Q3 2021 Site Centers Corp Earnings Call
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After todays presentation, there will be an opportunity to ask questions. Please note. This event is being recorded and now I'd like to turn the conference over to Steve Barker Senior Vice President of capital markets. Please go ahead.
Thank you operator, good morning, and welcome to the site centers third quarter 2021 earnings Conference call. Joining me today is Chief Executive Officer, David Lukes, and Chief Financial Officer, Conor Saturday.
In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at Www <unk> centered dotcom, which is intended to support our prepared remarks during today's call.
Please be aware that certain of our statements today may contain forward looking statements within the meaning of the federal Securities law.
These forward looking statements are subject to risks and uncertainties and actual results may differ materially from our forward looking statements.
Additional information may be found in our earnings press release and in our filings with the SEC, including our most recent reports on Form 10-K and 10-Q. In addition, we will be discussing non-GAAP financial measures on today's call, including <unk> operating <unk> and same store net operating income reconciliation of these non-GAAP financial measures to the most directly pop.
<unk> GAAP measures can be found in todays quarterly financial supplement.
At this time it is my pleasure to introduce our Chief Executive Officer, David Lukes.
Thank you Steve Good morning, and thank you for joining our third quarter earnings call. We had another strong quarter really across the board unless I felt was ahead of plan new leasing volume was at its highest in a number of years, we exceeded our 2021 investment goals with the closing of Hammond Springs, and subsequent to quarter end.
<unk> distributed $190 million to site centers. Thank.
Thank you to the entire site centers team for working so hard to achieve these accomplishments, which position our company for sustainable growth going forward.
I'll start this morning discussing third quarter results talk briefly about leasing and then discuss our investments and capital as we look to grow our portfolio of assets and wealthy suburban communities.
As I mentioned third quarter I'll, let that fall was ahead of our budget on higher than expected NOI and lower G&A expense.
We collected 99% of our billed rent for the quarter looking back to 2020, we've now collected 96% of 2020 base rent, including $21 million of deferral of repayments.
Our tenant assistance program, which effectively ended in 2020 has now collected 98% of the deferred rent due which is really a testament to the durability of our portfolio cash flow the credit strength of our tenant base and the quality of our team and our real estate.
Moving to leasing we had a truly outstanding quarter with over 1 million square feet leased including 237000 square feet of new leasing, which is our highest in two years, despite having a considerably smaller portfolio.
We signed six anchors this past quarter, bringing our year to date anchors to 19.
These 19 anchors signed year to date have a number of interesting characteristics that are indicative of the operational strength we're seeing.
First off 15 of the 19 anchors were signed with publicly traded companies highlighting the credit quality of our primarily national portfolio.
Second 30% of the square footage is from new concepts that are sponsored by investment grade parent companies and were launched in the last 18 months.
We have 13 more anchors in lease negotiation, which we expect to be completed by the first quarter of next year with similar characteristics to the deal signed to date.
We expect this activity to be a material driver of our growth over the next several years, particularly since new anchors that are property, usually drive shop demand in response.
We've already seen some of this demand resulted in positive rental growth and an acceleration and executed shop leases include.
Including over 50, new shop deals in this quarter alone with a number of exciting and well capitalized new concepts.
Shifting to investments in September we acquired Hamon Springs in Atlanta for $31 million, which pushes our year to date acquisitions to $80 million ahead of our $75 million goal for 2021.
Atlanta is our largest market and we're very excited about the growth outlook for the city and for this property in particular with average household incomes in excess of $130000 and incredible visibility and a high traffic corridor.
Similar to Delray and Charlottesville acquisitions convenience is the anchor at the site as it does not have a traditional large format tenants.
While box demand has been very strong the advancements and Geo location data mean that we don't have to rely on the anchor as the assumed primary driver of traffic.
This opens a compelling sub sector in open Air shopping center and has been the bulk of our acquisitions year to date.
That said going forward I'd expect us to be active in both anchored and onto anchored assets that fit our growth and sub market criteria.
Our investment thesis is based on three clear facts that have emerged in the last year and a half.
One there is now more money and wealthy suburbs two they're more frequent customer visits due to a more flexible work from home culture, and three an increasing value and convenience for both tenants and customers alike. These.
These facts are producing occupancy gains, but also rent growth at.
At a time when buying vacancy is becoming increasingly challenging given the strength of operating fundamentals. We are heavily focused on finding the right properties in the right Submarkets, where rent growth is happening and we have an opportunity to re tenant existing square footage with stronger credit tenants at higher rents.
The foundation of our investments is our balance sheet and our access to capital.
As was announced a few weeks ago RBI declared and paid a distribution on sites preferred investment in early October.
In this distribution site centers received $190 million and does not expect to receive any additional distributions from RBI in the future on the account of its preferred investment.
The payment along with recently announced RBI asset sales and a common dividend declaration leaves RBI, which has three remaining properties and a clear path towards a conclusion.
It also returns almost $700 million of capital to preferred and common stakeholders, which was part of the original thesis and the business plan for the formation of RBI.
All of US at site centers are incredibly proud of the thought and work that went into this innovative spin and we are excited about future investment prospects for the return on capital we received.
And with that I'll turn it over to Conor.
Thanks, David I'll comment first on quarterly results discuss revisions to 2021 guidance and forward earnings considerations and conclude with our balance sheet third.
Third quarter results were ahead of plan as David mentioned on better operations and lower G&A expense.
Total uncollectible revenue at sites share included $1 $6 million of income or one cents per share from payments related to prior periods, primarily from cash basis tenants.
Outside of this there were no other material one time items that impacted the quarter.
In terms of operating metrics the lease rate for the portfolio was up 50 basis points sequentially, which was on top of 40 basis points last quarter and speaks to the strength of our leasing activity and minimal bankruptcies.
Based on our current leasing pipeline that David outlined we believe the lease rate will continue to increase into year end.
We provided an updated schedule and the expected ramp of our $12 million signed but not opened pipeline on page eight of our earnings slides, we had 300000 square feet or $5 $1 million of annualized base rent commencement in the third quarter and yeah. So no pipeline now represents just over 3% of annualized third quarter base rent or over four per.
<unk>. If you also include the anchors in negotiation in our pipeline.
Moving onto our outlook, we're increasing 2021 O with a full guidance to a range of $1 13 to $1 14 per share to incorporate reported results with outperformance driven by prior period reversals earlier rent commencements and higher retention.
Rent Commencements and uncollectible revenue remain the most volatile factors, which will impact fourth quarter results.
We've also increased same store NOI guidance to a range of 12.5% to 14%.
The updated range reflects reported results and excludes any future prior period adjustments.
It implies that 2021 same store NOI is affectively running slightly ahead of 2019 levels and that 2022 NOI for comparable assets would also be ahead of 2019 based on our leasing pipeline and initial budget forecast as well in.
In terms of the fourth quarter. There are a few moving pieces to consider from the third quarter as outlined on page 12 of our earnings slides.
First as I previously mentioned, we had $1 $6 million of nonrecurring uncollectible revenue in the third quarter.
We are anticipating a handful JV asset sales to close in the fourth quarter, which will impact our share of JV NOI and JV fees.
Third we expect RBI be used to be about $3 $5 million in the fourth quarter, which is roughly flat from the third quarter.
And fourth G&A will increase from the year to date run rate as expenses pick up.
These factors will act as headwinds versus third quarter, partially offset by rent commencements and investment activity.
A summary of these factors on page 10 of our earnings slides.
Moving to 2022 O F O. We are not providing formal guidance at this time, but wanted to provide clarity on a few line items.
First on RBI gives.
Given that RBI now owns just three properties. It is fair to assume that RBI fees paid to site will be minimal in 2022 upon the fees resetting in January with the dilution from lost fees offset over time by the reinvestment of preferred proceeds into acquisitions.
Second interest expense at site share is expected to be roughly flat to 2021.
Third we would expect G&A to total around $52 million and fourth included in 'twenty 'twenty. One year to date results are $12 $7 million or <unk> <unk> per share of nonrecurring reserve reversals related to prior periods.
Turning to our balance sheet included in the receivables line item at quarter end is just under $2 million of net COVID-19 related deferrals, we expect to collect in the future as a deferral program winds down.
Details on the timing and composition of the gross deferral balance are outlined on pages, six and seven of our earnings slide deck, but with 84% of the total gross deferral balance repaid to date the impact on earnings in future periods will be limited.
Finally, wrapping up with liquidity and sources and uses.
So format for the $190 million distribution from RBI and the early retirement of our $88 million of January 2022 mortgage maturity. The company has just over $150 million of cash on hand, and $25 million of common equity from forward sales under our ATM, which is available for future settlement.
This liquidity will allow us to take advantage of investment opportunities as they arise and to drive sustainable growth and create stakeholder value and with that I'll turn it back to David.
Thank you Connor operator, we're now ready to take questions.
Thank you we will now begin the question and answer session.
To ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Okay.
Our first question comes from Rich Hill from Morgan Stanley. Please go ahead.
Hey, good morning, guys.
Wanted to just maybe start with a nuts and bolts question I appreciate the disclosure about the $12 7 million benefit in 'twenty one to date can.
Can you maybe walk through how much of that $12 7 million was realized in three Q and maybe what we can expect in <unk>.
Sure Rich.
Of the $12 seven $1 6 million was in the third quarter we.
We don't budget included in our budget excuse me any future revisions. So if we had them in the fourth quarter that $12 seven would move higher.
Got it and so just just so since we don't know last year exactly what would same store or in a what would stay the same store NOI have been without that benefit sure. So year to date and again, that's just for the first three quarters because nothing in the fourth quarter like I mentioned, it's been about a 535 apart excuse me 530 basis point.
Kind of a good guy for the year. So all 12 seven wrenches included in same store.
Got it. Thank you very much and then maybe a bigger picture question about the cadence of occupancy if I go back to sort of your peak prior to Covid not in 2019, but even prior to that you were around 95%.
You see a path to getting back to 95% and what does that cadence look like.
Well I mean Richardson, David based on the past couple of quarters, I think the cadence looks pretty good.
And from a poll at the portfolio perspective, the quality of the assets given the spinoff of RBI is a lot higher than it was in the last cycle. So I don't see any reason why the portfolio can't be $95, 96% and rich the only thing to add to that if you recall prior to Covid. We had a couple of properties I think there's three or four we were keeping space offline as we looked at.
Government properties or projects excuse me and some other ideas and in our comment kind of over the last couple of quarters has been the retail demand has been so strong or the demand from retail tenants has been so strong we've taken those kind of out of redevelopment and assume that they will be leased up so I would say, our our kind of peak occupancy. We think we could do for this portfolio post COVID-19, it's probably higher than it was pre.
Covid.
Okay. That's helpful guys and just just just maybe push on this a little bit is it you know you had you had almost 50 basis points sequential improvement on our numbers do you think that's a fair run rate or should we see acceleration and that sequential improvement, yes, rich the horsepower as a percentage is always difficult, but if you look on the ethanol pipeline that we have in there.
<unk> or excuse me in the slides you can kind of you see the dollar amounts we expect the percentage as always you can get a little little screwy with depending on GLA, but I would focus more on the dollars.
Okay got it.
And jump back in the queue I'm sure I have a lot more questions, but I'll I'll give some people some airtime.
Thanks, guys. Thanks.
Thanks Rich.
Our next question comes from Katy Mcconnell from Citi. Please go ahead.
Hello, Kitty as your line open.
Hi, good morning, sorry about that.
And I was wondering if you could just walk us through the increase that you saw in leasing capex per square foot this quarter and to what extent was that driven by rising construction costs. There are some extra Washington gas is quite high.
Hey, it's Conor so if you look on page 14, our net effective rents line on the right side, you can kind of see what percentage of the deals of new deals. We're doing are anchors versus shops and the reason we disclose this is just you know anchors have lower net effective rents by definition. So if you look on for the fourth quarter. We were excuse me for the third quarter, we were up to 57% were anchors.
Last quarter. It was only 34% so I'll turn it over to David for the construction of Carl's comment, but it really is just a mix issue is we just more anchors this quarter and I would expect that to continue in the fourth quarter as well.
The construction side Katie Yeah. There's no question that there has been some inflation, particularly in construction materials, we haven't really seen it yet in labor, but on the construction materials side. There is definitely about a 10% to 15% increase in a number of categories.
The issue is when you start to lump in those categories that have inflation.
When you look at it as a part of the total cost of the deal, meaning landlord costs Ti and commissions.
There hasn't really been that much.
Impact yet that is meaningful the.
The big issue for US is really more the characterization of whether their shops versus anchors.
Okay, and then as you look at the near term lease expiration schedule what are your expectations for recapturing space at this point and potential mark to market upside next year, Yeah, well I think the biggest issue for US is that the leasing demand is so strong.
Pretty much across the board I mean, if you remember a year and a half ago. It started in the out parcels and then it moved into anchors announced moving into shops, I think what's really going to happen is we're going to start seeing a lot of properties moved to a pretty high occupancy, which is going to put pressure on renewals from tenants because they won't have the choice to relocate so our expectation is.
Renewals incur.
The increase in the percentage of tenants that exercise their options increase which means that the amount of available inventory, we're going to have is going to stay a little bit low.
Okay, great. Thank you thanks Katy.
Our next question comes from Alexander Goldfarb from Piper Sandler. Please go ahead.
Hey, good morning good.
Are you done there.
So let me just I'll continue on from <unk> question on <unk>.
On leasing Capex taken from a different angle what are you guys seeing as far as.
Labor.
And also.
Also delays in opening some of our recent site visits have shown some restaurants closing early.
They don't have the labor or some I think it's probably more on the on the F&B side, it's just tougher to open because of equipment shortages or materials or bill or millwork or things like that so I'm curious what you guys are seeing yeah, I think Alex we're seeing the same thing I mean, there's there's growing anecdotal evidence.
That supply chain problems are starting to have an impact on both cost and timing of construction projects.
To date, there really hasn't been any economic impact to us and as we're signing leases I think we're starting to see a little bit longer lead time for signature of lease to rent commencement.
And so I think the landlords have had a chance to put that in their budget because we're seeing it when we signed the lease.
But theres no question that it's been a little more difficult to get permits it's been harder to get materials.
Even even if your stockpile certain materials in certain pieces of equipment. It's just it's still just a little bit more difficult to get a tenant open and it costs a little bit more than it has I wouldn't say, it's material yet, but we're certainly keeping our eye on it.
Okay and then next question as you guys look I mean, you guys have spoken about market rent growth. So I think that David in the past you've mentioned that finally.
Seeing actual market rent growth certainly, 18% on new leases of Braskem, but if you drill it down would you say this is widespread across all tenants all categories or is it really driven by.
Certain parts of your portfolio and then the flip question what parts of your portfolio are you still looking at rent roll Downs.
Well they I think the easiest answer to that question is that.
As of this quarter I'm, feeling very confident that rent growth is pretty much across the country. We've hit a high watermark in a.
A number of states.
With respect to shop rents I think youre, starting to see anchor rent pick up yes.
Anecdotally a property just came for sale last week across the street from one of our larger assets.
And the in place rents at that property for sale or in the mid Thirty's. We just signed four leases in the mid fifties across the street. So.
I think when you kind of turn to acquisitions. It's it's the same philosophy are finding value in looking for rent growth because it feels like a lot of rents are really moving up a little bit faster than I would've expected.
In terms of Mark to market, that's always a tough question, Alex because it has everything to do with when a tenant decides not to exercise their option or whether they decide to exercise.
It is very common you know when a large portfolio like this to have one or two roll downs.
Every quarter every other quarter.
Because you are trying to figure out which kind of do you want to keep it long term, but as you start to see Occupancies get up to the fact that these tenants aren't going to find a place to go within the same trade area. Then the renewal rates are probably going to increase from here and I think we'll probably have fewer roll downs.
So bottom line I mean, I know you wouldn't admit like Hey, we have trouble on 5000 square foot tenant or a trouble on ex tenant or whatever but bottom line as we head into next year.
Youre, saying that either because of replacement demand.
Jeff where rents have grown for that size blocks and that type of pattern that theres no real area in your portfolio, where you expect.
A material headwind you you look at everything is basically flat to up.
As we head into 'twenty two.
That's correct.
Okay. Thank you.
The next question comes from Todd Thomas from Keybanc Capital markets. Please go ahead.
Hi, Thanks, good morning.
First question just appreciate some of the earnings considerations for 'twenty two I'm curious if you could provide some guideposts around investments you talked about you you've exceeded the $75 million target for 'twenty. One you have repaid the $190 million RV I, perhaps just curious if you can talk about the timeline to reinvest that capital in what we might.
Expect us as we go.
As we look ahead into 'twenty two sure Todd well if you remember when we set our goal for for this year. We have we had leverage levels, we had some free cash flow.
And I think we achieved those goals this quarter.
Barely moving past what our original Budd.
Budget for the year was the difference of course as you know is that now we have the repayment of the RBI prep. So the cash on hand is about $150 million as Conor mentioned.
And I would expect that we're going to be reinvesting that capital as soon as we find assets that we think fit well with the portfolio. So I think it's fair to assume that that's kind of our target at this point to deploy that $150 million beyond that I think it has everything to do with the opportunities because our leverage right now is at the low end.
Of our kind of preferred.
Debt to EBITDA range. So I think we do have a lot of capacity to grow if we find things that we want but we're going to start with the cash on hand, and then move from there.
Okay, and then I just had a follow up I guess on your comments around around rent growth.
You know there has been a considerable increase in retail sales across most categories and I'm just curious if.
If if you see anything changing regarding the.
You know sort of model around setting rents and occupancy costs that retailers can can tolerate whether you would expect to.
Sort of you know.
Participate in higher sales environment as leases expire as you would ordinarily or are there other implications today that.
I'm sort of might prevent you from seeing the flow through as you negotiate new and renewal rents.
No I think Todd just come back to David's answer I think youre spot on I mean, you look at the factors that are driving rent growth tenant sales are a big part of it right. So.
I think we would agree with you that as tenant sales continue to improve and are well above current levels like our top 15 tenants I think like 13 of the 15 has sales for their portfolio was above above 2019 levels that in neurostar benefit as we renew them or as they look to sign new leases. So.
I think the longer the short answer to your question is yes, we do expect to participate in and the sales growth in the form of either higher renewals or hire new leases.
As we execute them over the next couple of years.
Okay alright, thank you.
Our next question comes from Samir Khanal from Evercore. Please go ahead.
Hey, David can you provide a little bit more detail on the property you acquired.
Atlanta, Georgia, what was the cap rate on the deal.
Maybe broadly what are you seeing for pricing per centers.
That are that are anchored in O&M non anchored centers at this time.
Hey, good morning Samir.
Haven't disclosed cap rates on individual properties I think the way I would like to describe it as that.
When you're in a rent growth market, it's a lot different deploying capital than when you ran in occupancy growth market from an acquisitions perspective, it's very difficult to find vacancy to buy right now because sellers don't want to sell vacancy.
The operating fundamentals are just too good so.
What we try and do is use all of our evidence from recent leasing to figure out where market rents are going which tenants have demand.
How we can fill that fulfill that demand and in this particular property in Hammond Springs it.
He was asked that we've been chasing for the last couple of a couple of years same with Delray. We've been we've been really after the sellers to see if we can acquire them.
And it's just at a very very high traffic intersection it's got the near term rollovers from shop tenants with no.
No options, which gives us a mark to market that's double digits. So we're very excited about the CAGR on this one more than anything else.
To a certain extent that does show up in the cap rates.
And so I think what's really happening on both anchored and on anchored and frankly of many types of format, whether it's grocery or power or a mixture of both her lifestyle youre starting to see the unlevered IRR, it's all kind of moved down together, because the risk of occupancy and finding tenants.
Has been replaced by the opportunity to raise the rents on existing tenants. So I think for the next year or two it feels like this business is going to be a renewables business.
And that and it was very well to accompany thats buying assets with with leases that have near term rollover.
Got it thanks for that color and then maybe second for me is on the occupancy side for the shop space.
I mean, how long do you think it'll take you to get you to take.
Take you to get back to the sort of the 90% level for shop space, which I think is sort of pre COVID-19 level.
Yes, I mean, we haven't put out kind of our multi year target yeah, that's something we're working on now but.
I think just to come back to Dave's initial comments, we're starting to see a lot more momentum on that front. So I do think you will start to move up.
Shops to move up in sympathy with our anchors, but we haven't put out a kind of long term target I do think coming back to Rich's question, though it is fair to assume at the very least we get back to where we were pre COVID-19 levels. The only difference versus the anchors is unlike our are the three or four properties I mentioned, where we're keeping anchor space online, we werent keeping shops offline so that that would be the only difference but otherwise.
<unk> I think it's fair to assume shops move up in sympathy with anchors, we just havent given that long term target yet.
That's it for me thanks, guys. Thanks Man.
The next question comes from Floris Van ditch come from Compass point. Please go ahead.
Yes.
Good morning, guys.
You know obviously solid quarter.
Very strong balance sheet congrats corner on that as you think out how do you expect to be deploying your call of 1 billion to of liquidity potentially and and as you think about acquisitions versus redevelopment versus ground up.
Versus M&A, how would you how would you rank those.
Potential capital.
Usage is.
Good morning floor on a risk adjusted basis. There is no question that the primary target right now is external acquisitions.
And so if youre looking at external acquisitions, you were talking about how your.
Your IRR or so becoming alright.
<unk> are coming in a little bit because obviously pricing has gone up.
At what point does that slip and I know your redevelopment pipeline seems pretty light right now and I think thats by choice.
Do you see that changing any time or what needs to happen on the acquisition side, how much more do do unlevered IRR need to come in before that starts to flip to to where you think hey.
I deploy more capital and redevelopment.
Yes.
What's interesting is that I'm not personally convinced that the unlevered IRR is have come in that substantially I think the difference is the going in cap rates have come down but rent growth is becoming to show its rear its head pretty pretty robustly I think across a lot of companies. So if youre going in cap rate is lower but your growth is higher and theres less.
Capex, because it's more renewals and less occupancy driven I think your sustaining an unlevered IRR that the same it was six or nine months ago. So I mean to me I think that's why external acquisitions right now it has the highest unlevered IRR at the lowest risk because it's becoming more of a renewal business and less of an <unk>.
Occupancy or development business, and let's not forget that the challenge with redevelopment is the time factor, where it's a long time to entitle with a long time to permit there is good growth on our redevelopment pipeline, but it's not without risk, particularly with construction costs going up and I think that's why a lot of retailers are starting to focus on grass.
<unk> whatever square footage they can in wealthy submarkets, because they know there's going to be a lag before new construction shows up and enforce the only clarification just on the redevelopment side. We've got disclosure on page 17 herself just the projects underway. We've got a number of other tactical projects. We're working on pads, all lots et cetera, some small scale expansions, but they just don't show up.
Ourself until until they're underway. So we've got a couple more that were excited about and working on it's not like we're shelving them to focus on acquisitions, but you're right relative to the enterprise acquisitions would be more material relative to redevelopment.
Thanks, guys that's it for me.
Thanks, Laura.
Again, if you have a question. Please press Star then one.
The next question comes from Linda Tsai from Jefferies. Please go ahead.
Hi, good morning in terms your interest in non anchor centers. You mentioned you have T O locational data they get comfort with demand what do you look for from a.
Our merchandise mix perspective.
To be comfortable around the sustainability of that traffic since there isn't an anchor.
I think it's a great question Linda I mean, if you start with the data that tells you who the customers are that that's the most important piece or at least the first step are you attracting the customers are they coming to the property transaction and the second is the credit profile and I think it would be somewhat surprising if you were to look at a lot of unanswered product.
In the U S. It does have a lot of credit tenants, particularly on the banking side wealth management.
A lot of our restaurant concepts and so forth. So the credit profile I don't think is all that dissimilar.
Any other traditional anchored center.
And what we look for is kind of the right mix between the credit tenants, which usually have a number of options left and therefore, they really have your real estate for a number of years versus the local tenants. They usually don't have options and therefore, there's more near term exploration. So the game plan for a quite a bit of Thats ananke.
Our strip that we've been purchasing is to measure the credit quality of the tenants that are there recognize that they are likely to be staying based on traffic and then look for specific renewal or replacement ideas for some of the local tenants. So we can upgrade the credit quality along the way.
Makes sense and then how are you thinking about bad debt for 2022 since 2021 benefited from pull forward of bankruptcies in 'twenty consumer strength and proven credit profiles government support.
Yes, it's a good question Linda we haven't given any guidance on bad debt or uncollectible revenue whichever whichever.
Whatever bucket you will kind of look at it I would just say.
In terms of bankruptcies theres nothing material, we're tracking to date that could quickly change all through the holiday season approaching and again I mean, as we've talked about over the last couple of quarters. Since Covid started if you look at our top tenants and in the number of who are public and how much capital they've accessed they've materially change their balance sheets from a capital structure perspective, and then coming back to I think it was Tom's question on the <unk>.
Syed their sales have increased as well so I would just say from a tenant credit perspective, we feel materially better about our our tenants today than we did pre COVID-19 with maybe an exception or two around theaters et cetera, but you know, we'll see how the holiday shakes up and and plays out and we'll provide guidance in February as a kind of explicit numbers for next year.
Thanks, just one last one you mentioned retention rates, helping the quarter what was what's the progression been like the past few quarters and how does <unk> compare to the historical average well the progression has been easy right. If you think about 2020 and Covid, obviously with a number of bankruptcies et cetera, and fallout. It was it was lower I don't know.
Have the exact figure off hand, Linda, but historically, we've seen anchors in the 90% and shops in that 70% to 80% and so to David's point, if that climbs higher youre going to see a higher retention rate and probably more pressure upward pressure excuse me on a on rents on both anchors and shops. So again I think for anchors its been historically and at 90%.
And for shops in the 70% to 80% area.
Thank you.
Our next question comes from Mike Mueller from J P. Morgan. Please go ahead.
Yeah, Hi, two questions first David can you talk a little bit about some of the new concepts that youre doing deals with it as you mentioned in your intro comments and then on when you're evaluating anchored versus an anchored shopping center acquisitions. I mean, what are the differences youre generally seeing in terms of.
Escalators.
Bedded organic growth.
France's between the two.
Sure well on the new concept side I mean, theres been a couple of concepts that are sponsored by a major credit investment grade corporations being public lands, which is a new concept that Dick's sporting goods has.
It's a really interesting concept I think it fits well with kind of the post COVID-19.
Outdoors activity.
Centric culture, I think they've got a great runway ahead of them at a really really cool concept.
Dollar general started out at <unk>.
Called pop shelf, which we've been working with quite a bit I think it's a fascinating concept it fits right in that size.
Of box that pier, one left a couple of years ago.
It's a I think a kind of a wealthier suburban oriented concepts around nine to 10000 square feet really cool concept bunch of restaurants carbon sweet green and the like really interesting and kind of adding something new to a lot of properties and even if you look Mike. It's some of the capital raise is lately or IPO filings.
First watch in Port <unk> and all the birds are starting to see some of these are these online retailers move into bricks and mortar so that the new concepts.
I think had been one of the surprises for us in the last six months.
There really have been a lot of tenants.
Tenants focused heavily on bricks and mortar when you translate that to acquisitions and anchored versus non anchored.
The reason in my prepared remarks, I said that we'd be looking at both types of assets that I think it just has to do with the opportunity of an individual property and in.
And the renewals right now really is where we're angling for because that's where the rent growth is is that and that's where you can capture more IRR.
I haven't really seen a big difference in escalators are frankly with shop leases, whether it's an anchored or an anchored property I think be the escalators that are always similar somewhere in the kind of two and a half to three 5% range. What's more important is which tenants have options and which ones don't because the higher occupancy gas as ive said, the more likely tenants are going to be forced to draw.
Are there options, which means there than it is even less inventory inventory for others.
So I think that's kind of the way we're looking at it.
Great that was it.
Thank you.
Yes.
There are no more questions in the queue. This concludes our question and answer session I'd like to turn the conference back over to David Lukes for any closing remarks.
Thank you all very much for attending we will talk to you next quarter.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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