Welcome to today's 2025 Global Property CEO Conference. I'm Nick Joseph, here with Craig Mailman with Citi Research. I'm pleased to have with us Kimco's CEO Conor Flynn. This session is for Citi clients only, and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC25 to submit questions. Conor, we'll turn it over to you to introduce the company and team, provide any opening remarks, tell the audience the top reasons an investor should buy your stock today, and then we'll get into Q&A.
Good morning. Thanks for having us. Pleasure to be here. With me today, to my left is Ross Cooper, our President and Chief Investment Officer. To my right is Glenn Cohen, our CFO. And to Glenn's right is Dave Bujnicki, our Head of IR and Strategy. We're really excited to be here today to talk about Kimco. We are off to a great start. Kimco, if you're not familiar with us, we are the largest open-air grocery-anchored shopping center across the United States. Our strategy is really focused on first-ring suburbs, looking at the grocery-anchored properties and trying to unlock the highest and best use of those assets through our entitlement program and through our platform to add grocery if it doesn't already exist. We've seen a big shift in supply and demand over the past five to 10 years.
One of the big benefits of our sector right now is the lack of new supply. So if you look at it from a very high level, we're the only sector that has 0.3% of existing stock under construction, which is the lowest of any commercial real estate sector. If you look across the portfolio, we're going through a very strong demand cycle where we're seeing multitudes of bids for spaces that come available. You're seeing a good depth and breadth of retail concepts. When you think about the shopping center as a whole, primarily we look at the anchors as being ones that drive traffic at all points during the day.
And now what we're seeing in the small shop side of the business is a shift to more services and medical, which is a stickier use, meaning that they put a lot of their own capital into the space, which gives us confidence in the staying power of that small shop tendency. You're seeing the consumer continue to shop where our traffic is still up year over year. We're very focused on the everyday goods, everyday essentials. So when you think about a grocery-anchored shopping center, it's really where you live and where you work and where you go drop your kids off. And that trip is where we try and intersect to offer value and convenience. And we feel like that's the winning formula today for the U.S. consumer, is they're very focused on time. They're very focused on how far their dollar can go.
And obviously, in the inflationary environment that we've just come through, they're looking to see where they can maximize the use of their dollars. And when you look at what really drives traffic and cross-shopping traffic, merchandising mix is super important at the shopping center. And what we've found through our data analytics is that the grocery anchor plus what we call the treasure hunt anchor, which is really the off-price user. So if you think about TJ Maxx, HomeGoods, HomeSense, Sierra Trading Post, Ross, Burlington, Nordstrom Rack, all of those players are in the category that we call treasure hunters. And what that means is that when you go into the store, you are unlikely to see the same product the next time you are in that store. And that drives traffic. And those two types of anchors, we're seeing a tremendous amount of cross-shopping traffic.
So what you think about is how do you not only get the consumer to the asset, but then how do you keep them at the asset and how do you have them shop multiple different stores at that asset? And those two anchors really drive significant traffic. And then what we try and do is add through that merchandising mix different concepts and offerings that can really spark traffic at different times of day so that the asset is alive and breathing throughout the day and night. We actually have an asset just down the road here called Dania Pointe, and you can sort of see that. Hopefully, you have some time. We did a tour yesterday, but we actually have a lot of different uses there that sort of exemplify what I just mentioned. Again, we're off to a great start.
Last year, we were one of only two REITs in our sector to produce 5% FFO growth. We're very focused on making sure that we continue to be a leader in growth. We feel like we're in the position where, as a large operator, we can take our efficiencies of scale and turn them into advantages of scale, and that's really been our message for the past few years, is to understand how do we go about what is in our DNA at Kimco, which is being a super efficient operator and taking advantages of those efficiencies, so you're seeing it with our balance sheet. Glenn has done a wonderful job putting us in a position where we've never actually been before, where we're an A-minus rated from Fitch and our positive watch from two other rating agencies. We have tremendous access to capital.
The portfolio has gone through a massive upgrade. We've done a massive amount of repositioning where we wanted to get to that first-ring suburb of the top 20 major metro markets. We feel that's where the supply and demand is firmly in our favor. So that disposition program has been completed, and now we're in a unique position where we can actually continue to asset manage every asset and understand how do we maximize growth, and what we've found is a differentiator at Kimco is a number of things. First and foremost, we have 10% of our annual base rent coming from flat ground leases. So if you think about our Costcos, our Walmarts, our Home Depots, our Lowe's, those are great credit tenants, but they're not really producing any same-site NOI. They're relatively flat. They're ground leases that are going for long periods of time.
And that's a pool of capital that we feel like we can access and redeploy accretively into higher growth, grocery-anchored assets. And then our entitlement program, as I mentioned earlier, we're very focused on unlocking the highest and best use of our real estate. Shopping centers, in my opinion, are almost like oil wells. There is so much potential untapped. And if you think about the format, it's 80% parking lot, 20% single-story building. And so that 80% parking lot is not producing any revenue. And if you position that in the first-ring suburb, that's where population growth is occurring. That's where you're seeing a lot of density being formed, and our asset is becoming the hole in the donut. So if you tour any of our assets, you'll probably see towers up around our real estate.
That's where our team has been laser-focused on putting entitlements in place where we have the right to build apartments in the parking lot that is underutilized. We've activated 3,000 apartments that are cash-flowing today. We have crested our goal of 12,000 apartment units entitled. Now we're in a mission to see how we unlock that value. We can sell those entitlements. We can ground lease those entitlements. We can contribute those entitlements to a joint venture to activate them. The thesis there is the apartments really produce a significant premium to the apartments in the market, primarily because of the amenity base that we offer as a shopping center. If you live in New York City or if you live in a city that has apartment buildings, they typically price on location and the amenity package they offer.
Shopping centers have, on average, 50-75 different retailers in the location, and there's no amenity of an apartment tower that comes close to that, and that's why we've seen across every activation that we've had, our apartments pricing the premium to market, so we're in a very good spot to start the year. Obviously, there's been a few bankruptcies that seem to be sort of catching headlines. Store closures are up year over year. That being said, we're starting off from an all-time high occupancy for the sector, including Kimco being able to push rents so that mark-to-market opportunity. A lot of these leases that are from the watchlist tenants, we haven't done leases with these tenants in over a decade plus, and so we're actively pre-marketing these spaces to see how the bankruptcy auction plays out with Joann's. We're actively marketing the Party City boxes.
We're very encouraged by the demand we're seeing, and a lot of those spaces are perfectly fitted for a grocery conversion, and that's what we get excited about because when we convert it to a grocery-anchored shopping center, the cap rate compresses, the traffic picks up, and then you're able to re-merchandise the center around that grocery anchor, so I'll pause there.
Great. That was great. I guess your first comment was actually on supply and how shopping centers see the lowest amount of supply right now across commercial real estate. But then you talked about, obviously, the strong fundamentals, strong occupancy, everything like that. When would you expect or what would you need to see to see supply start to come back to compete, just given the operating environment you're seeing now?
I think one of the major overhangs for retail in general was the oversupply for probably two decades. And if you look back, that was, I think, one of the major hurdles that we were facing when bankruptcies occurred. We didn't have the depth and breadth of demand, and there was a lot of supply in each of these markets. And so now when you look at the health of the sector today, again, 0.3% of existing stock under construction, that's virtually zero. So when you look at what's going on, there's actually more being demolished than there is being constructed. And so to see that inflect and to see new development really start to have a significant impact on our numbers, we ran really what the return on cost would have to look like for developers to come back into this space en masse.
You're really going to have to see rents escalate north of 60% from today to really see a return on cost to create a spread on an exit cap that's north of 200 basis points. That's really where I think the minimum would be. Most folks would want 300-plus spread on that spread from a return on cost to an exit cap. We're nowhere close to that. The few, and I could count on one hand, the few real developments that we've been tracking are in like the third ring of Phoenix, Vegas, where there's been sprawl and new community formations where there's really been a retail desert. Those are the types of situations that call for one retail development in those markets.
The only way those are getting built is heavily subsidized by the community, meaning that they get tax abatements and things like that to make the returns make sense. So I think we're pretty far off in terms of seeing a wave of supply having any real sort of significant impact. What we are tracking is obviously the watchlist tenants, as those really create what we call shadow supply, where we can really work with our major tenants that are doing 100-plus new stores a year and line them up for each and every one of those opportunities if and when it comes back to us. The other point I'll just make quickly is on the bankruptcy side of it.
I've never seen this before in my career where there is a significant amount of bidding for almost a large portion of bankruptcy tenant leases that are going through the auction process. That just showcases the lack of good quality retail in the market today. Retailers would rather come out of pocket to buy somebody else's lease and then put all their own capital into that space to retrofit it to their needs versus sign a new deal today. So that sort of gives you the dynamic of what's going on today in the market.
Conor, you just hit on the watch list. I think a little over a month ago on your call, you guys had talked about some of the auction processes progressing for Joann, for Party City. Can you give an update on maybe where we are relative to what you guys were assuming in guidance in terms of maintaining tenants in place versus maybe boxes going vacant if there's any update post-auctions?
Yeah, it's still a fluid environment because obviously the Joann's has yet to play out, so we'll see how that continues to go. I will say that the bankruptcy filings this year are repeat offenders, right, so the Chapter 22s of the world have been to the dance before, so it's not a surprise, and the watch list for us and for the sector continues to get smaller and smaller, so if you think about who's on that watch list today, it's the same folks that we've been talking about for a decade. Some of them actually through COVID, like Joann's, thought that they had a pep in their step, had a boost, thought that that was a run rate of sales. All of a sudden, that was not their recurring run rate of sales when things dropped off.
And so they mismanaged inventory, mismanaged balance sheet, and so they were right back to the same situation they're in. What we see is, so there's a few different categories that are active today. And the nice part about the bankruptcy situation that we're in today is we're at all-time low in terms of vacancies, right? So you're coming into it where very little supply is available. And then you have different square footage for the people that are going through bankruptcy today. So if you take just Party City, on average, Party City boxes range between 10,000-12,000 sq ft. Some are a little bit larger, some are a little bit smaller. But that square footage actually ranges in a number of different retail categories.
What we've seen at the auction is that there are a few very aggressive folks like Five Below, like the dollar stores, like some of the service players, even some of the specialty grocers like Aldi and Lidl that are really aggressive to find locations that they have not yet been able to find in the open market. Joann's is a little different. Joann's is a little bit larger. Our boxes range from 25,000-32,000 sq ft. That's a different retail category. The nice part is that's probably the deepest retail category we have across all square footages. That's where all those treasure hunters I talked about earlier, all the TJ Maxx concepts, Ross, Burlington, all the specialty grocers, Sprouts, Whole Foods, Trader Joe's. You've got a number of different players in that square footage that really are aggressively expanding.
And with no new development, that's really where they see opportunity to hit their new store count. Sprouts is a great example of someone that is absolutely doing great. We're doing a lot of deals with them. Specialty grocer drives a lot of traffic, but they have yet to hit their new store opening plans two years running. And they told us they have to get more creative and more aggressive in order to hit their new store opening plans. And so we feel like aligning with them and all of our portfolio reviews, we give them the opportunity to hit their new store opening plans with these unique opportunities that Kimco has to present them because honestly, that's where scale can be an advantage. That's where you can take your relationships and your portfolio and say, "Let me help you meet your new opening plans.
We can do it this year. Take a look, see where the voids are, see where the white space is. And we have a platform lease. We have the ability to dedicate resources to make sure the construction goes as planned. As they've learned through multiple cycles, it really matters who your landlord is.
So I'll just add because you asked on the guidance side, our credit loss assumption for the year is 75-100 basis points, which is consistent with where it was last year. We came in at the low end of the range last year. So we've baked in expectations around Party City, Joann's, Big Lots into those numbers. If you look at them in total, if you lost all of them on January 1st, which obviously did not occur, the total impact is 120 basis points. So as we look, we kind of baked in what assumptions we had. And it varies a little bit. You can't exactly pin it all down. But our 75-100 basis point credit loss assumption takes into account what would happen with these three. So we feel comfortable about where guidance is.
Probably if you look at where we are today, about 30 basis points is what's going to go away based on where we are, right? The timing of when the liquidation sales will happen with Joann's, where we are with Party City in the loop. And then again, what you probably will see is our shadow pipeline expand, right? You're going to have these come off. We're going to sign all these leases. They're not going to be open yet. So it's going to be pretty visible what happens. And besides the auctions, what's the shadow kind of interest in the space? We've heard from a lot of, from you and your competitors that there's no supply, so everyone's underwriting every store that some of these bankrupt tenants have. How quickly do you think that could lead to replacement tenants?
And with where your occupancy is, obviously there's the time piece and the rent piece in your IRRs, but how important it is to take extra time to get the right tenant to merchandise the center? How do you balance all that? What are you guys seeing right now in the pipeline?
Yeah, that's the art of the deal. You have to make sure that you take the whole center into really understanding that you're asset managing and how do you create the most value for your shareholders. So understanding which tenant can really drive value from a cap rate compression, understand which tenant can drive value from a traffic perspective, understand obviously how you can improve the economics. The capital that's going into these deals is going down. The economics continue to improve. Net effective rent is laser-focused for the team. I think the good news is, again, we see a tremendous amount of demand for these spaces. And you have the ability to upgrade your tenancy by picking the best of the best. You are seeing some of the difference of retailers and their expansion plans.
You are seeing sort of the ability to push on the terms and the landlord-friendly terms. Again, we focus on what the highest and best use is of the real estate, so we're very good at understanding what goes into a lease and what doesn't go into the lease to protect the landlord rights for the future because parking lots, in our opinion, are untapped resources, and so the old lease of giving the tenant sort of control of everything for forever and a day is gone, and we are very focused on understanding that these are leases we're going to have to live with for our life and beyond, and so we are very focused on understanding what goes into those and giving us the best opportunity to recapture parking lots and activate them for the future.
It kind of dovetails a little bit. We got a question coming through a live Q&A on TI and LCs and just generally any impact we may see from tariffs and whether there's delays in getting equipment or material costs. Kind of what are you guys, what's the early read on what you've dialed in for kind of some of the cost to backfill some of these bankruptcies versus maybe what you're hearing from vendors about potential price increases for materials and also just equipment potential delays there?
Yeah, it's obviously a very fluid situation that we're in with the tariffs and the threats of tariffs. I think when you look across what we're doing, clearly there could be a situation with lumber depending on what happens with Canada and what goes into that tariff and if there are carve-outs or not. So again, I think the way I look at it is we can manage through global supply chains because of our size. And we've done it before through COVID. We have a diversified supply chain. We've managed through that situation very well. And we'll continue to do so. We've outlined sort of a path of understanding where all the different supply pieces come from and understanding how do we pivot if we need to. Right now, we haven't seen any dramatic impact in terms of supply and really the labor costs.
Again, as I mentioned before, the supply side of new construction of retail is nowhere near the horizon. When you look at the cost of labor, when you look at the cost of goods, that doesn't seem to be subsiding. I feel pretty good about obviously taking advantage of our scale of understanding that when we buy in bulk, we're going to get the product. We have some very dedicated relationships and partnerships that are very important to the counterparty. That could be an advantage for us if things do start to get tricky.
And so right now, fundamentally, supply is low, good demand for space. The one question I get a lot from investors, which I'm sure you guys do, is everything, the tailwinds there, but the group, you guys put up 5% FFO growth, right? Same store still around 3% to maybe 5%. What drives it to the high end on a sustainable level and maybe kind of pushes through that to capture the demand dynamic right now and kind of walk through maybe the puts and takes of retail versus maybe some other property types and the ability to push rents and what some of the limits are and how you offset that with what you talked about earlier with concessions on control and other items of negotiation that maybe are going more in your favor that we don't see necessarily, but create value through the parking field and other avenues?
Sure. So happy to. So the building blocks of shopping centers are a little different than other sectors. So if you think about our building blocks, I mentioned the ground leases before, and those are relatively flat. And then if you look at sort of the traditional run rate of a shopping center, traditionally, like on a good year, same-site NOI of like 2% plus was really sort of where you were shooting for. And that's because the dynamic of shopping centers, if you just take it from the surface, is heavily weighted towards anchors with some smaller shops mixed in. And the anchor lease is really designed where, and this is in the past, where there are bumps every five years that are typically between 8 and 12%. The small shops typically run annual escalators between 2 to 3% historically.
So what we've done in this current environment has been able to increase those annual escalators on the small shops, as well as increase the bumps on the anchors while bringing down the capital. I think one of the big overhangs in retail for most of my career has been the amount of capital that has had to go in to produce leases and the flatness of those leases. And so what we've tried to do is scale back the capital going in while increasing the growth profile of the leases. The issue that we're facing and that most are facing in the sector is that 90% of our leases were signed 5, 10, 15, 20 plus years ago because of the amount of control that these leases have. Typically, leases are 10 years of firm term with multiple options on top.
Typically, in downturns, that's a great form of safety because when people are running for the exits, that long weighted average lease term is actually in your benefit because it allows you to weather the storm. You have good credit tenants.
They're not able to retrade if rents start to go down. This is a new dynamic. Rents have gone up significantly. There's no new vacancy. And we're able to push rents. But again, it's on that top sliver of vacancy or the leases that you have turning over each year, which is again, runs between 5% and 10%. And so that's why the growth dynamic is slowly, methodically improving year over year. And I continue to think that if this dynamic continues for this year, next year, the year after that, you're going to continue to see the growth profile improve. We're very proud of producing over 5% last year.
We continue to think that it's not how you start the year, it's how you finish. Obviously, the bankruptcy noise to start the year is always something we have to work through. But we do believe that the balance sheet positions us to obviously weather any type of storm that comes. We do believe the tenancy that we have is really well positioned to grow and continue to produce solid both FFO and same-site NOI growth.
So I'll just add, the NOI growth is actually very strong if you look at it, right? Us and many of our peers and any other company who's financed stuff over the last 10 years is facing refinancing activity that rates are definitely higher. And you can see it in interest expense. So it shows up there. The NOI is growing at a much faster clip than the interest expense. And we're outpacing it, which is really good. But it does have an impact on overall FFO growth. I think it has an overall growth on anyone's company at this point. So we've done a pretty good job, I think, refinancing where we are. But we're refinancing debt instruments that have two and three handles on them that are being refinanced with four and five handles on them. So it comes into play.
But the NOI growth is clearly there and growing at a much faster clip.
Any questions in the room? All right. Well, they continue to come in through live QA. So Conor, you touched on kind of the opportunity for residential within your centers right now. And so this question is specific to how you're thinking about monetizing that versus giving up control of that real estate longer term. And how do you think about structuring it?
Yeah, it's almost like frozen custard. It's one of Milton's favorite phrases. It's nice to look at, but it's hard to get to. And it's one of those situations where I do believe it creates significant value for our shareholders long term. But when you're trading at a discount to NEB like we are today and you don't have the cost of capital to really activate it yourself, you look at that as opportunity to monetize and then redeploy those proceeds accretively. It's the same thing that Ross and his team have done to start the year where, when we traded at a premium and a strong multiple, we issued equity on the ATM, match funded it with an accretive grocery anchored acquisition. Since then, we've been trading at a discount and we've been a net seller.
So I think you have to be cognizant of the fact where you are relative to your cost of capital. And these are long-term projects. And the entitlements, I do believe, will continue to add value. And so what we're looking at doing is potentially monetizing some of those multifamily entitlements that are in areas that don't necessarily have the best supply and demand dynamics where we believe it's better off having someone else activate them. We can also contribute them as our land with the marked-up basis for the entitlement work we've done into a joint venture. So in essence, our capital becomes our land basis plus the entitlement work that we've done. And then we get to ride in a joint venture the upside of the construction without putting our capital to work. And so we've done that with our asset in Suburban Square.
We continue to think that's going to be a really strong performing mixed-use asset that we activate. We continue to look across the portfolio to see, again, methodically how do we continue to activate and then look to see again which ones we want to monetize. Because this year, I think we're in a unique position where we can recycle accretively, whereas before we were never able to recycle accretively. So if you look at our ground leases that would sell at a low cap rate plus our entitlements that are not cash flowing today, and then you recycle that into growing shopping centers, it creates a really nice match funding opportunity for us to continue to grow accretively through recycling. But entitlements for us continue to be, I think, a value-add component to our platform.
We'll just get to a point where, again, I think the flywheel starts to happen where we've activated a few that are very successful. We could then look at a couple of different models of how do you go about continuing or recycling that capital and to really continue to create a lot of value for our shareholders.
If I could just add, ultimately, regardless of what path we take, as Conor mentioned, we can look to sell, ground lease, contribute into a joint venture. At the end of the day, how we structure that is extremely critical to making sure that we protect the real estate in the shopping center because it's very much intended to be symbiotic and additive to both the retail and the multifamily. As Conor mentioned, we see premiums on the retail component. You see premiums on the multifamily component when it works in concert and both components are done the right way. Ensuring that we have those protections, those controls, whether it be design, whether it be cross-access, things of that nature is something that we're extremely cognizant of regardless of how we ultimately monetize that entitlement.
I don't know, Ross, maybe this gives you more airtime or you throw it back to Conor, but you guys have 10% of your NOI coming from ground leases. How much of that 10% is real estate you'd want to monetize versus keeping control, and what could be kind of the cadence of sell down? Like how much, and maybe Glenn also, capital are you kind of dialing into that you tap into that really low cap rate source versus being able to kind of more match fund with maybe some joint venture on the multi kind of contributions to finance some of the spend? Kind of walk through a little bit of that calculus.
Sure, happy to. And my comment on the activation or the monetization of some of the entitlements actually also is very relevant to the conversation on the ground leases because maintaining control of our real estate is of the utmost importance. So regardless of what we sell and how much we do, we're going to make sure that that does not impact our ability to control and create value on the rest of the shopping center. So the way that we're looking at the monetization of the ground leases is really bucketing into various categories and then taking advantage of the least impactful to the shopping center where we can create the most value and recapture and recycle that. So you look at the large pool that we have of the 10% and then you break it down into categories.
What is the retailer and the cross-shopping that comes from that category? Where is that located within the shopping center? Is it on the end cap with its own parking field, or is it in the middle of the shopping center, sort of in the heart of the asset? Do we have the property already bifurcated from a tax parcel standpoint, or do we have to go through that process? Do we have the appropriate amount of term? We're having conversations right now with several of our anchor tenants to do blended extends and make sure that we can maximize the value of that before we go to sell it off, so with that process right now, we've sort of uncovered the sort of first tranche of opportunity that we're going to be bringing to the market and entertaining for sale.
While we haven't specifically identified the amount that we're going to do, the desire and the process that we're looking at is a multi-year process, not just taking advantage of it in 2025 so that we can juice as much growth as possible and then not have that as a recurring stream of capital. So we really want to make sure that we are laying out this program for 2025, 2026, 2027, and beyond. So we'll take a measured approach at doing it. The nice part is that different from years past with our disposition program, this is very much intended to be an accretive recycling of capital. It is not intended to be dilutive. So as long as we can get the pricing and the cap rates that we anticipate where the market is pricing it today, we'll execute on that.
If for one reason or another that doesn't come to fruition, we don't see the opportunity to redeploy at a spread, then there's no gun to our head to do anything that isn't going to add value to the company, so that's the way that we're looking at it right now, and we're confident that we're going to be able to do that throughout the year.
Yeah, and I would just add, it's not just accretive. It's growth enhancing, right? Because you're looking at assets that, many of them, had flat leases for five to the next 20 years versus buying an asset that has a little bit of a higher cap rate, but has a growth rate attached to it. So it really does create a flywheel as you start selling them off and investing them that way.
You guys have been active recently on acquisitions and been successful at sourcing some second caps with growth down the road. What does the acquisition pipeline look like? And how interesting are some of these bigger lifestyle centers that are coming to market from an accretion standpoint, given you have some lower cost of capital potential funding sources?
Yeah, there's plenty of opportunity out there, but it is competitive. To Conor's earlier point, we took advantage in the fourth quarter of last year to issue some equity and redeploy that into the acquisition that we made in January of this year. So we have somewhat of a clean slate on the go forward for this year. One of the major differentiators for Kimco that we talk a lot about is diversification. And thinking about our acquisition strategy and our investment strategy, including the structured investment program that we have, is that we look for opportunities to differentiate our capital. At different points in time in the cycle, investors are looking for different things. Earlier in the post-pandemic world, it was all about geography.
And so we took advantage before, I think the crowds really rushed to the Sunbelt per se to acquire the Weingarten portfolio when we saw within our own portfolio that those assets were outperforming other parts of the country. There are points in time where format has been really first and foremost where everybody wanted a certain format, whether it be grocery anchored or unanchored strip or lifestyle. So being that we have the diversification of all of those formats, we can choose at what point in time there is an arbitrage opportunity or a way for us to differentiate our capital and chase that when other investors are going for the opposite. So being a national portfolio allows us to pick different geographies when one is in favor and one might not be, but we have conviction that longer term it's going to come back. Same with format.
Today, I think the investor pool is really looking for growth. So it's less about geography. It's less about format. It's more, do I see more growth in this particular asset because it has a little bit more shop space and I can push that? Is there more growth in this shopping center or this opportunity because there's lower WAL and I can get to that liquidity and that lease quicker? And therefore, there's a mark-to-market spread in the near term versus a longer-term investment. So that's what we're looking at. How do we take our capital and differentiate versus where the vast majority of investors are looking for at any point in time? And I think that we've been able to do that successfully. It's very competitive, as I mentioned right now, for all the reasons that Conor outlined with the fundamentals of our business.
Investors and institutions want to own high-quality open-air retail. It's just a matter of how do I do it accretively, how do I get in there? And in many cases, it's looking for an operator that has the ability to do that because this is a sector that requires a platform and an expertise to create value that might be, in our mind, more challenging than some other asset classes. So having that team, having that platform is really critical to value creation. And so that's really what we're seeking today.
The only thing I would add, and that's spot on, Ross, is we've seen sort of a snap back to a public discount to NAV, and you would think with the ROIC prints from Blackstone privatizing that REIT at a sub-6 cap, you would see the sector trade towards that cap rate where you see the private transactions continuing to go off sub-6 and yet the public sector trading off, so there is a major disconnect right now between private and public valuations, and so we continue to be mindful of that. We're underwriting a lot of different things, but since that has happened, we have not been really active and watching in the transaction market.