier is super hard. When you find a big box that fits the needs of a handful of those, they will bid that up to try and control that real estate. The junior box or the mid box size is always a little bit in terms of a funky tweaker. If you think about 50,000 to 65,000 sq ft, that's where a Dick's, and then it sort of drops off from there. There's sometimes the larger format grocers, like a Kroger Marketplace. You get a handful of other users that like that sort of larger size, but there's not a very deep bench in terms of users for that category. You drop into sort of the more traditional grocer size, which again, can range from 25,000 - 40,000, and that's inclusive of all the major brands that are growing from the small side, Trader Joe's, Sprouts, and you've got Aldi and Lidl on the discount side. You've got Kroger, you've got Albertsons, you've got Whole Foods, so you've got Whole Foods, and you've got a number of folks that are in that square footage size that are doing new deals. That's on top of all the off-price sectors that we've talked about. Each one of those is doing 100+ new deals a year. When you think about the demand drivers for that sector, that's probably the deepest bench of demand. You get to the smaller, sort of mid-size box, is what we call it, that 10,000-12,000. That's where you've got the Ultas; you've got the dollar stores. You've got a number of folks that are very active in that category. The small shop side, I would say, is the most upside for Kimco. We're over 96% occupied, but our small shops are just over 92% occupied. If you think about it, our anchors are at 98%+ occupied. The small shop lift is where we see the future growth coming from Kimco. That's where all those services are coming in. That's where we're super excited to see a diversity of demand coming in. It's not a one -size-fits-all. You can come up with a 1,000 sq ft user, a 2,000 sq ft user, or a 5,000 sq ft user; it sort of ranges from all the different use cases. The nice part is that depth of demand is about as good as it gets. Okay, I want to ask a bit about capital allocation and maybe start with this point you ended on, which is the occupancy rate. If you are 98% occupied for those anchor boxes, and as you say, you're already selling these pre-leases, so you're kind of selling the lease before the current lease is due, why aren't you moving to more short-term, maybe more flex-term, leases? If you look at Europe, for example, the European retailers, H&M and so on, do three-five year leases that are f lex -term and link to revenue and so on; we're still doing these 10-year fixed-term leases. Why not? Yeah. I think it has to do with maybe legacy, right? That's sort of the industry norm: on the shopping center side, the anchors typically like these 10 years of firm term with options on top. There are bumps every five years. That was sort of the way that they could control the space and control their cost side of the business. When you look at the mall sector in the U.S., that is very much linked to the percentage of sales. Similar to the European model, where there's a lot more volatility, both up and down, depending on the success of the retailer. To push back on that point, with 98% occupancy. Yeah Surely you call the shots. Yeah rather than the tenant, right? No doubt. You still have the ability to reprice the new leases. The problem is your base is set from 7+ years in the past, where those economics are not changing anytime soon. You are seeing a repricing of economics on new leases going forward. You're seeing it both in the small shops and in the anchor side. Typically, there was a lot of covenants and controls that anchors had, co-tenancy provisions, sales kick-out rights, and all of these provisions that are retailer-friendly and that allow them, again, to have more control over their destiny. Most of those are long gone. The economics are improving in terms of both the going-in rent that you're able to mark-to-market on, as well as the economic lifts in terms of the annual or the five-year type of growth and the reduction of options controls as well. Moving to fair market value options versus sort of a fixed market option. That's all happening real time, no doubt about it. It's just, again, that sliver that you're able to reprice is pretty small. Every 10 years, you're rolling over those. Correct. Yeah. What about new capital allocation opportunities? You've talked about ground lease parcels. You've talked about mixed-use developments with residential as well. Can you tell us a little bit about what you're doing there? Sure. Kimco Realty owns, as I said, over 550 shopping centers. If you think about it from the high level, like as a commercial real estate sector, it's about 20% single-story buildings, 80% parking lot. When you think about the underutilization of that real estate, we are probably the most underutilized form of commercial real estate. We set out to understand how to unlock value for our shareholders by identifying the highest and best use of a lot of this parking that I think is going to be a future upside for our shareholders. If you think about driverless cars, the robotaxis, and all the things that are here already, we've been talking about this for five years: parking ratios. The reason why we have that 20%/80% ratio is because it's mandated from the municipality. You need to have four or five per 1,000 parking stalls; that's the ratio; that's why you've created these huge fields of parking. We're already starting to see parking ratios come down; that's where you're able to then add density to your parking lot. That density can be in all forms and shapes and sizes. What we've identified is we've entitled 14,000 apartment units across the portfolio as future upside to unlock from the parking lots. That's already in place. That's already the work we've done over the past three or four years. When we look at the long term, again, we're trying to look at the long term and focus on that; we see these shopping centers evolving into mixed-use communities, mixed-use campuses, where multi-family is really where we've been focusing. The apartments enhance the retail. The retail enhances the apartments. If you think about how an apartment price is on a relative basis, it's usually the location and the amenity base it's servicing. We typically have close to 50 - 100 retailers in each location. Name one apartment building that has 50 - 100 amenities in it. Maybe they'll have a gym, maybe they'll have a coffee shop, maybe they'll have a grocery store. You get to the next 50, and there's no chance, right? That's why all of our apartments that we've activated, and we've built over 4,000 now, are priced at a premium to market. That's sort of the long-term vision of the evolution of the shopping center: to create these mixed-use environments. Again, we like to think that that's like the untapped upside to Kimco, all while we're hitting all-time high occupancies on the retail with the pricing power and the earnings growth that we have. We've got an opportunity to deploy capital in a number of different areas. We do have a number of ground leases that you mentioned. That's really sort of the Costcos, the Walmarts, the Targets, the Lowe's, the Home Depots that are sitting; we like to call them flat pancakes. They have close to, call it, 50-100 years of control, paying little or nothing with no economic sort of increases along the way. They would price pretty much on top of where their bonds price. That's accretive recycling we're looking at activating going forward, where we can sell these ground leases at close to a 5-5.5 cap and then redeploy that into a growing shopping center at a 6-6.5 cap. Not only is it going in as the FFO accretive, but the same site NOI growth is usually 200-300 basis points higher, because in essence, you're getting very, very little growth from one, and there's usually significant growth from the other. That's sort of the accretive recycling in terms of capital allocation we're doing. Interesting. Okay, we want to ask some retailer-specific questions. Sure as well. Maybe I'll start with off-price, then Zhihan Ma can ask a little bit about the big box stores. Within off-price, you have this dynamic of TJX, Ross, and Burlington, your top three tenants in that order, right? Where, as you say, they're all adding a minimum of 100 units, 100 net boxes per year, and Burlington is going to closer to 120. What are the dynamics between the three, and do you often get them bidding for the same box? Talk a little bit about the co-location dynamics as well. Do you like to have them co-located in the same center, or do you try to avoid that and spread them out? We think they enhance each other. They are not so keen on each other coming into the same shopping center. It is a dynamic where it's evolved over the years. I would say that the shopping experience is one where each of them has a little bit of a differentiated strategy, as you know. I think Burlington has been the most aggressive in the bankruptcy market. Which I mean by their buying leases out of the bankruptcy market, to be more competitive, to get stores in a hyper-competitive market. TJ Maxx has been very successful in sort of expanding the demographic profile. Like we talked about, going to new markets with all of their flags, finding new areas, and new white space to go and launch. I would say Ross has had an interesting one. They have what they call the double-down strategy, where if you have a really strong Ross store, they have found that they can put a second Ross store within very close proximity and have no cannibalization in terms of one store hurting the other, because in essence, the merchandising mix is so different in each one. I'm really fascinated by how they can turn merchandise so quickly and make it so different each time you go into a store, and each store is differentiated from the other store. They have store-by-store allocation. It's amazing. It's amazing. Their buyers, I think, are the secret sauce. Yeah. Their buyers are the ones, and they have a very loyal customer base. Like, you get texts when there's a new truck coming to a store, if you're a loyal customer, knowing that when that truck unloads, there might be that one handbag that is the it handbag. It might not be the color, but it is a color of the it handbag, and people are going to jump over each other to get that. You talked about earlier the market shift away from department stores. We had a slide for a long period of time to showcase that. It's remarkable. If you look back 10 years and just look at market share from market cap weighted of where the department stores were, and where the off-price sector was, and where it is today. It is a monumental shift. Yeah in terms of market share shift. I think, again, they have become what the U.S. consumer is looking for. They want the brands, but they don't want to pay full price. They want the it handbag, but they don't mind if it's the off color. They have the ability to push product through, so you know each time you go in, it's not stale. Do they have co-tenancy? You mentioned they don't love being right next to each other. Yeah. In the past, they have said that being next to each other helps them because it's sort of the auto dealership idea, right? It makes the pie bigger. Do they have co-tenancy limitations or vetoes against one another when they sign new leases? Each lease is different depending on the vintage and when it was signed, and if you acquired it, somebody else signed it. There are co-tenancies in older leases when the retailer had negotiating leverage. Many times it's tied to the number of anchors in a location. If a number of those anchors go vacant, then a co-tenancy clause kicks in, and they're a percentage of rent versus a fixed rent. That's the way the co-tenancy clauses typically work. The exclusive clause is what you're talking about; it's more about whether you can block another competitive retailer from coming in. Again, depending on the vintage of when the lease was signed, some of them do have exclusive clauses. Being the largest landlord for TJ Maxx, Ross, and Burlington does have its benefits. We can do package deals with all three we have. The same goes for negotiating out some of these clauses to allow some of the others into these shopping centers, where if we already have a TJX or if we have a Ross or we have a Burlington, we can do some horse trading to allow them to come in if they allow them to come into some of our other shopping centers. They will say that they like to keep each other out when they have the negotiating leverage, but they also enhance each other when they're in the same shopping center. It's a little bit of a cat -and-mouse game. Understanding that dynamic is important. We're at a point where they are okay with living with each other. They'd much rather be the dominant force in the shopping center by themselves, getting all those sales. Okay, last one on off-price. Where do you kind of see the end game here? If they're adding, you're talking about a net of 300 + boxes per year, and they're all highly profitable and highly productive. Sales per square foot, it's soaking up market share. At some point, that starts to stagnate. Do you think we're close to that point? TJX has had some new strategies, like opening more rural stores in second- and third-tier markets. Is that the natural evolution as some of the high-demand shopping centers are filled to capacity? I'd like to hear your perspective on this. I feel like you've probably done some modeling on this, on where it's going. I've always been surprised at the growth engine of off-price, and it doesn't seem to be anywhere near even plateauing. It seems like it continues to grow, and it continues to take share. There aren't many department stores left, if you think about who they've been really taking a lot of market share from, and then where does that continued growth come from? I think it's new markets, right? I think it's those markets where they continue to bend the demographic that they are servicing. Well, let me ask, to answer your question, I think from a demand perspective, there's absolutely more share to gain. Yeah. Department stores still have plenty of revenue. There's still a lot of mainstream stores, mainline stores, and even online retail. From a real estate perspective, do you think they're reaching saturation? They have so many stores now. They have about 6,000, between 6,000 and 7,000, stores total in the U.S. I think as long as the product is differentiated, there's still more runway to go. I think when you look at sort of all the flags of TJ Maxx and how differentiated they are, I think when you look at Ross and dd's and how differentiated those two are, and then you think of Burlington as the younger brother trying to catch up to the other two, I think they have a lot more white space to go in terms of new markets. Ross just coming into the Northeast, like, that's a massive market that they're not even really penetrating yet. Clearly there will be a time, and they are global in a lot of ways, or TJX is, and so there are more areas for them to grow. I think there's still a lot of pockets for them to continue to go at the pace they're on. Right. Yeah off-pricers, the dollar stores I cover, a lot of them have slowed down. growth in recent years. Why do you think that's the case? I think they're citing the higher cost and lower ROI on new stores than before. Do you see a world where they're going to re-accelerate store openings? Yeah, that one's always a tough one to try and wrap your head around. I think at one point there was a Dollar Store opening every day, right? It was one of those situations where the growth profile was just unsustainable, right? In terms of how fast they were trying to grow the fleet, and then the combination, and then the divorce between, with the Family Dollar and all. I think there was a combination that was ill-advised, and then when they split it back up, they're probably on better footing separately. I think Family Dollar is a little bit more rural-focused. They try to be rural. Right. Yeah. Maybe unsuccessfully. Yeah. Again, where Kimco focuses is on that first-ring suburb. I actually think dollar stores have a little bit of an advantage because there are really no more toy stores left, right? If you think about the offering that they have, they have the combination of a little bit of groceries, they have a little bit of toys, and they have a very wide demographic that they service because the grab-and-go stuff services everyone. They're probably saturated in a lot of markets just because of that growth profile, which was, I think, unsustainable. They were, you know it better than I do. I think their new growth plans were crazy for a while, right? It was thousands of stores. I think it was, again, grow, grow for growth's sake, and then when the comp stores started to flatten out or go negative, that's when it became very difficult. I think the one exception is Five Below. Yeah growing really nicely. Yeah. There are still sub-2,000 stores, kind of a younger retail chain. Yeah. Do you see them becoming more of an aggressive grower again? They definitely are my top choice. When you think about it, they have really filled that niche of the toy store of the new generation. In essence, they have really latched onto that. They just entered the Pacific Northwest not long ago. They have a pretty big expansion plan there. They have a lot of white space. I think when you look at their growth plans and how successful they've been in our shopping centers, it gives me a lot of conviction to want to do more of those. Yep. I have another couple of questions on the ground leases side of things, knowing that you don't. Sorry, was that a question? Yeah. Yeah. Yeah, absolutely. I was going to ask about Walmart and Costco as well, given that you don't directly lease to them, but some of them are doing interesting real estate strategies on their side, too. Walmart is getting into a shopping center. Costco is doing, I think, a mixed-use property with apartments on top of a Costco. What do you make of those moves? What are they trying to achieve? We do leases with Walmart and Costco. Right, okay. Just so you know. Those are our ground leases. . Yeah. Typically, they like to build with their own capital. It's the cheaper cost for them. That fixes their rent at a much lower rent. We do have a lot of Walmarts. We do have a lot of Costcos. I think the Walmart deal that you're talking about is really more of a rehabilitation of a mall into more of a distribution-type hybrid center. where they can control sort of the back of house and create a new model for distribution into that hub. That might be a solution for some of these malls that probably need to be reconfigured: make it more of a distribution hub. In essence, they're not super close, but they're close enough to the population. Costco has always tinkered with trying to get into markets that they don't service. Many times, that makes them creative in terms of format. In order, sometimes, to get into these higher -density population pockets, you have to do a density play in terms of multifamily over retail. We've done a lot of those with grocers. Costco being a supercharged grocer is not surprising to me. Those are pretty nuanced, though. You need a pretty large parcel for a Costco, and then you need a developer to feel comfortable doing the multifamily over that Costco. Again, that I think is more of a penetration of a certain market to get into. You have to get creative. You're not going to land your aircraft carrier in a market where there's just no open land for that to happen. Many times, you have to be part of a mixed-use environment, and I think that's what justifies that. Yeah. Final question from my end. Yeah. Similar to Aneesha's kind of anchor tenant restriction question. Yeah. I've been hearing something like the anchor tenant being a grocer or mass club retailer, maybe putting restrictions on what some of the smaller boxes can or cannot do in their format. Is that kind of in line with your understanding? I've seen Dollar Tree is trying to expand into the multi-price point ranges. Are they facing some restrictions from anchor tenants? For sure. It depends on when, again, the lease was signed and the vintage of the lease. Typically, if the retailer has negotiating leverage, they will try and restrict as many uses as they can. Maybe not to force them out, but maybe to use that to extract leverage from the landlord. In essence, when Dollar Tree wants to add a layer of groceries, the grocer typically says a shop cannot have more than maybe its 10% or 20% of their floor plate dedicated to groceries. Usually those nuances occur when the lease is signed in a different vintage because they have the ability to sort of form it in a way that gives them more control over the surrounding retail. I will say that it's interesting to see the store-within-a-store concept continue to evolve. You've seen Target do it a number of times. You've seen Kohl's do it with Sephora. You've seen a number of them do different combinations. You're seeing, obviously, the brands that really drive a lot of traffic. Yeah. We have about a minute left. Maybe you could give us a closing view on your outlook for the sector in general and why you think there is structural growth rather than cyclicality ahead. Yeah, the structural growth I think for Kimco specifically is really tied to that lack of new supply. I think that is something that I think is going to continue to be a tailwind for at least the next five years. Because in essence, if you put a shovel in the ground today, it's going to take all of three to four years to bring that product online and stabilized. When you look at that backdrop and where demand has gone, again, think about the black swan events that have occurred that were going to be the nail in the coffin to brick-and-mortar retail. Now what's interesting is e-commerce is actually a tailwind to brick-and-mortar retail. If you think of Amazon, Whole Foods has massive expansion plans. Amazon's going to keep throwing things against the wall to see what technology they can put in retailer boxes. You probably just saw the Amazon announcement of trying to use their AI for other retailers. That's going to continue. That's exactly what they're supposed to do. They're like a test kitchen for all types of technology for retail. If it's the grab-and-go technology that didn't really work for the consumer, you know what? That technology may work in other forms. It's exciting to be in a part of the retail cycle where it's evolving, but it's very clear that the store and the consumer is gravitating toward our product. Okay. Well, we can end it there. Thank you for joining us. Thank you, Conor. This was a really interesting conversation. My pleasure. Thanks for having me. Thank you.