Kimco Realty Corporation (KIM) Earnings Call Transcript & Summary

Good morning. Welcome to the 8:15 session at Citi's Global Property CEO Conference. I'm Michael Bilerman. I'm here with Katy McConnell. We're extraordinarily pleased to have with us Conor Flynn, the CEO of Kimco Realty. The session is for Citi clients only. If media or other individuals are on the line, please disconnect now. Disclosures are available on the webcast and up on the AV desk. For those joining us in person, you can stand up at the mic. You can scan the QR code to type in any questions. And those that are online, can type them in the question box and it will come to us. Conor, I'm going to turn it over to you to introduce Glenn and Ross and Kimco, and then Katy and I will kick it off with some Q&A.

Thanks so much, Michael. It's really a pleasure to be here and kudos to you and Katy for putting a wonderful conference together in challenging times and exciting to be all back together. And it's been a wonderful time to get everyone back since, I guess, the last time we were all together was actually here right before the start of COVID. So kudos to you for pulling everybody together. It's been wonderful. With me today is Ross Cooper, our President and Chief Investment Officer; and Glenn Cohen, our CFO and Treasurer. Clearly, a lot has changed since the last time we were all together. The physical store means more retailers today than ever before. This is evident in the extraordinary recovery we've experienced in our operating fundamentals, which bodes well for our commitment to FFO growth. As I highlighted during our recent earnings calls, our primary driver of FFO growth is leasing, leasing, and leasing. It is our utmost priority, and we feel confident in our ability to execute, given the strong momentum and solid demand from all tenant categories, which also supports our efforts to push rents. This is especially noticeable in the Sunbelt region and demonstrates how our recent merger with Weingarten was a perfect fit for Kimco's strategic vision. Our operating fundamentals continue to benefit from the suburbanization trends spurred by the pandemic, which helped to increase retailer sales and push traffic counts at our centers to above 2019 pre-pandemic levels. Demand for the grocery-anchored asset class is strong. In the absence of new supply plus the high barriers to entry in our top markets, we've seen deals regularly trading at sub-5% cap rates even for one-off assets as well as portfolios on the West Coast, Metro D.C., Florida, New York, Charlotte and elsewhere. The stark disconnect between public and private pricing is becoming increasingly evident. As shopping centers continue to play a critical role in the omnichannel retailing world, retailers are investing more into their physical locations. Ultimately, we aim to be the first in last mile retail. We want to attract those tenants that can plug into the supply chain and deliver goods and services to the consumer in the most flexible and convenient way possible. This is our pathway forward to pushing our occupancy back to and beyond our pre-pandemic levels. When we reached an all-time high occupancy at 96.4% right before the start of COVID in 2019. We remain focused on our opportunities to deleverage our balance sheet, and we recently redeemed our $500 million 3.4% bond due in November, replacing it with a $600 million 10-year bond at a 3.2% coupon. Our liquidity is abundant with nothing outstanding on our revolving credit facility and more than $200 million in free cash flow after dividends. And of course, we still have our Albertsons Holdings, which is appreciated since year-end and is a valued at approximately $1.4 billion. In closing, we have a very good visibility into our earnings growth. And thanks to our impressive leasing momentum, the significant mark-to-market opportunities as legacy below-market leases expire and the war chest of entitlements we continue to pursue for future value-creating redevelopment opportunities. And with the continually strengthening balance sheet and ample liquidity, we have the ability to strategically deploy capital for opportunistic investments for accretive acquisitions that will create additional value for our shareholders. And with that, I'll turn it back to you.

Thanks for that, Conor. So we started each of these sessions asking each CEO, why an investor should buy your stock over any other listed property company?

So Milton always taught us that it's all about the people. It's all about your team. And I think that's still the priority #1 is to make sure that the team at Kimco are activists for their shareholders. And I still believe today that, that is the most important ingredient into what an investor should be looking for in an investment. Second is really the multiple levers for growth that we have. We're pretty unique when we have -- this will be the first full year as a combined entity with Weingarten. We're very excited to show what the combination can produce as well as, obviously, the opportunities we have with Albertsons and the monetization coming this year with the lockout expiring at the end of June. And I think when you look at the third piece of it for us would probably be that wide disconnect that I mentioned earlier between public and private pricing. The beauty of our sector is grocery-anchored shopping centers trade on a weekly basis. So if you want to put some data together very quickly, you can see what private market valuations are and quickly determine where public market valuation should be.

We're starting to see increased transaction activity and it's growing in size, right? I would say a lot of the transactions were single assets, maybe smaller portfolios. But over the course of the last few months, we're now starting to see some larger transactions occur. Are you finding that the capital is willing that there's -- what is that size that someone is going to be willing to put down for that public to private arbitrage? Is there enough money that you could see potential privatizations not -- I'm not talking about Kimco because I don't think anyone is going to privatize Kimco at your size, and I don't want to lose you in the public markets either. But could you see that transpire?

I think there's plenty of capital. I really do. There's record amounts of capital on the sidelines right now, and you're seeing, obviously, with the joint venture that we announced with Blackstone. The amount of money that nontraded REITs are raising is pretty phenomenal. That's not just Blackstone, obviously, with Brookfield getting into it as well as Starwood. And they're all looking at our product type. So I think there's no lack of conviction on the shopping center space today. And if you look at the relative risk-adjusted returns from the grocery-anchored shopping center versus apartments versus industrial, you can get very comfortable with underwriting growing cash flow and going in at a higher cap rate than those other 2 segments. And I feel like that's probably what will trigger more activity on the privatization side.

So where is your comfort level in buying in that competitive landscape? And how will you distinguish yourself in terms of finding opportunities if the cap rates are compressing so much?

I'll start, but I think Ross should probably add some color to that. When we look at our opportunity set, we're very fortunate at Kimco. Obviously, with the recently completed Weingarten transaction, we have a lot of wood to chop in terms of new joint ventures that may be opportunities for us to buy out. We just actually executed 2 JV buyouts from the Weingarten JV portfolio. We continue to look internally as well for future redevelopment opportunities that are very accretive for us. Ross has done a wonderful job with the preferred investments with the structured investments of preferred equity and mezzanine financing. So third-party acquisitions, no doubt about it, are very aggressively priced right now. So we look up and down for our network for opportunities. We can do creative things structurally for deferred taxes and creating units. So it's a nice spot to be where we have a lot of internal opportunities. So we don't have to be super aggressive and win very competitive bidding wars.

It is if we've discussed this before. No, I think you nailed it. I mean, we look at our investment strategy holistically. So competing on third-party acquisitions clearly is very competitive today. A lot of capital in the marketplace today. Cap rates continue to compress. But if we can be very strategic and disciplined and selective on those third-party acquisitions couple it with the joint venture buyouts that we have, 13 new joint venture partners from the Weingarten portfolio that we're discussing every single day and then with the mezzanine financing and preferred equity investments that we're doing that are averaging double-digit returns. You put that all together and when you blend it together, we're getting to a very accretive return that's well in excess of our cost of capital. So that's really the way that we look at it.

And the mezz and pref program does have a right of first refusal or right of first offer. So in a lot of ways, we're getting our foot in the door for a future acquisition pipeline, which is why we're excited about that program.

What's your outlook for where cap rates for the sector overall could go over the next 12 months? And how do you think about your ability to remain competitive in the bidding process?

We don't see it changing from the current environment. To be honest, there's more people getting into open-air shopping centers, not less. Brookfield is just ramping up their NTR. Starwood, obviously, starting to get aggressive as well on the bidding tent. Blackstone has been very aggressive in the bidding tent. All of our public peers are chasing a lot of similar type product type. You're seeing cap rates compress across the risk spectrum. So from the core grocery-anchored center to the power to the lifestyle. And again, it's -- we're very fortunate where we can be very disciplined and look for those accretive opportunities. As Ross mentioned, we have a few different levers that others don't. So I think for us, we'll be selective. But when we see something with hair on it that our platform can either unlock value through our entitlement program or through our leasing platform, we have a lot of conviction that we can add value in the near term and try and put our best foot forward.

I think in terms of your question on how we're going to remain competitive, I mean, we have very deep standing relationships. I think that we really pride ourselves on our ability to structure deals. So yes, we're not going to be successful in every bidding environment that we're in. There's going to be a lot of deals that we don't win because pricing gets too competitive, and that's okay. But we can be very selective. We've seen more owners, sellers that are interested in tax deferred structures, which we have a long history of being able to structure in a very accretive way for both parties. So that's really where we like to pick our spots. We can be creative. Anybody could just pay the most in a bidding war, but we like to try to find the little hair and the little nuances that make it right for us.

So where would you peg current cap rates today for representative -- for your representative portfolio?

Too high.

I mean if you look at our...

I mean, I'll tell you the consensus is used in the 6 cap on you. So is that 100 basis points wide? Is it more than that do you think?

I think it's at least 6. I think it's at least 100 basis points wide. If you look at our concentration in the top 20 metro markets, we haven't really seen a 6 cap asset trade in any of those top 20 major metro markets. We'd love to find those opportunities, but currently, they're trading mostly sub-5. So it's when you look at the grocery anchors that we have with the largest landlord for Whole Foods and Amazon, the largest landlord for Target, we're the largest landlord for Kroger, Ahold Delhaize, Albertsons, those are the type of anchors that drive that premium cap rate. And I feel like if you just combine sort of the recent data points, you can very quickly come to that conclusion.

Well, and also as part of that, the distinction factor you talked about Albertsons rising since year-end, right? I think you said $1.4 billion current stake. They obviously announced strategic alternatives to drive their own value. How should investors think about your role in any potential transaction? Are you solely a shareholder that you want to just liquidate stock upon the first lockup expiry in June? Or would you entertain a swap of stake for assets and do sale leaseback? Ultimately, what's the goal for you in terms of getting out of this? Is it a deleveraging, funding other growth? Or is it a mechanism to effectively be assets?

Sure. I'll let Glenn mention a little bit on the structuring side of it. But clearly, Albertsons is not only an ownership position for us, but it's also our major tenant. And so we want to act as good partners for them to be sure to ensure that they're successful longer term because we're a long-term landlord. We're trying to make sure that we have the best credit tenants. And so we're looking out for the actual entity rather than just a trade in shares as well.

Yes. I mean it's a pretty unique investment. And because of its size and where our basis is today, we have a very, very sizable potential capital gains. Our basis is a little over $100 million. So you have today a $1.3 billion gain. One of the things that we have to grapple with and we've dealt with it is the gross receipts testament remaining a REIT. So 75% of your gross revenues have to come from real estate activities. Obviously, a sale of a marketable security would not meet that test. So when we look at our gross revenues from real estate today, they're around $1.7 billion to $1.8 billion. So in a given year, we could only do about $300 million to $400 million of capital gain and keep our REIT status within the REIT. So what we would have to do if there was a major transaction, a one-off transaction that privatized it all for cash, we would monetize $300 million to $400 million of it in the REIT. The balance of it then would be shifted to our taxable REIT subsidiary. And we have ways to deal with that as well. So we would have control of all the cash. We'd be able to use it for either debt repayment. We have 2 callable preferreds one is [ 5.125%, one is 5.25% ] this year. So there's opportunity there. We have a little bit more debt to pay down. And I keep peppering Ross on more accretive investments on whether it'd be external acquisition, the partnerships as well as the structured investments. So there's an enormous amount of uses for the capital, lots of optionality and ways for us to protect our REIT status and use the capital at the same time.

Is the asset swap stake for assets effectively like a buyback, a swap? Is that possible?

You mean like a 1031 exchange for...

Effectively, I mean, we -- you think back to like the GMPT transaction with Taubman back in the '90s, right, where they effectively exchanged stake for interest in assets. And I just didn't know if there's a different way to structure for you to get value out in an efficient manner?

We couldn't swap our marketable security for real estate and have it be a 1031. We'd still have the gain issue. And then we wouldn't have -- you have invested in the assets. So the tax issue doesn't go away from that. If the company did a tax-free exchange, like any other merger, we would then have obviously the stock of another company. So we still have a similar situation. I mean, ideally, we've been in the investment for a very long time. We've made enormous amount of money over a very extended period of time. It's been a great investment for us. We do want to monetize it and redeploy a lot of that capital back into things that are generating true recurring income to us on the real estate side and again, deal with further taking down leverage. So it's going to be a mix.

How do you think about your equity today in the sense that I mentioned at a 6 cap, consensus NAVs are circa around where your stock is at. But at a 5 cap, you're in the high 20s. So does that -- if that's where the value is, is buying back your stock and option for your cash? Or is that not on the table?

We look at the whole suite of opportunities, and we do have a buyback program. And we also have an ATM program. So when the wins are in our favor, obviously, we look to try and use the ATM and invest accretively. We have bought back stock when it's at depressed values. Right now, we're sitting with a tremendous amounts of capital. As I mentioned, we have a lot of cash on our balance sheet. Nothing on our $2 billion line of credit. But we have accretive investment opportunities as well to really grow FFO. So when you look at the opportunities that we have and the redevelopments that are active and the leasing momentum that we have, we continue to think if we can prioritize FFO growth, really showcase what the portfolio can do this year as a combined entity with Weingarten that we should be rewarded with a stronger cost of capital.

You talked about getting back to -- not getting back to exceeding prior peak occupancy, where are the biggest vacancy pieces to get there? What do you -- where is the most work that your operations team needs to do? Is it type of asset? Is it the type of space? Is it a geographical element? Is it more suburban than urban? What is the time to get there once you define where it is? And how do you think about the rent and expense side once you get to that occupancy level, i.e., are you going to be at a better margin because you're going to be at better rents and lower OpEx?

There was about 8 questions in there. Okay.

But you got it all.

So structurally, we came into the pandemic at all-time highs, and we're about 200 basis points below that all-time high level. Now it's broken out into anchor spaces and small shop tenants. What led the recovery and it's obviously been a V-shaped recovery for us was the anchor demand because they're better capitalized tenants. They had very aggressive opening plans, and they wanted to grab market share because they saw that the consumer was gravitating towards last mile shopping centers that they can shop the way that they choose, whether it's buy online, pick-up at store, curbside pickup, delivery to the home, you name it, that was working, and it continues to work today. So what really -- the second leg, we've seen the anchor occupancy continually pick back up, and we're very -- getting very close to pre-pandemic levels. The small shop side is where the mom-and-pop tenant really took the brunt of the pandemic. And our occupancy there peaked around 91.1 pre-pandemic levels. So we've got more work to do there. And typically, the way I like to phrase it is, we've got anchors that are signed that are yet to open. And we have momentum in the small shop sector, and we continue to build back that occupancy but the best way to lease the shopping center is when an anchor is active, and we have a lot of them about to open. You look at our physical to economic occupancy spread. At one point, it was over 300 basis points. It's compressed a little but still elevated. That's a lot of anchor leases that have yet to open. And when you get an anchor like a Whole Foods or a TJX or some other -- the other wonderful tenants that we have in our shopping centers, usually the small shops around that dark anchor become a lot more valuable. And so there's a patience level you need to have to be able to merchandise correctly. There's a patience level you need to have to have an active anchor and then be able to fill in around it, but we're seeing tremendous demand for small shops and that's the next leg up for us. And that's the priority for us this year going forward is to focus on that small shop leasing. And as our platform continues to improve, we really think we've got an aggressive approach to that, where we can do and focus on higher credit quality tenants that are looking to do 100-plus type new deals a year and have multiple concepts. So we can do 3 or 4 type franchise-driven concepts that may be owned by one entity but can do all 3 or 4 in the same shopping center over multiple shopping centers across the organization. So that's where we continue to see real opportunity for us to push and see some real upside this year and next year.

It feels like we've started the year with many of the positive tailwinds continuing for the retail sector, especially on the leasing side. So I'm just curious what risks are on your radar today? And do you anticipate that the inflationary environment and rising oil prices could potentially impact consumer spending in a meaningful enough way that could dampen that leasing demand we're seeing?

That's the big question, right? I mean that is what we're all wrestling with. So far, we look at our data pretty closely. And January was relatively slow. February has really snapped back in terms of way above 2019 levels for all of our major retailers. They continue to see momentum into March, and we're watching that closely to see how the consumer patterns may change. Clearly, gas is going to be an additional tax on the consumer that wasn't necessarily anticipated. Wages are rising, but not really as fast enough as the other inflationary issues that we're dealing with. So far, what we have seen is it hasn't had any impact on the demand side. The leasing side has been robust across the different sectors. If you look at grocery, if you look at off-price, if you look at sporting goods, if you look at furniture, if you look at really the major categories that are driving the demand with hundreds of openings each year, that hasn't -- it's not like a sugar high. They're not trying to fill or catch up from the pandemic. It's a multiyear target where they have 100-plus deals per year. And that, I believe, is sustainable because most of the retailers that we have, have benefited from the pandemic, have improved their balance sheets and have really a position for growth in their store count. And we're hopeful that with our platform, we can capture the lion's share of that growth.

I would just add, the consumer today is pretty healthy, right? I mean unemployment is 3.5%, participation rate really needs to increase a little bit. But you do have wage growth. It's not going to keep up if inflation is at 7%, but we do have wage growth, very low unemployment. And the savings rate is at like historic levels. So coming out of the pandemic with all of the aid that was put in, you have a consumer that has an incredibly healthy balance sheet. So could certainly weather the storm for a while. I mean if it goes on for years, it's another story. But I think right now, really, you're not seeing any impact on the consumer is pretty healthy.

And if you thought we were going into an economic downturn, would you accelerate leasing even more at this point?

I don't think we ever take our foot off the pedal of leasing, to be honest. I think that's just sort of our DNA, and it's really -- it's the lifeblood of our business. So it's always been the priority for us to really -- it will always be the top priority for us. It doesn't matter what kind of environment we're in to be honest.

How are your retailers thinking about last mile fulfillment through your stores today?

Yes. That's sort of one of the biggest silver linings of the pandemic is the last mile retail store has become more valuable. And it's very clear when you look at the earnings transcripts of all of our major retailers, they're showcasing that. They're reinvesting in those stores to optimize those stores for last-mile distribution fulfillment. You saw curbside pickup very quickly become sort of the norm in our shopping centers. We launched it nationwide and it became very clear that, that was one way customers really felt comfortable shopping during the pandemic. We've seen that comfort level continue. People like the convenience factor. The way that I like to phrase it is it's a very CapEx-light way to give all of our retailers almost a drive through because it's very convenient to just drive in, get your things loaded up and drive out, especially if you have kids in the car. So we continue to think that there's a lot more ways where the last-mile store will evolve over the next 5, 10 years. Right now, retailers are piloting different concepts. Some of them are bolting on micro fulfillment centers to their existing stores. Some of them are sort of moving back of house to front of house. Some of them are using refrigeration towards the checkout counters for grab-and-go type of items that people have ordered online. Right now, there's still a tremendous amount of human element touch involved. I would anticipate automation to be sort of the next chapter of last-mile distribution of fulfillment. But it is very clear that retailers now look at their fleet very differently. When we used to have retailer meetings that used to be with the store real estate folks. And there was a very different team managing distribution fulfillment. That is gone. Now it's one team managing all of their real estate holdings, and it is very clear that the line is blurring, and the store is being invested to give them that optionality so that the 4-wall profit is maximized. They're getting credit for the online sales in the trade area. And that's really, really what's, in my opinion, what's going to drive occupancy costs and help us be able to push rents in the future.

There's a question that came here through the live QA. You mentioned anchor space is leading the shop recovery. Given supply chain issues, what are the risks there to those openings being drawn out or delayed and, therefore, pushing out your shop recovery?

Yes. Obviously, construction costs have been an issue. Labor has been an issue. And what we've always focused on is the net effective rents of our deals and then trying to expedite the deal process. So at Kimco, again, thanks to our platform, we have always looked at ways to expedite and compress the deal curve. And what I mean by that is prenegotiate a platform lease so that you're not starting from scratch. Every time you go into a lease negotiation with the retailer, most of our retailers, we have hundreds, if not thousands of stores with. So the lease structure is usually baked before you even get to the negotiation on the rent and some of the specific details on the location. So that usually compresses the front end of the deal curve. The question on the back end of the deal curve and how do you get them from signature to open? How do you make sure you keep the construction cost, the construction time line on track? We have invested heavily in building out a team internally of expeditors. We call them tenant coordinators that really take it soup to nuts upon signature to help them walk through municipalities to get their approvals, to get their stamps on their plans, to get them contractors that we've worked with before to potentially source materials for them that may be tricky today because we're ordering and buying large quantities of these goods and materials, we typically have better pricing and faster expeditors to [ deal with ]. So again, I'm -- as you can tell, I'm very, very focused on efficiencies of scale and trying to make our platform more valuable. And I think this is a big way we can do it.

How -- when you look at Weingarten, how much opportunity is there by putting the Kimco way and the Kimco operations on that asset base?

Well, clearly, that gave us a lot of conviction on striking the deal. We felt like with our team and with our process and procedures and our platform, we should be able to drive the leasing side of it, both on the anchor and the small shop side. We are also using our data to see the recovery in the Sunbelt in our own portfolio and saw very quickly how the recovery was being led by the Sunbelt. We were seeing record leasing on both anchor and small shops in the Sunbelt. So when we announced the deal, Weingarten's occupancy was actually lower than ours. By the time we closed, it was actually on par with ours so that we did see a really quick ramp-up of leasing occupancy there. I think the other big key for us is our entitlement platform. It's something that we've invested a lot of time and effort into. We've gotten now 5,000 apartment units entitled over the last 5 years. We believe the Weingarten portfolio sitting in the markets like Miami, Dallas, Houston, Austin, Scottsdale, Silicon Valley, L.A., those types of assets that they have, I think, are right for future redevelopment, future densification. And we're working already on trying to make sure we focus on entitling those projects for future density.

There's actually a question that came up on that topic that wants an update on the time line, capital investment and the potential number of properties, units in the major redevelopment program, EG Signature Series. Are you entering these in or very detailed and residential conversions. How has the strategy evolved post COVID?

So the primary goal for us is to focus on using our human capital to entitle as much as we possibly can across the portfolio. We feel that's the best use of our human capital is to give ourselves future optionality to, again, create value and different levers for growth in the future. Now each asset is its own animal. Each municipality is its own animal. Some people are not in my backyard type folks. They don't want any changes. Some people are very pro change, want to see the asset enhanced. They want to see sort of the live-work-play environment that we can create. And so it really depends on each asset and the climate that we're dealing with. Luckily for us, we focus on being good stewards of communities. And so we have always led with municipalities bringing our corporate responsibility report, our sustainability initiatives, showcasing what we've done in other communities to enhance the community. And most of the time, municipalities are dealing with developers that once they get their entitlements, they're usually dealing with somebody else. Somebody has come in and gotten the entitlements and the flip out and they're dealing with another developer or second or third type of owner of it. Kimco is a long-term owner. So we've been very focused on building that trust level with these municipalities where we own multiple assets and want to be long-term good stewards of the community. So that's why we've been successful in getting the 5,000 apartment units. We've got over 1,000 builds. We've got close to 675 actively under construction right now. Another 350 will go into the active pipeline here shortly. The primary projects that are going up right now, one in next to Amazon's HQ2 at our Pentagon Center. It's the second tower that we're building there. The first tower leased up in 6 months with 4 rental increases, and it's really shattered our underwriting in a good way with record leasing. The second tower is just topped off. So we're looking forward to seeing that come online. Down here in Florida, up the road here at Fort Lauderdale Airport, we have our large Dania Pointe project. The first apartment tower is fully leased. The second apartment tower is under construction. They are 2 levels up. The third apartment tower is starting to move dirt. Now all 3 of those apartment towers are on ground leases. So one of the ways that we like to activate these projects and still have fee title is to use a ground lease structure with the ROFR. So again, we don't want to overcommit to development. We'd rather have use other people's money and you get the benefit of the flywheel of a mixed-use environment, where we have embedded customers, we have the ability to charge higher rents because of the sales that are coming from these projects. And so you'll see us do more of those going forward where we can either ground lease it to a developer or potentially contribute the land that's entitled at a marked-up basis and into a joint venture with a multifamily expert.

There was another couple of questions that came through on Albertsons, which said, can they distribute the stake to shareholders through a dividend and then investors can sell, and I would assume that's a non-start. I mean while you can do that, that doesn't give Kimco any cash and doesn't allow you to have that capacity to reinvest. It gets the shareholders the value that you've created that you just shrunk the base, and they pay the tax versus you.

We still have it. No.

You still have the tax even if you distribute the shares.

We still have the tax problem, it's a tax issue, I should say.

You can't distribute the gain to them.

If we distribute the shares to the shareholders, the company has the [ game ].

Still?

Yes.

So that's a non-starter completely. And so the only option is either the company merges someone else, and you then get a stake in NewCo. They privatize and you get -- distribute out your cash, assuming it's a cash transaction or they do a large sale leaseback transaction that generates the cash and maybe that drives value and then on your first lockup, you start to sell. Would that be the 3 leading contending options that we should think about?

Yes. For the most part, yes. I mean, again, the lockups end at the end of June. So optionality for us begins at that point. We -- again, there's no restrictions anymore. So we can start to sell. We do -- again, we do want to monetize a portion of it, and we've assessed and have all the tools to make sure that we don't affect our REIT status and whatever transaction was to occur. If we -- if there's no transaction, we can monetize it over a 3- to 4-year period. The options we have because it is actually important. Our dividend, which we just raised about 12%, our dividend level based on our current forecast is equivalent or right in line with where our taxable income is. So any transaction that creates a large capital gain is going to create a requirement for -- to deal with that additional distribution requirement. So the ways we can deal with it are we can distribute cash. Again, that doesn't allow us to reinvest our company or delever. We could, and we don't -- these are the options. We could do an 80% stock dividend and 20% cash or any derivation thereof. Any mix as long as you have at least 20% in cash. And then the third option is pretty interesting. We could pay the capital gains tax in the REIT. If we do that and the tax would be about 25%, we would then retain the 75% of the remaining cash and the shareholders would be entitled to a credit, not a deduction of credit for the amount of tax that we pay. And I've gotten this question also, if you were a tax-exempt entity, even a tax exempt empty can file to get the cash back and distribute to the shareholders.

We have 16 seconds to do with 3 rapid fire. Same-store NOI growth for the shopping center sector overall in 2023?

2023, probably, I would say, 3%.

3%, that's it? Come on?

I like to be conservative.

[ You like to be conservative ]. Okay. 10-year treasury a year from now, it's [ 1.8% ]?

Between 2% and 2.25%.

What do you say?

2% and 2.25%.

2.75%. Will the shopping center sector have more or fewer companies a year from now?

Fewer.

Fewer? All right. Thank you very much.