Q2 2021 Acadia Realty Trust Earnings Call

[music].

Good day and thank you for standing by welcome to the Acadia Realty Trust second quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you will need to price.

Star 1 on your telephone please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to Teresa Wang. Thank you. Please go ahead.

Good morning, and thank you for joining us for the second.

Quarter 2021, Acadia Realty Trust earnings Conference call. My name is Theresa Wang Summer Interning, Our finance Department before we begin please be aware that statements made during this call that are not historical maybe deemed forward looking statements within the meaning of the Securities and Exchange Act of $19.34, and actual results may differ materially.

Price indicated by such forward looking statements due to a variety of risks and uncertainties, including those disclosed in the company's most recent form 10-K, and other periodic filings with the SEC forward looking statements speak only as of the day of this call July 29th 2021 and the company undertakes no duty to update them during.

From the cost management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia as earnings press release posted on its website for reconciliation of these non-GAAP financial measures with the most direct comparable GAAP financial measures once the call becomes open for questions. We ask that you limit your first.

During the school to 2 questions per caller to give everyone. The opportunity to participate you may ask further questions by Reinsert yourself into the queue and we will answer as time permits now it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks.

To reach that great job.

First Rob and thanks to all our summer interns for joining us this summer.

Good morning, everyone.

As you can see from this quarter's result, several of the trends that we have discussed on past calls.

Our NAV showing up in our earnings performance.

So today I'll spend a few minutes discussing.

Seeing how these trends are positively impacting our business and then we will delve into the details.

First of all.

Retailer demand continues to accelerate and it continues to broaden.

As we've noticed noted on past calls while leasing activity was initially weighted to.

Substitute and suburban portions of our portfolio.

We're now seeing a meaningful pivot from lockdown oriented necessities to more discretionary spend.

We're also seeing retailers once again focusing on the key street.

And the patients in the major markets that we're active in.

And while we're seeing solid performance throughout our portfolio 1 of the key Differentiators of our company is our ownership of street retail in key gateway markets, a differentiator that certainly caused legitimate concern during COVID-19.

Thankfully the rebound here is both welcome.

And worth discussing so let me spend a few minutes on the street retail segment of our portfolio as you know roughly 40% of our core portfolio. NOI consists of street retail and about half of that is in the highest density corridors.

Of the major gateway markets during the early days of Covid.

This half of our street retail was hardest hit whether it was Soho in New York, The Gulf Coast, and Chicago M Street in Georgetown.

Retailers, we're facing an existential crisis.

Unknown duration.

And Thats us.

Certainly in the early days of a lockdown it was the other half of our street retail in the lower density markets, such as Greenwich Avenue in Connecticut, Our Armitage Avenue in Chicago.

As well as other necessity and suburban components of our portfolio that had the most retailer activity.

And.

Understand this lower density component continues to perform well.

We are seeing a shift in attention by our retailers back to the higher density corridors and we're seeing this much sooner than we expected.

In the luxury segment for example, many retailers are.

Not only staying in their flagship locations, but they are expanding their footprint, especially in key must have markets.

This is evidenced by our second quarter lease with YSL at our gold coast location at Rush <unk> Walton in Chicago, where are they.

While we expand our expanding their existing store by over 50% and they entered into a new 10 year lease.

Across the street from Us.

<unk> is expanding there.

Pes as well providing further evidence of this submarkets rebound from 12 months ago.

And this is certainly not just a gold coast phenomenon. This trend is playing out in Soho as well as other key markets and it's not just luxury retailers.

Bridge, an aspirational retailers are also beginning to show up as well.

For example in Melrose place in Los Angeles after the end of the quarter we.

We did a lease with 1 of our retailers there for another 5 years at a double digit lease spreads showing the strength of this carter and retail retailer confidence in.

In Los Angeles.

Now to be clear retailers are still being selective on which markets. They are choosing to expand into.

Extended it is still a tenants market.

But what recently felt like a decade's worth of vacancy.

Is quickly being absorbed.

And while retailers and landlords are climbing out of several years of headwinds headwinds that predated COVID-19.

The recovery is encouraging with vacancies being leased up in Covid discounts were heavily structured leases quick.

Quickly being replaced with real deals.

That are approaching or in some cases exceeding pre COVID-19 risks.

That along with luxury retail.

We're seeing that digitally native and other up and coming direct to consumer retailers stepping up.

Retailers, whose influence seems to go far beyond their physical footprint only a few years ago.

These retailers debated the need for physical stores.

That debate is over.

Whether it's <unk> Parker or all Bert the best in class digital retailers are seeing the significant benefit of physical stores.

For instance on M Street in Georgetown last quarter, we added digitally native retailer ever linked to our portfolio.

And this is encouraging because Georgetown is still in the early stages of reopening and the fact that tenants such as all birds.

Mason My family's favorite Levein bakery are arriving on M Street all of this is further evidenced.

Of the support for this cargo.

And it's not just retailers, hoping to capture a future rebound tenant sales performance is already confirming the recovery.

For several retailers in our portfolio or in our Carter's they are beginning to post sales performance that is already comping positive.

So pre COVID-19 sales and this is before the return of international tourism and before a full reopening.

Even in markets that have been slow to reopen such as San Francisco, Despite all of the headlines.

We're beginning to see positive activity.

And as these.

Key streets continue to activate.

We are entering into what is setting up to be a nice multi year rebound.

Not only our rent significantly below prior peak, but it appears clearer now that retailers are committed to connecting.

<unk> directly with their customer both digitally but also through these important store, so whether it's <unk> or be Parker.

We are seeing the increased recognition of the importance of these locations in an omnichannel world.

As John will discuss even before <unk>.

Taking into account.

Count anticipated additional market rent growth.

We should be able to drive above trend NOI growth at higher levels from the next several years.

For instance, in Soho, notwithstanding the huge gut punch over the past 18 months, we forecast our Soho.

<unk> whole portfolio NOI to nearly double over the next few years.

And then assuming that this rebound continues.

The growth could be even better in the street retail component of our portfolio.

Where we have more opportunities to mark to market our leases than in our.

Weighted portion of our portfolio since fair market value resets resets are much more common.

In our street portfolio than in our suburban.

Then from a capital markets and investment perspective, while there has been less actionable distress then.

<unk> thought in the early days of the crisis.

Interesting and actionable deal flow is increasing.

In terms of our funds 5 investing as Amy will discuss.

We are seeing a nice increase in acquisition opportunities and this is due to the fact that in the private markets.

And when my real estate still remains somewhat out of favor.

Now we expect that this will shift.

Over time, given that in the debt markets borrowing cost and debt proceeds have returned to pre COVID-19 rates and levels.

And in the public markets, we have seen significant compression in implied cap rates over.

The past year, but for a variety of reasons.

It may take some time for the private markets to catch up and in the interim we will continue to deploy capital Opportunistically. So with respect to fund 5 we're continuing to selectively buy out of favor properties with unleveraged yields of about.

Retail net then lever them 2 to 1 with borrowing costs, well below 4% and clip a mid teens current cash flow.

Now this doesn't ignore the fact that the United States is over retail.

Okay.

Or that achieving real net effective rental growth is going to take hard work.

It's going to take some luck.

But these acquisitions don't require significant growth they just require stability.

And if we see cap rate compression commensurate with the public markets, which certainly seems likely over the next couple of years the opportunity for asymmetrical upside feels pretty compelling.

<unk>, 8% with respect to our core portfolio investments our acquisition pipeline is also heating up.

As you know our focus here has been to selectively acquire assets in the highest barrier to entry markets, where we can achieve.

Superior long term growth.

Obviously COVID-19.

And related issues were a real gut punch for many of the Carter's we're active in but thankfully we are seeing encouraging signs of long lasting rebound driven by 3 important factors.

First <unk>.

Rents in many key streets that we're active in are at a cyclical low point.

Second.

Many of the tenants, we do business with have now successfully navigated the so called retail Apocalypse.

And third and finally, the consumer is.

Very healthy shape and returning to discretionary spending.

Yeah.

Given the amount of disruption we have seen in the major markets. It's understandable that deal flow initially slowed but sellers are beginning to return and given the roller coaster ride they went through we.

We are seeing sellers being realistic on rental growth and other assumptions. So while it is still a bit early.

Based on the improving deal flow. We are currently involved with and what we are seeing in the pipeline, we expect to be able to acquire best in class retail properties in the key high barrier to entry Carter's.

Where retailers are going to continue to cluster.

And while in the second quarter, we began to put some dollars to work Accretively, we are confident that.

As meaningful buying opportunities arise.

We will be in a position to capitalize them.

And.

While our strong embedded internal growth certainly means we can afford to be disciplined and we can afford to be patient.

Our relatively small size means that every $100 million of acquisitions add about 1% to earnings base.

So to conclude we.

We are pleased to see our quarterly results reflect the rebound in leasing and operating trends.

It is also encouraging to see retailers stepping up again for the unique must have locations that dominate our portfolio.

And then most importantly, it is.

Exciting to think about the potential opportunities in front of us.

Specially from management teams like ours with access to multiple types of capital.

And a proven track record of deploying it.

So with that I'd like to thank our team for their hard work and success last quarter and I will turn the call.

Yeah.

Thanks, Ken and good morning, everyone I'll start off with a discussion of our second quarter results followed by an update on our core NOI growth expectations, and then closing with our balance sheet.

Starting with the quarter <unk> came in above our expectations at <unk> 30, a share and this was driven by a combination of 2 items first.

Rent commencement on new street leases, including in Chicago, with Veronica Beard on Rush and Walton along with J crew in Lincoln Park, and in New York City with watches as Switzerland in Soho.

And consistent with what we had observed last quarter, we are continuing to see leases commence earlier than we had initially anticipated as retailers expedite their store openings.

Call to China in an effort to capture the extraordinary consumer demand.

And secondly, we are continuing to see significant improvements in our credit reserves.

The improvement this quarter was driven by increased cash collections, we collected 96% of our pre COVID-19 rents during the second quarter and saw continued consistency within our street urban and suburban.

Urban portfolios and net of 96% cash collection rate, our quarterly reserve should trend in the $2 million range or 2 to 3 cents a share.

Additionally, during the second quarter, we recognized a onetime benefit of approximately <unk> from cash collections on past due rents.

The majority of this benefit came from our gym in theater tenants.

Tenants that represent approximately 4% of our core ABR.

As outlined in our release given the continued growth and conversion of our pipeline into executed leases along with a significantly improved outlook on our operations. We have once again raised our full <unk> full year <unk> guidance with an updated expectation of $1.

EBITDA of $1.14.

And this represents a 7% increase at the low end of our original guidance.

And in terms of our <unk> outlook for the second half of the year, we are anticipating that our quarterly <unk> <unk> should trend in the 25% to 27% range and this is before any possible benefits from cash basis.

<unk> for the sale of Albertson shares.

As it relates to albertson specifically.

We have revised our 2021 guidance to reflect an updated range of zero to $7 million or zero day, 8 a share for potential share sales.

And as a reminder, irrespective as to when the shares are actually sold given that our cost.

Basis and are Albertson stock is zero its simply a question of when not if that there is upside shows up in our earnings.

Using today's share price, we have over $20 million of profit represented representing in excess of 20 a share of <unk>.

In terms of timing, while its share share sale is still possible.

This year that decision is with our partners is that decision with our partners is based upon a variety of factors and for purposes of modeling 2021 earnings it may be prudent to push any realized gains into next year.

So not only are we incredibly pleased with the performance of our portfolio of this quarter. We are also.

Also increasingly optimistic about the much more impactful core NOI growth that we believe is still in front of us.

This growth is being driven by the recovery in our street and urban portfolio and if our business continues to perform in line with our expectations. This should provide us with meaningful multi year internal growth, which in summary has.

And our core NOI between 5% to 10% annually through 2024, with an expectation of more than $25 million of incremental NOI over 2020 that we believe gets us to $150 million in 2024, so while it's premature to provide multi year <unk> guidance at this point given the leasing.

This progress we have made to date and the acceleration of recovery within our portfolio.

Not only are we anticipating meaningful <unk> growth in 2022, but we are well positioned for strong <unk> growth for the next several years and that's even before we layer in the impact of any accretive redevelopments external growth or the profit profitable.

<unk> projections that we anticipate should continue to rise from our fund business.

The 3 the 3 key drivers of this growth include first.

Profitable lease up of our core portfolio second further stabilization of our credit reserves and lastly, contractual rental growth.

Now I'll provide a bit more granularity on.

On each of these pieces first on the lease up.

As outlined in our release, we have approximately $14 million of pro rata ABR in our core pipeline with more than half or approximately $7.5 million of that already executed.

And to further highlight the recovery that we see playing out within our street and urban markets.

60% of our exits executed leases have come from our street and urban portfolio with New York City alone representing nearly 40% of our current pipeline.

In terms of the pipeline itself you may recall when we initially started discussing it in the second half of last year. It stood at $6 million, so with the $7.5 million.

Of leases that we've signed to date not only have we signed 125% of our original pipeline, but we are also more than doubled it in the short period of time and this is providing us with an increased confidence in both our ability to successfully execute profitable deals and equally important the strong and increasing demand for our prime Street and urban locations.

Of these leases that have been executed are starting to meaningfully show up in our metrics.

Spread between our physical and leased occupancy grew over 100 basis points during the quarter to 260 basis points with our New York Metro portfolio, leading the way with a pro rata physical to lease spread of approximately 700 basis points at June 30.

And a $14 million pipeline represents our pro rata share of ABR and is comprised of over 400000 square feet of space with approximately 70% of the $14 million being incremental to our 2020 NOI.

In terms of the timing as to when we expect that our pipeline will impact earnings we anticipate that about 2.

$2 million of this will show up in 2021 as compared to our initial expectation of $800000 with an.

Mental $6 million to $8 million in 2022, and the balance coming in during 2023.

The second driver of our NOI growth involves our expectation of ongoing stabilization of our credit reserves as.

As I mentioned.

Sure at a 96% cash collection rate this translates into quarterly reserves in the $2 million range or $8 million or an annualized equating to <unk> <unk>.

We anticipate that of the $8 million in annual reserves annualized reserves.

That approximately 75% or $6 million.

Earlier lives will ultimately revert back to full rents with the remaining 25% or $2 million annual annualized ultimately not making it to the other side, providing our leasing team with the opportunity to profitably re tenant the space into what we are currently experiencing isn't very robust leasing environment.

And the last piece.

<unk> of our growth comes from contractual rental growth.

Given by the higher contractual rent steps built into our street leases. This blends to about 2% a year across our portfolio and contribute approximately $3 million of incremental annual NOI.

As a reminder, given the impact of straight lining rent contractual growth.

It doesn't increase our <unk>, but nonetheless, as an important driver of our NOI and ultimately NAV growth.

As an update on near term explorations consistent with a tenant rollover assumptions that we provided on our last call. Our NOI forecast continues to assume that we get back approximately $9 million of ABR.

At various points over the next 18 months from our remaining 2021 and 2022 lease expirations.

This $9 million includes approximately $4 million of ex of ABR expiring within the next 6 months from 2 tenants located in some of our best locations and we have meaningful traction.

<unk> 2 profitably re tenant these locations with a portion of this space already reflected in our pipeline.

Now moving onto our balance sheet during.

During the second quarter, we successfully closed on a $700 million unsecured credit facility with an accordion feature enabling us to upsize it to $900 million.

This new facility significantly increased our liquidity along with extending our maturities for 5 additional years and we saw incredible support on this deal the transaction was oversubscribed with all of our existing banks remaining in the facility and we successfully added 4 additional banks.

The successful execution of this transaction gives us further confidence.

Our ability to pursue an ex execute external investment opportunities. Additionally, through improve operations and deleveraging. We have also brought our core debt to EBITDA down to the mid sixes and are on track to get into the fives in 2022, as we gain as we begin to see the meaningful NOI growth show up in our results.

Lastly is out.

Outlined in our release, we raised approximately $46 million through our ATM at an average issuance price of 20 to 30 seconds.

And we were able to accretively redeploy these proceeds through the funding of investments and repayment of debt.

In summary, we had a strong quarter. We came in ahead of our expectations and have continued optimism as we look.

And on the next several years.

And with the additional liquidity that we generated this past quarter, we are well positioned to pursue an aggressive external growth strategy.

I will now turn the call over to Amy to discuss our funds.

Thanks, John today, I would like to provide a brief update on each of our 4 active funds beginning with pan side.

Forward first we are pleased to report that fun deal flow is kicking in with our fully discretionary capital finally, getting the credit it deserves.

We currently have approximately $170 million of fund size of acquisitions under contract or under agreements in principle.

This includes the $100 million.

We previously reported as of the first quarter.

Consistent with fund 5 existing investments. This committed pipeline is comprised of higher yielding suburban shopping centers.

For stable properties pricing remains at approximately an 8% unleveraged yield in fact private cap rates for these types.

Sub suburban shopping centers have remained at this level since at least 2016, when we when we began leaning into this strategy with funds for.

At this going in cap rate, we have been able to maintain an approximate 400 basis point spread to our borrowing costs, enabling us to clip of mid.

Mid teens leveraged yield on our invested equity.

More recently, we are also seeing new acquisition opportunities with some immediate value add re leasing which plays to our strength as retail operators.

At the beginning of the year, we had allocated 60% to fund 5.500.

$2 million of capital commitments.

Including our committed acquisition pipeline, we are now approximately 75% allocated and we have until August of 2022 to fully deploy the rest of our dry powder.

Due to our selectivity at acquisition are exists.

Distinct fund 5 assets have navigated the pandemic well with.

With our collections rate that is now in the mid nineties consistent with our core portfolio.

And notably throughout the pandemic. This carefully selected portfolio has delivered a consistent mid teens leveraged return.

Over the life of our inverse.

<unk>, we expect to generate most of our return from operating cash flow.

That said there is a tangible opportunity for outsized performance due to cap rate compression.

After all real estate borrowing costs have returned to their pre pandemic levels and public market cap rates for retail real estate have also compressed.

While private market cap rates remain the same.

As a result, we believe that signals are pointing to reversion to the mean in the private markets to over the next few years.

And every 50 basis points of cap rate compression would add 250 to 300 basis points to our projected irr's.

Given the amount of capital on the sidelines and recovering retail fundamentals. This is also a good time to Opportunistically harvest properties.

1 area of focus is our grocery anchored properties, which have gotten a pandemic boost and remain in fever in the capital markets.

To that end during the second quarter.

We completed the sale of 4 grocery anchored properties all located in the state of Maine.

These were part of fund force northeast grocery portfolio.

At 1 property, we had recently completed the installation of a new junior anchor and at 2 others. The supermarket anchors had recently exercised.

Their next 5 year options, providing enhanced cash flow stability and finance ability for the next buyer and better exit pricing for us.

Finally, turning to fund 2 in city point, we continue to see positive momentum at this iconic property with shopper traffic and tenant sales both continuing.

Moving to increase.

Recall that city point is located at the epicenter of a development boom in downtown Brooklyn, which has resulted in the completion of nearly 16000, new residential units since 2004, and another 13000 units either under construction or in the development pipeline.

Among our New York City neighborhoods downtown Brooklyn, now ranks 13th for median home price up nearly 80% year over year to $1.4 million.

This should all enter to the benefit of our mixed use project.

On the city point leasing front, we've seen strong interest in the fall.

Former century 21 space from both traditional retail users and commercial tenants.

There is also strong interest in the concourse level, which is anchored by our by our Dekalb market Hall.

And we're pleased to announce that we recently executed a lease with spirit physical therapy for a 2000 square foot space.

Fronting Gold Street, and the New York City Web development of a new 1 acre park.

With all these positive indicators. This is the perfect time for us to go to market to refinance this project over the next 12 months.

So in conclusion, our fund platform remains well positioned with our successful capital allocation strategy.

<unk> and our portfolio of existing investments that continue to March towards stabilization.

Now we will open the call to your questions.

As a reminder to ask a question you will need to press star 1 on your telephone to withdraw your question press the pound key please stand by while we.

<unk> the human day roster.

Okay.

Okay.

Your first question comes from Todd Thomas with Keybanc capital market.

Yes.

Hi, Thanks, good morning.

John.

Thank you both.

And a lot of detail around NOI growth from the portfolio over the next few years and I'm just curious within the $150 million of NOI that you are talking about achieving by 2024.

I think Ken I heard you say Soho Street retail NOI may double in the next few years.

Is that right and is that specifically.

The Soho collection of assets that you own or did you mean, the New York Street and urban retail portfolio overall.

Net Soho Todd Soho alone.

Yes.

I was picking that as an example, because so certainly.

Was hit hard.

Hard during the pandemic and depending on what.

What assets you owned what basis, where the rents were.

The outcome certainly for many people felt uncertain and as we're looking at this we're seeing a very nice rebound.

Okay and then.

The comments about a potential above average NOI growth over the next couple of years with with that.

NOI growth.

It's pretty clear that the street and urban retail will lead the way just given the leasing pipeline in your commentary there, but can you just touch on the suburban retail portfolio and your thoughts around.

Yeah.

In that segment of the core portfolio.

Sure.

And let me touch on on both the roller coaster ride that street.

Assets went through from 2010 to 2015.

Rents grew between 10 and 20.

8% a year.

And we commented that treat street trees don't grow to the sky.

And sure enough 2016, and 17, you saw a correction downward.

And so pre Covid. Many of these streets were facing significant headwinds vacancies and rents were.

We're down.

Covid was another body punch.

And now retailers are able to climb out at a very low rental basis compared to certainly the 2015 peaks.

And so when we talk about our confidence of growth it's because 1.

They are starting at a low rental basis.

2 there is strong pent up demand and in an omni channel world those kind of locations can be really powerful for the retailer. So that's why we see above average growth there now in the suburban side. There is a lot of positive.

Momentum on that side as well.

But.

We do need to recognize that.

Unlike what I described for street retail rents.

We're slow to grow in the 2010, 11.12, but as the economy was expanding.

Rents in our suburban portfolio of spec.

Especially our satellites grew in the 2015 to 2019 'twenty period. So we're starting off of a higher base.

But the consumers coming back.

There are shifts to the suburbs. So we're seeing certainly right now a nice lift there and we remain hopeful that that.

That side of our portfolio can do well, but again.

Rent starting points and different set of expectations. The next few years, we will see our hope is that everything does well, but we do remain very bullish on this rebound that we're seeing industry.

It is now.

Amy mentioned.

Some monetization opportunities from dispositions in the funds business.

It is now a good time to explore recycling capital and sort of selling our calling the suburban retail portfolio at all.

We're getting there as I think I pointed out and Amy pointed out there's still a disconnect between the public markets and the private markets for a variety of reasons that I could get into later.

I'd.

Not call it a sellers market, maybe in some select areas and secondly.

Notwithstanding my enthusiasm for our street retail retail portfolio and its recovery, let's also realize we're still climbing out of a global pandemic that hit us hard and thank goodness for the diversification we had within our core competencies.

<unk> of.

Long term stable leases with target with strong suburban assets. So.

We're certainly considering everything Todd, but I don't think you should expect a huge culling until the private markets catch up with the public which will happen, but it may take a year or 2.

Okay alright, thank you.

Yeah.

Your next question is from Floris van <unk> with Compass point.

Thanks, guys for taking my question.

So there's a lot to chew over them at a lot of good news here.

Certainly if I, if I read the tone, but.

John maybe.

You talk about the $150 million of NOI.

And a couple of Years' time, but yet you gave a range of same store NOI growth of 5% to 10% if I do the math.

I mean, I can get to north.

$170 million of NOI are you.

Are you it seems like you're.

Certainly, leaving some some some room for 4 for exceeding I guess your headline numbers what is driving the confidence behind that is it is it just the tenant demand that youre seeing.

So of course, I think if you go back right I think before the pandemic hit US we were on track to do this and that was through a combination of several.

The factors, we look at today, we went into the pandemic with lease up but we went in with.

Strong contractual growth right. So I think we had those factors in front of us before and those havent those havent changed I think.

It gives us the confidence that we are feeling better about that trajectory on the leasing pipeline that we have so I think if we look at how that's accelerated at $6 million pipeline. Then we started just 6.

6 months ago quickly grew to 8 to 10 now the 2014 were seeing demand that is at levels that was bill.

<unk> before the pandemic. So I think that's what's really giving us the confidence that retailers and echoing Ken's remarks are starting to show up in our markets. They are.

Coming to the spaces that they are having store profitability from them. So I think that's how we see us getting there in the 5% to 10% range theres going to be some years given that we are leasing up.

What a lot of space that are going to be closer to the 10% something closer to the 5%.

And we are giving ourselves some room that if this this rebound does come back and we do see.

Some of the rent growing beyond what our current ex patient expectations are today I'm optimistic we can we can beat that but I think just on our base case and what we're seeing.

We see a pretty clear path to getting there and let me add 1 more point because John is spot on in terms of retailer demand, but what caught me off guard and I think caught a lot of us off guard.

Was the fact that certain retailers and in Soho, but also in other markets that.

That got hit hard certain retailers, especially luxury are already comping positive to pre COVID-19 sales before the international tourism that we always credited those retailers for achieving their sale, it's before that even happens.

We know there's a bunch of reasons pent up demand healthy consumer a variety of other factors, but I would say, it's not just tenants, calling us, saying, hey, we want space its tenants showing us their sales performance.

And it is certainly counter intuitive.

As to what you would've expected climbing out of a global pandemic and a painful recession and it is showing how this climb out is going to be different than the others.

Just just to make sure that that.

And I understand in net.

Mark I understand so your guidance.

<unk> assumes.

Again the.

The $4 million of that includes $4 million of rent, leaving your portfolio and presumably not getting released right away, but maybe gets filled sometime next year is that is that correct.

So first just to confirm you are talking about the of the 9 million of.

ABR that rolls through 2022, the $4 million that I mentioned is we expect rolls in the next 6 months just to confirm is that the yes.

Yes, that's correct.

So, yes, I think the expectation will be a bit of downtime, but what I will point out is that within our pipeline. Some of that is already already in there. So I think the downtime and keep.

In mind these are.

It could be a release, which could be a minimal amount of downtime. So yes.

The assets.

It's certainly in our in our expectations, but 1 we think this will be high quality space that gets leased up quickly and profitably.

And maybe maybe 1 other.

Yeah.

A question in terms of the.

As you look at New York, and I know that.

Talk to you guys in the past about this as well, but your opinions on the demand for so we wanted to.

You guys were very.

Smarten picking out Soho, which is more domestic.

Focused not as dependent on on tourism et cetera, how does your view in markets in New York, how have they changed or evolved as obviously tourism has been decimated times square has been on its heels are you starting to look at that market in <unk> and <unk>.

Potentially see.

For attractive opportunities relative to maybe 12 months ago or 24 months ago.

So.

The short answer is we're looking at multiple different markets and depending on the price point.

The Devil's in the details, but let me try to get more to your point Floris, we do say.

There is a chance there.

Net the return to work component of Midtown Manhattan will either take a long time to come back.

Or will change now we have very little exposure to that specific meaning whether you come to the office 4 days.

As a week or 5 days, a week or whether it starts labor day or Thanksgiving.

That's really not going to impact where we're focused right now it could impact other markets and I think we need to be open minded to those changes.

And I, probably would be less enthusiastic about buying.

2 retailers dependent on how many days a week you come into the office, but that was always the case in other words, we've said for years not all foot traffic is created equal and you need to be very careful about trying to capture a sale from someone rushing from grand Central station to their office.

And we will continue to be cautious about that as it relates to the time squares of the world, they're going to come back. It's a matter of how much time does it take in a whole bunch of uncertainty that exists right now for us to buy into that we got to get paid for the uncertainty.

There are other places that I remain more bullish on than I.

So if he can be constructive and get the kind of returns we want so more likely youll see us continue to stay focused in those areas that we're comfortable with I mentioned in the prepared remarks, Melrose place great Little few blocks and we're seeing positive lease spreads we are seeing.

I think positive sales performance relative to pre Covid, well, that's great and let's continue to do those as well.

I guess the.

The.

<unk>.

Thinking about no growth place, it's really it's relatively small in that market is relatively small.

Seeing how much capital can you realistically deploy.

In submarkets like that versus obviously massive markets like times square or Madison Avenue.

So we can.

So we're relatively small to Florida, so as I pointed out every $100 million of acquisitions adds about 1%.

<unk> to our earnings so we do not have to win any pie eating contest in order to achieve outsized growth for our shareholders that being said you're absolutely right. There are some markets, where we will add.

Fewer amounts of dollars, but let's make sure we're doing it wisely and Accretively and if we do we win.

So and then there will be others, where there could be outsized returns still a little early but we think we will hopefully be able to present, a nice combination of both.

Your dog agrees with me.

Okay. Thank you sorry about that guys.

That's it from me.

Thank you.

Your next question comes from Linda Tsai with Jefferies.

Yes, hi in terms of the increased $2 million pipeline just from June what percentage of that is from street and urban versus suburban.

Fairly consistent blend Linda so I'd say, it's probably following the 60.60.

Good day of things, we're seeing still seeing incredibly strong demand and in the.

The street and urban space, I think consistent consistent with the overall.

Okay.

And then John regarding your comments on improved liquidity from both debt and equity and pursuing a.

A more aggressive external growth strategy.

How quickly would you expect to deploy this capital.

And contractual rent increases at 2% of growth and $3 million of NOI.

What does the external growth look like in comparison.

Yes, I'll, let Ken hit the external growth, but what I can tell you that of the $46 million.

For liquidity that we raised through the ATM. This quarter, we will we were able to redeploy that accretively. So we did a structured finance investment this quarter that was incredibly profitable and through deleveraging and a couple of other investments. We did we were able to deploy a relatively modest amount accretively. So I think I'll turn it over to Ken as we look.

But I think between the expansion of line and the flexibility we have on that we have a lot of firepower to put to work.

Yeah. So.

John's right and we have strong embedded internal growth. So we don't have to rush to create external growth just for the sake of growth but.

Sellers are coming back to the table.

Everyone hit in their bomb shelter for awhile and now that day.

Owning retail requires a level of expertise.

Perhaps now is a good time, because we have a decent sense of where rents are we.

We have a decent sense of where values are.

Look forward costs are.

And the sellers are starting to show up because it takes not just us having the capital it requires realistic sellers and initially we thought that would be the debt holders as we all know we did not see the debt crisis and real distress selling and buying.

Borrower attunity, but what we are now seeing whether it is lenders whether it is other people in the capital stack core borrowers with true equity, we're seeing them come to the table I don't want to predict exactly when it happens because if I say, we're going to do $300 million next quarter and we don't we will spend the entire next call talking about that we're going to put this money.

Awkward wisely, we are comfortable with multiple types of capital and access to it and I think it's going to be a really exciting time for companies with our core competencies to both create internal growth and then supplement that with external growth.

And then Ken you mentioned, you're more bullish on certain markets Melrose are there any other streeter urban markets that the pandemic has uncovered that makes sense for your portfolio.

Yes.

You will not hear me say them right now.

But.

The pandemic did cause a reshuffle.

<unk> of the deck.

And let me explain my interest is derivative of where our retailers say you know what we could plant a flag. There. We can do business. There we can see long term growth and sign long term leases there.

And those markets if we can get in at the right price, we will listen very carefully.

Carefully to what our retailers are doing and as you all know it can't just be because retailers are interest. It it has to be that they can do the sales and even if it's strong for a retailer we need to see that there are adequate barriers to entry.

Such that we as a landlord have pricing power.

Our team is.

The best I think doing a great job of focusing on a variety of markets, but it very well may be.

It looks more like the existing great markets.

Subtract, 1 or 2 and add 2 or 3 then it is a wholesale reshuffling of where retailers.

Buffers, and thus us landlords want a day, so stay tuned on that side.

Yeah.

Thank you.

Sure.

Yes.

Your next question is from Katie Mcconnell with Citi.

Great. Thank you.

So given.

Sure, Yes, you've made in street retail leasing this quarter can you talk about how the structure of leases has evolved in terms of the flexibility of our operating tenants nationally and has been negotiating power shifted back to you in NAFTA Youre able to question Mitchell rents more aggressively from here.

Yes, and this is.

All of the important Katy because first of all what I would tell you is we are managing through with our leasing team.

In case of Whiplash.

Non.

Not that many months or quarters ago, we were trying to hold retailers hands to make sure. They can get through and leases were very structured.

Structured with our emphasis on percentage rent.

And a whole bunch of uncertainty what I commented on prior calls is we were very flexible and cooperative in the short term and we found our tenants more focused on the short run. So we were not signing long term 10 year.

Impulses with contractual growth, we were doing mainly shorter term.

Leases fast forward to the last quarter today, you've heard US mentioned, we signed a 5 year renewal we did an expansion for 10 years Youre seeing real leases.

Less dependent on.

<unk> were not relevant to percentage rent than otherwise.

And while it is still very much a tenant's market, while you should expect even in the best of the markets. The ones. We're most excited about youre going to see headlines of vacancy vacancy frankly that we welcome because we need to.

On the right tenants coming back and we need to see the right tenants, expanding but youre going to see a lot of vacancy so.

<unk> in some cases below pre COVID-19 and other cases at or above.

We'll lease term real tenants real balance sheets and all of that.

Seals, good and then add to that what we see as real market rent growth opportunities as well as contractual growth feels pretty good it feels a lot better.

Than anything we talked about 2 or 3 quarters ago.

That's helpful. Thanks.

And then with the additional fund acquisitions added to the pipeline this quarter, what should we expect as far as the timing of getting those over the finish line by the end of this year.

If our team can't get those over the finish line. We all have problems some of them are taking longer.

For deal specific reasons in 1 case lender approval of assumption of the debt.

In another case, a pre condition to closing around.

Tenancy, so understandable reasons that they're not closing as fast as they normally would but all of these are teeing up very nicely and.

It's a good business again and Amy emphasize this if we're clipping mid teens returns.

And if we got through the Covid crisis without any material impact to those returns a couple of quarters got hit hard. We all went through that and then they are returning.

And.

And it's at the 8 cap level, if we see cap rate compression commensurate with what we're seeing in the public markets commensurate with what we're seeing in the debt markets.

Could be really powerful returns, we hope that deal flow continues to grow every sign that I'm seeing is that it will.

Feels like a good.

Business to both get these deals closed before year end.

And then there should be a bunch of behind that.

Great. Thank you.

Okay.

Yeah.

Your next question is from <unk>, Kim with <unk>.

That.

John you guys provided pretty good commentary on the ABR in our pipeline for your core business, how about for the consolidated joint ventures.

Amy you want to handle the part you referred to the funds is that correct.

Yes.

Got it.

The pipeline for the funds in terms of.

Jim pipeline now that.

Lease ABR.

Oh got you.

We've seen consistent with the core portfolio activity, both in the suburban front as well as coming back on the street retail side. These are small portfolio. So I would just expect overall from to be consistent with the core.

Okay.

You mentioned some positive activity for city point alright.

Maybe putting a timeline on when we can expect like leased occupancy for that asset.

Yes, certainly that the pandemic just caused a little bit of day to our initial stabilized.

With vision, but we're seeing a lot of positive momentum as I mentioned Alamo has reopened at top performing movie Theater. We did had century 21 vacating the fall, but we've been really pleased with the leasing interest in that space.

And then we have our Dekalb market Hall that really remained open throughout the pandemic.

<unk> and.

They are ramping up sales once again I think on a prior call I mentioned the strong leasing momentum there in terms of operators. So signs are pointing to again, a really positive horizon for this asset, including a recent street level deal that we're excited about.

If I were.

Were to guess I would say 24 months.

And some of that is just how long it takes to get certain leases signed in the others.

The park that is getting built across the street that are gold Street portion faces.

It will happen over the next 12 months to 24 months.

The leasing ability for our street level Gold Street is going to be that much stronger.

Once that park has opened once we re anchor the century 21 again a lot of other good leasing happens so I would not encourage our leasing team to make everything.

Free single deal. This week I think it will take 24 months and I think we'll be rewarded for the patients.

Okay and just last question from me.

How are you are retailers thinking about yes.

Covid in adult variant and the impact it might have on day, 1 is willingness to sign deals or if it caused the delay.

I'm, just kind of high level thoughts there.

Yeah, and I think we need to.

All be aware of a few things 1 there's a lagging timeline between.

Issues like this and retailers' response.

So far we have not.

Seen any slowed.

And any concerns specifically around delta but.

But I think it's on all of us to recognize that this is a challenge.

It's a challenge that we can get through because the vaccine works and the vaccine will work vaccine hesitancy is certainly a concern, but I think retailers who are thinking.

Slowed 3.510 years down the line have the level of confidence that we will get through this even if it's a short term bump.

Okay. Thank you guys.

Sure.

Your next question is from Hong Zhang with Jpmorgan.

Yeah, Hi, I guess, you've talked a lot about renewed demand leasing volumes I am just kind of curious when you think youll move past being having to get its first year concessions on new leases.

I think we're getting close.

<unk> I think that.

Assuming the reopening occur as we all believe and see them to be.

The notion of initially.

Let's pretend we're talking about a restaurant and we only have a few restaurants, but initially the thought was.

If I.

I opened my restaurant or if I open my restaurant, who knows who will show up and what we're seeing now even in lockdown cities.

His restaurants are in many cases comping positive to pre COVID-19.

We have some restaurants in our portfolio that we put on.

Percentage rent than the percentage rent payments are higher than their contractual.

So some of the structure was in anticipation of it may take a while to reopen we're now seeing enough positive signs that both retailers and then we as landlords are looking past that and then the other side of this is.

Giving retailers the breathing room for 6 to 12 months.

And then they step up and step up significantly.

Again, we're starting to see that shift that retailers are thinking more long term and thus they are thinking about things on a straight line basis as Woodward.

Yes. Thank you.

And there are no further questions at this time from now I'll turn the call back over to management for closing remarks.

Great.

Thank you everybody for joining us enjoy the rest of your summer and we look forward to seeing you in person again.

<unk> concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

[music].

Yeah.

[music].

Yeah.

[music].

Good day and thank you for standing by welcome to the Acadia Realty Trust second quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand the conference over.

Over to Teresa Wang. Thank you. Please go ahead.

Good morning, and thank you for joining us for our second quarter 2021, Acadia Realty Trust earnings Conference call. My name is Theresa when I'm a summer intern in our finance Department before we begin please be aware that statements made during this call that are not historical maybe deemed forward looking.

Looking statements within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by such forward looking statements due to a variety of risks and uncertainties, including those disclosed in the company's most recent form 10-K, and other periodic filings with the SEC forward looking statements.

Speak only as of the day of this call July 29, 2021, and the company undertakes no duty to update them. During this call management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia as earnings press release posted on its website for reconciliation of these non-GAAP.

Financial measures with the most direct comparable GAAP financial measures once the call becomes open for questions. We ask that you limit your first round to 2 questions per caller to give everyone. The opportunity to participate you may ask further questions by Reinsert yourself into the queue and we will answer as time permits.

Now it is my pleasure to turn the call over to Ken Bernstein.

Steve <unk>, President and Chief Executive Officer, who will begin today's management remarks.

Thank you to reach the great job and thanks to all of our summer interns for joining us this summer.

Good morning, everyone.

As you can see from this quarter's result, several of the trends that we have discussed on past calls.

Of course.

Our NAV showing up in our earnings performance.

So today I'll spend a few minutes discussing how these trends are positively impacting our business and then we will delve into the details.

First of all.

Retailer demand continues to accelerate and it continues.

To broaden.

As we've noticed noted on past calls while leasing activity was initially weighted to the necessity and suburban portions of our portfolio.

We're now seeing a meaningful pivot from lockdown oriented necessities to more discretionary spend.

We're also seeing retailers once again, focusing on the key street locations in the major markets that we're active.

And while we're seeing solid performance throughout our portfolio 1 of the key Differentiators of our company is our ownership of street retail in key gateway markets a dip.

Theater that certainly caused legitimate concern during COVID-19.

Thankfully the rebound here is both welcome.

And worth discussing so let me spend a few minutes on the street retail segment of our portfolio as you know roughly 40% of our core portfolio NOI.

Roy consists of street retail and about half of that is in the highest density corridors of the major gateway markets. During the early days of Covid.

Half of our street retail was hardest hit whether it was Soho in New York, The Gulf Coast, and Chicago M Street in Georgetown.

Retailers were facing.

Missing an existential crisis of unknown duration.

And Thats understandably in the early days of a lockdown. It was the other half of our street retail in the lower density markets, such as Greenwich Avenue in Connecticut, Our Armitage Avenue in Chicago.

As well as other necessity and suburban components.

Portfolio that had the most retailer activity.

And while this lower density component continues to perform well.

We are seeing a shift in attention by our retailers that to the higher density corridors and we're seeing this much sooner than we expected.

A R.

In the luxury segment for example, many retailers are not only staying in their flagship locations, but they are expanding their footprint, especially in key must have markets.

This is evidenced by our second quarter leased with YSL.

Well at our Gulf Coast location at Rush <unk> Walton in Chicago, where are they.

Expand our expanding their existing store by over 50% and they entered into a new 10 year lease.

Across the street from Us.

Viewers expanding there.

Based as well providing further evidence of this sub markets rebound from 12 months ago.

And this is certainly not just a gold coast phenomenon. This trend is playing out in Soho as well as other key markets and it's not just luxury retailers.

Bridge, an aspirational retailers are also.

Beginning to show up as well for example.

In Melrose place in Los Angeles after the end of the quarter, we extended a lease with 1 of our retailers there for another 5 years at a double digit lease spreads showing the strength of this carter and retail retailer confidence.

In Los Angeles.

To be clear retailers are still being selective on which markets. They are choosing to expand into.

And it is still a tenants market.

But what recently felt like a decade's worth of vacancy.

Is quickly being absorbed.

And.

Retailers and landlords are climbing out of several years of headwinds headwinds that predated COVID-19.

The recovery is encouraging with vacancies being leased up in Covid discounts are heavily structured leases.

Quickly being replaced with real deals that.

That are approaching or in some cases exceeding pre COVID-19 risks.

That along with luxury retailers, we're seeing the digitally native and other up and coming direct to consumer retailers stepping up.

Retailers, whose influence seems to go far beyond their physical.

While footprint only a few years ago.

These retailers debated the need for physical stores.

That debate is over.

Whether it's <unk> Parker or all bird the best in class digital retailers are seeing the significant benefit of physicals.

<unk> stores.

For instance on M Street in Georgetown last quarter, we added digitally native retailer ever linked to our portfolio.

And this is encouraging because georgetown is still in the early stages of reopening.

And the fact that tenants such as Albers Buck Mason my family's favorite Levein.

Physical free are arriving on M Street all of this is further evidence.

Of the support for this car.

And it's not just retailers, hoping to capture a future rebound tenant sales performance is already confirming the recovery.

Baker several retailers in our portfolio or in our partners. They are beginning to post sales performance that is already comping positive to pre COVID-19 sales and this is before the return of international tourism and before a full reopening.

Even in markets that have been slow.

Reopened such as San Francisco, Despite all of the headlines.

We're beginning to see positive activity.

And as these key streets continue to activate.

We are entering into what is setting up to be a nice multi year rebound.

Not only are rents significantly below prior peak, but it appears clearer now that retailers are committed to connecting directly with their customer both digitally but also through these important store, so whether it's <unk> or be Parker.

We are seeing the increased recognition of the important.

And so these locations in an omni channel world.

As John will discuss even before <unk>.

Taking into account anticipated additional market rent growth, we should be able to drive above trend NOI growth at higher levels for the next.

Yes.

For instance, in Soho notwithstanding the huge gut punch over the past 18 months, we forecast our Soho portfolio NOI to nearly double over the next few years.

And then assuming that this rebound continues.

The growth could be even.

Several letter in the street retail component of our portfolio.

Where we have more opportunities to mark to market our leases than in our suburban portion of our portfolio since fair market value resets resets are much more common.

In our street portfolio than in our suburban.

Then from a capital markets and investment perspective, while there has been less actionable distressed than 1 might have thought in the early days of the crisis.

Interesting and actionable deal flow is increasing.

In terms of our funds 5 investing as Amy will discuss.

Even we are seeing a nice increase in acquisition opportunities and this is due to the fact that in the private markets retail real estate still remains somewhat out of favor.

Now we expect that this will shift over time, given that in the debt markets borrowing cost and debt proceeds have.

Turn to pre COVID-19 rates and levels.

And in the public markets, we have seen significant compression in implied cap rates over the past year, but for a variety of reasons.

It may take some time for the private markets to catch up and in the interim we will continue to deploy capital.

<unk> so with respect to fund 5 we're continuing to selectively buy out of favor properties with unleveraged yields of about 8% then lever them 2 to 1 with borrowing costs, well below 4% and clip a mid teens current cash flow.

Now this doesn't ignore the fact that the United States is over retail.

For that achieving real net effective rental growth is going to take hard work.

Going to take some luck.

But these acquisitions don't require significant growth they just require stability.

And if we see cap rate compression commensurate with the public markets, which certainly seems likely over the.

After a couple of years the opportunity for asymmetrical upside feels pretty compelling.

Then with respect to our core portfolio investments our acquisition pipeline is also heating up.

As you know our focus here has been to selectively acquire assets.

Our next game the highest barrier to entry markets, where we can achieve superior long term growth, obviously COVID-19 unrelated issues were a real gut punch from many of the Carter's were active but thankfully we are seeing encouraging signs of long lasting rebound driven by 3 important factors.

Assets first.

Rents in many key streets that we're active in are at a cyclical low point.

Second.

Many of the tenants, we do business with have now successfully navigated the so called retail Apocalypse.

And our.

A much stronger position to succeed in an omni channel world.

And third and finally, the consumer is in very healthy shape and returning to discretionary spending.

Okay.

Given the amount of disruption we have seen in the major markets. It's understandable.

Our in net deal flow initially slowed but sellers are beginning to return.

And given the roller coaster ride. They went through we are seeing sellers being realistic on rental growth and other assumptions. So while it is still a bit early.

Based on the improving deal flow, we are currently involved with and.

And what we're seeing in the pipeline, we expect to be able to acquire best in class retail properties in the key high barrier to entry Carter's where retailers are going to continue to cluster.

And while in the second quarter, we began to put some dollars to work Accretively, we are confident that.

As meaningful buying opportunities arise.

We will be in a position to capitalize them.

And while our strong embedded internal growth certainly means we can afford to be disciplined and we can afford to be patient.

Our relatively small size means that every hundred.

$1 of acquisitions add about 1% to earnings base.

So to conclude.

We are pleased to see our quarterly results reflect the rebound in leasing and operating trends.

It is also encouraging to see retailers stepping up again.

<unk> is a unique must have locations that dominate our portfolio.

And then most importantly, it is exciting to think about the potential opportunities in front of us.

Especially from management teams like ours with access to multiple types of capital.

And a proven track.

Record of deploying it.

So with that I'd like to thank our team for their hard work and success last quarter and I will turn the call to John <unk>.

Thanks, Ken and good morning, everyone.

I'll start off with a discussion of our second quarter results followed by an update on our core NOI growth expectations, and then closing with our balance sheet.

Again, starting with the quarter <unk> came in above our expectations at <unk> 30, a share and this was driven by a combination of 2 items first rent commencement on new street leases, including in Chicago with Veronica Beard on Rush and Walton along with J crew in Lincoln Park, and in New York City, with watches, a Switzerland and Soho and.

And consider.

<unk> with what we had observed last quarter, we are continuing to see leases commence earlier than we had initially anticipated as retailers expedite their store openings and an effort in an effort to capture the extraordinary consumer demand.

And secondly, we are continuing to see significant improvements in our credit reserves.

The improvement this quarter was driven by increase.

<unk> cash collections, we collected 96% of our pre COVID-19 rents during the second quarter and saw continued consistency within our street urban and suburban portfolios and net of 96% cash collection rate, our quarterly reserve should trend in the $2 million range or 2 to 3 cents a share.

Additionally, during the second quarter.

Immunize, the onetime benefit of approximately <unk> from cash collections on past due rents.

The majority of this benefit came from our gym in theater tenants that represent approximately 4% of our core ABR.

As outlined in our release, given the continued growth and conversion of our pipeline into executed leases along with a significantly.

We <unk> on our operations, we have once again raised our full <unk> full year <unk> guidance with an updated expectation of $1.5 to $1.2014.

And this represents a 7% increase at the low end of our original guidance.

And in terms of our <unk> outlook for the second half of the year, we are anticipating.

Improved quarterly <unk> <unk> should trend in the 25% to 27% range and this is before any possible benefits from cash basis tenants or the sale of albertson shares.

As it relates to Albertsons specifically.

We have revised our 2021 guidance to reflect an updated range of zero to $7 million.

Our zero day, 8 a share for potential share sales.

And as a reminder, irrespective as to when the shares are actually sold given that our cost basis in our albertson stock is zero its simply a question of when not if that theres upside shows up in our earnings.

Using today's share price, we have over $20 million of profit.

That are represented representing in excess of 20 a share of <unk>.

In terms of timing, while its share share sale is still possible. This year that decision is with our partners.

That decision with our partners is based upon a variety of factors and for purposes of modeling 2021 earnings it may be prudent to.

Any realized gains into next year.

So not only are we incredibly pleased with the performance of our portfolio of this quarter. We are also also increasingly optimistic about the much more impactful core NOI growth that we believe is still in front of us.

This growth is being driven by the recovery in our street and urban portfolio and apart.

Our business continues to perform in line with our expectations. This should provide us with meaningful multiyear internal growth, which in summary has us growing our core NOI between 5% to 10% annually through 2024 with an expectation of more than $25 million of incremental NOI over 2020 that we believe.

<unk> gets us to $150 million in 2024.

So while it's premature to provide multi year <unk> guidance at this point given the leasing progress we have made to date and the acceleration of recovery within our portfolio.

Not only are we anticipating meaningful <unk> growth in 2022, but we are well positioned for strong.

Strong <unk> growth for the next several years and that's even before we layer in the impact of any accretive redevelopments external growth or the profit profitable transactions that we anticipate should continue to arise from our fund business.

The 3 the 3 key drivers of this growth include first profitable lease up of our core portfolio.

Second further stabilization of our credit reserves and lastly, contractual rental growth.

Now I'll provide a bit more granularity on each of these pieces first on the lease up as.

As outlined in our release, we have approximately $14 million of pro rata ABR in our core pipeline with more than half or approximately.

$7.5 million of that already executed.

And to further highlight the recovery that we see playing out within our street and urban markets.

60% of our exits executed leases have come from our street and urban portfolio with New York City alone representing nearly 40% of our current pipeline.

In terms of the pipeline.

[noise] itself you may recall when we initially started discussing it in the second half of last year. It stood at $6 million, so with the $7.5 million of leases that we've signed to date.

Not only have we signed 125% of our original pipeline, but we are also more than doubled it in a short period of time and this is providing us with an increased confidence on both.

Our ability to successfully execute profitable deals and equally important the strong and increasing demand for our prime Street and urban locations.

And these leases that have been executed are starting to meaningfully show up in our metrics.

Spread between our physical and leased occupancy grew over 100 basis points during the quarter to 260 basis.

With our New York Metro portfolio, leading the way with the pro rata physical to lease spread of approximately 700 basis points at June 30.

The $14 million pipeline represents our pro rata share of ABR and is comprised of over 400000 square feet of space with approximately 70% of the 14 million.

Being incremental to our 2020 NOI.

In terms of the timing as to when we expect that our pipeline will impact earnings we anticipate that about $2 million of this will show up in 2021 as compared to our initial expectation of $800000 with an incremental $6 million to $8 million in 2022, and the balance coming in during 2000.

Points.

The second driver of our NOI growth involves our expectation of ongoing stabilization of our credit reserves.

As I mentioned earlier at a 96% cash collection rate this translates into quarterly reserves in the $2 million range or $8 million when annualized equating to <unk> <unk>.

We anticipate that of the $8 million in annual reserves annualized reserves.

That approximately 75% or $6 million when annualized will ultimately revert back to full rents with the remaining 25% or $2 million annual annualized ultimately not making it to the other side, providing our leasing team.

Same with the opportunity to profitably re tenant the space into what we're currently experiencing is at very robust leasing environment.

And the last piece of our growth comes from contractual rental growth.

Driven by the higher contractual rent steps built into our street leases this blends to about 2% a year across our portfolio.

And contribute approximately $3 million of incremental annual NOI.

As a reminder, given the impact of straight lining rent contractual growth doesn't increase our <unk>, but nonetheless, as an important driver of our NOI and ultimately NAV growth.

As an update on near term explorations consistent with a tenant rollover.

All of our assumptions that we provided on our last call. Our NOI forecast continues to assume that we get back approximately $9 million of ABR at various points over the next 18 months from our remaining 2021 and 2022 lease expirations.

This $9 million includes approximately $4 million.

<unk> of ex of ABR expiring within the next 6 months from 2 tenants located in some of our best locations and we have meaningful traction to profitably re tenant these locations with a portion of this space already reflected in our pipeline.

Now moving onto our balance sheet during.

During the second quarter, we successfully.

On a $700 million unsecured credit facility with an accordion feature enabling us to upsize it to $900 million.

This new facility significantly increased our liquidity along with extending our maturities for 5 additional years and we saw incredible support on this deal the transaction was oversubscribed with all of our exist.

<unk> remaining in the facility and we successfully added 4 additional bags.

The successful execution of this transaction gives us further confidence in our ability to pursue and ex execute external investment opportunities.

<unk> through improve operations and deleveraging. We have also brought our core debt to EBITDA down to the mid sixes.

Existing and are on track to get into the 5% in 2022 as we gain as we begin to see the meaningful NOI growth show up in our results.

Lastly, as outlined in our release.

We raised approximately $46 million through our ATM at an average issuance price of $22.37.

And we were able to accretively redeploy these proceeds.

<unk> funding of investments and repayment of debt.

In summary, we had a strong quarter. We came in ahead of our expectations and have continued optimism as we look forward in the next several years.

And with the additional liquidity that we generated this past quarter, we are well positioned to pursue an aggressive external growth strategy.

I will now turn the call.

Through the Amy to discuss our funds business. Thanks.

Thanks, John today, I'd like to provide a brief update on each of our 4 active funds beginning with funds side.

First we are pleased to report that fund deal flow is kicking in with our fully discretionary capital finally, getting the credit it deserves.

We currently have.

Approximately $170 million of fund 5 acquisitions under contract or under agreements in principle.

This includes the $100 million, we previously reported as of the first quarter.

Consistent with fund 500 existing investments this committed pipeline is comprised of higher yielding.

<unk> suburban shopping centers for.

For stable properties pricing remains at approximately an 8% unleveraged yield in fact private cap rates for these types of suburban shopping centers have remained at this level since at least 2016, when we when we began leaning into this strategy with funds for.

At this going in cap rate, we have been able to maintain an approximate 400 basis point spread to our borrowing costs, enabling us to equip a mid teens leveraged yield on our invested equity.

More recently, we are also seeing new acquisition opportunities with some immediate value add re leasing which.

Each plays to our strength as retail operators.

At the beginning of the year, we had allocated 60% of fund $5.520 million of capital commitments.

Including our committed acquisition pipeline, we are now approximately 75% allocated and we have until August.

A 2022 to fully deploy the rest of our dry powder.

Due to our selectivity at acquisition, our existing funds 5 assets have navigated the pandemic well.

With our collections rate that is now in the mid nineties consistent with our core portfolio.

And notably throughout the pandemic.

This carefully selected portfolio has delivered a consistent mid teens leveraged return.

Over the life of our investment we expect to generate most of our return from operating cash flow.

That said there is a tangible opportunity for outsized performance due to cap rate compression.

After all real estate borrowing costs have returned to their pre pandemic levels and public market cap rates for retail real estate have also compressed.

While private market cap rates remain the same.

As a result, we believe that signals are pointing to reversion to the mean in the private markets to over the next few years.

And every 50 basis points of cap rate compression would add 250 to 300 basis points to our projected irr's.

Given the amount of capital on the sidelines and recovering retail fundamentals. This is also a good time to Opportunistically harvest properties.

1 area of focus.

As our grocery anchored properties, which have gotten any pandemic boost and remain in fever in the capital markets.

To that end during the second quarter, we completed the sale of 4 grocery anchored properties all located in the state of Maine.

These were part of fund force northeast grocery portfolio.

Palio.

1 property, we had recently completed the installation of a new junior anchor and at 2 others. The supermarket anchors had recently exercised their next 5 year options, providing enhanced cash flow stability and finance ability for the next buyer and better exit pricing for us.

Finally, turning to fund 2 in city point, we continue to see positive momentum at this iconic property with shopper traffic and tenant sales both continuing to increase.

Recall that city point is located at the epicenter of a development boom in downtown Brooklyn, which has resulted in the completion of nearly 16.

16000, new residential units since 2004, and another 13000 units either under construction or in the development pipeline.

Among all New York City neighborhoods downtown Brooklyn, now ranks 13th for median home price up nearly 80% year over year to 1.

$4 million.

This should all inure to the benefit of our mixed use project.

On the city point leasing front, we've seen strong interest in the former century 21 space from both traditional retail users and commercial tenants.

There was also strong interest in the concourse level, which is anchored by.

1 by our Dekalb market Hall.

And we're pleased to announce that we recently executed a lease with spirit physical therapy for a 2000 square foot space fronting Gold Street, and the New York City led development of a new 1 acre park.

With all these positive indicators. This is the perfect time for us to go to market.

They are refinanced this project over the next 12 months.

So in conclusion, our fund platform remains well positioned with a successful capital allocation strategy and our portfolio of existing investments that continue to march towards stabilization.

Now we will open the call to your questions.

As a reminder to ask a question you will need to press star 1 on your telephone to withdraw your question press the pound key please stand by while we can pass the human day roster.

Okay.

Okay.

Your first question comes from Todd.

2 women with Keybanc capital market.

Hi, Thanks, good morning.

John Ken you. Both you provided a lot of detail around NOI growth from the portfolio over the next few years and I'm just curious within the $150 million of NOI that you're talking.

<unk> talked about achieving by 2024.

Ken I heard you say Soho Street retail NOI may double in the next few years is that right and is that specifically.

The Soho collection of assets that you own or did you mean, the New York Street and urban retail portfolio overall.

Net Soho Todd so.

Talking of yen.

I was picking that as an example, because so certainly.

Was hit hard during the pandemic and depending on what.

What assets you own what basis, where the rents were.

The outcome certainly for many people felt uncertain.

We're looking at this we're seeing a very nice rebound.

Okay, and then the cash.

Comments about potential above average NOI growth over the next couple of years with with that.

NOI growth.

It sounds pretty clear that the street and urban retail.

And I think the way just given the leasing pipeline in your commentary there, but can you just touch on the suburban retail portfolio and your thoughts around growth.

In that segment of the core portfolio.

Sure.

And let me touch on on both the roller coaster ride that St.

Assets went through from 2010 to 2015 rents grew between 10 and 20% a year.

And we commented that free street trees don't grow to the Sky.

And sure enough 2016, 2017, you saw a correction downward.

And so pre Covid. Many of these streets were facing significant headwinds vacancies and rents were down.

Covid was another body patch.

Now retailers are able to climb out at a very low rental basis compared.

There to certainly the 2015 peaks.

And so when we talk about our confidence of growth. It's because 1 they are starting at a low rental basis.

2 there is strong pent up demand and in an omni channel world those kind of locations can be really powerful for the retailer. So.

That's why we see above average growth there now in the suburban side Theres a lot of positive <unk>.

Momentum on that side as well.

But.

We do need to recognize that.

Unlike what I described for street retail rents.

We're slow to grow in the 2010, 11.12, but as the economy was expanding rents in our suburban portfolio, especially our satellites grew in the 2015 to 2019 'twenty period. So we're starting off of a higher base, but the consumers coming back.

There are shifts to the suburbs. So we're seeing are certainly right now a nice lift there and we remain hopeful that that side of our portfolio can do well, but again.

Brent starting point.

And different set of expectations. The next few years, we will see our hope is that everything does well.

Well, but we do remain very bullish on this rebound that we're seeing in the streets.

<unk> is now Amy mentioned.

Some monetization opportunities from dispositions in the funds business.

It is now a good time to explore.

Floor recycling capital and sort of selling our calling the suburban retail portfolio at all.

We're getting there as I think I pointed out and Amy pointed out there is still a disconnect between the public markets and the private markets for a variety of reasons that I could get into later.

I.

Not call it a sellers market, maybe in some select areas and secondly, <unk>.

Notwithstanding my enthusiasm for our street retail retail portfolio and its recovery, let's also realize we're still climbing out of the globe.

Mobile pin them ex that hit us hard and thank goodness for the diversification, we had within our core competencies of.

Long term stable leases with target with strong suburban assets. So.

We're certainly considering everything Todd, but I don't think you should.

Expect a huge culling until the private markets catch up with the public which will happen, but it may take a year or 2.

Okay alright, thank you.

Your next question is from Floris van <unk> with Compass.

This point.

Yes.

Thanks, guys for taking my question.

So there's a lot to chew over them in a lot of good news here certainly if I, if I read the tone, but.

Yeah.

John maybe.

You talk about the $150 million of NOI.

Hi.

In a couple of Years' time, but yet you gave a range of same store NOI growth of 5% to 10% if I do the math.

I mean, I can get to north of $170 million of NOI are you.

Are you it seems like you're.

Certainly, leaving some.

Some some some room for 4 for exceeding I guess your headline numbers what is driving the confidence behind that is it is it just the tenant demand that youre seeing.

Yeah. So of course I think if you go back right I think before the pandemic hit US we were on track to do this and that was through a combination of.

Except for the factors, we look at today, we went into the pandemic with lease up but we went in with.

Strong contractual growth right. So I think we had those factors in front of us before and those havent. Those havent changed I think what gives us the confidence that we are feeling better about that trajectory. We're on is the leasing pipeline that we have so I think.

How that's accelerated at $6 billion pipeline, then we started just ex <unk>.

6 months ago quickly grew to 8 to 10 now the 2014 were seeing demand that is at levels that was before before the pandemic. So I think that's what's really giving us the confidence that retailers and echoing Ken's remarks are starting.

If we look at our markets they are coming.

Coming to the spaces that they are having store profitability from them. So I think that's how we see us getting there in the 5% to 10% range theres going to be some years given that we are leasing up a lot of space that are going to be closer to the 10% something closer to the 5% and we are giving ourselves some room that if this is.

To show up and does come back and we do see.

Some of the rent growing beyond what our current ex patient expectations are today.

Domestic we can we can beat that but I think just on our base case and what we're seeing.

We see a pretty clear path to getting there and let me add 1 more point because John is spot on in terms of retailer.

Rebound hand, but what caught me off guard and I think caught a lot of us off guard.

Was the fact that certain retailers and in Soho, but also in other markets that got hit hard certain retailers, especially luxury are already comping positive.

Taylor to move to pre Covid sales before the international tourism that we always.

Credited those retailers for achieving their sale, it's before that even happens now there is a bunch of reasons pent up demand healthy consumer a variety of other factors.

But I.

Positive day.

It's not just tenants, calling us, saying, hey, we want space its tenants showing us their sales performance.

And it is certainly counter intuitive to what you would've expected climbing out of a global pandemic and a painful recession and it is showing how.

How this climb out is going to be different than the others.

Just just to make sure that that.

I understand that.

Mark I understand so your guidance assumes.

Again.

The $4 million that includes $4 million of rent, leaving.

I would say portfolio and presumably not getting released right away, but maybe gets filled sometime next year is that is that correct.

So first just to confirm Youre talking about the of the 9 million of ABR that rolls through 2022, the 4 million that I mentioned is we expect rolls in the next 6 months just to.

Confirm is that the.

Yes, that's correct Dan.

So, yes, I think the expectation will be a bit of downtime, but what I will point out is that within our pipeline. Some of that is already already in there. So I think the downtime and keep in mind. These are.

It could be a street lease which could be a minimal amount of downtime. So yes.

The assets.

Leaving your it's certainly in our in our expectations, but 1 we think this will be high quality space that gets leased up quickly and profitably.

And maybe maybe 1 other.

A question in terms of the.

As you look at New York, and I know that.

Talk to.

You guys in the past about this as well, but your opinions on the demand for so we wanted to I mean, you guys were very.

Martin picking out Soho, which is more domestic.

Focused not as dependent on on tourism et cetera, how does your view.

New in markets in New York, how have they changed or evolved as obviously tourism has been decimated times square has been on its heels are you starting to look at that market.

Potentially see more attractive opportunities relative to maybe 12 months ago or 24 months ago.

So.

The short answer is we're looking at multiple different markets and depending on the price point.

The Devil's in the details, but let me try to get more to your point Floris. We do think there is a chance.

Net.

The <unk>.

Return to work component of <unk>.

Our Midtown Manhattan.

We'll either take a long time to come back.

Or will change now we have very little exposure to that specific meaning whether you come to the office 4 days, a week or 5 days, a week or whether it starts labor day or Thanksgiving.

That's really not going to impact where we're focused.

<unk> right now it could impact other markets and I think we need to be open minded to those changes.

And I, probably wouldn't be less enthusiastic about.

Buying into retailers dependent on how many days a week you come into the office, but that was always the case.

In other words, we've said for years not all foot traffic is created equal and you need to be very careful about trying to capture a sale from someone rushing from Grand Central station to their office. So we will continue to be cautious about that as it relates to the time squares of the world, they're going to come back it's a matter of.

How much time does it take in a whole bunch of uncertainty that exists right now.

For us to buy into that we got to get paid for the uncertainty.

There are other places that I remain more bullish on than I think we can be constructive and get the kind of returns we want so more likely youll see us continue to stay.

Focused in those areas that we're comfortable with I mentioned in the prepared remarks, Melrose place great Little few blocks and we're seeing positive lease spreads we're seeing positive sales performance relative to pre COVID-19, well, that's great and let's continue to do those as well.

I guess.

The.

The thing about Melrose place, it's really it's relatively small and that market is relatively small so how much capital can you realistically deploy.

In submarkets like that versus obviously massive market's like.

Square or Madison Avenue.

So we can so we are relatively small to Florida. So as I pointed out every $100 million of acquisitions adds about 1% to earnings. So we do not have to win any pie eating contest in order to achieve outsized growth for our shareholders that being.

You're absolutely right there are some markets, where we will add.

Fewer amounts of dollars, but let's make sure we're doing it wisely and Accretively and if we do we win and then there will be others, where there could be outsized returns still a little early but we think we'll hopefully be able to present.

A nice combination of both.

Your dog agrees with me.

Okay. Thank you sorry about that guys.

Is it from me thanks.

Yeah.

Your next question comes from Linda Tsai with Jefferies.

Yes, hi in terms of the increased too.

<unk> said pipeline just from June what percentage of that is from street and urban versus suburban.

Fairly consistent blend Linda so I'd say, it's probably following the $66.40 of things, we're seeing still seeing incredibly strong demand and in.

The street and urban space, I think consistent consistent with the overall.

And then John regarding your comments on improved liquidity from both debt and equity and pursuing.

A more aggressive external growth strategy, how quickly would you expect to deploy this capital and.

Contractual rent increases at 2% of growth and $3 million of NOI from.

What does the external growth.

Growth look like in comparison.

Yes ill, let Ken hit the external growth, but what I can tell you that of the $46 million of.

Liquidity that we raised through the ATM. This quarter, we will we were able to redeploy that accretively. So we did a structured finance investment this quarter that was incredibly.

Profitable and through deleveraging and a couple of other investments. We did we were able to deploy a relatively modest amount accretively. So I think I'll turn it over to Ken as we look look forward, but I think between the expansion of line and the flexibility. We have on that we have a lot of firepower to put to work.

Yeah. So.

John.

That's right and we have strong embedded internal growth. So we don't have to rush to create external growth just for the sake of growth but.

Sellers are coming back to the table, everyone hidden their bomb shelter for awhile and now they are saying.

Owning retail requires a.

A level of expertise per.

<unk> now is a good time, because we have a decent sense of where rents are.

We have a decent sense of where values and borrowing costs are.

And the sellers are starting to show up because it takes not just us having the capital it requires realistic sellers.

Initially we thought that would be the debt holders as we all know we did not see that.

Debt crisis, and real distress, selling and buying opportunities, but what we are now seeing whether it is lenders whether it is other people in the capital stack core borrowers with true equity, we're seeing them come to the table I don't.

And exactly when it happens because if I say, we're going to do $300 million next quarter and we don't we will spend the entire next call talking about that we're going to put this money to work wisely, we are comfortable with multiple types of capital and access to it and I think it's going to be a really exciting time for.

Companies with our core competencies to both create internal growth and then supplement that with external growth.

And then Ken you mentioned, you're more bullish on certain markets.

<unk> are there any other streeter urban markets that the pandemic has uncovered that makes sense for your portfolio.

Yes.

You will not hear me say them right now but.

The pandemic did cause a reshuffling of the deck.

And let me explain my interest is derivative of where our retailers say you know what we could plant a flag there we can do business there we.

We can see long term growth and sign long term leases there.

And those markets if we can get in at the right price, we will listen very carefully to what our retailers are doing and as you. All know it can't just be because retailers are interest. It it has to be that they can do the sales and even if it's strong for a retailer we need to see that there are.

Adequate barriers to entry.

Such that we as a landlord have pricing power or.

Our team is the best I think doing a great job of focusing on a variety of markets, but it very well may be that.

It looks more like the existing great markets.

Subtract, 1 or 2 and add 2 or 3 then it is a wholesale reshuffling of where retailers shoppers and thus us landlords want a day, so stay tuned on that side.

Thank you.

Sure.

Your.

Next question is from Katie Mcconnell with Citi.

Great. Thank you.

All the progress you've made in street retail leasing this quarter can you talk about how the structure of leases has evolved in terms of the flexibility of our operating tenants and nationally and has been negotiating power shifted.

Adjusted back to you and now Youre able to question Mitchell rents more aggressively from here.

Yes, and this is important Katie because first of all what I would tell you is we are managing through with our leasing team.

In case of Whiplash.

Non.

Not that.

That many months or quarters ago, we were trying to hold retailers hands to make sure. They can get through and leases were very structured with an emphasis on percentage rent.

And a whole bunch of uncertainty.

What I commented on prior calls is we were very.

Flexible and coop.

Rather than the short term and we found our tenants more focused on the short run. So we were not signing long term 10 year leases with contractual growth we were doing mainly shorter term.

Leases fast forward to the last quarter today, you've heard us mentioned we sign.

Coop, a 5 year renewal, we did an expansion for 10 years Youre seeing real leases.

Less dependent on were not relevant to percentage rent than otherwise.

And while it is still very much a tenant's market, while you should expect even in the best of the markets the ones. We're.

We're most excited about youre going to see headlines of vacancy vacancy frankly that we welcome because we need to see the right tenants coming back and we need to see the right tenants, expanding but youre going to see a lot of vacancy so.

<unk> in some cases below pre COVID-19.

In other cases at or above.

Real lease term real tenants real balance sheets, and all of that feels good and then add to that what we see as real market rent growth opportunities as well as contractual growth feels pretty good it feels a lot better.

Than anything we talked about 2 or 3 quarters ago.

Yeah.

That's helpful. Thanks, and then with the additional funds acquisitions added to the pipeline this quarter, what should we expect as far as the timing of getting those over the finish line by the end of this year.

Yeah.

If if our team can't get those over the finish line, we all have problems.

Some of them are taking longer for a deal specific reasons in 1 case lender approval of assumption of the debt.

In another case, a pre condition to closing around.

Tenancy so understandable.

Ball reasons that they are not closing as fast as they normally would but all of these are teeing up very nicely and it's a good business.

Ken and Amy emphasize this if we're clipping mid teens returns.

And if we got through the Covid crisis without any material impact.

Impact to those returns a couple of quarters got hit hard we all went through that and then they are returning.

And that's at the 8 cap level, if we see cap rate compression commensurate with what we're seeing in the public markets commensurate with what we're seeing in the debt markets.

<unk> could be really.

Really powerful returns we hope that deal flow continues to grow every sign that I'm seeing is that it will.

Feels like a good.

Business to both get these deals closed before year end.

And then there should be a bunch of behind that.

Great. Thank you.

Sure.

Okay.

Yeah.

Your next question is from <unk>, Kim with <unk>.

Thanks.

John you guys provided pretty good commentary on the ABR in our pipeline for your core business.

For the consolidated joint ventures.

Amy you want to handle the part you referred to the funds is that correct yes.

Yes.

Got it.

The pipeline for the funds in terms of acquisition pipeline no debt.

At least by ABR.

Gotcha.

We've seen consistent with the core portfolio activity both in the suburban front.

As well as coming back on the street retail side. These are small portfolio. So I would just expect overall from to be consistent with the core.

Okay.

You mentioned some positive activity for 3 point alright.

Close to maybe putting a timeline on what we current expect.

Leased occupancy for that asset.

Yes, certainly that the pandemic has caused.

I'll get a delay to our initial stabilization, but we're seeing a lot of positive momentum as I mentioned Alamo has reopened at top performing.

The theater.

I'd had century 21.

In the fall, but we've been really pleased with free leasing interest in that space.

And then we have our Dekalb market Hall that really remained open throughout the pandemic.

And they are ramping up sales once again I think on a prior call I mentioned, the strong leasing momentum there in terms of operator so.

Signs are pointing to you know again, it really positive horizon for this asset, including a recent street level deal that we're excited about.

If I were to guess I would say 24 months.

And some of that is just how long it takes to get certain leases signed in the others.

VK Park that is getting built across the street that are gold Street portion faces.

Will happen over the next 12 to 24 months the leasing ability for our street level Gold Street is going to be that much stronger.

Once that park has opened once we re.

<unk> the century 21 again, a lot of other good leasing happens so I would not encourage our leasing team to make every single deal. This week I think it will take 24 months and I think we'll be rewarded for the patients.

Okay and just last question from me how are you.

There are retailers thinking.

<unk>.

The Covid and the Delta variant and the impact it might have on your willingness willingness to sign deals or if it caused the delay just kind of high level thoughts there.

Yeah, and I think we need to.

All be aware of a few things 1 there's a lagging.

Behind line between.

Issues like this and retailers' response.

So far we have not.

Seen any slowdown any concerns specifically around delta but.

But I think it's on all of us to recognize that this is a challenge.

It's a challenged.

<unk>, we can get through because the vaccine works and the vaccine will work vaccine hesitancy is certainly a concern, but I think retailers who are thinking 135.10 years down the line have the level of confidence that we will get through this even if it's a short term bump.

Thank you guys.

Sure.

Your next question is from Hong Zhang with Jpmorgan.

Yeah, Hi, I guess, you've talked a lot about renewed demand leasing volumes I'm just kind of curious when you think you'll move.

Okay being having to get its first year from sections on new leases.

Yes.

I think we're getting close.

I think that.

Assuming the reopening that occur as we all believe and see them to be.

The.

The notion of initially.

Pretend we're talking about a restaurant and we only have a few restaurants, but initially the thought.

It was.

If I reopened my restaurant or if I open my restaurant, who knows who will show up and what we're seeing now even in lockdown cities.

Is.

Move restaurants are in many cases comping positive to pre Covid, we have some restaurants in our portfolio that we put on percentage rent and the percentage rent payments are higher than their contractual.

So some of the structure was in anticipation of it may take.

Take a while to reopen we're now seeing enough positive signs that both retailers and then we as landlords are looking past that.

The other side of this is <unk>.

Just giving retailers the breathing room for 6 to 12 months and then they step up and step up significantly.

Again, we're starting to see that shift that retailers are thinking more long term and thus they are thinking about things on a straight line basis as would way.

Yes. Thank you.

And there are no further questions at this time from now I'll turn the call back over.

Over to management for closing remarks.

Great.

Thank you everybody for joining us enjoy the rest of your summer and we look forward to seeing you in person again soon.

This concludes today's conference call. Thank you for participating you may now disconnect.