Kimco Realty Corporation (KIM) Earnings Call Transcript & Summary

So welcome to the Kimco roundtable. Joining me is Conor Flynn, who is the CEO of the company. And Conor, I'll turn it over to you to introduce the team and provide some opening remarks.

Thanks very much, and thanks for having us today. With me today are my partners here, Ross Cooper, our President and Chief Investment Officer; Glenn Cohen, our CFO; and Dave Bujnicki, our Head of IR. We're really happy to be here today. For those of you less familiar with Kimco, we are the largest owner and operator of open-air grocery-anchored shopping centers. We focus on high barrier first-ring suburban markets across the Sunbelt and coastal states. Today, 86% of our ABR comes from grocery-anchored shopping centers and over 91% of our portfolio is concentrated in the strongest demographic corridors with high barriers to entry. That foundation is really what drives both resilience and growth regardless of economic climate. Our strategy is clear, focus on necessity-based retail, maintain a disciplined balance sheet and use our national scale, deep retailer relationships, redevelopment platform and creative capital allocation, including structured investments and strategic use of entitlements to deliver outperformance through the cycles. Since our last earnings call, we haven't seen any slowdown in leasing velocity or tenant demand, quite the opposite. Retailers are actively pursuing space, accelerating deals to meet their store opening mandates and focusing tightly on well-located, high-performing centers just like Kimco owns. In today's tight supply backdrop, delaying new store openings mean losing share to a competitor, and our pipeline reflects that urgency. Recent highlights just a 5-store Sprouts package, we executed in under a month multi-site T.J. Maxx deals turned around in just 10 days. That's a new record for us, demonstrate the pace that's now possible with the right platform and the right technology. I do believe technology is going to be a differentiator for Kimco in the not-too-distant future. Nothing encapsulates this more than the speed of which we've been able to backfill the bankruptcy tenants that we were dealt this year. Over 90% of the box is vacated by Party City, JOANN and Big Lots have been executed at large double-digit rent spreads. This has helped expand our signed but not open pipeline to $66 million which will provide meaningful future cash flow growth as 88% of that will commence by the end of next year. Small shop occupancy is another bright spot for Kimco. We're at a record high at 92.2% and we see further opportunity to expand that even higher, primarily driven by the broad-based demand. If you think about a shopping center at the evolution of retail, we're seeing just a surge of tenant demand from services, health and wellness, beauty and really, the rolodex of retailers continues to expand. I think one of the things that really sets Kimco apart is our ability to operate all different types of retail because that's really what retailers are focused on today. It's not the prototype of what the asset is called, whether it's a grocery-anchored shopping center, a lifestyle center or a power center. It's really more about the corner and the demographic of where their data is saying their customer sits and how to best service that customer. And that's really why I think Kimco is really well positioned because the future of retail is not what type of asset you have. It's the platform you have, the relationships you have and the ability to be nimble enough to create opportunities for retailers that are looking to grow. I want to also tell our scale and optionality. We have like really identified a tremendous amount of optionality for future growth. We use it in right of first refusals and right of first offers, we're doing that in our structured investment program. All of the mezzanine financing and preferred equity that we put in place are on assets we want to own. And those assets, we have ROFOs and ROFORs on. We continue to focus on grocery. We're up to 86% from our annual base rent coming from grocery-anchored centers. A lot of that growth has been driven by our asset management platform, where we actually include a grocery component from some of the boxes we've gotten back. Grocery stores like Sprouts, Trader Joe's, Aldi, Lidl. We're doing a large-scale Kroger deal. We've got a number of deals cooking with BJ's and Walmart and others. It's really interesting to see that. All different parts of the square footage categories have multiple demand drivers really pushing our occupancy levels to all-time highs. We also have very disciplined capital allocation. We've identified our flat ground leases, which are 9% of our annual base rent. It's really a nice opportunity for us to accretively recycle. Kimco has been on a long journey to get to where we are today. we've really had to transform the portfolio to 86% grocery anchored by selling really dilutively higher cap rate assets for middle markets and reinvest in grocery-anchored shopping centers. Now we're at a point where we can showcase that, hey, the transformation is showing up in our numbers. The organic growth is really strong, leading to sector-leading FFO growth, and now we're at a point where we can asset manage the portfolio to accretively recycle meaning we can sell our flat ground leases at very low cap rates, take that capital, redeploy it in growth shopping centers that have not only a higher going-in cap rate but a much higher compound annual growth rate, leading to a very high unlevered IRR. So those are the types of initiatives we have put in place to differentiate Kimco from the peer group to continue to have us be the upper quartile earnings growth driver. We were one of the only two shopping centers REITs to 5% FFO growth last year. We're well on our way for doing that again this year and believe with that $66 million of signed but not open pipeline, we have the -- really all the tools in our tool belt to showcase that we can consistently do there.

Thank you, Conor, for that. Maybe to kind of talk about the different buckets of growth you spoke about. Let's start with the technology side. You said -- I mean I feel like every time I look at a lot of these shopping center names, they look very familiar. So talk about the technology differentiation then your platform.

Yes. technology, in my opinion, is going to be, I think, a real advantage of scale, and we've been investing in it for a long period of time to sort of get our systems and our -- really our backbone in place. So Salesforce, obviously, is a wonderful tool that we use day in and day out and we have occupancy on a hourly basis updated. But where I see sort of the future going is really showcasing how technology has led to data insights that you can only get from using the best-in-class technology. And so Generative AI is clearly sort of where everything is headed. We've started to use that on the leasing front. We've seen a lot of success on it generating leads specifically in small shops. So the anchor rolodex, we know them all pretty well. They can call me on my cell phone, I can call them on their cell phone. It's really sort of the diversity of demand on the small shop side is where we see the funnel being opened up because a lot of those small businesses may have one business and are looking to open a second one or if you're a regional player and have a new store opening plan, we can sit down with them and showcase that, "Hey, if you want to hit your new store opening plans, let us use our technology, understand your demographic profile, understand where your consumer lives, works and plays and what shopping centers that Kimco owns, can service them". And that's what's led to portfolio deals recently with Sprouts and others that we think are a big difference makers for us. So overall, I think generative AI is going to have a meaningful impact on G&A. I think if you look at Kimco's operating efficiencies, the G&A for Kimco has been relatively flat over the past three years, and we bought a public company, we bought the single largest asset Kimco has ever acquired in Waterford Lakes. And we continue to see that operational efficiency as we grow and put our platform and position for growth as being a real differentiator.

So one of the companies I cover in the self-storage extra space was also talking about ChatGPT and how some of the customers are using ChatGPT to kind of say the requirements they look for, et cetera, to make it more sort of AI initiative. Are you seeing that sort of leasing? I mean how deep is this AI initiative that you're maybe alluding to?

So I think the early green shoots that we see are in marketing and so we use it pretty consistently across all of our marketing platform, and it allows us, I think, to get more market share because of that. I think also, like you can go through each vertical, I think legal is going to be a pretty sizable one where you can in essence, query, you have to start from scratch. You have to make sure that your data is all correctly identified, and it's in the right place so you can query it correctly, and that's all of our leases. And so those are types of tools that allow you to move faster. Also, the deal curve is being compressed. That's why I mentioned the T.J. Maxx need. That's why I mentioned the Sprout steels. Those are the fastest we've ever done and a lot of the tools we're using today allow us to expedite that deal curve. Because in essence, every day, we calculate every single day of how much money that costs Kimco for that tenant not to be open in rent paying. And so everybody knows exactly how much meaningful impact that they will have. And so those are the types of things that I think when we look at the accounting side, we already use it for a lot of the abstracting that's already done through AI. The tools we have in place, I think, are readily available, and we're challenging each department to say, "Hey, what more can you do with these tools?" I mean, Ross and I were just talking about it this week that we're already experimenting, we're taking brokerage, offering memorandums and putting them into ChatGPT and seeing what does that Argus model looks like versus one that's driven by an acquisitions analyst and continue to see how strategic capital allocation can be utilized differently using those types of insights as well or like how future demographics are shifting, what retailers are going to perform well in certain areas.

Is there an upfront sort of cost to this in terms of the initiatives? Or how should we think about the expense side of it?

Right now, there is no incremental cost because it's still free and so I think we have really targeted each department head to say, "Hey, look, you are in charge of understanding that this is going to be a user tool" and I think of it as an output, like how do you magnify the leasing output by using the tool. And so that's why we continue to point to like portfolio deals and leasing volume because that to me is where I think the initial onset is really going to have a meaningful impact. There's going to be synergies along the way as well in terms of redundancy of tasks. But overall, I think we're still in the very early innings to see how it's going to play out.

Maybe on the operational side, you talked about occupancy feels like there's room to push occupancy both, I mean, anchors are already kind of up there, but all the backfilling you're doing, but even on the shop side, maybe quantify, give us an idea of how much more you can push an occupancy maybe even into next year at this point?

Yes. So the historic high on anchor occupancy, we're still about 150 basis points below that. So that's a real runway that we believe we can recapture relatively quickly, especially when we look at the pipeline of anchors that we're doing deals with today. The small shop side is sort of an unknown how far we can push that because we're sitting at an all-time high. but some of our peers are at 98% occupied in small shops, and we're at 92.2%. So I still think of that as a real significant upside, especially when you look at the anchor deals that we have cooking right now because typically, those small shop vacancies are concentrated in assets where the anchor is sitting vacant. And so in essence, the hardest space to lease is the lease that's sitting next to a big box vacancy. So if we lease those big box vacancies up to 99% plus, which was our historic high, all of a sudden, the small shops should start to fill in nicely as well. And so the diversity again, that demand for small shops is really exciting because it's almost like what doesn't work in a shopping center because if it's all about convenience and value, like that's really where everyone is focused right now in terms of new store opening plans. And so we really leaned into services. We think that's the best way to get people out of their chairs into their car into the shopping center. A lot of these services you can't do online. And so we've always had a big component of like quick service restaurant, financial institutions. It's interesting to see like the bank branch evolve and have that come back. Obviously, here and nail salons, beauty, medical, urgent care, pediatric urgent care, vet clinics. It continues to evolve where the shopping center is like the most convenient aspect of people's lives to be able to access those types of services.

On the backfill, kind of the -- you said there's activity on like 90% of the boxes. Talk about kind of the -- certainly a lot of rent upside here. Maybe help us on kind of the timing of the NOI contribution on these boxes.

Yes. I mean I can briefly mention the depth of demand and Glenn maybe talk about the cadence of the SNO pipeline coming online. But the nice part is you have multiple demand drivers for every shop category right now. So on the big box players, we have multiple deals now going with Home Depot, Lowe's, Costco, Target, Walmart, BJ's, IKEA, Kroger and a 100,000 square foot prototype. So this -- it's really interesting to be at a point where the demand drivers are deep across all the different square footage categories, which allows us to say, "Hey, this is the box that's available. Make the square footage work." Because in essence, if we don't have to split a box, the CapEx load is a lot lower. And that's what's really been working for us across the board. So on depending on the size of the box, the junior anchor demand is probably has always been the deepest in terms of the demand pool. T.J.Maxx and all their banners, Marshalls, HomeSense, HomeGoods, Sierra Trading Post. Ross with their two banners, Ross and dd's, Nordstrom Rack, Burlington, those have all been like a very strong 100-plus new store year type growth vehicles. You've got Dick's Sporting Goods now doing their new prototype of House of sports, which is a larger box player, again, continuing to want to expand there. They also have Golf Galaxy and other banners. Grocery continues to be quite hot as well. It's really interesting. So on the smaller shop -- small box side, you've got all the leader Trader Joe's, which are in that 10,000 to 15,000 square foot range then you level up to the Sprouts and the Whole Foods, which are in that like 30,000 to 40,000 square foot range. Then you've got like the traditional grocers like Albertsons, Kroger and Ahold Delhaize, which are in that 40,000 to 50,000 square foot range. And then you got the big box players that are doing grocery as well like BJ's and Target and Walmart and Costco. So it's a really nice demand driver depth that we have.

Yes. So from the signed but not open pipeline, it represents about $66 million today. About $45 million of that will flow during 2026. And when you look at the backfills of what's created some of that signed but not open pipeline between the backfills of Party City, JOANN, Big Lots and Rite Aid, they make up about 20% of that signed but not open pipeline. So in pretty short order on the party cities, there were 49 leases, already 40 of them have been addressed on the JOANNs. There were 24, we signed 7, we have 13 LOIs. So there's only 4 left that we're marketing. And then on the Big Lots and Rite Aids, there were another 23 boxes, of which there's only 2 that are in the marketing phase. The others have either been assigned, leased or in LOI phase. So really very fast speed to replacing these boxes. And then over the next 9 to 12 months, we'll get them open and get the flows going. So we have really good visibility into what's going to come online into 2026.

Is there any questions from folks here? Okay. And I guess on the other side of it, as we think about these are all the positive but the risks next year, any kind of watch list kind of tenants categories we need to think through here?

The watch list is the smallest it's ever been. I think when you look at COVID, post COVID and then what happened earlier this year with JOANNs, Big Lots, Party City you really start off with a very, very small list. Some of the names by the way, have been on the list of my entire career and are now starting to do new deals again. And so it's like when you look at like Michael's and the market share that's up for grabs there from JOANNs and Party City going away, there's a real case to say, hey, I think they have a chance to come off the watch list. Now that being said, it's very hard to come off the watch list. I think the other like names that have sort of reorganized at home continues to operate and did not reject any of our leases, but we'll have to continue to monitor that. We only have five. Pinstripes, obviously, we only have one, but it's a very profitable location for us. We'll have to see how that plays out. These are very, very small in terms of the scale of Kimco. We don't really see any major bankruptcies for the rest of this year and don't really see a whole lot that we can anticipate at the beginning of next year. So there's names that have to reset their business plan. They have to deal with tariffs, they have to deal with maybe consumer spending changing. But overall, I think we're -- the occupancy levels sit today and the lack of new supply those boxes that do come back that, in essence, is the shadow supply that retailers that are in expansion mode are super eager to capture because without any new development, those are the spaces that they have to target in order for them to hit their new store growth.

Okay. So that 75 to 100 basis points should be ample. And as you think about credit loss reserves, right? There's going to be any -- that's just the kind of the normal...

Yes. I mean retail always has had a level of churn. So I don't necessarily think that it's going to change, but it's hard to see it sort of meaningfully changing like in terms for the worst. So I think we're in a better spot finishing off this year. And again, the watch list is the smallest it's ever been. And you could probably have something happen that changes that. But I feel like from a fundamental standpoint, it's about the healthiest the sector has been in a long, long time.

Okay. And leasing spreads still kind of -- should be similar to kind of what we've been seeing this year, right?

Yes. I mean it's a good combination of new leasing spreads being in that like 30-plus percent range and renewal spreads being high single digits. So it blends to -- I think we were the highest in 7 years when you look at our blended spread. So clearly, pricing power, there's a lot of negotiations going on right now where we're trying to push as much as we can. And when you look at the brick-and-mortar business, that's where retailers are profitable. I think it was Walmart that just this past quarter, so that it was the first time ever that their e-commerce business ever turned profitable, and that's Walmart. And so when retailers want to grow free cash flow and then expand margin, they're going to invest in their store base.

Great. Are you surprised given the comments you're making on how strong the environment is right, really no supply out there like -- why can't we -- why can't you push rents even more, like why is this same-store kind of in this 3-ish -- you know how I mean, like percent range. Like what is? Is it just?

It's a combination of like the leases that have been signed over the past two decades plus, right? So it's like -- you have to remember, we're coming into the year at like pretty high occupancy levels, right? So I think the whole sector is near all-time high. And those leases that were signed, typically, the anchor leases are relatively flatter than the small shops, the small shops. And again, if you think about all the different retail cycles, a lot of those leases were signed where landlords didn't have pricing power, and they didn't have the ability to push annual escalators. And so I think the historical run rate of the shopping center sector and you know this well, is probably right around two. And so like to push the sector from two to three takes a lot. And so that's been the run rate for the past two years, right? So I think you're seeing incremental improvements but it's really because of the slice of the lease portfolio that you can get to each year is relatively small. So the new leasing, obviously, is where you're seeing the outsized lease spreads, the better economics, the improved annual growth rate. The renewals are typically negotiated because they have options that they can exercise. So those have been negotiated when they sign the lease originally. So that's why sort of the growth rate has improved, but it hasn't dramatically improved.

Any -- go ahead.

Thanks. Would you consider -- to get at the growth, is there [ quarter ] leases, [indiscernible] just want to do that and just in terms of the your offerings on the leases that you're writing right now. Historically, like you said, they've been growth limited. So what are the terms of the options nowadays such that you can get it.

Yes. No, it's a good question. So in terms of like the new lease terms and like we are taking out options on the back end. So like that -- what used to be like 4-, 5-year options was like the traditional anchor demand. Usually now, it's 1 or 2. And those bumps are either improve from the base term or at fair market value. And so that's where you're seeing the incremental negotiation take place. But yes, it is interesting to think of like how the retail model has evolved and where it is today. And overall, I think it's in a really good spot to continue in the momentum that we're showing.

The one area I wanted to talk about was sort of the capital recycling. So the asset recycling you talked about rental lease opportunities and kind of putting that in accretive acquisitions. Maybe expand on that, tell us how much you can sell in terms of kind of noncore assets or ground lease and then how much are you going to deploy into accretive acquisition?

Sure, I'm happy to take that. Thanks, Samir. I thought you'd never asked. So yes, I mean, Conor alluded to in his opening remarks, the differentiators that we have here at Kimco and really looking at optionality and ways to outperform when we look at our portfolio, we have upwards of 9% of our ABR that's coming from long-term flat ground leases. And it's a great credit. It's a bottleneck instrument, but it is certainly weighing on our growth opportunities. So when we look at what can we do to differentiate our capital, this is something that we have that is very unique within the sector. So we're taking a look at our portfolio, taking a look at that 9% of ABR and really looking at monetizing in any given year, starting this year, $100 million to $150 million of dispositions of these long-term flat ground leases. We executed on our first one last quarter, a Home Depot in California at a 5.7% cap and the beauty of this program is that when you look at recycling that capital, we are going to be converting that into a 1031 exchange on an acquisition this month on a dual grocery-anchored shopping center that has a going-in cap rate that's 50 basis points higher than the cap rate that we sold the asset. But more importantly than that, you're taking an asset that has a sub-1% CAGR and converting that into an acquisition that has 200 basis points of higher compound annual growth rate. And so on that particular asset, while one individual transaction is not necessarily going to move the needle dramatically on a portfolio of our size, when you think about the compounding effect of that additional 200 basis points of growth year after year, and layer that on to a couple of hundred million dollars a year over a multiple year period, it can start to have a real meaningful impact on both same-site NOI as well as FFO growth. And the really important part that Conor alluded to, is the consistency and the recurrent nature of that. So this is not a 2025, 2026 strategy. This is something that we envision happening and occurring on a year-over-year basis for the indefinite future of the organization. And the reason that we have confidence that we can continue to do that is because at the same time that we're selling some of these long-term ground leases, we're signing new leases with the same tenancy that we're selling. So as Conor mentioned, we're doing new deals with Walmart. We're doing new deals with Home Depot, Lowe's, BJ's, Target, et cetera. So we're replenishing that pipeline as we continue to recycle the capital and then converting that into 1031 exchanges where necessary or are there acquisitions where we're going an accretive higher going-in cap rate as well as a higher growth profile.

Does that $100 million to $150 million range include entitlement sales? Or is that all ground leases?

So the majority of it is ground leases. When we look at the entitlements, we will also be pruning some non-income-producing assets, some land parcels. But then the other component that we have that really is unique to Kimco is the entitlements and the multifamily densification program. So when you think about the way that we've been able to start to really generate value on the entitlements is we've taken some of this entitled land on improved land, we can enter it into a joint venture by contributing our land into this partnership where our contribution is in a preferred equity piece of the capital stack. So we're also earning a current return during the construction phase, which is important. And then the expectation is that upon completion and stabilization of the multifamily project, we can monetize that asset, crystallize the value and then go ahead and recycle that capital either into acquisitions or coming out of the ground with the next project, whatever the case may be. And having the optionality with the right of first refusal on those projects. The baseline expectation is that we'll go ahead and monetize that. But we have the option if we elected to you to bring in a new partner and retain the asset. So it's a really nice spot for us to be in and we think that we'll continue with that program. The first project that we anticipate stabilizing in 2026 is our Colter Avenue property at our Suburban Square asset in Philadelphia. And we just announced last week that we're -- we just broke ground on the next project in a similar program in our Westlake asset in Daly City, California. And if we can continue with that recurring site recycling, and get on that flywheel. We think that's a really nice way for us to continue to prove out value, enhance the assets by bringing the residential component to the property and then recycle the capital upon stabilization of the asset.

Maybe talk about -- expand on kind of the transaction market, kind of what you're seeing there. Certainly, a lot of -- it feels like there's a lot of lifestyle centers out there in the market right now, talk about -- deep debt buyer pool isn't, maybe, pricing?

Yes, I think that's another differentiator for Kimco is that we've historically been somewhat agnostic on format. As Conor mentioned, we really look at the demographics, the tenancy, the quality of the asset more so than the format of the layout and you're seeing a real blurring of the lines. You talk about lifestyle assets, but the last three acquisitions that we've made, which are categorized as lifestyle, all have a grocery component, all have a junior box lineup at rents that we're really excited about being able to mark to market over time and then have a component of that specialty lifestyle type retail. So it's extremely competitive today on all formats of open-air retail. You've seen a lot of capital aggressively chasing these assets. So we are in a unique position where we have a pretty wide aperture of both format and the way that we can invest in assets. Today, core acquisitions are not necessarily accretive for us based upon where our cost of capital is that's putting aside the 1031 exchange recycling of the ground lease capital. But we have a structured investment program that we think is a really interesting and exciting way for us to participate in high-quality real estate today where we're generating a higher return in the short term than we would obtain by acquiring the asset outright, but we're getting paid to wait. So we're getting right of first offers, or right of first refusals on all of these properties and all of this real estate. And at some point in the future, hopefully sooner than later, and we anticipate that our cost of capital will put us in a position where we could be more aggressive in terms of exercising these right of first refusals and right of first offers. When you think about the program, just on the structured investment side, we have upwards of $2 billion of gross asset value, where we have the first and last look on many of these assets. And at the appropriate time, we anticipate that many of these can ultimately become part of the acquisition pipeline. And that doesn't even include the institutional joint venture program that we have which is upwards of $6 billion of real estate in which we have partnerships where we have a right of first offer, a right of first refusal in the event that those assets are to be sold or we kind of push forward on trying to acquire some of our partners' interest in those assets. So we have a tremendous opportunity just within the embedded portfolio that we have investments in, not even mentioning trying to bid on third-party assets outside of that.

Got it. And then just, Glenn, maybe finally on the balance sheet, kind of what you're seeing there. And then my second question is, as you think about next year, talk about swing factors that can sort of move numbers we need to consider into next year?

Sure. So from a balance sheet standpoint, I mean, the balance sheet really is in great shape. We have an A- rating from Fitch. We're on positive outlook from both Moody's and S&P at BBB+, Baa1. We'll see where that goes. But they'll be evaluating that over the near term in terms of where it goes. But we think we're operating where we should be today. One of the nice things about where the portfolio and the balance sheet sits today is we do not need to do any further deleveraging. We're operating at a consolidated net debt to EBITDA in the low 5s. And on a look-through basis, including the preferreds and pro rata portion of JV debt in the mid-5s. And we think that's the right place to operate the company. So one of the things that's been a headwind for a while was all the deleveraging that we had been doing, right? It's dilutive to do that in nature. That's behind us. Same thing with the transformation of the portfolio. We've sold a lot of assets that were dilutive, what other assets that were at lower cap rates, higher quality stuff. So the portfolio is also in great shape. And now we're in a position similar to what Ross was talking about where we can sell these ground leases and accretively have a disposition program that will help add fuel to the FFO growth that we're targeting. In terms of some of the swing items that you asked about for next year, again, we're watching pretty closely. Getting the SNO pipeline up and flowing is a critical component. We don't anticipate a lot of bankruptcy activity. So again, as long as credit loss stays within with the target that we're assuming in that 75 to 100 basis point range, that should not be an issue. We will have a little bit of a headwind from refinancing of the $800 million of debt that matures next year, but the bulk of the debt doesn't begin maturing until August of next year. So we have time to see. So again, if there's some rate cuts and rates come down a little bit, I think we'll be in good position to absorb that as well. But the NOI growth is far out seeding, far exceeding the headwind from the refinancing that will go on. And then the other thing is just going to be the timing of some of the structured investments that we're doing as well as the timing around sales of the flat leases.

You want to mention the bonds spread?

Yes. From a bond spread standpoint, where we sit today, we did a bond at the end of June, a long 10-year bond at 92 basis points over the treasury. So that was one of the tightest spreads that we've ever issued. Today, if we went to the bond market, we're probably through that. We're probably in the high 80s or around 90 basis points over. So today, we'd issue a new 10-year bond really sub-5%. So we're going to watch closely and be opportunistic about the refinancings that come up. In addition, we have our full availability on our $2 billion involvement. So liquidity is in really great shape as well.

I've got to ask some rapid fire question here. All right. Number one, when the Fed starts to cut rates, do you expect long-term yields to decline, stay flat or potentially rise?

Relatively flat.

Okay. I think I know the answer to the next one. AI initiatives, maybe talk about spending on AI initiatives, is that going to be higher, flat or lower next year?

Higher.

Okay. This is for the sector. Same-store NOI growth for your sector will be higher, lower or same next year?

It's close to the same, maybe incrementally higher.

Okay. Perfect. Thanks a lot, Guys.

Thank you.