Greetings. Welcome to the joint conference call to discuss Kimco's acquisition of RPT Realty. This time, all participants are in listen-only mode. Question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll turn the conference over to David Bujnicki, Senior Vice President of Investor Relations and Strategy. Mr. Bujnicki, you may now begin.
Good morning, and welcome to the joint conference call to discuss Kimco's acquisition of RPT Realty, which was announced earlier today. Joining me on the call are Kimco's CEO, Conor Flynn, RPT CEO, Brian Harper, and other senior management members of the Kimco management team. As a reminder, statements made during the course of this call may be deemed forward-looking, and it's important to note that the company's actual results could differ materially from those projected in such forward-looking statements due to a variety of risks, uncertainties, and other factors. Please refer to each company's SEC filings that address such factors. During this call, management may make reference to certain non-GAAP financial measures that we believe help investors better understand our respective operating results. Reconciliations of these non-GAAP measures can be found in the investor relations area of our respective websites.
Please note that a presentation with additional details and information related to this transaction has also been posted to the investor relations pages of our respective websites. Further, given this transaction has just been announced, we may not be able to answer all questions at this time. More information about the transaction will be included in the proxy materials that will be filed with the SEC. With that, I'll turn the call over to Conor.
Thanks, Dave, and thanks to everyone for joining our call this morning to discuss another accretive portfolio-enhancing acquisition. With the unanimous approval of both the board of directors of Kimco Realty and the board of trustees of RPT Realty, we're very excited to be acquiring RPT in an all-stock transaction that will drive long-term growth and value creation for our shareholders in a leverage-neutral manner. The assets which overlap in key markets are highly consistent with our strategy of owning and operating first-ring, suburban, open-air, grocery-anchored, and mixed-use shopping centers, both in terms of the strong tenant profiles and the geographic locations across major Sun Belt and coastal markets. Furthermore, our operating platform and balance sheet strength will enable us to unlock future growth and value creation opportunities even beyond the overlapping properties, which we will integrate into our portfolio.
We will ultimately create an even stronger enterprise by increasing efficiencies of scale, cash flow, and long-term earnings growth potential. Let's take a closer look at the RPT portfolio being acquired. It comprises 13.3 million sq ft of GLA and encompasses 56 open-air shopping centers, including 43 wholly owned and 13 joint venture assets. There is also a small ownership stake we will pick up in a 49-property net lease portfolio. As part of our due diligence efforts, we've identified a limited group of RPT properties, primarily situated in the Midwest, that do not align with Kimco's strategy and will be sold over time. These properties are attractive in their own right and boast healthy growth profiles, which we believe will enable us to divest them in a manner that maximizes value. Nevertheless, we expect to begin discussions with potential buyers soon.
Now, to walk through 4 specific benefits of this transaction. First, we're thrilled at how the RPT acquisition, with its attractive overlapping assets that include multiple trophy properties, will further expand Kimco's already impressive scale and asset profile in our high-growth markets. These assets have a total ABR from grocery-anchored properties near 90%, which is higher than our current 82%, along with a strong NOI growth profile. These centers will increase Kimco's scale in our targeted Sun Belt and coastal markets, which benefit from positive demographic and migration trends. Second is the earnings accretion and NOI growth opportunities. As I mentioned, we expect this transaction to be immediately accretive to our key operating and financial metrics. We see initial annualized cost saving synergies of roughly $34 million over the first year after closing.
Longer term, we see even greater potential to expand NOI and cash flow growth, driving further value creation by pushing occupancy higher, capitalizing our Mark-to-Market opportunities in a large 330 basis point spread in leases signed but not yet opened, that serves as an additional tailwind. We will also acquire several attractive redevelopment opportunities, including residential mixed use, most notably of which is Mary Brickell Village, located in Miami, which will also expand Kimco's Signature Series portfolio. Third, this acquisition expands our partnership opportunities. We see potential for additional investments in grocery-anchored shopping centers and mixed-use assets, building upon RPT's existing JV relationship with GIC, a leading sovereign wealth fund. We look forward to potentially furthering that relationship.
Fourth, the structure of this acquisition allows Kimco to maintain its strong balance sheet, which provides us the flexibility and resources to capitalize on the embedded value creation opportunities ahead. In fact, upon closing, we expect the transaction to be leverage neutral. Before handing it over to Brian and then taking your questions, I'll walk through the terms of this all-stock transaction, unanimously approved by both boards. Under the agreement, RPT shareholders will receive 0.6049 of a newly issued Kimco share for each RPT share they own, which represents a meaningful premium to RPT's closing stock price on August 25, 2023. The purchase price represents a low 8% implied cap rate. This transaction, which will be subject to customary closing conditions, is expected to close in the beginning of 2024.
Following the close, Kimco and RPT shareholders are expected to own approximately 92% and 8% of the combined company respectively. We look forward to a seamless transition, as we'll be working off the proven integration playbook that saw us through our successful integration of Weingarten just two years ago. With that, it's my pleasure to turn it over to Brian Harper for his thoughts around today's announcement.
Good morning, and thank you, Conor. We are excited to announce the strategic combination with Kimco that should unlock additional value for all shareholders. As many of you know, over the past five years, RPT Realty has been on a mission to reshape its business to create a higher quality, higher growth, and more durable income stream for investors. It's been a very busy five years, to say the least. We recycled a large portion of our portfolio into coastal and Sun Belt states, taking Boston from no exposure to now being RPT's second largest market. We leased almost 8 million sq ft of space, predominantly to top national tenants, many of which are investment grade and have an extremely deep leasing pipeline. We've materially increased our grocer exposure through our acquisitions and leasing efforts. We formed two complementary joint venture platforms with best-in-class partners.
Finally, we obtained an investment-grade rating from Fitch. While we cannot be prouder of the success that we've had, as we think about the next phase for RPT, joining forces with Kimco made all the sense in the world for the reasons that Conor just mentioned. Now, let's talk about Kimco. They have a long track record of success, strong operating platform, triple B plus balance sheet, and deep mixed-use development experience that should unlock additional value for RPT shareholders. Additionally, Kimco's size, scale, and liquidity are true competitive advantages, and we are happy to be partnering with this premier S&P 500 company. They share a similar investment mindset, and we believe the combination will take our investment platforms to the next level. Our shared passion for operational excellence and cultural alignment should allow for a smooth transition and quick realization of merger synergies.
We and our board of trustees believe that the combination of Kimco and RPT is truly greater than the sum of their parts, and the stock-for-stock structure of the deal will allow both companies' shareholders to benefit from the future upside we expect to be created through this transaction. Before I turn the call back over to Conor, I want to thank each one of the team members at RPT Realty for their dedication, hard work, and passion. Without your tireless efforts, we would not be in a position to announce this agreement. I've known Conor and team for several years, and I'm more than confident that they are the right group to take the combined company to new heights. I'll now turn it back over to Conor.
Thanks so much. We're actually ready to go to the Q&A portion of the call.
Thank you. We'll now be conducting the question and answer session. If you'd like to ask a question today, please press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. So we may address questions from as many participants as possible, we ask you to please limit yourself to one question. If you have additional questions, you may re-queue, and time permitting, those questions will be addressed. One moment, please, while we poll for questions. Thank you. Thank you. Our first question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.
Good morning. Thanks a lot for taking my question. Can we talk a little bit about the background of the deal here? You know, is this a process initiated by Kimco? Is this an opportunity where RPT kind of put itself up for a bid? And just trying to get an understanding of, you know, Conor, how aggressive you and your team are looking for opportunities like this, and how much on the front foot you are for looking to grow.
Sure. Thanks, Michael. Look, we've long been a fan of RPT and Brian's leadership. You know, if you look at their culture, their team, and really their strategy, it mimics in a lot of ways, Kimco's culture, people, and strategy. They've done a phenomenal job transforming their portfolio. If you think back five or six years ago, Kimco went through a very similar transformation, and, you know, all those data points aligned. And obviously, the benefit of having a very strong balance sheet, you know, a very strong portfolio, allows us to do accretive deals like this. And so we've been laser-focused on harvesting organic growth in the internal portfolio and making sure that we continue to showcase that.
But obviously, you know, looking at liquidity we have, the Albertsons investment that we've been able to harvest, and then looking out for external growth opportunities, RPT really checked all the boxes for us and gives us, you know, an accretive deal that allows us to increase our efficiencies of scale, pick up some tremendous potential mixed-use opportunities... really strong leasing opportunities as well. If you just look at their occupancy, that's really some real upside there in terms of where we think we can take it just to the Kimco level. So, a lot of significant embedded growth when you look at their, their SNO pipeline, their signed but not open pipeline of 330 basis points. That's one of the highest in the sector.
So again, you know, we look at this and see it checks all the boxes and are very excited about the combination, and looking to see obviously what we can do with it going forward.
Thank you very much. Good luck to everyone involved.
Our next question is in the line of Samir Khanal with Evercore ISI. Please proceed with your question.
Hi, good morning, everyone. Conor, maybe I didn't see anything on the pricing or the cap rate on the deal. Maybe you can sort of elaborate on that.
Sure. It looks to be like a low implied 8% cap rate. So we're obviously, you know, enthused with the combination, and again, it gives us, I think, a lot of opportunity to harvest growth from the portfolio. If you think about the growth profile of what it brings to Kimco, that's what's really attractive to us, is that it really does shine a light on the growth profile and the supply and demand dynamic that we see existing for high-quality open-air shopping centers today. You know, they've got a 330 basis point SNO pipeline. Kimco has 300 basis points SNO pipeline, and if you look at their occupancy levels, as I said before, we think there's further upside there.
You know, when you look at the combination, I think the timing was opportunistic, and I think it works for all shareholders going forward.
Thank you.
Our next question is from the line of Floris Van Dijkum with Compass Point. Please proceed with your question.
Hey, congrats, guys, on the announcement. Conor, maybe if you could touch on what you plan to do with the existing GIC JV, and where you see opportunities going forward. And does that opportunity also exist in parceling out part of your portfolio, or is that, you know, more looking at other opportunities to grow the net lease, and the drier grocery-anchored portions of those JVs?
Yeah. Thanks, Floris. We really are excited to partner with GIC going forward. I'm not gonna speak for them. Obviously, they are really intrigued with the open-air shopping center sector and have aligned with RPT to put capital to work specifically in grocery-anchored shopping centers. So we're looking forward to working with them and expanding the relationship. On the triple net side of the business, you know, as you remember, we've had some very big successes on triple net portfolios in Kimco's past. You know, typically, those are done in opportunistic fashion where we're able to showcase the value creation of those transactions. Having a platform that has, you know, partners involved in the triple net sector really allows us, I think, to scale it further.
Now, again, I'm not gonna talk to the-- speak for the partners involved in that joint venture, but we're excited about the growth opportunity it brings to Kimco, and we'll have to continue to monitor the opportunity set there. We do believe there's, you know, we see a lot of deal flow across both the shopping center sector, and as you mentioned, there's triple net leases in every single shopping center. And so as we look out for the growth of the organization, we see it as very complementary to find ways to grow the triple net platform and look for unique opportunities to put transactions into that platform.
In terms of, you know, looking internally, I think that really it's more about future opportunities for growth for the triple net platform versus looking at the existing portfolio.
Thanks, Conor.
Thank you. The next question is from the line of Haendel St.-Juste with Mizuho. Please proceed with your questions.
Hey, good morning, and congratulations. First question, Brian, for you, maybe can you spend a moment or two discussing the rationale here from the RPT side? Why this deal? Why now? The pricing looks a bit light in terms of the cap rate versus where we thought market cap rates were. And can you comment on if there's a go shop breakup to your collar here? Thanks.
Yeah. So a lot of this I'm not gonna be able to comment on until the merger proxy filing, but here, here's what I'll say is: We're very proud of the success we've had in reshaping the portfolio and business, and we believe there's just additional value that will be unlocked as the result of this transaction. Kimco's track record of success, operational excellence, scale, cost of capital, and liquidity, as well as its mixed-use development expertise, we think is gonna add a lot of additional value to RPT stakeholders. It's really not a cap rate deal, as it's a stock-for-stock transaction, which will benefit from the combination that will accrue to both shareholder bases while delivering an attractive near-term premium and increased trading liquidity to our current shareholders.
You know, it's a relative value between our two companies and absolutely not a reflection of private market values.
Got it. Got it. And then a quick follow-up, if I could, just on the point of the value you guys can unlock here. You talked about $34 million in cost synergies, which I believe are primarily G&A related. Can you talk a bit more about the potential NOI synergies beyond that, and what type of IRR you can potentially generate on this acquisition? Thanks.
Yeah, we did release the G&A synergies. Obviously, that's where we wanna focus on, 'cause we feel like that is something we can crystallize very quickly. There should be, you know, revenue synergies to your point. But again, we prefer to just forecast the G&A synergies. As we've seen a lot of success with the Weingarten transaction, we feel, you know, very comfortable sort of crystallizing that and then showcasing really the revenue synergies that in a further, you know, down the fairway.
Got it. Got it. Okay. Thank you.
The next question is in the line of Nick Joseph with Citi. Please proceed with your question.
Thanks. Maybe, just following up on that last topic, in terms of the accretion, you know, can you talk about the timing? I know you'd mentioned as being immediately accretive to FFO, but the timing of the cost synergies that you quoted, and then also, is it also accretive year one on an AFFO basis?
Sure. So it is accretive immediately, which we put in the release. We do believe that the cost synergies, G&A synergies, will be achievable over the first year. As you saw with our Weingarten transaction, we were able to execute that relatively quickly. So we feel confident in the ability to integrate seamlessly and effectuate that opportunity. That's really the focus of ours in the integration.
On an AFFO basis?
Yeah, it's accretive, accretive on an AFFO basis as well. Just keep one thing in mind as we go through this, the synergies themselves, obviously are part of the accretion, but that does get offset by the refinancing of debt. They have, you know, debt that we will replace with ours. Their weighted average coupon's around 3.75% of mark-to-market, and the replacement of that debt's probably be in the 6% range. We just need to couple that with, the synergies that we'll get.
Most of the synergies, Nick, are on a cash basis, so they don't factor in the GAAP aspect, which you're talking about when it comes to AFFO.
Thank you.
As a reminder, to allow as many as possible to ask a question, we ask you, please limit yourself to one question. You may then requeue for any additional questions to be taken, time permitting. Thank you. The next question comes from the line of Dori Kesten with Wells Fargo. Please proceed with your question.
Morning, congratulations. How does the same store NOI growth outlook compare for the two companies over the medium term?
Yeah, they're very complementary. If you look at, again, the SNO pipeline, I think that's the best way to focus on the same-site NOI growth profile. Clearly, we're in a very strong environment for leasing. If you look at the supply and demand dynamic right now for open-air shopping centers and really sort of the Bed Bath, you know, transaction that you're seeing across the sector, there's very strong pricing power for landlords with good, high-quality real estate. And RPT checks all those boxes, and we're seeing that in their SNO pipeline of 330 basis points. But also there's a lot of leasing demand behind that.
That's where we get really excited, because with the lack of new supply of over a decade in our space, and really the continued momentum of open-air retailers in expanding, we see this as a real opportunity to leverage our platform strength and leverage our leasing expertise to drive significant growth going forward. So really, the SNO pipeline is where I would point to for future same-site NOI growth profiles.
Our next question is from the line of Wes Golladay with Baird. Please proceed with your question.
Hey, good morning, everyone. I just wanna talk about the initial deal accretion. It looks like it's maybe a few% on an FFO basis, but can you just clarify this is ahead of the merger adjustments? It looks like you may have to mark up the debt, but then also have the benefit of the below-market leases. And do you think those two adjustments will be a net positive or negative?
Well, again, we do expect that year one, the transaction will be accretive. When we get to our 2024 guidance, as this transaction is gonna close in the beginning part of the year, then we'll be able to comment further on just the total amount of the accretion. But you're right, you'll have the benefit of synergies, and again, that, that'll get offset by the change in the debt, and then we'll have the full mark-to-market on the leases and the accounting adjustments.
Thank you.
Great. The next question comes from the line of Lizzy Doykan with Bank of America. Please proceed with your question.
Hi, good morning. I was curious if you could talk more about the planned divestiture of the Midwest portfolio, how you plan on approaching this over time, kind of what the timeline is for that, and maybe, you know, what you expect the indications from certain buyers, what the appetite for those kind of assets will be like?
Sure. Happy to, Lizzy. So again, we're really pleased with RPT's transformation. It mimics almost exactly what Kimco went through. And so when you look at the quality of their assets, regardless of geographic location, you know, they're anchored by national, you know, investment-grade tenants, high quality, high, you know, occupancy, with significant growth embedded in the, in those assets. So as we've seen, you know, with the Weingarten transaction, we look at the entire portfolio, have asset strategies on every single asset, and then we look at the growth profile, we look at the risk profile, and then outline really a strategy going forward for each asset. And we plan to do the exact same thing with RPT's assets and feel very, very comfortable with the asset quality. So look, going forward, it will become a natural part of our asset management function.
So we'll continue to look at our portfolio as a combined portfolio and look to see where it makes the most sense to reinvest proceeds into sort of our strategic markets that we wanna continue to add size and scale to. So there's a really, I think, a nice opportunity here to combine the portfolios. We don't feel like we're under pressure to move out of any assets, just because of the growth profile that's embedded in all those assets. And there is, I think, a lot of dry powder, both private and public capital, for high-quality open-air shopping centers. So we feel like there is a nice opportunity there to be nimble, be opportunistic, and again, analyze each and every asset and then have a strategy for it going forward.
Our next question is from the line of RJ Milligan with Raymond James. Please proceed with your question.
Good morning, guys. Conor, I was wondering if you could talk about how you guys got comfortable with RPT's outsized exposure to Bed Bath & Beyond?
Sure, happy to. So RJ, as you've seen, they've done a phenomenal job on the leasing side, already, you know, navigating the leasing for a number of Bed Bath & Beyond boxes, and they have activity on the remainder. So very similar results to Kimco, actually, when you look at the spread of what they've executed leases on, as well as the pipeline of opportunities going forward and LOIs they have working on the Bed Bath boxes. It's really a testament, I think, to the entire shopping center sector right now. If you look at the health and the landlord pricing power, market rents are significantly higher today than when those Bed Bath & Beyond boxes leases were signed.
So it's a nice combination to step in and get the opportunity to mark those spaces to market, get the SNO pipeline to continue to build and showcase the future growth opportunities. And they've done the leases with the exact same tenant roster that we have. When you look at who's super aggressive right now, with multiple, you know, store openings, you know, it gives a nice backdrop to be able to inherit high-quality assets with leasing opportunities. And that's, again, one of the main reasons we're excited about this transaction, is because not only have they showcased that there is significant demand with their SNO pipeline, but we feel there's even further opportunities to drive that occupancy levels up to Kimco's level.
Our next question comes from the line of Ki Bin Kim with Truist Securities. Please proceed with your question.
Thanks. First, on the deal structure, I was curious, why all stock? Is there tax reasons that would have come into play if you did a portion of cash, just because you're sitting on, you know, a very healthy cash balance?
I mean, again, it's, it's like a negotiation like anything else, and we, we felt keeping our balance sheet incredibly strong was important. So doing 100%, stock transaction, we'll be issuing somewhere around 55 million shares, a little over $1 billion of equity, and that's coupled with replacing about $900 million-$950 million of debt on their side. So it keeps our debt metrics where we want them. We wanted the transaction to both be initially accretive and leverage neutral.
As you've seen, Ki Bin, we do have, you know, earmarked some uses for that capital as we acquired Stonebridge just this past week. And so that was a sizable deal, a lot of cash going out the door.
Thank you. Our next question is from the line of Connor Mitchell with Piper Sandler. Please proceed with your question.
Hey, good morning. Thanks for taking my question. I guess I was just wondering if you guys could provide an update on the committed capital spend for development and redevelopment for now the combined portfolio for Kimco and RPT.
Sure, happy to, Connor. So when you look at the capital really for RPT right now, it's more about leasing. There really is no active large-scale development or redevelopment projects. So when you look at the Kimco supplemental, you'll see really where, you know, our capital is going for redevelopments. And then going forward in the future, we do believe there's a lot of upside and a lot of opportunity to use our platform, specifically on the entitlement front, where we can use our human capital to go and entitle the highest and best use for some of these trophy assets that do have mixed-use potential. But again, that cost is minor in the scale because it's mostly human capital, and then we can identify what's the best time to activate those projects.
But right now, what we've done is really focus on the leasing side of the RPT portfolio and then work to really focus on the entitlement side. As you've seen us within our own portfolio, we think that the RPT portfolio has very similar attributes and real significant upside for future entitlements.
Our next question comes from the line of Anthony Powell with Barclays. Please proceed with your question.
Hi, good morning. Maybe a follow-up on that. Could you go into the magnitude of the mixed-use opportunity, both in Miami and elsewhere in the portfolio in RPT, and how important is mixed use overall as you look to kind of, you know, turbocharge your external growth? Seems like it's a more important priority now.
Yeah, happy to. So really, Mary Brickell Village, I would say, is the trophy asset that we see a lot of opportunity for densification in the future. It's similar in a lot of ways to our Pentagon project, where there's millions of sq ft of additional density as of right. And so we're going to work on phasing that asset to make sure that we have opportunity to go vertical over time. But there are leases in place, just like there was in our Pentagon asset, where we've done two residential towers. There's a lot of coordination and timing effort, and then a lot of entitlements that have to continue to be worked through, to really sort of put that asset in a position for future growth.
So we do believe that with all the opportunities and with all the density that's going up around that asset, there's significant, significant upside that we can harvest in the future. But again, right now, it's all about leasing on the RPT portfolio and really forecasting the future, you know, on the entitlement side, really probably we'll be focusing on Mary Brickell Village.
Our next question is from the line of Linda Tsai with Jefferies. Please proceed with your question.
Hi. Can you talk about the similarities and differences between your and RPT's leasing philosophies, and what does Kim's leasing platform bring to RPT's?
Sure, happy to, Linda. I think when you look at the cultures and the focus on leasing, you know, it's very similar with RPT and Kimco, and that's why we're so excited about the combination. We are all about leasing, leasing, leasing. You know, it is an opportune time to be a shopping center owner today. You know, market rent can be used as a negotiating tool to really drive premiums right now. And we continue to think that the combination and putting together an all-star team on the leasing side is going to benefit the shareholder base of both organizations going forward. And you see, like, the opportunity we think is significant on the small shop side as well as the anchor side, and that's where we're seeing significant momentum on our platform.
We do a lot of different outreach to highlight what we can do for efficiencies of scale, as well as the relationships that Kimco has. So we feel like there's real opportunity to continue to drive both the occupancy side on the anchor and the small shop side. And again, having a portfolio where you can fulfill tenants' opening requirements by sitting down and going through markets and seeing where they wanna grow and continuing to be out in front of that, and showcasing how much market share we're absorbing from tenants that have open-to-buy in different geographic locations where Kimco is situated, should benefit our shareholders going forward.
Our next question is from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question.
Hey, just, I was just looking at the ABR of RPT at 16 versus Kimco at 20. Maybe can you talk about sort of that delta? And is that when you talk about 70%-72% strategic overlap, I'm wondering if that means there could be an even bigger sort of sale portfolio other than the initial, that you identified here. Thanks.
Yeah, it's a good question because I think it's important to always look at ABR and then look at it next to the mark-to-market opportunities, right? So ABR is a snapshot of where the rent is today, and it's just like, you know, buying the worst house on the best street. You wanna have the opportunity to get that upside and mark that to market. And I think when you look at the portfolio that RPT has, it's one of the oldest REITs in the shopping center sector. Some of these assets have, you know, leases been in place since, you know, for decades. And then when you look at their leasing spreads, that's where we get really excited because they're sector-leading on leasing spreads. That mark to market is something that is truly an advantageous way to grow cash flow growth.
Because in a lot of ways, these tenants don't wanna give up that space when it comes to, to the lease end. You know, and that mark to market, when a tenant's in place and you get that spread, when there's no tenant improvement announced, no landlord work going into the space, that's nirvana. That's when you really get the mark to market and really get to crystallize that value day one without any capital going out. And that's what we think is really happening here at RPT, and we think we can crystallize it further going forward. So again, the Midwest portfolio is one that we're going to go asset by asset and put together strategic plans for, but the growth embedded in those assets is significant. And there's a lot of high-quality, grocery-anchored centers that we're gonna love to own long term.
Then again, there's gonna be some leasing opportunities, I think, to add grocery stores to a lot of these assets as well. We're in a very fortunate position where we're very comfortable with the transformation that RPT has executed, and now we feel like we're in a great spot to go asset by asset and put together strategies for these assets going forward.
Our next question is from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your questions.
Thanks for the time. Just a quick question, actually, two parts. Could you talk a little bit about the air rights on the RPT portfolio, how you thought about valuing those, and is that incorporated in the low eight cap rate that you discussed? And then the follow-up would just be, when you guys say it's immediately FFO accretive, is that encompassing or including the gapped mark-to-market on the debt and the leases? Just to clarify that point.
Sure. So on the first point, on the air rights side of it, you know, that is again, future value creation. It's not embedded in the valuation on the, on the implied cap rate. That's really on, on the cash flow today. So really, what we're looking at is, again, highlighting our platform opportunity to take our entitlement plan and go through all of their assets and see where there's future densification opportunities, so we can work on entitling for setting those opportunities up in the future. But as of today, as I mentioned, it's all about leasing. You know, Mary Brickell Village, I would say, is the one where we're gonna have heightened focus to really line up future densification opportunities. But those are years into the future, and again, right now, it's all about leasing for us.
Yeah, on the other question, again, it does not include all the GAAP adjustments yet. I mean, they need to still be, you know, completed. So that's a process that'll take, you know, several months as we go through, similar to what we did, with our previous merger with Weingarten. So it's more cash based.
Thank you. The next question is a follow-up from the line of Nick Joseph with Citi. Please proceed with your question.
Thanks. Sorry, just one quick one. Just in terms of the RPT preferreds, are those redeemed on a change of control?
Did you ask about the bonds?
No, the preferreds.
Oh, the preferred. The preferred, the preferred is not. The preferred has... There's no immediate call feature in that preferred. At 130% of the reference price, it can be called. So we'll be replacing the preferred with a similar Kimco preferred that's convertible under the same similar terms as the existing instrument.
Thank you. At this time, this will conclude our question and answer session. Well, thank you for joining us on our call today. You may now disconnect your lines at this time, and we thank you for your participation.