Paulina Rojas: Good morning. Price of interest rates, of course, has been unprecedented and introduces the question of how will retail our balance sheet and look after a company starts facing that maturity. So when you think about the future, how do you feel about potential tenant fallout? Do you think it will be — or that it’s reasonable perhaps to think about above average tenant failure given everything that is happening with interest rates?
Conor Flynn: It’s a good question, Paulina. I think when you look at the rate environment and how it impacts all industries, really the retailers that have near-term debt maturities are going to be facing higher interest expense and the refinancing, just like other industry. I would say that [Technical Difficulty] for Kimco has never been smaller when you look at the retailers that we continue to track from a credit perspective. And when you think about the supply and demand dynamics that I talked about earlier, we feel very comfortable with the credit loss reserve that we have today. Obviously, we just improved that this quarter and continue to be proactive on showcasing spaces that are not available today, but may be available in a year or two or even five years’ time.
And that’s what we’re doing right now is we’re showcasing not our current vacancies. We’re showcasing what may be available in the near-term or in the long-term to line up the best-in-class tenants. Because of the lack of supply, retailers are engaged in that knowing that it’s going to be hard to fill their promised pipelines of net new store openings in the current environment. So they have to align with folks like Kimco to try and fill that and see where they can add where they wanted to fix to build their needs.
Operator: The next question comes from Ki Bin Kim with Truist. Please go ahead.
Ki Bin Kim: Thanks. Good morning. To follow-up on that last question. Just given the rise in the cost of capital for your tenants, do you see that eventually weighing on their expansion plans? And second question, your active mixed-use developments, the yields went up pretty noticeably. Just curious what drove that.
Dave Jamieson: Yes. Kevin, great for questions. So with the first one, we maintain a very close dialogue with our big retail partners, and they’re looking through, I think, the short term impacts and continuing to try to grab market share where they can appreciate in that, that inventory is limited. And if they don’t get it today, there might not be new inventory available tomorrow. That said, every retailer has a different capital strategy, and that probably evolves most likely as ours evolves as well. So something that we stay very, very close to them. But as I can say right now, it doesn’t seem to be slowing the pace of growth the majority of those retailers. And as it relates to the mixed-use pipeline, yes, I appreciate the question.
So what you see there is you see four projects, three of which are ground leases and the fourth one being Colter which is the 1 that we identified as our preferred equity structure. That was the first of its kind that we’re doing. So this quarter, we felt it was appropriate to actually show what the real returns are related to the Kimco invested capital and the preferred returns related to those projects. Obviously, that yields a higher or accretive growth profile than if you’re just to invest all the capital yourself. So that’s what it’s reflecting, that’s the change.
Conor Flynn: The only thing I would add on the retailer demand side, in, and what we’re seeing is because of the rate environment because of the construction costs a lot of these tenants that used to do ground-up development and then sell those assets as sale leasebacks are now looking for second generation space versus the ground-up development side. And so they’re looking at how do they absorb existing inventory versus net new development, because of that lack of financing availability. And so that should drive more demand to the existing spaces, as well as that first-generation ground up development has really dried up.
Ki Bin Kim: Thank you.
Operator: The next question comes from Juan Sanabria with BMO. Please go ahead.
Juan Sanabria: Hi, thanks for the second shot here. Just a couple of questions. One, just on — going back to the RPT merger where we started. So what are you guys assuming in terms of the debt that needs to be refinanced. So that’s part one. And then part two, if you could just give us an update on the Rite Aid exposure and what you’re seeing or expecting there for the space that they’ve deemed that they’re going to get back in one form or another.
Conor Flynn: So in terms of the debt to be refinanced for RPT, if you look at the balance sheet at 9/30, they’re sitting with bank debt, both revolver debt and term loan debt of about $350 million and then they have about $511 million of private placement notes. So that’s the magnitude of what we’re looking at and then obviously, there’ll be merger plus that go into that. So it’s around $900 million in total. And as I mentioned, we have a variety of options about how to fund that from our Albertsons investment, cash on the balance sheet, aligned, obviously, access to the capital markets and other things.
Dave Jamieson: Yes. And as it relates to the Rite Aid exposure, right now, we know that three of our leases have been rejected in day one. That’s about 5 basis points of occupancy right now. So a de minimis impact, there are another two that we expect to close this quarter. So in total, that’s about 8 basis points of total occupancy on the impact. And right now, we have good activity in terms of hitting our retailer list and box size is appropriate for a lot of the mid-box users, and so the larger, sort of, small shop operators as well. So we’re very encouraged by the activity. We have one that has drive-through locations. So again, there’s good attributes, good components here that we feel pretty confident we can backfill those quickly.
Juan Sanabria: Thank you very much.
Operator: The next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.
Caitlin Burrows: Hi, good morning. Again I had originally tied to just sneak in a second one, but then we didn’t get to it. So here I am. And maybe it’s a little bit of a follow-up to Ki Bin’s question. But so we hear that macro uncertainty is lengthening the time it takes to sign leases in like office and industrial, so I’m just wondering if you guys are seeing this at all, like how have your tenant sense of urgency on signing leases evolved over the course of the year? And like have they changed? Or have you, I guess, avoided that?
Dave Jamieson: Yes. It really — it hasn’t changed. Not anything related to the macro environment. We’re tied for negotiating certain deal points that may add some time, but that’s normal course of business. If anything, people are looking to get leases signed quickly so they can get open sooner and they can start booking that growth within their portfolio. So there’s been no real material change in terms of time of execution.
Caitlin Burrows: Okay, thanks.
Operator: Next question comes from Libby Bakken with Bank of America. Please go ahead.
Libby Bakken: Hi. This is Libby Bakken. Yes, just a follow-up. So — do you think you could clarify the bridge or the walk from 3Q FFO to 4Q just based on the guide, it looks like it implies like a $0.01 to $0.02 step down into the fourth quarter. So just curious on what’s driving that.
Conor Flynn: Yes. Again, we have a couple of onetime things that are in the third quarter. As we mentioned, there’s some of this impact from the Wingard pension plan that was liquidated during the quarter. And there’s a few other onetime things. But again, we feel very comfortable with the guidance range and we’re at the upper end of the range that we set out for the year. Again, coming back, we made up a lot of headwind that we had going into the year, driving towards that high end of the range today. So that’s really the driver.
