Q2 2021 Federal Realty Investment Trust Earnings Call
Greetings and welcome to the Federal Realty Investment Trust second quarter 2021earnings call. At this time all participants are in a listen only mode. The question and answer session will follow the final presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
I will now turn the conference over to your host Leah Brady. Thank you you may begin.
Good afternoon. Thank you for joining us today for better Realty second quarter 2021 earnings.
Joining me on the call of our die 1 Angie just for guests when do your ear of Dawn Becker and all of that.
It will be available for your questions on the completion of our prepared remarks.
A reminder, that certain matters discussed on the call maybe deemed to be forward looking statements within the meaning of the.
Private Securities Litigation Reform Act of 99.
Forward looking statements include any annualized or projected information as well a bunch of referring to exit or interest in it advantage of results including guidance.
So on a relative believes the expectations for Blackstone.
These statements are based on reasonable assumption on a relative future operations on its actual performance may differ materially from the information on our forward looking statements and we can give no assurance that these expectations can be there.
The earnings release for supplemental reporting package that we issued.
Good.
Tonight.
Our annual report filed on form 10-K, and our other financial debt.
On your documents provide a more in depth discussion of risk factors that may affect our financial condition and the results operations the kind.
On the assay you limit your questions to 1 question and a follow on during the Q&A portion of our call you of additional questions. Please feel free to jump back on the Jo mill.
I will turn the call over to Don Wood to begin asking of our second quarter at the time.
Yeah.
Well, thank you Leah and good afternoon everybody.
And I would say.
Quote Seinfeld shrank the stand the went back baby and it seems to me where the real estate of choice.
Just because of the chase here on summarize where we are by these points we can.
Killed it in the second quarter of $1.41.
We raised our 2021 total your guidance by over 10% of the Mint.
We raised our 'twenty 2 guidance the only retail REIT income.
Does it get 22 guidance by the way.
The 5% at the midpoint.
We covered our dividends on the cash basis in the second quarter and rates of again for the 54th consecutive year.
We had record leasing volume more than we've ever done in any quarter in our 60 year history.
So we'll put more meat on the bone for each of those points and others, but that's 1 of this company is as we sit here on the first week of August of 2021, and we're feeling great about our market position.
So the balance of 41 of the share we exceeded even our most optimistic and start on forecast by 20 cents a share and were up 83% over last year's worth of Covid impact quarter, which of course for the second quarter.
And the nutshell, we didn't anticipate the bounce back in nearly all facets of our business to be so fast and so strong we didn't anticipate some of the 1 time deals that we were working on the execute it so quickly.
We talked about the pent up demand on the last fall of the form of strong traffic and leasing demand and that has continued unabated ever since the blended.
Ted.
The quarterly financial impact of that optimistic consumer meant that we 1 collected more rent in the second quarter from prior periods than we thought.
2 we had significantly less of unpaid rent in the quarter than we thought.
3 we had fewer tenant failures than we thought of.
Before we had far higher percentage rents from Covid modified deals than we thought.
And as I said, we covered our dividend on an operating cash basis in the second quarter way ahead of our expectations.
Of course, all of that means that will significantly raise the 2021earnings guidance and raised 2022 earnings guidance as well as we've said all along visibility for 'twenty..2 earnings was ironically better than 2021 that has proven to be the case and Dan on talk it through guidance details of a few minutes.
Oh, well this quarters earnings were as strong as they were in large part because of the election of the rent dollars or asking for it.
The real story here is the unprecedented amount of leasing that was done on what it means for the value of our real estate into the future.
Our properties are in demand across the board.
We did 120 for comparable deals in the quarter more than we've ever done in any quarter in our 60 year history.
For 558000 square feet on average rent of $37.34 for 4.8% more rent than the deals they replaced.
We signed another 90 non comparable deals most of them at our new developments on an average rent of $44.71 per foot.
That's 570000 square feet of space leased in 1 quarter alone, 25% more than our pre Covid quarterly average.
You might remember that we did almost as much last quarter too.
So when you put the 2 quarters together the production in the first half of 2021 is both staggering and unprecedented.
Big Kudos here to our leasing the legal support teams.
Nearly 1.1 million square feet at an average rent of $37 of 1.8% more than the previous leases growing through annual rent bumps over the next day plus years.
But that's really just the tip of the iceberg.
Another really interesting consideration is the breakdown of all of that would be between deals to renew tenants of deals with new tenants for.
Additionally, 2 thirds of the deals we do in any 1 period hovers around 2 thirds renewals at 1 third new tenants.
Not in the post Covid 6 months, it's actually nearly flat.
40% renewals and 60% new tenants.
So what does that mean and why is that important.
Well first it means that we lost the heck of a lot of tenants during COVID-19.
It's the cost more to put a new tenant in the space rather than renewing existing tenants are current tenant capital is higher on.
On the face of it that seems like bad news she got a dig deep.
Because what it also means is that our properties are in high demand from the days relevant and well capitalized for restaurants and retailers that are all trying to improve their sales productivity post COVID-19 through better real estate locations.
We've always been pickier than most in terms of the tenants we choose the merchandize on Saturday.
When you couple that with the execution of the broad post COVID-19. The property improvement plans that we've talked about over the last several quarters that higher capital outlay will result significantly higher asset values tomorrow.
I mean think about it on a post COVID-19 world.
Major market, the first year high quality suburban shopping centers with more than a smattering of the new post COVID-19 relevant tenants.
Doing business in revitalized shopping centers and mixed use properties focused more on outdoor seating on the curbside pickup on covered walkways and improved place making than ever before.
Places that are more fresh wood dominant more relevant in a myriad of ways and the communities they serve for years and years to come.
The value of our real estate net of GAAP is going up and the prospects of appear to be better than they were before COVID-19.
Also consider that at quarter end, our portfolio was 92, 7% leased.
Yeah, the only 89, 6% occupied.
That's 310 basis point spread or.
For nearly 780000 square feet of space, representing roughly $30 million in rent.
As the largest spread we've had since 2000 and spa.
You might remember how 2006.7 turned out.
Which obviously bodes well for the future of assuming inevitable tenant fallout occurs at historical levels.
And by the way just 3 years ago, we were 95 percentage.
Okay.
I Hope this also on the major acquisition announcement that we made in the press release on June 7.
The laid out before deals that we closed during the quarter.
Overall, we have an 80% interest on the combined income stream Rosemont shopping center of greater San Diego Camelback colony, and Hilton <unk> village in greater Phoenix and chest of brick shopping center in Mclean, Virginia.
Gross asset value of $407 million for <unk>.
1.7 million square feet on the 125 acres of land in prime locations in these markets and we strongly believe that pricing today would far exceed what we negotiated in the middle of Covid.
A presentation that we put out ahead of NAREIT and our investors NAREIT investor meetings in June focused on these acquisitions and debt, including the very unique potential redevelopment opportunity in gross margin since we control the virtually the entire 63 acre parcel on the tenant perspective and less than 5 years from now.
Sure.
Separately, we have another deal on the contract currently.
The close on in the quarter this quarter.
On the development side residential and office leasing activity is also picking up on both coasts.
It's really gratifying to see the rose quickly maturing coming into a zone and becoming the go to place for lots of things in the region.
On my Gummy County, Maryland of County, that's not doing a lot of office leasing these days.
Our phase III office building I don't I'm rose, 77% leased with another 11% under executed LOI. So nearly 90% committed at the point at rents in line with pro forma.
Strong and that's the office environment with mostly 2022 rent starts there.
Big quarter up at Assembly row, and that we received our certificate of occupancy for the retail portion and half of the units and Michelle on the 500 unit residential building that's part of the base the Redeveloped 10.
And its began moving in in July and initial leasing pages of exceeding our expectations.
145 units are already currently leased at rates that approximate our lease of underwriting.
And that seems to be getting stronger with each week the patents.
You know of Assembly row as the mixed use project in our portfolio that got hurt the most during COVID-19 and took the longest the begin to bounce back on now feels like it's recovering as fast as the others.
Office leasing of the Pune anchored building is also picking up the serious negotiations underway for the first time in over a year for a large portion of the remaining space nothing tangible yet, but a good sign nonetheless, some of this situation in San Jose, but on 375000 square foot spec office building under construction.
And nearing completion.
The only time being at the time being.
And the Coca walk in Miami, It's all about getting tenants open as we're fully leased on the retail side, mostly leased on the office side.
Tenant openings will continue through the remainder of this year, we look forward the hosting an investor tour in coconut Grove early next March.
More to come on that.
In Darien, Connecticut, construction and leasing of moving forward on time and on budget with the newly built Walgreens opening during the second quarter of ahead of schedule.
That's important because it makes way for the remainder of the demolition of the old shopping center started the residential over retail component of the project good stuff happening up there too.
Let me pause there stop that's about all I have for the prepared comments turn it over to Dan and I'll be happy to entertain your questions after that.
Thank you Don and good afternoon, everyone.
You unexpectedly strong results $1.41 per share on the quarter not only blew away 2000, twenty's year over year comparison.
It was a 20% sequential gain over first quarter of.
For more than 20% of our forecast and consensus.
Given the big beat on the quarter, let me take a little time to put some color around the broad categories about performance of Don outlined.
13 cents.
Outperformance was driven by collection related items.
6 cents of upside was from the improved operations.
With 5 cents for 1 timers that were above our forecast.
Which collectively total 24 cents for it.
Our previous quarterly guidance.
First some detail on the 13th of upside from collection.
Rent collections for the quarter net of percentage rent was almost 200 basis points ahead of expectation.
Prior periods of collect rent collection was $7 million.
Versus $4 million in our forecast.
Our percentage rent for the quarter was almost $3 million above forecast.
Highlighting the strength of consumer traffic across the portfolio.
Second the sixth sense of operational outperformance was driven by our occupancy of essentially staying flat.
It was roughly 50 to 100 basis points better the we had expected.
And improved hotel parking and specialty leasing revenues all exceeded forecast.
The third category of 5 cents of onetime items above forecast were attributable to Trump fees bankruptcy payments.
1 reserve reversals and other miscellaneous payments all collected the exceeding our expectations.
Please note that we do not expect the $1.41 to be the run rate for the balance.
He'd been 9 cents of the results are not expected to be recurring and as Don mentioned, we are in the midst of delivering 500 units residential at assembly row, which will be dilutive over the next few quarters amongst other items of would dress address that later when we get the guidance.
Well it takes some time and revisit collections, our collectability impact was more than cut in half the $6.4 million versus the $14.8 million, we had in the first quarter on the strength of prior and current period collections net of of babies.
Rent collection in the quarter surged, 94%, 4% from the 90% level of as reported on our first quarter call for.
For the abatements and deferral agreements totaling 4% of Bill Brent our unresolved rent now stands at just 2%.
For the $39 million of deferral agreements negotiated state 17 million and repaid.
Representing about 90% of the scheduled the Pearl payments.
Remaining repayments of 22 million are set to be paid back over the next few years.
Elections for cash basis tenants improve substantially roughly 80% of on the border up for.
From 66% on the first quarter.
Strong share.
For occupancy the continued pressure the we expected during the second quarter never really materialized as of our tenants remained resilient.
With the record breaking leasing volumes across the portfolio economic occupancy should steadily climb higher from this point driven by 310 basis points.
The spread between leased and occupied.
That is embedded within the portfolio other strong leasing metrics. The note our small shop leased occupancy grew almost 200 basis points the 85, 7% from.
From $83.8.
Huge movement for that metric in a single quarter.
With respect to our lifestyle oriented retail assets, whose performance was hardest hit during COVID-19 the spread between leased and occupied has grown to 440 basis.
And by strong tenant demand and signaling of sustainable acceleration and this is statements recovery.
The comparable property growth.
[noise] rebounded in the big way for the quarter up 39% on them.
Most of that should result in obviously a record for federal.
But also no better evidence of the lack of relevance of this metric in the current environment, whether it's positive for Nate.
Now, let me move to the guidance, we increased our guidance for both 2021.2022, taking 2021 up over 10% for my prior range of $4 of 54 cents for 70.
Up to a new range of $5.05.
The 515 for share this implies 13% year over year of growth versus 2020 at the midpoint.
And we are taking 2022 of 5% from our prior range of 505 to $5.25 to a new range of $5.30 to $5.50.
Let's review some of the assumptions behind the improved outlook.
For 2021, as I mentioned, the $1.41 per share results for the second quarter will not be of run rate for the balance of the year.
I mentioned 9 cents of that <unk> results as onetime in nature.
Term fees and bankruptcy related income will not recur at the same level and note. The we have very few term fees in the pipeline for <unk>.
While the current period collections.
The climb modestly higher.
The prior period collections are forecasted to trail off for the remainder of the year.
Also consider the previously mentioned dilution.
Roughly <unk> <unk> per quarter from the residential at assembly and other developments that will be delivering in the second half.
We also expect increased G&A and property level expenses of 2 cents per quarter as the cost of doing business.
As increased post COVID-19.
However, we do expect accretion from the second quarter acquisitions of roughly <unk> <unk> per quarter.
So this revised guidance implies an increase on our F. L O forecast.
Forecast for the second half of the year of <unk> 21 of almost 10%.
For 2022, the improvement in outlook is driven by 1 of the faster return to pre Covid collection levels.
2 a stronger occupancy due to the record leasing activity we've seen.
3 of full year contribution for Rosemont chest.
And Phoenix.
And then continued improvements and contributions from our development pipeline, although we continue to await tangible leasing.
Santana West feels like that will not contribute the <unk> until 2020 for it.
Also note that there was a level of practice fragrances men niche numbers by all reports of Covid variance for keeping the virus with us longer than we would like.
And we are still anticipating some level of tenant fallout. That's P. P. P money and other government subsidies for the way it impacts selected tenants the ability to operating profit.
And lastly, getting rent started on our record levels of new leasing activity will be of Paramount focus for.
For the operating team.
Please note there is no benefit assumed in our guidance in either of you from switching tenants back from cash basis to accrual basis again.
Finally, let's move to the balance sheet for an update on liquidity and leverage on the heels of deploying over $325 million on acquisitions and over 100 billion on in process development. During the quarter. We continue to have ample total available liquidity of $1.3 billion.
The $300 million of cash and an undrawn $1 billion of the wall.
So the $125 million of mortgage debt is scheduled to be paid over the next 90 days. We will then have no maturing debt until 2020.
And lastly, we continue to be opportunistic selling tactical amounts of common equity for our ATM program, we sold $140 million out of London share price of about $1.17.
For the quarter on a forward sales agreement.
In order to manage our liquidity over the next year.
The remaining spend on our $1.2 billion.
This development by volume is down 2 of $270 million with an additional $60 million remaining on our product for proven initiatives across the portfolio.
Given the surge in our EBITDA, our leverage metrics return to significantly stronger levels as well the pro forma for our true 2 acquisitions in the $175 million of board of equity other contracts our run rate for net debt to EBITDA is down to 6.2 times, our fixed charge coverage is back up to $3.
7 times.
And our total liquidity arms pro formats of 1.5 billion.
Our targeted leverage ratios remain in the mid <unk>.
5 times for net debt to EBITDA and above 4 times fixed charge coverage.
And before we get the Q&A, let me quickly mentioned wake of covering the dividend this quarter from <unk>.
Yesterday, our board declared an increased quarterly dividend per share of $1.07.
The surge in traffic across the asset base, the resilience and quality of our sector, leading real estate portfolio the <unk>.
<unk> of our balance sheet.
And the sounds of forward looking decision, making of management, maintaining the dividend for another challenging economic cycle now looks like.
The should provide federal shareholders with further peace of mind that with an investment in the fr Tee of a reliable uninterrupted steady stable stream of current income as part of their total return.
And with that operator, please open up the line for questions.
Thank you at this time, we will be conducting a question and answer session I think of it.
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Our first question is from Craig Schmidt of Bank of America. Please state your question.
Thank you.
I guess, where I wanted to focus in on is the small shops.
The 190 bps seems really strong on.
Most of your peers of showing just the it worse, they're showing an increase of leasing by the.
The the anchors.
The reasoning been their national and they can move faster than the small shops and 2 sometimes you need these anchors in place to push the small shops.
Maybe you could say what you did differently to drive the small shops or are you know.
What is it in the indicative of the from the small shop side.
Okay. Thanks, Craig let's just.
Let's turn it back over to Wendy, let's see when he thinks but I'd say hi, yeah, I think of it.
We continue to see kind of a really strong steady.
The man for my anchors you know whether its target in the home center and ran which was new to market. The continued to make the deals as the ollie's had historically, so really strong strength debt, but what I'm just as you pointed out what I'm really excited about is the fact that our small shop leasing has.
Terrific.
On a lot of demand for our properties very broad day between all of our property level and we continue to do deals with those best in class partner Channel has always been on our small shop side, whether it's Nike on what other Starbucks all the time to name a few 1 of them without really.
Kind of intrigued about and really speaks for the strength of the real estate is the kind of retailers, who maybe have a little bit more of the conservative expansion program and are selectively choosing.
Best in class locations across the country doing day small increments of well it really differentiate your property types.
Those names like Levein bakery, and goodbye for copying or you're on on room and board of Simon, Yes, and I could continue on and on I really what I'm excited about the kinds of tenants and of selecting our properties in the neighborhood and areas that way.
Net.
I know I know Don gave a breakout of 60% new 40% renewed.
What have you seen a similar ratio or what's the even higher new tenants in the small shop.
Well I'm not sure Craig we can go back and we can go back and look at it I would expect that the be commensurate.
Either way, but but.
I'd have to go back and look at I'll tell you the the new deals on the small shop side have been spectacular.
And so that's going to be a good that's going to be a big number I just don't know if it's bigger or smaller than.
On the anchors.
Yeah, Hey, Craig its Jeff.
Just.
Just to put a pin of it and really this is 1 of the thing but.
The differentiator, obviously between us and of our peer group is the lifestyle and mixed use properties of.
Well, we've said in the prepared remarks, the leasing of those properties has been exceptionally strong and the bulk of the leasing of those properties are by definition. The small shop tenants. So we're just very pleased with the.
The level of activity, there and the quality of the deals that our leasing teams have been able to get down in that portion of our portfolio.
Okay. Thanks, guys, Yeah, I mean, I was really surprised to see the the lift in small shops.
Yeah.
Our next question is from Mike Mueller of J P. Morgan. Please state your question.
Yeah.
Question on in terms of cash on hand.
I mean things of obviously improved quite a bit still seems like you're running with about $300 million of cash on hand.
How should we be thinking about what's.
I don't know if I could.
Normalized level for the current environment of cash should we expect that to drop the truck off to something more pre COVID-19 like or do you anticipate running with something more elevated over the longer term.
It's a good question.
Yeah look we were we've run through Covid with higher levels of cash I think we're still.
Above kind of the stabilized level of gas debt.
We expect the need to expect the run with I think over time will run that down and my expectation is that maybe it's the 100 maybe of $150 million of cash on hand versus kind of what we used to run which was kind of more on the $25 million plus minus.
Got it and 1 clarification when you were talking about before the upside in the quarter. I think you said 5 cents of 1 timers above what you assumed what was the total amount of of what you would consider to be the 1 timers in the quarter.
Of roughly about 8 million of.
1 time rate sensitive, but do you sense alright.
The spoke each centers are worth of 1 timers in the quarter and we had forecasted something obviously lower than that we did expect the obviously the splunk term fee net of.
Of the straight line and we did expect the repayment.
For many many of the loan, but we were surprised by a lot of other active.
Activity that the came through on the quarter that we don't expect to recur going forward.
Got it okay that was the thank you.
Our next question is from Katie Mcconnell of Citigroup. Please state your question.
Hi, good afternoon, everyone.
And I'm wondering if you could comment on you know based on your current fundamental outlook, how you're thinking about the opportunity to start additional phases of development.
In the near term I'm worried that the Pennsylvania, new ground up sites.
The channel pursuing Mark will touch on them.
The thinking about the all debt.
Some of them.
I Love the question Katy I'm not sure if you've been in our senior executive meetings over the past few weeks if your spine because those conversations are are front and center.
And look the the.
It depends right when when when you look at a place like like Pike <unk> Rose. For example, this is a property that we're really really happy with the office leasing that's been done in the.
On the first building of the building we're standing in the 909 rose could there be enough the man adhere to effectively started another building.
And time, it's possible. So we're talking about that looking at that could we find the big enough tenant debt that debt.
I don't know all of that stuff is the kind of thought process that we go through and each other and each of the big projects do we want to start a brand new ground up our in the next year of sudden no. We don't we.
We frankly have plenty to do on the existing ones that we had on when you look at the acquisition.
The trade off if you will versus development I think there was a window and I think we jump through that window during COVID-19, where where that difference.
Was really attractive and when did you toward acquisitions.
That's changed a little bit now.
It's still early in the in the recoveries. So we'll have to see how that plays out but you know with us it's not about turning 1 stick it on and the other 1 off it's about adjusting based on what it is that we find so I hope that's helpful and in terms of the where we'll be going going forward obviously.
Anytime we have a deal to to announce we'll certainly announce it.
On either the acquisition or the development side.
And I know you mentioned you had 1 additional acquisition on the pipeline of now on any other comments you can share as far as what's in the pipeline beyond that are you know what.
The net pricing there's mention of keep quiet the last for.
No not at this time.
Okay. Thanks.
Our next question is from Keith Sochua of.
Evercore ISI. Please state your question.
Yeah. Thanks, good afternoon.
Don you talked about the the widespread between the leased and the occupied I'm wondering a how quickly can that close and maybe if you or Dan could you just talk about what is implicit in your 'twenty 'twenty 2 guidance for either on average occupancy or perhaps a year end occupancy.
By 2022.
Sure Steve.
I'll take the first piece in any of you can take the numbers on the second set of grade, but you know the the when you when you see all of the leasing that we've done and it goes back a little bit to Craig's point a lot of it has been small shop.
And the small shops stuff tends to happen quicker effectively then the anchors. So the that stuff should be starting to help us later in 2021 and a loss of 2022, the anchors have a longer tail and.
And so there you should see more the benefit coming in 'twenty, 2 and even a few.
As far as as 'twenty 3 are there, but they are they are more focused towards the more weighted toward those those small shop deals that do go faster now look the the difference between obviously new deals versus renewables renewables are there right now and keep that income.
Going the new stuff that's coming in.
Is it in a lot of places to part and parcel of kind of our property improvement plans and our redevelopment plans. So as a result, you'll really see uptake of really upgraded portfolio over the next few years as a result of this.
And with regards to guidance.
Now, what's what's embedded there is I think some.
It is continued improvement.
For the through the end of the year, you should get back up above 90%.
Occupied by year end, and then probably over the course of the 92 to get into probably somewhere of about 92%.
Well, we get to kind of full spread of 310 basis points, we'll see but the the guidance is roughly kind of the 92% to 93% Bye bye.
By the end of 'twenty 2.
Okay, and maybe just as a follow on for you or for for Don You know when you think about you guys. Obviously took a lot of pain in the downturn and are starting to see the snapback.
Would you sort of guesstimate the U R. You know NOI would be back to pre COVID-19 levels is that of a 23 number or is that of kind of by the end of 'twenty..2 how do we sort of think about that piece of of recovery.
I don't know what to tell you about that Steve It's something that's certainly something that we've talked about a lot I would I would hope for it to be there in 'twenty 3.
Let me throw something else out of that show that the <unk>.
Maybe it's a little bit thought provoking you know if you took our if you took our portfolio today and you said alright. Historically this company has certainly been the 95% leased portfolio.
And you took all of the capital that we've spent in development projects and all of us.
Day to the.
Acquisitions that had been made et cetera, and other capital that's not yet producing income and you simply said alright finish up let's get this thing leased back up to 95 whenever that happens, let's get all of that development.
With tenants for would be over 7 Bucks a share.
So this really comes down to a notion of where we're not sitting here trying to focus on getting back the 2019 levels, where we're sitting here, saying well, we're putting money out in places we think that are smart.
We've certainly been hit by Covid.
Sleep delayed in terms of and certainly in the markets and the asset types that we have all the way through even more so but but getting back to you know something that was just okay back in 2019 hardly seems like it should be the goal. So you know I don't know when we when we get to.
What I just said, but that's.
That's where we are aiming man in and we're trying hard.
Great. Thanks, that's it for me.
Yeah.
Our next question is from Alexander Goldfarb with Piper Sandler. Please state your question.
Hey, good evening for.
First congrats on being a dividend paying I I wasn't even aware of that I do better the dividend aristocrat. So.
The dividend King, it's pretty cool dawn following up.
From from Steves question last quarter, but I asked you about 'twenty 2 and said you know you would put out 22, unless you thought that you could beat it which is what you've now done and listening to them talk about.
You know what's not in the number of meeting like your tenants who are cash basis now you're not assuming any of those people go back to being straight line, which means that's the boost that's an upward bias to earnings plus you killed. It on this quarter. There's no reason to think that you won't out for 4 months further quarters again.
Why should we stay within your guidance range for 'twenty 2 why wouldn't we do you know be above it because what you do is you run the team to always outperform you don't put something out there unless you think that you can achieve beyond that if you tell like Steve that you don't think you'd be back to peak and the likes of twenty-three and you just covered your dividend basically of.
Full year earlier than you thought again it sounds like there's some good upsides of 'twenty 2.
How in the World My friend, but possibly answer for you. The same way I did last time when I have to sit here and say from last time, Alex was right. I mean, that's hard for me to do well, it's hard for me to say that got done slowdown say that Lauder and just slower.
Well now you're getting greedy Alex the okay. So I said at 1 time and I do I believe what we were doing with sandbagging I do not believe that.
I believe what we are doing is assessing the situation as best we could at that time and I believe that things have gotten better a whole lot faster than our markets, but at the end of the day, Alex you erected and.
And that was due to get you didnt use do back of the knee, which I thought you should have in that particular spot. The nonetheless, so with respect to where we are now I'm going to say the same thing for you. We've done the best we can to kind of lay out where we are lay out the the.
The probabilities of of the.
You know of hitting our numbers.
I don't know what Delta does I don't know what the you know situations, where the situation goes in the country of the way we are the way we move things through but I do know when you sit and you look at our our forecasting and what you know what is it that we see happening we are clearly improving faster than <unk>.
We thought we were before will that happen again, I don't know maybe I Gotta get you in here to do the forecast for the for the company, but that's I don't have a good answer beyond that for you.
No I mean to that point I mean, 1 of the straight lining its the positive to you of your experiential tenants who are coming back 3 you know theres the improvement in Iraq. The same it just seems like Theres a lot of stuff in there.
That's the upward bias in each quarter, you know everyone exceed so I mean, that's that's the point is I think I've answered my other question, but you've answered. It. So the next question is as far as the new the you said that 60% of the people coming in to your portfolio of new tenants are those simply.
Locations from other centers, so they knew the market or the tenants looking to expand like just a little bit more color on what that new demand is.
The new demand is very broad base.
It it's all of the things that you said and more and frankly, when do you kind of touched it when she was talking about some of these tenants.
For a well capitalized tenants that are not they're.
Not volume guidance. So we're not trying to do you know 250, 300 stores 500 stores et cetera, they are selectively picking.
Locations to have brick and mortar.
Outfits that that supplement their online businesses et cetera, we're getting our fair more than our fair share of those type of tenants. That's a real positive thing theyre new to market and a lot of cases, there are effecting the newly capitalized and a lot of cases, 1 of the things that is most important here.
To think through is that.
Obviously, COVID-19 cleaned out weaker tenants and they did that Earl I, that's the April and May and June or.
In July of 2020 of them you know that list by heart.
The notion though of what happened over the next year and who you want to have in New York centers, particularly if you're spending 10, and 12 and $8 million on a center for a property improvement plan you want new blood in the retail.
Because you can't just have a nice place to sit outside the same old tenants that were you know pre COVID-19.
The average for our average now because of their sales so you're seeing.
Said it from the beginning but the demand is broad based and the demand is largely tenants trying to improve the real estate locations that they're in why because they're trying to improve the sales that it is that they do which is why they can pay the rents that we charge is all about that relationship.
Okay. Thank you Don.
Thanks, Alex you're right.
Our next question is from the Michael Goldsmith of UBS.
Please state your question.
Good afternoon, and thanks, a lot for taking my question just on the guidance again, what are the assumptions that you have built into the 2021guidance that would hit you catch each of the low end of the range versus what it would take to get you to the high end.
Yeah for the most part I think it's just the range of a lot of the things that we talked about them in the numbers whether it be continued.
Continued upward surge in collections.
How much additional.
Prior period.
Rents, we are assuming that rent trails off.
The problem. It was yes, we've had pretty steady prior period of rent collection of <unk> 7 million $8 million of $7 million over the last 3 quarters, we expected the trail off too and in the second half of the year of about $3 million of $2 million, respectively, and it could be some upside there.
From that perspective.
Yeah, we are likely to increase as we are successful was the acquisition.
Oh, we bumped our guidance slightly from that perspective, but it's all of the reasons all of the of the outperformance. We had we're expecting a term fees, we had $3.4 million net in the quarter versus $1.8 million net last year, we're not expecting.
<unk>, we're expecting maybe a million of the sport.
That's an area of for some upside.
We're higher than that that's up towards the upper end of the range.
So yeah.
So that's some of the pieces that get us.
From the top on the bottom.
That's that's helpful and you know, it's it's really admiral the admirable that you put out you know 'twenty 'twenty 2 guidance.
As we think about the <unk>.
You know your prior guidance for the current 1.
Your 'twenty the the gap between your 'twenty, 1 of 'twenty, 2 guidance kind of shrank this quarter and.
Some of that's explained I think where the price some of the 1 time charges, but what are the other changes and assumptions for next year debt that are reflected in that.
Well.
No Michael all of that was going to stay in and they are at the there's all like what you're basically seeing as a faster recoveries. So all of the things that were assumed are simply happening faster.
And so when you when you look at kind of what we had put out in 'twenty..2 initially obviously there was a run rate in 'twenty, 1 net rolled into 'twenty 2 to the extent the run rate is better than in 'twenty..1 it indoors of some of it accrues to the 22 also and that's basically all.
It is we we stay with the methodology that we use in our multiple year forecasting and we make that consistent.
You know each quarter that we updated those assumptions that the single biggest change is what I'm, saying and that is simply a faster recovery than what was there.
Thank you very much.
Our next question is from Juan Sanabria of BMO capital market.
Taking your question.
Hi, Good afternoon, I was just hoping to spend a little time on the on the lease spreads.
I guess based on current demand in the lease expiration schedule. How do you think spreads will trend into and maybe through 'twenty 2.
There's a slight dip sequentially in the spread in the second quarter. Despite the strong momentum as I don't know if that was mix related.
And your explorations kind of jump up next year in terms of the the dollar per square foot. So just curious if you of any context on how the spreads may evolve in the.
And through 'twenty 2.
I guess, what I'd say to you is it is a couple of things first of all of you know were relatively small company and so so in any particular quarter. There's there is always going to be rather significant variation.
Hi.
The last a little bit when you said there was a decrease in the second quarter to first quarter. I think 1 was 9 and 1 was a to me that's exactly the same.
In terms of the in terms of the the AR and in both of those quarters.
We're still deals obviously that were rolled down there.
There are other deals that were rolled up in the in a more significant way. That's that's basically what happens in most quarters. There was a mixture of are of those 2 things the the.
The probability that that it will stay in those single digit the numbers as highest that's that's where we're most comfortable effectively and kind of running.
Pushing rents and seeing what we can do in any 1 period and again that definitely definitely depends on on the mix.
Of any particular.
Quarter, which you know you don't get the bigger company, if you've got a much bigger company with more of a commodity product the kind of do the same type of deals over and over again, that's a great thing for you know for consistency.
But we are trying to bring in more value for you.
Great sorry, I should've.
<unk> been more clear I was focused on the the new big spread due restrict spreads.
Point taken.
I might just on just the same thing.
Got it and then the just on the acquisition side and any thought or color you can provide a bound potentially further expanding into new markets, whether it's the sunbelt or maybe Texas about how you're thinking about that of Conversely, what what could be used as a source in terms of potential calling or just.
Physicians are or that's not really the focal point for funding of it'd be more just match funded with equity at this point.
Hey, J D do you want to take that the start.
Yeah sure I mean, we are.
We've talked about this in prior quarters of the NAREIT, we are looking at.
Some new and different markets.
To expand I think of as we put it the number of ponds of we can fishing.
And.
So let's go on to Phoenix, and we're looking at the other markets as well right now we don't really have anything to talk about when we do we will.
Like Don said earlier, we're really happy we got the deals done that we did get done when we got them done.
The market has tightened up quite a bit so.
As always we will be.
Careful and conservative in.
Hopefully get some deals done every time, we do a deal on we do a deal on the cash basis that always causes us to look at the existing portfolio and think about disposing of an asset or 2 that maybe doesn't keep up with the rest of the portfolio in terms of it.
The property level NOI growth and you know when we have cash acquisitions too.
Yeah.
The will allow us to do that and make those dispositions on a <unk>.
Tax neutral basis, we we will but really not a lot to talk about on that regard right now.
With regards to funding as we always are we're very balanced on opportunistic and I will look at it and to the extent of the investment sales market offers us an opportunity to sell some assets at really attractive pricing, we'll take advantage of it.
Well you know when we do it.
Thank you.
Our next question is from Derek Johnston of Deutsche Bank. Please state your question.
Hi, everyone. Good evening.
How has.
Hi, how is the office interest materialize, especially for Santana West and thanks for the color on your HQ and also the traction that you're seeing of Kumar and I do know that Santana is still a bit away from delivering what I also believe it was almost fully leased with an LOI prior to the pandemic has that for.
Central tenant or other anchors like them, perhaps re engaged or are you seeing any traction there.
Oh, Jeff this 1 as all of you Buddy.
[laughter].
Well the answer it for the last part of your question directly.
The potential tenant the way, we're close with pre pandemic no. They have not materialized and we don't expect them to.
Now that we're starting to come out of the pandemic.
The activity out here in Silicon Valley.
For the office leasing perspective has definitely picked up for the last 6.
The 90 to 120 days tours of started again, you've probably all heard about the.
The deal that Apple did a few weeks ago for 700000 square feet.
Which is of great sign for the market there are several other large users.
That have requirements that are conducting tours, including tours of 1 Santana West you know in coming days and weeks, we don't have anything to talk about and.
Again, we won't until we will but I can tell you that.
The activity has picked up quite a bit of what's what's the grades and won't really happy about as it relates to 1 Santana west of there is very very.
Little supply.
In Silicon Valley, right, now and particularly on new supply that's the amount of time.
So.
That makes us feel good about our prospects for getting the building ways theres not a lot that we're competing against right now.
Now it seems like a great asset. Thank you and work with me here. So all high quality retail assets seem to be generating a ton of demand alright. So this strong of leasing in a post pandemic environment I mean, like I don't know who could of fully seen that so okay federal strong.
The leasing Sop.
Spreads on the highest ABR is now what's going on here Don like what dynamics of shifts can you share.
Now that you're seeing because really I, just want to stop talking and listen for another minute. If you would on weather.
Yeah.
Derek Let me let me let me go through at least what I, what I think is happening and.
Wendy please feel free to add or do you have of anybody that wants out of I mean look there is there is if you're just be of retailer for a minute b of restaurants for a minute and have gone through what just happened in this country over the last 18 months and frankly.
What was happening the pressures that were on you for the 3 and 4.5 years before that and so so here you are now.
And in many cases.
Recapitalize it.
In many cases with a different level of competition than you had before.
And you're in a position where you can reset.
And effectively that's what that's what is happening if you've got the chance I mean, when they can tell you the bandwidth if you sit on Rockville Pike.
And in 1 of the 4 or 5 shopping centers that all aimed for different parts of the consumer on Rockville Pike that we own the.
There have been tenants that have been trying to get on the like for years and years in the right type of center.
Is the right type of centers, we've been over 95% leased.
For Rockville Pike for much if not all of that time, except for the last 15 months. There is an opportunity that is not.
So there was an opportunity that the true.
The improved your real estate in it very very well located.
First tier suburbs of major cities and you've got a landlord.
Who is who is openly and anxiously.
Improving those shopping centers for a post COVID-19 environment why would you not.
Choose to go there.
Where would you choose to go instead, because at the end of the day, it's not about the rent it's about the profit there.
And effectively higher sales.
Better margins on more affluent customer and better real estate with the landlord that's investing side by side with you.
It seems to.
You're in there with with you know of new balance sheet.
Seems to be a pretty smart choice for a lot of tenants, including and especially those small shop tenants that Craig Schmidt was referring to before and that Wendy went through in detail. So I hope that's helpful. That's what we see happening in the markets that we're in at the.
Property debt, we're in it's why the investment in the properties to be post Covid investments are so important to our retail they've got to be partners with their landlord.
And the only thing Dan I would add to that on that.
Some of that up so well in terms of how the of each of US are thinking of now Inc. On the flip.
Side of how we're thinking it gives us the equal opportunity its strength.
And the merchandising, it's falling thinking that's the way well capitalized whose balance is going to meet that post COVID-19 world.
How should we make on investment property. So it's really a benefit for both sides.
Thank you so much.
Thank you.
Yeah.
Yeah.
Our next question is from Chris Lucas with capital 1 Securities.
The state your question.
Hey, good evening, everybody. Thanks for taking my questions I'm done and this kind of follows up on <unk> question, but I. Appreciate the comments you've made about sort of the demand being pulled forward.
But I was curious as to the conversations you're having with your you know the the.
Tenants, who want to have in your shopping centers.
Are they expressing interest in in thinking about not just the this year next year deals, but the future out years are you seeing the sustainability of this demand with those kinds of tenants.
Well that's a good question, Matt because Chris as as you look I mean, 1 thing you'll you'll notice is is with the volume that we're doing.
Still.
Average tenant term of what 3.4 years 8 for years, which is about a year more than than you kind of used to see.
From us and I think what you're what you're trying to what they're trying to do is plant flags that effectively get them. You know 2 of the next decade now.
Certainly as the portfolio goes from 89% leased of 92 to 94 et cetera, it gets harder and harder and harder.
To be able to do that so in some respects it it's in a lot of respects, it's constrained by the supply that's available.
2 of them and that's kind of why you know.
When everything is great in the industry and everything else you know of rising tide lifts all boats, because you've got to find the best the best spot, but that's also you know, especially the time like this when those tenants are trying to take advantage of an opportunity that they have not had for you.
For years.
So that's kind of what what what I'm seeing I don't know Wendy if you want to add anything for that or I think the only thing I can add is when I.
I don't know how long yet.
But when I look at the pipeline and it's still very robust. So I don't see that we've done a lot in second quarter and languages.
It's about the cell so right now it's I'm confident.
Yeah, I think my comment really relates to the anecdotal conversations I've had with tenant rep brokers, who have talked about their clients not really thinking about 'twenty, 1 and 'twenty 2 openings, but thinking about 2020 for openings and that the volume of activity has ramped considerably and that was really what I was thinking of all of it.
Yeah, Chris, but that's that is what happens to it I mean, that's the stuff takes time I mean, I was thinking before when somebody asked the question of the difference between the high on the low end of the guidance you know 1 of the things that we didn't say what are we going to be able to get with all of this leasing our tenants open faster than assumed or slower.
Then of symptoms.
And that's not totally in our control that was you know cities with permits there is retailers that have different plans of of their timetable of et cetera. So you know the.
The lag in our business, obviously between signing the lease assigning all of the it's not the end of the process getting that rent starts at the end of the process and that you know that is a it's a complex.
The thing to do.
And a lot of ways. It takes some time. So that's part of what you are hearing from those tenants also as you know the lead time to be able on lockup space for the.
The true post Covid environment.
Great. Thank you for that and then Dan I just wanted to follow up on the collection side.
On the abatements were down sequentially from 10 to 7 million I'm, just curious as to whether that part of it was driven by.
Driven by tenant fallout or was that driven by the moving towards paying rent and then kind of.
Alongside that is also your ADR under cash basis looks like it went up the call it $10 million quarter to quarter is that predominantly new deals where were those legacy leases moved to cash.
Moving on that.
I'm going to ask you the repeat the question, Chris and do it 1 other time.
Okay, sorry about that Dan.
On Abatements, you went from $10 million to $7 million was most of the debt.
Related to this tenant fallout or was it related to tenants primarily moving to paying your rent. So the abatements sort of went away and moving towards paying us rent.
Okay and then the second question is related to the the a b or the Thunder cash basis, the percentage of your commercial leases under cash basis remained the same quarter to quarter, but the volume of ABR.
ABR was up considerably.
For the second first quarter, the second quarter. So it generated about $10 million Delta on gross ABR, that's under a cash basis.
And so I wanted to understand whether that was predominantly based on new deals that you had signed whether there were some legacy leases that sort of contributed to that increase and the ADR.
On the cash basis.
Yeah the.
That distortion was driven by the acquisition.
Obviously, we think we acquired 325 million of $400 million worth of assets that had.
175 million square feet.
Obviously, that's going to skew some of the data.
Okay perfect. Thank you.
Yeah.
Our next question is from Greg Mcginniss Scotiabank. Please state your question.
Hey, good evening.
So Don on development I believe I saw entitlement request of Pike, <unk> rose to potentially add lab or R&D space there.
Provide some color on how potential construction costs of investment yields compare between traditional office and lab space.
The remainder of developments and whether that's an asset type you may pursue at other locations as well.
Greg first of all I loved the chair I love that you're looking at debt stuff and see of what's going on around here. What we're doing is trying to make sure that we uncover on where real estate cost.
Trying to uncover the highest and best use for the the real estate debt. That's here at Pike, <unk> Rose and certainly up at Assembly row, and and you know on other places and certainly when you look at life Sciences, and you think about Montgomery County, Maryland.
Important business, that's here that with the little bit of luck expands and by the way expands the places where the tenants value. The amenity base that other office type tenants value in these in these locations and the same applies.
2 of Assembly row now at Pike, <unk> Rose are we anywhere near being able to answer your specific questions in terms of the economics on it whether it's viable doesn't make any sense no we're not.
We're in that early exploratory phase, but we're in the early exploratory phase because we believe theres something potentially there.
I've got nothing more to say about that at this point other than you know the entitlements in this on this 27 acres.
Could certainly be used for that use.
And similarly.
Similarly.
At Assembly row, So in assembly row could be closer because the that businesses is.
You know that business is.
Terms of Boston, and Cambridge, and Somerville is.
It's even.
Has he been closer to fruition than it is here, but in neither case am I really ready to talk to you about the about the economics, because we're not sure of what we got yet.
Okay, that's fair.
And then you also mentioned that lifestyle centers or having a bit of a resurgence in tenant demand could you also discuss discuss the level of N type of demand you're seeing them on the other asset types and if there's any noteworthy trends by geography that color would be appreciated as well.
Yeah.
Do it necessarily but I can't really do of between <unk>.
Power centers or.
Grocery anchored centers or regional centers, because it really does.
It depends on the geography, there is no question that even in the second quarter, we were operating in markets, which were still.
I wouldn't say locked down like they were in January and February, but only coming back in the coming up and building in terms of there.
You know <unk>.
But the debt it was so strong in all of them.
That debt.
We had to wood.
Just feel really good about talking about it the only thing I would say is during that period of time the second quarter.
Weather had a lot to do with it so Boston felt like it was a few weeks behind New York, which felt like it was a few weeks I, Washington D C et cetera, that's the.
As the weather changed and as those restrictions came off Holy Cow was.
Was there was there of pent up demand and that has that's continued.
It's interesting we're talking a little bit of gone off on a little bit of attention, but you gave me an opportunity so I'll do it.
You know when you think about the Delta variant itself and what's going to happen with respect to and obviously, we don't know, but we do know of few things.
The open air formats fantastic.
And in the markets, where we're at which had been a big disadvantage as they all close down in 2020. These are markets, where the vaccine rates are among the highest in the country.
There are also the markets and this is important.
Mask wearing it is accepted.
Theres not a stigma to it otherwise so so the notion of like we see a lot of people wearing masks at of our shopping centers.
Our our properties, but theyre shopping just fine because they're comfortable.
With that so I don't know, how it's going to play out, but I do like the fact that that really in these markets, both east and west coast debt that the vaccine rates are among the highest in.
In the country, because I think that's an important thing.
For the long term of of this mess for it.
Yeah.
Okay, and just a quick follow up because you mentioned pent up demand and I'm curious on guidance. How are you guys thinking about this level of leasing activity and how much of that might be pent up demand versus more continued and sustainable tenant demand.
Yes, there is.
Theres certainly some.
But as Wendy's is set of couple of times. The other pipelines for where we got a bunch of boy I've got a bunch of deals to do it.
Or will it be as robust as a.
The second quarter of the first quarter I doubt it I mean, it's hard to the it's hard to maintain.
That level of activity plus I think that the people would quit they've been working on their asses off but nonetheless.
On the you know the ability the too to see elevated levels based on historical levels for the foreseeable future is real.
Alright, Thanks, Dan.
Our next question is from Floris van <unk> of.
At this point please state your question.
Uh huh.
Thanks for taking my question guys I know, it's a it's a long a long evening here for everyone I'm just just.
Making sure I understand the the signed not open pipeline. The 320 basis points, you said, it's around $30 million of of a b R is that correct.
Correct.
So it's about 5%, 5% of <unk> T O y.
Of total rent.
Total range, Yeah. So is that about 5% of your P O Y a ballpark figure.
Yeah.
Yeah, Yeah, that's right so.
Oh.
Look it's the it's a solid number but it looks like you've pulled forward a lot of your NOI pickup already in this past quarter. So you've got another 5% to go just just making sure. You've also indicated gone I think you've said you hope to get back to you know to 90, 495%.
Occupancy that suggest another 3% or 300 basis point pick up from from from from the the current levels. So is that another 5% potential NOI impact going.
Going forward.
Yeah of course Louis.
At the end of the day. If this is the 95% leased portfolio and I'd say as I said earlier with the the development sales and.
The capital that we've spent fully performing I don't know when that would be talking about over 7 bucks a share.
And earnings for the for the place.
So yeah, you Betcha now asked me the day, we get the 95% occupancy I'm not sure I can give it to you.
You know, we're when we're fully leased up on the the.
Development that has happened.
Obviously, but yes sure your model makes sense is as to the way you're looking at.
So let me ask you the the the follow on on that so obviously your NOI goes up your your any of these should be going up as well does that make you think wait a second maybe I should you know hold off on on tapping the ATM until my stock price gets up a little bit more or wood.
You still be comfortable.
You know raising more capital at the.
117 level with.
With these results behind you.
So you know the answer.
Sure.
On what it's going to be for me. This is a balanced plan.
And the the ability to effectively raise a little bit of capital.
In most markets along the along the way is something that debt doesn't surprise in the masters it keeps everybody on it.
It matches beautifully the the money that spend out of the idea of letting leverage get way up because there may be that day that you can do it and then you do a big overnight that's not our model.
And and so yeah, you know I mean, we need those investors and I think we have them, we need more of them, who basically appreciate that steady balanced approach toward equity raising debt raising dividend payment.
What you get when you are when you get the high quality assets.
Thanks, Tom.
Our next question is from Linda Tsai of Jefferies. Please state your question.
Hi, I just had 1 question.
In terms of the tenants that have the payback plan beyond 2021 what percentage of your ABR is that and then when did the plans finally conclude.
Yeah.
At least she got the lending you've got you've got people moving papers around all of it with placement on here just give us the second.
And beyond.
What we have outstanding roughly half of that should be paid back by the end of the year and beyond that it's.
Another chunk in 'twenty, 2 with the balance.
With the balance of 23 in the 24th.
So youre, probably looking at about a half of half in the balance of the year on.
<unk>.
And 'twenty, 2 and then the balance of beyond that.
But what percentage of your ABR is on that kind of plan.
I don't have that range.
My fingertips the weekend, we can provide that to you offline.
Okay. Thanks.
Okay.
Our next question is from Paulina Rojas of Smith of Green Street. Please state your question.
Hello, and thank you.
That's clearly a lot of interest and debt sort of interest in the open Air Center of this space and how do you think investors are looking at the lifestyle centers.
How has the level of comfort with the category changed in recent months in.
In your opinion.
I don't know the the.
The you know when you look at retail real estate the.
<unk>.
The.
Big investors that we talk to are very interested obviously in the cash flow prospects of that particular asset. The particular real estate. When you look at lifestyle I think what has become very clear during this process. During this these these last.
6 or 8 months is that those type of assets.
You know I don't know, what we really mean by lifestyle in my mind debt, where we are talking about you know largely our mixed use properties.
And larger assets out of that.
Also include a residential or office component associated with it I know that the man that we're seeing from tenants and therefore, the understanding of that from investors is very strong the.
The notion that as debt.
On the notion that.
We all know the grocery anchored centers are.
Very popular right now to effectively look at based on how they worked out through.
The COVID-19, but in terms of you know when you sit and you say where is your growth over.
Over the next 5 years of 6 years or 7 years.
I know, how we feel and I believe the investors on this company.
Appreciate the higher growth potential of those type of thought centers.
Yes.
And your portfolio of course has a mix of property types, but if you could break capture portfolio of how far from pre Covid is the NOI from the 30% of your portfolio comprised by lifestyle centers.
Well, it's still 15, 18% off.
Okay.
Thank you for lunch.
Our final question is from Katie Mcconnell of Citigroup.
So the question.
Hey, it's Michael Bilerman here with Katy.
I guess as you listen to all of your peer.
All of them review their leasing stats of pretty much every public company instead of reporting pretty.
Pretty record leasing strong pipelines and I wanted to know whether you're on your team have noticed any shift in the marketplace between public and private landlords and their share of sort of wood.
Leasing that's going on.
There is a market share shift that is occurring to the better quality assets of the REIT town and the.
The better capitalization of the rights are.
And whether that shift is real or just sort of on the margin and if it's real.
That alter the landscape at all and then provide an Idaho what happens to all of those centers that are not getting all the things of that.
The rest would come acquisition opportunities of redevelopment opportunities whether this is the thing that's happening or not.
Boy, Mike of Michael that's of Great question, and I wish I had more than anecdotal.
The evidenced by it but let me give you the anecdotal stuff debt debt that I see I mean, it kind of ties back to what I was saying before in terms of of <unk>.
Taylor is making longer term investments, they're trying to set themselves up for the next decade post COVID-19 and they know that they want to be with landlords.
Who are wisdom, and what that means with them is care about who their merchandising next to share about whether they are investing in the properties to the effectively attract customers with a place making perspective of curbside pickup I mean Curt.
Side pick up.
Can I tell you of how many tenants asked about it what did they use it or not.
That's another question, but it's of critical thing to figure out whether the landlord is is in it with them and trying to make them successful as businesses. If you're a private company that is under capitalized and I make that distinction because they well capitalized private company and Theres a bunch of them.
Net net you and I know that are disadvantaged at all [laughter] and been darn good at what they are what they do but if you were a private company, who is under capitalized and trying to kind of milk for the cash flow from the existing shopping center I think you're in a series of disadvantaged postpone.
And so so that depending upon the marketplace, who was in the marketplace, who is willing to invest or not I do think that is the sustainable trend.
That will widen the gap, if you will between better real estate and less invested real estate.
Thank you.
Your example on the bike and rode on the Pike example, our tenants just for.
Signing leases because he's available now and they know they want to get into the better space with the better quality landlords, but they havent, let the other lease expire and so.
Macro retail statistics are going to start essentially showing the depressed level of overall occupancy just because of its more of a tenant moving around with made the leap a slight uptick.
Given some of the new tenants coming into the marketplace.
Don't have an opinion on that either of you guys.
Because of their site.
When they're signing leases it is for a move generally it's not due to.
Milk the old store that they had in the market and add another 1. So so it is you know now I will say that that will try to incentivize them to leave early.
And effectively use this period of time to create an economic deal that makes sense for them to leave early or something but it's not.
No I don't.
I don't see it being.
Extra deals if you will that is going to wind up with with Closeouts in the old places down the road in any significant way at least I don't see it that way I don't know when do you shaking their heads.
I agree.
It's more strategic it's more timing, but I don't you kind of.
Moving the other stories on heading 2 years left on that range.
Needs to match up the most of the time of the quality of tenants that we're dealing with.
Now historically Publix was a good example of a company of Florida that would do that on.
Well, Alex Wood wood.
The good.
Leave the store go dark on the store on open 1 on.
The open 1 across the street, if it was better.
If it was better real estate of better landlord at the et cetera. So.
There's always there's always exceptions I guess, there's always 1 on 1 off the but why do not see that or we don't see that as the trends.
I guess just touched on.
Unusual market to go through the right sorry, Jeff you were saying.
Yeah, the answer kind of the second part of your question Michael If you look at the.
The acquisitions, we got done in second quarter, 1 of the common threads across those deals was the owner for whatever reason was unwilling or on payable do invest capital in the property going forward.
Those are perfect.
Well located shopping centers, where that's the owner's mentality of those are a perfect acquisition for us.
We like those because we will come in and put it on the capital on a great location and you know.
So virtually immediate results in leasing are very strong results for the short term and the leasing so yeah to the extent of the pandemic causes more of that to happen.
That will put more properties on our radar screen for sure.
Great well I appreciate the color even if it's anecdotal I know, we're not gonna have perfect answers as of yet as we transition to the next phase of the.
Of the pandemic.
Thanks, Michael Alright, Thanks, Chris.
Our next question is from Tammy <unk> of Wells Fargo Securities. Please state your question.
Great. Thank you so much on.
Sort of given all of the leasing activity that you did in the quarter I guess I'm curious what annual contractual rent bumps look like on the new leases signed relative to what you were negotiating them pre COVID-19 maybe on that.
All of it to that I'm wondering if you are seeing any retailers backing away from the opening or closing stores to determine the inability to find the labor today.
I guess the first part of your question Tim on you.
On average you'll still.
Still see plenty of deals at 3% bumps of 2.5% bumps the anchors will still be flat for 5 and then up 10 and.
I don't see a difference in the deals we're doing compared to pre Covid. I guess is is the big point. The is the big point there and then the second part of the question was what.
I'm, just curious I guess given.
You know we've we've heard some there are some challenges in some of the smaller retailers in particular.
Labor and of course, I'm curious kind of thing any retailer backing away from openings or closing stores as a result of that.
I don't think so I mean, there's no question that as a parent issue, especially when youre talking about the service businesses.
On the restaurants and other service businesses like that.
But in terms of not doing deals because of that no I don't see that day.
Don't see that are actually happening now.
No.
Ask me that again every quarter and figure out what's what's going on with that labor situation, because I do think that has to give a little bit and.
I think it will just by the natural in the natural of course, as we go but no not backing off yet.
Okay. Thanks, and then maybe just for more I should think about future development opportunities and just as the person here and reflect on the approaching stabilization from the current on your way pipeline I guess I'm curious what projects either in the big 3 or in the Shadow pipeline you view as the most compelling today and.
And of our construct higher construction cost.
Having any impact on how you're thinking about future development.
Yeah, well the unit cost.
Of course always true.
What we do and then you know on the Big 3 what we want to make sure. We do as best we can because these are planned for 15 years.
20 years in terms of their execution on those things just to have a good mix of of both retail which brings people to the to the asset residential which we do love.
To do in terms of in terms of debt Nathan.
Night and weekend traffic and.
A.
Ponant of office, which adds the daytime so we still want to be able to do all of those on our big projects.
And those numbers all the time construction costs seem to have stabilized a little bit at this of.
At this point in time I think that's a that's a general good sign wood.
Do need to get comfortable with where rents are and you know how.
Whether we were able to make some money I think ive said earlier in the in.
In the.
Remarks that there are a number of opportunities potentially of Pike <unk> Rose of assembly that are is that we've seen now I can't wait to be telling you that there's other opportunities at Santana row, once we get that big building lease.
Which I would love to be able to tell you, but are not ready to do that yet and you know the the <unk>.
The existing projects that the debt.
We are still being built like Darien.
And income yet to start like a Coca walk.
And in full measure, we'll also provide be providing growth over the next couple of years.
Great. Thank you.
Okay.
Okay.
We have reached the end of the question and answer session I will now turn the call back over to Leah Brady for closing remarks.
Thanks, everyone for joining on to have a great night.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great evening.