Q4 2021 Federal Realty Investment Trust Earnings Call

Greetings and welcome to the Federal Realty Investment Trust fourth quarter 2021 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during todays conference. Please press star zero on your telephone keypad I'll remind you. This conference is being recorded.

Speaker 1: Greetings and welcome to the Federal Realty Investment Trust's fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Leah Brady. Thank you, ma'am. You may begin.

I would now like to turn this conference over to your host Ms. Leah Brady. Thank you Ma'am you may begin.

Good afternoon. Thank you for joining us today for federal Realty's fourth quarter 2021 earnings Conference call.

Speaker 2: Good afternoon. Thank you for joining us today for Federal Realty's fourth quarter 2021 earnings conference.

Joining me on the call are Don Wood antibody that for I guess when do you see your dawn Becker.

Speaker 2: Joining me on the call are Dawn Wood, Dan Jeeves, Jeff Burkus, Wendy Seer, Dawn Becker, and Melissa Polis. They will be available to take your questions at the conclusion of our prepared remarks.

They'll be available to take your questions at the conclusion of our prepared remarks.

A reminder, that certain matters.

Speaker 2: A reminder that certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Oh, maybe deemed to be forward looking statements within the meaning of the private Securities Litigation Reform Act.

Forward looking statements include any annualized or projected information as well as statements referring to expected or interested in is the best result included in guidance, including Guy.

Speaker 2: Forward-looking statements include any annualized or projected information, as well as statements referring to expected or anticipated events or results included in guidance, including guidance. Although Federal Realty believes that expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements, and we can give no assurance that these expectations can be obtained.

Then federal Realty believes that expectations reflected in such forward looking statements are based on reasonable assumption and a royalty of future operations and its actual performance may differ materially from the information in our forward looking statements and we can give no assurance that these expectations.

The earnings release, and supplemental reporting package that we issued.

Speaker 2: The earnings release and supplemental reporting package that we issued tonight, our annual report filed on Form 10-K , and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and results of operations. Our conference call tonight will be limited to 75 minutes. We kindly ask that you limit yourself to one question during the Q&A portion of our call. If you have additional questions, please re-queue. And with that, I will turn the call over to John Wood to begin the discussion of our fourth quarter results.

Tonight, Our annual report filed on Form 10-K , and our other financial disclosure documents provide a more in depth discussion of risk factors that may affect our financial condition and results of operation our COO.

Both the name will be limited to 75 finally I. Please limit yourself to one question during the Q&A portion of our call.

I have additional questions. Please re queue and with that I will turn the call over to John would you begin the discussion of our fourth quarter results.

Thank you Leah and congratulations on your promotion to Vice President of Investor Relations.

Speaker 3: Thank you, Leah, and congratulations to you on your promotion to Vice President of Investor Relations this month. Really well-deserved, and we're sure lucky to have you.

Really well deserved I'm sure look yeah.

Well good afternoon everybody.

Well it makes federal's business plans so different is our <unk>.

Speaker 3: What makes Federal's business plan so different is our multifaceted approach to capitalize on these best located, best tenanted retail properties with a laser focus on bottom line earnings growth.

Faceted approach to capitalize on these best located best tenants.

Retail properties with a laser focus on bottom line earnings growth.

100, and for individual assets or the proverbial toolbox filled with numerous ways of achieving that goal for years to come.

Speaker 3: 104 individual assets with a proverbial toolbox filled with numerous ways of achieving that goal for years to come.

Okay Global pandemic to knock us off our horse for time went back up we're riding high.

Speaker 3: It took a global pandemic to knock us off our horse for a time. But we're back up and we're riding high.

2021 was the first step or each quarter throughout the year exceeded our upwardly revised expectations that trend continued in the fourth quarter with <unk> per share of $1 47, handily, beating our forecast and of course last year.

Speaker 3: 2021 was the first step for each quarter throughout the year exceeded our constantly upwardly revised expectations.

Speaker 3: That trend continued in the fourth quarter with FFO per share of $1.47 handily beating our forecast and, of course, last year.

Trying to starve the business continues to be Lisa.

Speaker 3: The shining star of the business continues to be leasing, as it's been all year, but it was taken to new levels in the fourth quarter. I need to put this into context, so bear with me.

As it's been all year, but it was taken to new levels in the fourth quarter I need to put this into context, So bear with me for a minute.

First on a companywide basis in the fourth quarter, we signed 149 commercial leases.

Speaker 3: First, on a company-wide basis in the fourth quarter, we signed 149 commercial leases.

That is retail and office, but not including residential leases, which itself was really strong.

Speaker 3: That is retail and office, but not including residential leases, which itself was really strong for nearly 900,000.

For nearly 900000 square feet of space.

That includes renewals of existing tenants.

Along with space at ear sits vacant today is expected to be baked in the coming months.

Whereas for new buildings currently under construction or just completed that's.

That's an annual base rent commitment of nearly $35 million.

Speaker 3: That's an annual base rent commitment of nearly $35 million.

Consider that over the last 10 years and average quarters outflow.

Speaker 3: Consider that over the last 10 years, an average quarters output produced about 110,000 commercial leases and 500,000 square feet.

<unk> hundred 10.

110, commercial leases and 500000 square feet.

That means that in this quarter, we did 35% more deals are 80% more GLA.

Speaker 3: That means that in this quarter we did 35% more deals for 80% more GLA than after.

This is very strong quarterly volume, even though year or each previous quarter seem to set some sort of record.

Speaker 3: This is very strong quarterly volume, even in a year where each previous quarter seemed to set some sort of record.

Oh, I don't think that those fourth quarter levels of regularly repeatable our leasing pipeline suggest they will remain above historical averages for the foreseeable future.

Speaker 3: While I don't think that those fourth quarter levels are regularly repeatable, our leasing pipeline suggests that they will remain above historical averages for the foreseeable future.

For the full year 2021, we did 573 commercial leases for $2 9 million square feet and an annual rent commitment of $116 million. These activity levels are unprecedented over the very long history of this company.

Speaker 3: For the full year 2021, we did 573 commercial leases for 2.9 million square feet and an annual rent commitment of $116 million.

Speaker 3: These activity levels are unprecedented over the very long history of this company.

But this leasing volume is particularly important because it provides strong validation at the very diversified product type that we own and are creating very highly sought after.

Speaker 3: But this leasing volume is particularly important because it provides strong validation that the very diversified product type that we own and are creating is very highly sought after.

And the last thing is broad based.

It's the single biggest reason that I believe federal Realty is better positioned post COVID-19 than we were before.

Speaker 3: It's the single biggest reason that I believe federal realty is better positioned post-COVID than we were.

Let me break down the quarter numbers, a little bit more I think you'll see what I mean.

Speaker 3: Let me break down the quarter numbers a little bit more. I think you'll see what I mean.

Of the 149 commercial leases one.

Speaker 3: Of the 149 commercial leases signed, 116 of them, or nearly 600,000 square feet, were for comparable space, one where a tenant previously operated.

116 of them are nearly 600000 square feet were for comparable space, one way or tenants previously operated.

Those leases were written at an average rent of $34 34 six.

6% higher than the tenants they replaced.

Another nine leases for 22000 square feet were written for non comparable space at average rents per foot a 43 53.

Speaker 3: Another nine leases or 22,000 square feet were written for non-comparable space at an average rent per foot of $43.53 at places like Assembly Road, Phase 3, Cocoa Walk, and Kettleback Colonnade in Phoenix.

Places like Assembly row Phase III, Coca walk and Camelback culminated in Phoenix.

But it's the remaining 24 leases for 277000 square feet at net rent of $48.52. There really is a strong positive differentiator for bids.

Speaker 3: But it's the remaining 24 leases for 277,000 square feet at net rent of $48.52 that really is a strong positive differentiator to our business.

It's the office leasing at our long established mixed use communities in this quarter, primarily at Assembly row, and Pike <unk> Rose now look.

Speaker 3: It's the office leasing at our long established mixed use communities in this quarter, primarily at Assembly Row and Pike and Roads. Now, look.

Certainly realized that general office leasing does not invoke right now good reason given the macro level uncertainties surrounding back to work policies, but not all office space is created equal.

Speaker 3: I certainly realize that General Office leasing is not in vogue right now for good reason, given the macro levels of uncertainty surrounding back-to-work policy.

Speaker 3: But not all office space is created equal. And it has become clearer and clearer with each quarter, heck, each month that passed.

This has become clearer and clearer each quarter heck each month that passes.

The new class a office product that we own or building at five of our amenity rich mixed use communities is in extremely high demand and commanding rents that are clearly additive to both earnings and value.

Speaker 3: that the new Class A office product that we own or are building at five of our amenity-rich, mixed-use communities is in extremely high demand and commanding rents that are clearly additive to both earnings and value.

Each of those five are well established retail locations already and the office component is an expansion building on the success of the retail.

Speaker 3: Each of those five are well-established retail locations already, and the office component is an expansion building on the success of the retail.

They are of Assembly row.

Speaker 3: They are Assembly Row, Pike and Rose, Bethesda Row, Santana Row, and Coco Walk. That's it. Ann Gehry deals with a myriad of terminology that didn't have a Course in Culture but now feels to address the e-balline models and assessments within deprecation by AUDREY Rthey play the role in counterpatient

I can rose Bethesda row, Santana row, and coastal work that's it.

Deals with a myriad of companies in lots of different industries headlined by our lease with choice hotels for their new World headquarters at Pike <unk> Rose are just the latest examples of company choosing our building that's the product of choice when attended for the future.

Speaker 3: headlined by our elites with Choice Hotels for their new world headquarters at Pike and Rose, are just the latest examples of company choosing our building as a product of choice, no pun intended for the future.

Those companies are joining others like Puma Avalon Bay net at Bank of America, and Splunk, and helping to create long term sustainable communities and our portfolios some of the Massachusetts Government County, Maryland, Silicon Valley and Miami.

Speaker 3: Those companies are joining others like Puma, Avalon Bay, NetApp, Bank of America, and Splunk in helping to create long-term sustainable communities in our portfolios in Somerville, Massachusetts, Montgomery County, Maryland, Silicon Valley, and Miami.

Check this out.

Speaker 3: And check this out. While 197,000 feet of the 277,000 feet dozens quarter was primarily in newly constructed buildings at Assembly and Pike and Rose, the remaining 80,000 was for comparable space at a positive 23% rollover.

197000 feet of the 277000 feet doesn't quarter was primarily a newly constructed building at assembly and Pike <unk> Rose the remaining 80000, what's for comparable space at a positive 23% rollover.

That strong rollover was largely driven by our first renewal and expansion at 450 artisan way at Assembly row.

Speaker 3: That strong rollover was largely driven by our first renewal and expansion at 450 Artisan Way at Assembly Row, the 100,000 square foot office building built as part of Phase 1.

<unk> thousand square foot office building built as part of phase one.

That rent went from a blended sub sub $30 triple net rent.

Speaker 3: That rent went from a blended sub $30 triple net rent to the mid-40s triple.

The mid Forty's Triple net.

Pretty good data point of a longer term office upside that exists well executed well on monetized mixed use communities in first tier suburbs.

Speaker 3: Pretty good data point of the longer term office upside that exists at well executed, well-immanitized, mixed-use communities, and first-tier server.

As I've said and firmly believe all office opportunities are not created equal.

Speaker 3: As I said, and firmly believe all office opportunities are not created equal.

And while we don't have anything to announce on this call Santana West there is serious interest from a number of substantial and it's where we're making some very good progress.

Speaker 3: And while we don't have anything to announce on this cold, Santana West, there is serious interest from a number of substantial tenants where we're making some very good progress.

Okay.

And by the way take a look at the occupancy gains, we're making on the retail portfolio.

Speaker 3: And by the way, take a look at the occupancy gains we're making on the retail portfolio, portfolio wide, which are equally impressive.

Retail portfolio, a portfolio wide, which are equally impressive.

At year end were 93, 6% leased and 91, 1%.

Speaker 3: At year end, we're 93.6% least and 91.1% at.

That's an 80 basis point leased and a 90 basis point occupied pick up in just three months.

Speaker 3: That's an 80 basis point leased and a 90 basis point occupied take up in just three months.

Pressing for sure, but still a ways to go to get to a 95% plus historical bogey.

Speaker 3: Impressive for sure, but still a ways to go to get to our 95% plus historical bogey.

Okay. So what about the all the chronic.

Well as you would expect there's little impact in the fourth quarter as the various spreads didn't take hold until late December and January .

Speaker 3: Well, as you would expect, there's little impact in the fourth quarter, as the variant spread didn't take hold until late December and January . And what the impact will be on 2022 has yet to play out. But thus far in 2022, it feels like across the board, shoppers, tenants, and other constituents seem to be viewing Omicron as temporary, and while wearing masks and being more careful in most of our markets, are marching forward with typical winter shopping.

And what the impact will be on 2022 has yet to play out.

But thus far in 2022, it feels like across the board shoppers tenants and other constituents seem to be viewing omicron as temporary.

While wearing masks and being more careful in most of our markets are marching forward with typical winter shopping patterns.

Requests for rent accommodations and it said that you only have not agreed to anything significant at all at this time.

Speaker 3: Requests for rent accommodations from tenants have been few and we've not agreed to anything significant at all.

Now from a capital allocation standpoint, which after all is really what we as management teams in this industry do to add the most value.

Speaker 3: Now from a capital allocation standpoint, which after all is really what we as management teams in this industry do to add the most value, we're actively using all three levers, asset sales, acquisitions, and the continued expansion at our established properties, all in the name of bottom line earnings growth.

We're actively using all three left.

Asset sales acquisitions and the continued expansion at our established properties all the name of bottom line earnings growth.

You'll notice from our 8-K, we closed on the sale of two shopping centers, where we saw limited upside in the future the.

Speaker 3: You'll notice from our 8K that we closed on the sale of two shopping centers where we saw a limited upside in the...

The combined proceeds of $113 million, just Leesburg Plaza Saugus shopping center sold at a blended high 5% cap rate were used to reduce debt before year end.

Speaker 3: The combined proceeds of $113 million from Jess Leesburg Plaza and Saugus Shopping Center sold at a blended high 5% cap rate were used to reduce debt before year-end.

On the acquisitions front, we'd like to invest several hundred million dollars in 2022 based on our identification from our hit list of targeted properties that feel like they may trade.

Speaker 3: On the acquisitions front, we'd like to invest several hundred million dollars in 2022 based on our identification from our hit list of targeted properties that feel like they may trade.

Progress early in the year has been encouraging and soliciting serious conversations stay tuned.

Speaker 3: Progress early in the year has been encouraging and soliciting serious conversations.

And certainly on the development front, we expect to be substantially done constructing our residential over retail neighborhood in Darien, Connecticut. This year.

Speaker 3: and certainly on the development front. We expect to be substantially done constructing our residential over retail neighborhood in Darien, Connecticut this year.

We're underway at our $190 million office tower for choice hotels, if I can rose and we have more than a dozen property improvement redevelopments underway throughout the portfolio.

Speaker 3: We're underway at our $190 million office tower for choice hotels at Pike and Rose. And we have more than a dozen property improvement redevelopments underway throughout the portfolio.

By the way Citi will be hosting a tour of our newly completed Coca walk mixed use project during their conference in South Florida next month, it's pretty spectacular it's created over $60 million in value on our 200 million dollar investment and we'd love to see a wide variety of investments there.

Speaker 3: By the way, Citi will be hosting a tour of our newly completed Koka Wok mixed use project during their conference in South Florida.

It's gonna be inactive year on all fronts.

I got to believe the visibility of this multiple year bottom line earnings growth plan.

Speaker 3: I've got to believe the visibility of this multiple year bottom line earnings growth plan.

It's the most transparent in the sector.

That's all about all I have for prepared comments, let me turn it over to Dan and I will be happy to entertain your questions after that.

Speaker 3: That's all about all I have for prepared comments. Let me turn it over to Dan and we'll be happy to entertain your questions after that.

Thank you Dawn Hello, everyone.

Our reported <unk> per share $1 47 was up 29% from the fourth quarter of last year.

Speaker 3: Our reported FFO per share, $1.47, was up 29% from the fourth quarter of last year, and roughly 6 cents above the top of our guidance review.

These six cents above the top of our guidance.

For the year, we reported <unk> per share of $5 57.

Speaker 3: For the year, we reported FFO per share of $5.57, a 23% increase over 2020's results.

A 23% increase over 2000 Twenty's results.

Both of those reported increases exclude the one time debt prepayment charge.

Speaker 3: Both of those reported increases exclude the one-time debt repayment charge from 4Q2020 in order to show a meaningful apples-to-apples comparison.

For Q2 thousand 20 in order to show a meaningful apples to apples comparison.

Primary drivers of that outperformance versus expectations were higher percentage rent from COVID-19 amended leases both screen better collection rates.

Speaker 3: Primary drivers of that outperformance versus expectations were higher percentage rent from COVID-amended leases bolstering better collection rates.

The faster acceleration in occupancy than expected.

Speaker 3: faster acceleration and occupancy than expected.

Broker leasing and residential assets, including the phase III residential and assembly.

Speaker 3: stronger leasing at our residential assets, including the phase three residential and assembly.

Well, we're real estate taxes than we had forecasted plus financing activity, which occurred later in the quarter.

Speaker 3: lower real estate taxes than we had forecasted, plus financing activity, which occurred later in the quarter.

This was offset by higher G&A.

Speaker 3: This was offset by higher DNA, higher property level operating expenses, primarily one-timers, and lower term fees than we thought.

Higher property level operating expenses, primarily one timers.

And lower term fees than we forecast.

Although the analysts they keep track we had $1 7 million of term fees for the quarter against a fourth Q2 thousand 20 level of $3 6 million.

Speaker 3: For those analysts that keep track, we had $1.7 million of term fees for the quarter against a 4Q2020 level of $3.6 million.

<unk> continued to improve with 97%.

Speaker 3: Elections continue to improve with 97% of monthly bills rent being collected for the quarter, up from 96% reported on our third quarter call.

We billed rent being collected for the quarter.

Up from 96% reported on our third quarter call.

Including abatements and deferrals, we are 99% resolved.

Speaker 3: including abatements and deferrals, we are 99% resolved.

Prior period collections were down to $5 million versus 8 million three Q and.

Speaker 3: Prior period collections were down to $5 million versus $8 million and 3Q. And as a result, our collectability adjustment was up modestly to $2 million, primarily driven by this prior period fall.

And as a result, our collectability adjustment was up modestly to $2 million, primarily driven by this prior period Paul.

Collection of deferrals continue to outperform our expectations with a 46 million of total rent, we deferred the startup Covid 'twenty.

Speaker 3: Collection of deferrals continue to outperform our expectations. Of the 46 million total rent we deferred since the start of COVID, 27 million has been collected, which represents roughly 90% of the amounts that were scheduled to be repaid by year-end.

$7 million has been collected which represents roughly 90% of the amounts that were scheduled to be repaid by year end.

Don already highlighted a record breaking quarter and year Alicia let me.

Speaker 3: Donald already highlighted our record breaking quarter and year of leases. Let me add some additional color.

And some additional color.

As you mentioned, we were 91, 1% occupied at quarter end, a 90 basis point increase over both the third quarter and year over year.

Speaker 3: As you mentioned, we were 91.1% occupied as a quarter end, a 90 basis point increase over both the third quarter and year over year.

Our lease rate stood at 93, 6%, an 80 basis point increase over the third quarter and 140 basis point increase year over year.

Speaker 3: Our lease rates stood at 93.6%, an 80 basis point increase over the third quarter, and a 140 basis point increase year over year.

And the 250 basis point spread between leased and occupied should set us up for strong growth over the course of 2022.

Speaker 3: and the 250 basis points spread between leased and occupied should set us up for strong growth over the course of 2020.

These significant gains were primarily driven by small shop leased.

Speaker 3: These significant gains were primarily driven by small samples.

Our small shop lease percentage is up to 87, 4%.

Speaker 3: Our small shop lease percentage is up to 87.4%, a 130 basis points sequential increase in the quarter, and a 280 basis point increase year over year. Solid progress in getting back to our targeted bogey of around 90% for small shop. Highlighting some of this small shop activity or deals for some of the most sought after tenants of today.

130 basis points sequential increase in the quarter and a 280 basis point increase year over year.

Solid progress and getting back to where I'm talking about around 90%.

Highlighting some of this small shop activity for deals.

Some of the most sought after tenants today.

Or be Parker with three new deals.

Meanwhile, with two new leases.

On debt with chip Armstrong Paige denim OS pizza another Nike live another glass plant just to name a few.

Speaker 3: Fondant with chew, Foxtrot, Paige Denham, Oath Pizza, another Nike Live, another Gloss Lab, just to name a few.

Anchor leasing was solidly up 50 basis points to 96, 8% given broad based activity with 12 deals totaling 320000 square feet up to almost 600000 for the quarter.

Speaker 3: Anchor leasing was solidly up 50 basis points to 96.8% given broad-based activity with 12 deals totaling 320,000 square feet of the almost 600,000 for the quarter. Categories for new deals include grocers, discount apparel, sporting goods, home furnishings and more.

<unk> categories.

Categories for new deals include grocers discount apparel sporting goods.

Things in health care.

On the residential side, we saw a surge in leased occupancy of 240 basis points year over year to 97, 2% and saw strong high single digit year over year, new lease rent route.

Speaker 3: On the residential side, we saw a surge in lease occupancy of 240 basis points year over year to 97.2%. And so a strong, high, single digit, year over year, new lease rent group.

We feel well positioned to drive incremental growth in 2022, given forecasted strength.

Speaker 3: We feel well positioned to drive incremental POI growth in 2022 given forecasted strength, particularly in our Boston and Silicon Valley markets.

Typically in our Boston and Silicon Valley markets.

Evidence of this plan are evidence of this can also be see a scene, where after just seven months.

Our 500 unit in the cellar residential tower at Assembly is already 60% leased and rents, which were 15% higher than the pre COVID-19 lease up rental rates manta.

Its sister Reggie Tower next.

Next door that assembly row.

In terms of redevelopment, we now have roughly $400 million of remaining spend on our $1 5 billion dollar investment pipeline.

Speaker 3: In terms of redevelopment, we now have roughly $400 million of remaining spend on our $1.5 billion investment pipeline. Much of that pipeline has recently been...

Most of that pipeline has recently been placed into service.

These projects will be a source of significant earnings growth in 2022 through 2025 is to continue to ramp up and you'll like contribution.

Speaker 3: These projects will be a source of significant earnings growth in 2022 through 2025 as they continue to ramp up in POI contributions.

In our 8-K, we have reinserted disclosure relating to the ramp up of DIY and our large in process projects and also provided some detail on them putting them on the 99% leased kokomo.

Now to the balance sheet and an update on our liquidity position.

Speaker 3: Now to the balance sheet and an update on our liquidity position.

The fourth quarter was an active one when the capital markets for them.

We raised another $85 million common equity through our ATM on a forward basis blended gross price of 130 50.

We repaid mortgages totaling 117 million, but encumbered the avenue of White Marsh Montrose crossing hitting another $18 million of P O y to our unencumbered pool.

Speaker 3: We've repaid mortgages totaling $117 million that encumbered the avenue at White Marsh and Montrose Crossing, hitting another $18 million of POI to our unencumbered team.

During the quarter, we sold $121 billion in assets, including the Leesburg, Virginia, So I'll, just Massachusetts asset.

Mentioned, bringing our total for the year to $142 million at a blended yield in the mid points.

As a result, we ended the year with 162 million of Paas available and Undrawn $1 billion credit facility.

Speaker 3: As a result, we ended the year with $162 million of cash available, an undrawn $1 billion credit facility.

At $264 million of forward equity to be taken down in 'twenty two leaving.

Speaker 3: have $264 million of forward equity to be taken down to 22, leaving us with total liquidity of over $1.4 billion.

Leaving us with total liquidity of over $1 4 billion.

Our leverage metrics continue to move.

Net debt to EBITDA is now down into the high five times level for the fourth quarter annualized net of the forward equity.

Speaker 3: Net debt to EBITDA is now down into the high five times level for the fourth quarter annualized net of the forward equity Thanks rise, T

And that metric is forecast to improve over the course of 2022 development Toi comes online and occupancy drives fire from leases that are already executed.

Speaker 3: And that metric is forecast to improve over the course of 2022 as development POI comes online and occupancy drives higher from leases that are already executed. Again, our targeted level is in the low.

Again, our targeted level is in the low five time frame.

Fixed charge coverage is back up to just under four times, we have no debt maturities until mid 2020.

Speaker 3: Fixed charge coverage is back up to just under four times. We have no debt maturities until mid-2023.

Yeah.

Now onto guidance.

For 2022 we are increasing our guidance range to $5 75.

Speaker 3: For 2022, we are increasing our guidance range to $5.75, $5.95 per share, a 10-cent increase over our previous range.

$5 95 per share a 10 cent increase over our previous range.

This represents 5% growth at the midpoint, 7% at the high end and this was driven by occupancy levels.

Speaker 3: This represents 5% growth at the midpoint, 7% at the high end. And this is driven by occupancy levels.

Expecting to increase from 91% at year end up into the mid to upper 92% range by the end of 2022.

Speaker 3: expecting to increase from 91% at year-end up into the mid to upper 92% range by the end of 2022.

And increased forecast for current period collections up from an average of 95% in 'twenty, one when averaged 98% over the course of 19 of the 22.

Speaker 3: an increased forecast for current period collections up from an average of 95% in 21 to an average 98% over the course of 22.

Greater contribution from our redevelopment and expansion pipeline again for those modeling let me direct you to our 8-K, where we're providing our forecasts to stabilize P O Y ramp up a year.

Speaker 3: greater contribution from a redevelopment and expansion pipeline. Again, for those modeling, let me direct you to our 8K where we're providing our forecast of stabilized POI ramp-up by year.

As well as accretion from our 2021 acquisitions being online for the full year.

Speaker 3: as well as accretion from our 2021 acquisitions being online for the full year.

Additionally, all of the $440 million of 2021 acquisitions, they are really outperforming our original underwriting.

Speaker 3: Additionally, of the $440 million of 2021 acquisitions, they are really outperforming our original underwriting and are expected to yield a blended 6% in 2022 versus an initial 5.5% expectation.

Checked it to yield a blended 6% in 2022 versus an initial 5.5% expectation.

Please note that these deals would clearly shell a blended sub five cap rate in today's environment.

Speaker 3: Please note that these deals would clearly sell at a blended sub-5 cap rate in today's environment.

Now this will be offset by lower prior period collections with a net 2021 level.

Speaker 3: Now this will be offset by lower prior period collections where the net 2021 level

$92 million.

And for 'twenty, two is expected in the range of $5 million to $8 million.

Speaker 3: And for 22 is expected in the range of five to 8 million.

We were expecting lower net term fees, we had $8 4 million in 2021 and forecast $4 million to $6 million and 22 more in line with historical averages.

Speaker 3: We were expecting lower net term fees. We had $8.4 million in 2021 and forecast $4 to $6 million in 2022. More in line with the overall average.

Despite over 300 basis points of headwinds from prior period collections and lower net term fees are comparable growth forecast is 3% to 5% for 2022.

Speaker 3: Despite over 300 basis points of headwinds from prior period collections and lower net term fees, our comparable growth forecast is 3 to 5 percent for 2022.

Yeah.

Other assumptions include free.

Speaker 3: Other assumptions include $300 million to $400 million of redevelopment and expansions that are existing properties.

Three to 400 million redevelopment and expansions at our existing properties.

$3 million to $400 million of equity issued the forward equity already sold.

Speaker 3: $300 to $400 million of equity to be issued inclusive of the forward equity already sold.

G&A is estimated in the $50 million to $54 million range for the year.

Speaker 3: GNA is estimated in the $50 to $54 million range for the year.

We've set a credit reserve of roughly 2%.

Speaker 3: We've set a credit reserve of roughly 2%, plus or minus 50 basis points.

Oh from minus 50 basis points.

Dispositions made in 2020 , one contributed $8 million, Hawaii to 2020 , one that obviously won't be there in 2022.

Speaker 3: Dispositions made in 2021 contributed $8 million of POI to 2021. And that obviously won't be there in 2022.

And we will have lower interest income driven repayment in mid 2021 of $30 million mortgage loan yields of 10%.

Speaker 3: And we will have lower interest income given the repayment in mid-2021 of a $30 million mortgage loan that yielded 10%.

As is our custom this guidance does not reflect any acquisitions or dispositions in 2022.

Speaker 3: As is our custom, this guidance does not reflect any acquisitions or dispositions in 2022. We will adjust for those as we go, given our optimistic approach to both.

And just for those as we go.

Given our opportunistic approach to both.

It also does not assume any tenants moving from cash basis to accrual basis.

Speaker 3: It also does not assume any tenants moving from cash basis to accrual basis.

And please note the expanded disclosure in our 8-K leading to guidance.

Speaker 3: And please note the expanded disclosure in our 8K leading to cut.

With respect to our goalposts for 2023 and 2024, we continue to believe that bar.

Speaker 3: With respect to our goalposts for 2023 and 2024, we continue to believe that 5% to 10% compounded growth from our upwardly revised 2022 FFO range is achievable.

10% compounded growth.

From our upwardly revised 2022 ethical range is achievable.

I mean in terms of the lease up at one Santana West.

Speaker 3: Timing in terms of the lease up at one Santana West will have a big influence on where we end up within that range.

A big influence on where we end up within that range.

Now, while we are not providing color on specific timing $7 per share that's about it's a realistic target in the coming years.

Speaker 3: Now, while we are not providing color on specific timing, $7 per share of FFO is a realistic target in the coming years. And with that, Operator, please open the line for questions. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2.

And with that operator, please open the line for questions.

At this time, we'll be conducting a question and answer session.

I would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is another question queue. You May press star two to remove your question from the queue.

Using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys.

One moment, while we pull for questions are.

Our first question comes from the line of Alexander Goldfarb with Piper Sandler You May proceed with your question.

Hey, good afternoon.

So two questions here. The first question is you know obviously on the apartment side, what we've seen all around as you know the rent rebounds and rent growth is tremendous.

Speaker 4: So two questions here. The first question is, obviously on the apartment side, what we've seen all around is, the rent rebounds and rent growth is tremendous.

<unk>.

On the on the retail side the sales recovery.

Speaker 4: On the retail side, the sales recovery has been just off the charts. I mean, the mall companies have been saying, you know, it's well exceeded 2019. You guys were talking similar.

Has it been just off the charts I mean, the mall companies have been saying you know what well exceeded 2019, you guys were talking to similar it's hard to believe that this is all just a catch up of people staying in their homes you know during 2020 and early 'twenty 'twenty. One. So do you think there's something else at work or is this just like a one.

Speaker 4: It's hard to believe that this is all just a catch up of people staying in their homes, you know, during 2020 and early 2021. So do you think there's something else at work? Or is this just like a one hit wonder we all rebounded, you know, this year or 2021 and then sales are leveling out? Or do you think that people have sort of, and retailers themselves have rediscovered retail, and therefore this accelerated sales pace is sustainable the next

Hit Wonder we all rebounded you know this year are quite in 'twenty. One and then sales are leveling out or do you think that people are sort of and retailers themselves have rediscovered retail and therefore this accelerated sales pace is sustainable in the next several years.

Yeah, Alex I mean that is the I mean, that's the question of the day. The everything we said we seem to see and again, that's it's looking at it through our view, which is not a national view, it's really primarily a closer view suggests that that that this.

Speaker 5: Yeah Alex, I mean that is the question of the day. Everything we seem to see, and again it's looking at it through our view, which is not a national view, it's really primarily a...

Speaker 3: suggests that the recovery of sales, et cetera, are here to stay. I do think there was something very interesting.

That's a recovery of of of sales et cetera are here to stay I do think there was something very interesting that happened through through Covid in terms of People's realization of how important social.

Speaker 5: that happened through through COVID in terms of people's realization of how important social was. It's real important and into how going out to eat and to play at the shop is. So I think a lot of that stays. The other thing and you kind of touched on it early in the first part of the question I want to address it is the residential.

Was it real important.

Going out.

To eat in to play and to shop, and so I think a lot of that states. The other thing and you've kind of touched on it early in the first part of the question I wanted to address it is the residential side.

No.

Speaker 5: You know, there is no doubt that places, and again, our residential outlook is only on a few places, but it got hurt, you know, as you think about it going into COVID. The way it's recovering is pretty interesting.

There is no doubt that that.

Places and again all residential.

Outlook is an adult them fully on a few places, but it got hurt you know what.

As you think about it going into Covid. The way, it's recovering is pretty interesting to me.

And we have a really interesting barometer, if you remember at assembly.

Speaker 5: And we have a really interesting barometer. If you remember at assembly, pre-COVID, we were opening up a big 500-unit building that we called Montage. And in that building, in the fourth quarter of 18, over November , December of 18, before any COVID, that building, we had average rents of $3.35.

Pre COVID-19 , we were opening up a big 500 unit building.

That we called month and and in that building.

In the fourth quarter of 18 October November December 18, before any COVID-19 .

That building, we had average rents of $3.35.

Ironically, we're now opening the second building, which is also 500 units and it's right next door, it's called Masella, it's leasing up faster than we thought and it's leasing up at $3.85 in that fourth quarter, 15% more than pre COVID-19 .

Speaker 5: Ironically, we're now opening the second building, which is also 500 units, and it's right next door. It's called Masella. It's leasing up faster than we thought, and it's leasing up at $3.85 cents in that fourth quarter. 15% more than pre-COVID.

At Assembly row, it's really interesting if you look at the deals that are happening in January and February it's not a big big.

Speaker 5: at assembly row. It's rea if you look at the deals in January and February , just a sample size becaus

You know our sample size because January and February in Boston, but those are well over $4 a foot.

So there is something that's happening here with respect of lifestyle with respect of shopping with respected to.

Speaker 5: So there's something that's happening here with respect to lifestyle, with respect to shopping, with respect to certainly the office piece in terms of what's to come there. That really feels to me like an energized pre-COVID time that to some level is here to stay.

Certainly the office piece in terms of what's to come there that is really that really feels to me like an energized pre COVID-19 time that to some level is here to stay.

Okay and then the second question is are you know with with the recent the crime waves that have happened and you know stores that had been targeted I mean your portfolio has been hit.

Speaker 4: OK, and then the second question is, you know, with with the recent the crime waves that have happened.

Speaker 4: and stores that have been targeted. I mean, your portfolio has been hit. On the public earnings calls, all the companies that I've asked so far, everyone said there's a little bit more security costs, but no tenant has changed their leasing plans or is moving stores. And yet, when we speak to people and some of the companies privately or speak to others that are involved in retail in urban settings, it's a different story. So my question is,

Yeah on the public earnings calls all of the companies that I've asked so far everyone said, there's a little bit more security costs, but no tenant has changed their leasing plans or as moving stores and yet when we speak to people and some of the companies privately or you know speak to others that are involved in retail in urban settings, It's a different story.

So my question is is it just that in general there's really been no fallout theres increased lease expense security costs, but in general there's been no leasing fallout tenants really aren't shifting their portfolios or is it that got some certain markets, they're seeing a change, but it's not a change that is that is appearing.

Speaker 4: Is it just that in general there's really been no fallout, there's increased security costs, but in general there's been no leasing fallout, tenants really aren't shifting their portfolios, or is it that yes, in certain markets

Speaker 4: they're seeing a change, but it's not a change that is appearing nationally, you know, as the retailers look at their fleet.

Nationally.

As the retailers look at their fleets.

I can really only respond to our properties in our markets and I can tell you there has not been a change in any of the retailers.

Speaker 5: I can really only respond to our properties and our markets, and I can tell you there has not been a change in any of the retailers' plans for moving forward because of crime. Okay. Okay. Thank you, Don.

Plans for moving forward because of price.

Okay. Okay. Thank you Don.

Our next question comes from the line of Craig Schmidt with Bank of America. You May proceed with your question.

Oh, yes. Thank you.

Speaker 6: Yes, thank you. You guys have come out of COVID being rather aggressive, impressively so on your external growth. You really taking up your acquisitions, and you continue to push on your redevelop.

You guys have come out of Covid being rather aggressive.

Preferably so on your external growth.

You're really taking up your acquisitions and you continue to push on your redevelopment.

Just wondering though with the continued pressure on cap rates may you start to favor redevelopments over acquisitions, just because its tougher to buy and adding value when cap rates are so attractive.

Speaker 4: I'm just wondering, though, with the continued pressure on cap rates.

Speaker 4: may you start to favor redevelopments over acquisitions just because it's tougher to buy and adding value when cap rates are so attractive is a compelling proposition.

As a compelling proposition.

Yeah, Great question Greg.

Speaker 5: Great question, Greg. Let Jeff jump on that first, particularly from the acquisition side. Yeah, hey, Craig. Good evening. I mean, I think you're right on point. We were really happy with what we got done in 21. As Dan mentioned in his prepared remarks, we got those deals done in the first half of the year, generally speaking.

Greg.

Let Jeff jump on on that first particularly from the.

Acquisition side, Yeah, Hey, Craig a good evening.

I mean, I think you're right on point we.

We were really happy with what we got done in 'twenty, one as Dan mentioned in his prepared remarks, we got those deals done in the first half of the year generally speaking.

All of the properties, we bought in 'twenty, one half right.

Element of value add.

Opportunities going forward, which as you know we think is very important when you're buying something in the second half of the year.

Mhm tightened up.

Ah, yes yields are now whether you're talking about cap rate or IRR are lower than they were pre pandemic and we're.

We're public equity trades, you know in the.

The teams on average, it's a real head scratcher as to how you make the numbers work for you know your normal grocery anchored neighborhood or community center, but the numbers just don't work, especially when you look out a few years.

Speaker 7: It's a real head scratcher as to how you make the numbers work for, you know, your normal grocery anchored neighborhood or a community center. The numbers just don't work, especially when you look at it.

And what the growth of the property level needs to be this or the implied growth in the equity that's issued by the half.

Speaker 7: and what the growth of the property level needs to be to support the implied growth and the equity that's issued by the asset.

I think you're spot on.

Speaker 7: I think you're spot on and, you know, as you know, we're careful about that kind of stuff.

And you know, we're careful about that kind of stuff.

You've always been really disciplined because we've never felt pressure to.

Speaker 7: We've always been really disciplined because we've never felt pressured to buy anything because we have, as Tom said, so many tools in the tool bag. We'll continue doing what we've done for

To buy anything because we have so many schools in the school bag.

Sue we'll continue doing what we've done for you over the last two decades or most of us have been here and we'll be careful about what we buy and make sure. It's got a good go forward growth prospects, a densification opportunities lease up releasing all that kind of stuff.

Speaker 7: Yeah, the last two decades, most of us have been here and we'll be careful about what we buy and make sure it's got good go forward growth prospects.

Speaker 7: densification opportunities, lease up, releasing, all that kind of stuff.

But certainly if you don't have the ability to source of stuff. If you don't have the ability to take advantage of those opportunities is just growing by buying something.

Speaker 7: But certainly, if you don't have the ability to source that stuff, if you don't have the ability to take advantage of those opportunities just growing by buying something in today's market, it's not a very good idea in my view.

And it's.

It's not a very good idea in my view.

Okay.

Thank you.

Our next question comes from the line of Katy Mcconnell with Citi. You May proceed with your question.

Speaker 1: Our next question comes from the line of Katie McConnell with Citi. You may proceed.

Hi, everyone. Thanks, I'm, just wondering if you could walk us through some of the key swing factors that could get you to the higher the low end of your updated guidance range.

Speaker 1: Hi, everyone. Thanks. I'm just wondering if you could walk us through some of the key swing factors that could get you to the higher the low end of your updated FFO guidance range, since it's still a fairly wide range for this year. And what would need to happen for you to narrow that more throughout the year?

Fairly wide range for this year and what would need to happen for you that you know that one throughout the year.

This is Jim and Katy how are you look I think that you know we'd be we'd given a range of 3% to 5% for comparable property.

Speaker 3: This is Jeff, and Katie, how are you? Look, I think that, you know, we've given a range of 3 to 5% for comparable property. You know, I think that kind of what goes in that is just, you know, collections both prior and prior period as well as kind of going forward current.

Yes, I think that's kind of what goes in that is just you know are collections of prior <unk>.

And the prior period as well as kind of going forward correct.

Also kind of what we do with regards to <unk>.

Speaker 3: Also, kind of what we do with regards to, you know, term fees, which we've kind of reduced. Our prior period grants have also been reduced. We've given a range. I think you'll see on page 32.

You know the term fees, which we've kind of reduced our prior period rents have also been reduced.

Given a range I think you'll see on page 33.

And our guidance, we give kind of a little bit of a range with regards to you know.

Speaker 3: In our guidance we give a little bit of a range with regards to, you know, G&A expense of 50 to 50.

Our G&A expense, 50% to $54 million.

I think it's a little bit of a sense of the range of.

Speaker 3: Um, I think it's a little bit of a sense of the range of development, redevelopment capital that we can put to use.

Development and redevelopment capital that we can put to use and then also are you know how much.

Speaker 3: And then also, you know, how much equity we raised, you know, we've also.

Equity we raised.

We've also.

Speaker 3: how quickly some of the rents can come online at our developments, as well as the rest of the year, how we can get things rent started. So I think there's a whole host of those. I think we've given a range.

How quickly some of the rents kind of come online and our developments as well as the rest of the year, we can get things.

Started so I think there's a whole host of those I think we've given a range.

Of our credit reserve around 2% plus or minus 50 basis points. That's another one and obviously that shows up.

Speaker 3: of a credit reserve at around 2% plus or minus 50 basis points. That's another one. Obviously, that shows up well reflected in the 3% to 5% comparable to an extent.

Reflected in the 3% to 5% comparable to an extent.

But those really I think kind of are.

Speaker 3: But those really, I think, kind of are the levers that get us there with regards to that stated range of guidance. Again, it does not include dispositions, does not include acquisitions, does not include any changes in our revenue recognition with regards to cash versus-

The levers that get us there with regards to that ceded.

Our range of guidance.

Again. It does not include dispositions does not include acquisitions does not include any changes in our revenue recognition with regards to cash versus accrual.

It's Michael Bilerman here with TD.

Speaker 8: It's Michael Bellerman here with Katie. Don, I was wondering if you can maybe just step back and just think about the capital sources and uses. You have three to $400 million of development and redevelopment plan that you have targeted for this year. In your opening comments, it sounded like there was a number of transactions on the acquisition front that you have underway.

Don I was wondering if you can maybe just step back and just think about the capital sources and uses you have $3 million to $400 million of development and redevelopment spend that you have targeted for this year.

In your opening comments.

It sounded like there was a number of transactions on the acquisition front that you have underway.

You list here about $3 million to $400 million of equity, which is effectively a I don't know if that equity is all common equity I don't know, if you're doing that to be equity or selling assets, but just talk a little bit about how you think about funding that growth and how significant it could be.

Speaker 8: Um, you list here about three to $400 million of equity, which is effectively, I, I don't know if that equity is all common equity. I don't know if you're doing that to be equity in selling assets, but talk a little bit about how you think about funding that growth and how significant it could be.

You bet Michael So the first thing you got to remember is that we've got forward equity contracts of $2 50 260.

Speaker 5: You bet Michael. So the first thing you got to remember is that we've got forward equity contracts with 250, 260, $260 million that has already been sold that will be taken down in in 2022. At some point, that's important.

$60 million that has already been sold that will be taken down in in 2022 at some point that's important.

Incremental equity.

Speaker 5: Incremental equity in our budget is another $140 million or so on top of that. We're also looking at selling a couple of assets that probably you should think about another $100 million or so there. So what we're really certainly trying to do is be very balanced with respect to

Our budget is another 140.

A million dollars or so on top of that we're also looking at selling a couple of assets that are that probably should think you should think about another $100 million or so there. So what we're really certainly are trying to do is be very balanced with respect to.

You know the capital that we would use that again have raised a lot of it already that's important we're not going to lever up the company, we're going the other way.

Speaker 5: you know, the capital that we would use that again have raised a lot of it already. That's important. We're not going to lever up the company. We're going the other way.

And so the notion of Oh.

Speaker 5: And so the notion of, you know, new deals and how those deals would be financed, they'll stand on their own, and we'll figure out, you know, the best way to finance those, depending on what type of asset they are, you know, where we're going. But with respect to the stuff that's committed, we're in really good shape because of the refunded equity so far and the couple of dispositions that we would.

New deals and how those deals would be financed all stand on their own.

And we will figure out the best way to finance those depending on what type of asset. They are you know where were going with respect to the stuff that is committed.

We're in really good shape because of the pre funded equity so far and.

The couple of dispositions that we would do.

And I guess from.

Speaker 8: I guess from a volume perspective, how do you think about, you added all the yield back to the supplemental, thank you for that, some pretty attractive yields relative to where the acquisition market's being priced and certainly relative to where you got those deals off last year.

A volume perspective, how do you think about you have you added all the yield back to the supplemental thank you for that.

Some pretty attractive yields relative to where the acquisition markets being priced and certainly relative to where you got those deals off.

You know last year.

So I guess why not activate more of the stuff that's in your wheelhouse versus going out and paying a lower cap rate per acquisition from issuing equity at a discount to where your NAV right.

Speaker 8: So I guess why not activate more of the stuff that's in your wheelhouse versus going out and paying lower cap rates for acquisitions and issuing equity at a, at a, at a discount to where your NAV is. Right. Then maybe to lose the salary if

Calibers.

First of all fully agree with you Michael fully agree with you and what did you have to first really make sure you get is all the capital that has been spent to date that has not that has not yet producing.

Speaker 5: First of all, fully agree with you, Michael. Fully agree with you. And what you have to first really make sure you get is all the capital that has been spent to date that has not that is not yet produced.

And that that is automatic.

Speaker 5: and that is automatic FFO growth, automatic property level growth, and it is the single biggest source of growth in the next couple of years after plain old

<unk> growth.

Property level growth and it is the single.

The biggest source of.

Growth in the next couple of years after plain old.

Our lease up of a portfolio that is still under lease in terms of where it goes those two things are huge the other thing with respect to two.

Speaker 5: uh, lease up of a portfolio that is still under lease.

Speaker 5: in terms of where it goes. Those two things are huge. The other thing with respect to you know acquisitions and this is where I could not agree with you more, they've got to make a lot of sense. Now I will tell you that there is one that that we're looking at specifically in order to to handle a you know a 1033 transaction that that we had a couple years back. So there are a couple you know we will stay.

But you know acquisitions and this is where I could not agree with you more they've got to make a lot of sense now I will tell you that there is one that that we're looking at specifically in order to to handle a you know a $10 33.

Transaction that that we had a couple of years back. So there are you know we will step up.

To be able to do a deal that makes sense overall on a on a overall tax reform exercise, but beyond that your point is 110% right I couldn't agree with you more.

Speaker 5: to be able to do a deal that makes sense overall on a overall tax return.

Speaker 5: But beyond that, your point is 110% right. I couldn't agree with you more. OK. Thanks. See you at Cocoa in a few weeks.

Okay. Thanks.

Thanks to you it could go in a few weeks.

Our next question comes from the line of Greg Mcginniss with Scotiabank. You May proceed with your question.

Hey, good evening.

Speaker 9: Hey, good evening. So, just looking at leasing. So, leasing volumes are obviously quite strong. Rent spreads are slightly less exciting. Could you just talk about market rent growth that you're seeing relative to 2019 and then in what regions you're either seeing more strength or recovery in rent growth?

So I guess looking at.

Leasing leasing volumes are obviously quite strong rents.

Rent spreads are slightly less exciting could you just talk about market rent growth that you're seeing relative to 2019, and then in what regions, you're either seeing more strength in recovery and rent growth.

Yeah, I guess I can start on that winning jump in wherever I screw this up but the when we sit and we look at.

Speaker 5: Yeah, I get I get started on that. Um, when he jumped in wherever I screw this up, but the the when we sit and we look at

You know, 6%, 8%, 9% something like that which is where we expect to be.

Speaker 5: you know, 6%, 8%, 9%, something like that, which is where we expect to be overall. You know, that,

Overall.

You know that that is.

That's about where we are overall compared to not only 19, but with what is in place all the way through when you look specifically to 19.

Speaker 5: about where we are overall compared to not only 19 but with what is in place all the way through. When you look specifically to 19, and I just did this to get comfortable with it, we are three, four, five or so percent higher.

Did they start to get comfortable with it we are 345 or so percent higher than 2019 overall that doesn't mean and I've said. This 100 times that it will always be the case that there aren't specific deals that'll either drag that down or drag that way up in this particular quarter.

Speaker 5: than 2019 overall. That doesn't mean, and I've said this 100 times, that it will always be the case that there aren't specific deals that'll either drag that down or drag that way up. In this particular quarter, I got a, you know, there's a good example of that, we had a CDS in line at Barracks Road, one of our best shopping centers that we could not accommodate.

You know there is a good example of that we had a CBS in line at Barracks Road, one of our best shopping centers that we could not accommodate a drive thru. They left the shopping center to go across the street for a drive through those things happen that was a big rent payer.

Speaker 5: a drive-thru. They left the shopping center to go across the street for a drive-thru. Those things happened. That was a big rent tear.

Speaker 7: that wouldn't be able to be replaced without that deal.

That wouldn't be able to be replaced without that deal. There those rollover there would've been eight for the company. So there's always a couple of things like that they go both ways throughout the throughout the company, but overall you are talking about a level of demand.

Speaker 5: Those rollovers would have been eight for the company. So there's always a couple of things like that. They go both ways throughout the company. But overall, you are talking about a level of.

It's in excess of the supply of our particular product. So overall you should expect that continue.

Speaker 5: that's in excess of the supply of our particular product.

Speaker 5: So overall, you should expect that continued growth in rents. The other thing is, though, you've got to translate...

Continued.

Growth in rents.

The thing is though.

You kind of translate that down to the bottom line.

And when when you hear a big numbers of rollovers, but no growth at the bottom line you got to sit there and say.

Speaker 5: And when you hear big numbers of rollovers, but no growth at the bottom line, you've got to sit there and say, what's.

Because from my perspective, taking being able to expand that properties that are fully.

Speaker 5: Because from my perspective, being able to expand that properties that are fully settled as great retail destinations, like a Pike and Rosen, like an assembly, like a Santanaro, to be able to add buildings, to expand what you have, my gosh, that's great risk-adjusted growth.

Settle as great retail destinations like applying can really don't like at assembly like Santana row, so be able to add buildings to expand what you have my gosh, that's great risk adjusted gross debt.

That's really needs to be thought through and considered it and in terms of it so both the leasing and the expansion and the pips that property improvement plans all of that.

Speaker 5: that really needs to be thought through and considered in terms of it. So both the leasing and the expansion and the PIPs, the property improvement plans, all of that, all of that, when that happens, winds up, I think we show you bottom line growth that is consistent and sustainable for a number of years. That's the name of the game.

All of that when that happens winds up I think we show you bottom line growth that is consistent and sustainable for a number of years. That's the name of the game.

Alright, well. Thank you and then just regarding those potential acquisitions that you know Michael we're referencing what are you seeing in market from a cap rate perspective, how do you think that impacts the value of your portfolio.

Speaker 9: All right, well, thank you. And then just regarding those potential acquisitions that you and Michael were referencing, what are you seeing in the market from a cap rate perspective? And how do you think that impacts the value of your portfolio? I know, Dan, a few years ago gave us his NAV estimate, which I believe you weren't too pleased about him giving in the first place, but he convinced you otherwise, which we all appreciated.

Dan a few years ago gave us his a N a V estimate, which I believe you Werent you pleased about I'm, giving in the first place how do you convince you otherwise, which we all appreciate it.

And I think that stands now.

First of all Greg that's just good cut back up between them.

Speaker 5: First of all, great. That's just good cup bad cup between them is that we're on the same page In terms of that look, I don't know it's been it's so well publicized. It's so well clear that That you know really strong shopping centers today are in the markets that we want to get or some five general Yeah, I mean that's best, you know, that's that's I mean that's that's that's that's it

I'm not aware of.

Yeah in terms of that look I don't know if it's been it's so well publicize it so we'll clear that.

You know really strong shopping centers today or are in the market said, we want to be in or some five general yeah. I mean, that's that's you know that's that's where they are when you take a look at at our big projects that we have when you look at you know what the value of cocoa walks gotta be when COVID-19, when they come and say when you take a look at what's being added at Viking.

Speaker 5: when you take a look at the big projects that we have, when you look at what the value of Cocoa Walk's gonna be, when you come and see it, when you take a look at what's being added at Pike and Rhodes and Assembly, et cetera, I think you're gonna...

And assembly et cetera, I think youre going to.

It's pretty obvious that you're talking about sub five across the board.

Speaker 5: I think it's pretty obvious that you're talking about sub-5 across the board in this company, not at every shopping center, but across the board.

And this company not not at every shopping center, but across the board in sports and so what do you. When you look at that you can do the math as to where you think the NAV should be but to me that data in a V is it is critically important the most important thing about that that ties obviously into the cap rate, whereas the growth.

Speaker 5: And so when you look at that, you can do the math. That's the way you think the NAV should be. But to me, that that NAV is is critically important. The most important thing about that, it ties obviously into the cap rate. Where's the growth, man? How are you going to grow it? And what's that thing going to be like in a few years? Because that's what a buyer is paying for.

Man.

How are you going to grow it and what is that thing going to be like in a few years, but that's what a buyer is painful.

Okay, and then just to follow up on that with the new structure in place should we expect to see some of.

Speaker 9: Okay, and then just to follow up on that, with the new structure in place, should we expect to see some use of that structure in terms of OP units to help with on the acquisition side?

Use of that structure in terms of O P units to help with on the acquisition side.

You know maybe yes, maybe no that that is that was an administrative change that.

Speaker 5: You know, maybe yes, maybe no that that is that was an administrative change that was was.

<unk> was was.

Frankly, we found a relatively simply simple way, an inexpensive way to do it where dawn Farrell nationally.

Speaker 7: Frankly, we found a relatively simple way, an inexpensive way to do it. We're going past that.

Speaker 7: to be able to do that such that we, so that we weren't at any disadvantage should the opportunities come up. So I know it's not a bad thing in any way you look at it. And to the extent, you know, some of the deals we're talking about or looking at can utilize that and give the particular seller more comfort, great. But I couldn't handicap it with, oh yeah, that, you know, that means we'll do four deals instead of one deal or that kind of thing. But it's generally a good thing.

To be able to do that such that we so that we werent at any disadvantage should the opportunities come up so I know, it's not a bad thing.

And any way you look at it and to the extent you know some of the deals where you were talking about or looking at can utilize that and get the particular stellar more comfort right, but I couldn't handicap. It with you is that Oh, yeah that you know that means we'll do four deals instead of one deal or that kind of thing, but it's generally a good thing.

Alright, Thanks, Tom.

You bet.

Our next question comes from the line of Juan Sanabria with B.

Speaker 1: Our next question comes from the line of Juan Sanabria with the...

BMO capital you May proceed with your question.

Hi, Thanks for the time.

Speaker 6: Hi, thanks for the time. I think you mentioned about 150 basis points of occupancy growth in the prepared remarks from year end to year end. But just curious if you can give us any sense of the cadence throughout the year. Typically, seasonality in the first quarter, but that seems to have gone out the window with COVID here and the recovery today. So just curious if you have any wisdom to share now we should think about occupancy for 22.

I think you mentioned about 150 basis points of occupancy growth.

In the prepared remarks for yearend to yearend, but just curious if you can give us any sense of the cadence throughout the year you typically see some seasonality.

She's an hour in the first quarter, but it.

That seems to have gone out the window with with Covid here and there.

The recovery today. So just curious if you have any waste a picture on how we should think about occupancy for 'twenty two.

Yeah, I think that grows and it's a range.

Speaker 7: Yeah, I think that growth and it's a range, you know, where we're trying to get up into that 92 and a half to high nineties range. I think you should just model it pro rata by quarter. I don't think there's a particular cadence in terms where how that increase will occur on the occupied.

We're trying to get up into that 92, and a half the high.

High 90 range I think you should just model it pro rata.

By quarter I don't think there's a particular cadence in terms where how that.

And that increase will occur on the occupied a metric.

Okay, Great and then just on Santana West I'm, hoping you can give us a little color on how those leasing discussions are progressing.

Speaker 6: Okay, great. And then just on Santana West, I'm hoping you give us a little color on how those recent discussions are progressing. Any expectation for signing a lease here in the near term to give us more confidence in maybe adding that incremental NOI to like a 23 property NOI as that development comes on or how should we think of the timing of that potentially?

Any expectation for for our siding at least here in the near term to to give us more confidence than maybe adding that incremental NOI to like a 23.

P property NOI is as that development comes on or how should we think of the timing of that potentially.

You know on the on this particular issue I have never been so toward in my life about talking more than I should or less that I should on this I know what I'm very comfortable with is that that the.

Speaker 5: You know, on this particular issue, I have never been so torn in my life about talking more than I should or less than I should on this. I know what I'm very comfortable with is that the...

Conversations that are happening.

Speaker 5: Conversations that are happening are a bit of a horse race right now and the notion of

A bit of a horse race right now and the notion of.

Kind of helping one versus the other I don't want to signal anything on that more than more.

Speaker 5: kind of helping one versus the other. I don't want to signal anything on that more than to tell you that we're making some good progress. I'm not going to put a time on it and I can't give a little bit more given the nature of the negotiations at this point.

More than to tell you that we're making some some good progress.

I'm not going to put a time on it and I can't.

Give a little bit more given the <unk>.

Given the nature of the negotiations at this point.

Sorry.

Understood. Thank you very much.

Our next question comes from the line of Handel St. Juste with Mizuho you May proceed with your question.

Speaker 1: Our next question comes from the line of Handel St. Just with Missouha.

Yeah.

Hey, Don Hope you guys are well I wanted to ask you about the AR cash basis tenants are still pretty elevated here I don't think there's a teens versus our last quarter I guess I'm curious why we aren't seeing more progress on that given the backdrop are you doing in terms of leases. The rents are going up how do we square that versus your optimism about Australia, obviously in your voice.

Speaker 10: Hey Don, hope you guys are well.

Speaker 10: cash basis tenants. Still pretty elevated here. I don't think there's a change versus our last quarter. I guess I'm curious why we aren't seeing more progress on that given the backdrop. You're doing tons of leases. Rents are going up. How do we square that versus the optimism that's fairly obvious in your voice and your outlook?

Outlook.

What what are you referring to with regards to your question regarding the cash basis.

Speaker 11: What are you referring to with regards to your question regarding the cash basis?

The percentage I'm looking here at 26%.

Speaker 10: The percentage, I'm looking here at 26%.

Uh huh.

Let's see.

Speaker 12: Let's see. There's no plans for us to switch them back from a cash basis to an accrual basis. There's likely to be some...

There's no plans for us to just switch them back from a cash basis when accrual basis.

You know theirs.

Is it likely to be some fairly high hurdles for us to do that and Oh, even pre COVID-19 , we had a big chunk most of our restaurants on a cash basis to begin with already so I wouldn't anticipate.

Speaker 3: for us to do that. And uh COVID-19 , we had a big chunk on a cash basis to begin I wouldn't anticipate, yo though there's any progre kind of repayment of defe see other progress with r of payments and then we'l but I wouldn't anticipate why we have nothing in ou to making that change fro

Though there was any progress when you see kind of repayment of deferrals, we need to see other progress with regards to consistency of payments in there and then we'll make those decisions, but I wouldn't anticipate anything in and and that's why we have nothing in our guidance with regards to make.

Making that change from cash flow.

Got it got it and capacity, but what was that pre COVID-19 what was the range Russell.

Speaker 10: Got it, got it. And comparatively, what was that pre-COVID? What was the range relative?

Probably around you know kind of the mid teens as a percentage of ABR.

Speaker 5: Probably around, you know, kind of the mid teens as a percentage of ABR. You know, just a big chunk of that was restaurants and then our normal cash basis tenants, lower quality, you know, lower quality tenants at any one point in time.

I'm just a.

A big chunk of that was restaurants and then our normal.

Cash basis tenants with lower rent quality are lower.

Lower quality tenants at any one point in time.

Got it okay. Thanks for that and a question on the rent Commencements last year certainly the focus on BEC collections. This year more so on rent commencement and I'm, just guess I'm curious to a question that supply chain and labor constraints any risk of perhaps not meeting some of the rent commencement timelines and risk to the signed but not yet opened our rents and any sense of any.

Speaker 10: Okay, thanks for that. And a question on rent commencements. Last year certainly the focus was on rent collections, this year more so on rent commencements. And I just guess I'm curious, to a question of supply chain and labor constraints, any risk of perhaps not meeting some of the rent commencement timelines and risks of the signed but not yet opened rents, and any sense of anything you're able to do to perhaps compress some of those timelines or work with tenants in any way? Thanks.

You are able to do to perhaps a compressed some of those timelines or work with tenants in any way. Thanks.

Yeah. The answer is yes to all the questions you just asked about that and let me add.

Speaker 5: Yeah, the answer is yes to all the questions you just asked about the Handel. Well, I mean apps look, supply chain is a big deal.

Looks like the supply chain is a big deal.

And are we able to do stuff about it you bet, we are from that standpoint.

Speaker 5: Uh, and are we able to do stuff about it? You bet we are, uh, from the standpoint of, uh,

Point of.

Certainly the components of it whether you're talking about HVAC equipment, whether you're talking about some of the provisions in the lease where that tenant will work with US. There are things that we have done and continue to do and as Wendy loves to say boy you can't argue with this is great relationships with tenants.

Speaker 5: certain of the components of it, whether you're talking about HVAC equipment, whether you're talking about some of the provisions in the lease where that tenant will work with us, there are things that we have done and continue to do. And as Wendy loves to say, and boy, you can't argue with this, is great relationships with tenants means that there's a partnership.

It means that there's a partnership there and trying to get a store open and that partnership means. There is there is more likely to have a give and take in that are in the build out process of where you can find the right equipment to be able to get stuff in and we've had some real good success getting started with that does that mean, there's no risk.

Speaker 5: And that partnership means there is more likely to have a give and take in the build-out process.

Speaker 5: of where you can find the right equipment to be able to get stuff in. And we've had some real good success getting started with that. Does that mean there's no risk?

Speaker 5: Uh, on the supply chain side, the store opening? Of course not. Uh, anybody that tells you differently is...

On the supply chain side, the store openings of course, not all of it but it tells you. It differently as you know you look him square the eye because that's that's what's going on in the country right now, but we're all over it and frankly have been all over it for for quite some time, including staffing up there including helping.

Speaker 5: you know, look, I'm squa that's that's what's goin uh, right now, but we're

Speaker 7: They are including helping as best we can with relationships in the cities on the permitting side, which is always the least predictable part of this. So, all hands on making sure that the three million square feet of leasing that has been done at this company in the past is able to to have its best chance for starting before or on the dates that we've got for.

As best we can with relationships in the cities on the permitting side, which is always the right the least predictable.

Part of this so all hands on making sure that the 3 million square feet of leasing that has been done at this company in the past is able to to have its best chance for starting before or on the dates that we've got forecasts.

Did you guys give an updated number for the signed but not yet rent I think last quarter that figure was $25 million, we expect a 90% to hit this year can you give us some lift.

Speaker 10: Could you guys give an updated number for the Simon at-yet rents? I think last quarter that figure was like $25 million. We expected 90% to hit this year. Can you give us a quick look?

Yeah, So where we're at with signed not occupied.

Speaker 3: Yeah, so we're with side not occupied, you know, that, you know, what's what's identified in a difference between our lease and occupies is about 23 million. We've also got a big chunk

You know what let's identify it in a different you know leased and occupied is about 23 million.

We've also got a big chunk of that.

That is effectively.

Speaker 3: That is effectively.

About $17 million.

Speaker 3: about $17 million that is in our non-comparable pool or basically currently in our redevelopment pipeline.

It is in our non comparable or basically currently.

The redevelopment pipeline.

As well as what's in our current pipeline of kind of 2022 deals that have been signed so far and going forward. It gets you up into the $50 million of total rent starts are potentially so we feel good about where we stand and we see that as a big driver of.

Speaker 3: as well as what's in our current pipeline of kind of 2022 deals that have been signed so far and going forward gets you up into the 50 plus million dollars of total rent starts potential.

Speaker 7: So we feel good about where we stand, and we see that as a big driver of some upside in over 22, when it's 23.

Some upside in our over 22 and <unk> 23.

Wonderful Thank you guys.

Our next question comes from the line of Floris Van Dijk gum with Compass point you May proceed with your question.

Speaker 1: Our next question comes from the line of Flores Van Dyckum with Compass Point. You may proceed with your question.

Thanks, guys for taking my question.

Actually following up on what <unk> asked about as well I mean, if I do the math I see you know excluding.

Speaker 9: Actually, following up on what Hendel asked about as well, I mean, if I do the math, I see, you know, excluding the NOI coming online from the development pipeline, which, you know, could be, you know, up to 75 million. You know, you've got more than 10 million of NOI growth.

The NOI coming online from the development pipeline, which you know could be.

Up to $75 million.

You, you're you've got more than $10 million of NOI growth sort of identified here.

Speaker 9: sort of identified here if I add up all of these pieces. So if we start factoring this out, and obviously not all of it's gonna come online in 22, but significant amount will be probably back-ended to 22 into 23, but we're looking here at double-digit NOI growth.

If I add up all of these pieces. So if we start factoring this out and obviously not all of it is going to come online in 'twenty, two but you know a significant amount it will be probably back ended the 'twenty two into 'twenty three but we're looking here at you know double digit NOI growth.

You know going into you know by the end of 'twenty three comfortably double digits.

Speaker 9: uh, you know, going into, you know, by the end of 23 comfortably double digits. Um, that seems pretty attractive.

That seems pretty attractive.

Are we missing something here.

Well keep in mind, I mean, a lot of strong growth as the developments come online and I think you can look at our additional disclosure on the big projects to kind of get a sense of that.

Speaker 7: Keep in mind, I mean, look, we'll have strong growth as the developments come online. I think you can look at our additional disclosure on the big projects to kind of get a sense of that.

Speaker 7: Keep in mind, though, also there's the offset of capitalized interest going away as we deliver those buildings. We have signed leases there as we deliver those spaces to the tenants. Obviously, we shut off the capitalized interest. So that's a bit of an offset. So obviously, that's what flows down to the bottom line. It's just not kind of how quickly we grow the NOI.

Keep in mind, though also there's the offset of capitalized interest going away as we deliver those buildings, we have signed leases there as we deliver those spaces.

Spaces to the tenants, obviously, we shut off the capitalized interest so that's a bit of an offset so obviously, that's what flows down to the bottom line. It's just not kind of how quickly we grow the NOI up top obviously, there's capital associated with some of the redevelopment and expansions that we've got.

Speaker 7: up top, obviously there's capital associated with some of the redevelopment and expansion.

And then.

Speaker 9: And then, as Don sort of alluded to in some of your residential leasing, presumably having a building that's signing rents 15% higher than next door, that suggests that the existing rents have some significant potential upside here as well. How long will it take, do you think, in your view, to harvest some of that residential rental upside as well?

As you know Don sort of alluded to in some of your residential leasing presumably having a building that's signing rents 15% higher than next door that suggests that the the existing rents have some significant potential upside here as well how long.

Will it take you know do you think in your in your view to harvest some of that residential rental upside as well.

Yeah, that's a great question handle and that should be a source of positivity.

Speaker 5: Yeah, that's a great question Handel and that should be a source of positivity uh for uh 2022 particularly you know through the spring season and the later in the year a little bit of luck we'll have uh that big building up in uh up at assembly uh all these stuff by the end of the year which would be great which would be good stuff for uh

For two.

2022 particularly you know through the spring season, and so it is a later in the year a little bit of luck, we will have a big building up in Oh, but assembly are all leased up by the end of the year, which would be great, but should be good stuff for.

For you know 2023, and really based on what's going on in Boston right now that that is a real bright spot from a life sciences perspective, and are back to work perspective, and our job creation perspective that is one of our if not our heart you know.

Speaker 5: for, you know, 2023. And really based on what's going on in Boston right now, that is a real bright spot from a life sciences perspective and a back to work perspective and a job creation perspective. That is one of our, if not our, you know, strongest markets.

Our strongest markets.

Which is interesting because if I wanted to stick with the market that was hurt the most.

Speaker 5: which is interesting because it was one of the, it was the market that was hurt the most during COVID. Gotcha.

During COVID-19 .

Gotcha.

That's it for me.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, one moment, while we poll for questions.

Speaker 1: press star 1 on your telephone keypad. One moment while we pull for questions.

Our next question comes from the line of Linda Tsai with Jefferies. You May proceed with your question.

Speaker 1: Our next question comes in the line of Linda Tsai with Jeffries. You may proceed with your...

Hi, can you discuss expectations embedded in your P y growth of 3% to 5%, what's the balance between growth and revenues and expenses.

Speaker 1: Hi, can you discuss expectations embedded in your POI growth of 3 to 5%? What's the balance between growth in revenues and expenses?

Yeah, I think that the.

Yeah, we would expect expenses.

Speaker 3: We would expect expenses. We've had a good year with regards to real estate taxes and keeping them low this year. So they should have been growing.

We've got a good year with regards to real estate taxes, keeping the blow this year so they should.

They should have a b grow from this level I would expect that yeah, there should be kind of modest figure 3% rent expense growth.

Speaker 3: I would expect that there should be kind of modest, kind of bigger 3% rent expense growth out of ordinary course.

Ordinary course are from that perspective, and then obviously just occupancy growing with collections growing.

Speaker 3: from that perspective. And then obviously just occupancy growing, you know, with collections growing, with the offset of some prior period and lower term fees, so forth, all factor in and obviously some of the credit reserve is embedded in there beyond just the collection impact.

With the offset of some prior period and lower term fees and so forth all factor in and obviously somebody you know some of our credit reserve is.

It's embedded in there beyond just the collection impact.

So all of those but with regards to expenses I would I wouldn't forecast kind of a traditional about a 3% increase.

Speaker 5: So all of those, but with regard to expenses, I would forecast kind of a.

Speaker 3: traditional kind of 3% increase on both OPEX and real estate taxes. And maybe a little bit higher on the OPEX, just got to get inflationary pressure. But that's all embedded in that 3-5.

Increase in both Opex and in real estate.

Taxes, and maybe a little bit higher on the Opex, just gotta get inflationary pressure.

But that's all embedded in that three to five.

And then what are you forecasting for bad debt in 2022.

It's it's like I said, our credit reserve is as you know call it 2% plus or minus 50 basis points I think there's a bunch of.

Speaker 5: It's, you know, like I said, our credit reserve is the, you know, call it 2% plus or minus 50 basis points. I think there's a bunch of, you know, traditionally, we're kind of in the 50 basis points of bad debt as a component of that credit reserve. It's going to be elevated, I would expect, you know, probably going to be, you know, at least north of 1%, and that's what's, you know, and there's a range that's reflected.

Traditionally we're kind of in the 50 basis points of bad debt as a component of that credit reserve, it's going to be elevated I would expect you know, we're probably going to be at least north of 1%.

And that's what's you know and there's a range that's reflected in that three five.

Speaker 7: But, you know, it'll be elevated in 22, you know, even above kind of the collection.

To be elevated in 'twenty two.

Yeah, or even above gotta be a collection of things.

Thanks, and then in the earlier comments, you mentioned that lease up at Massawa is getting 15% higher rents is there anything in particular driving that maybe in terms of the demographics that are moving in.

Speaker 1: Thanks. And then in the earlier comments, you mentioned that lease up at Missala is getting 15% higher rents. Is there anything in particular driving that, maybe in terms of the demographics that are moving?

No its job growth is job growth in Boston, I mean life Sciences, absolutely on fire. It's returned to a you know two.

Speaker 5: No, it's job growth. It's job growth in Boston. I mean life science is absolutely on fire. It's returned to work. It's just a powerful job creating market. A lot of relocations into the market from other parts of the country. Yeah. Very impressive.

Put it to work, it's it's just a powerful job creating market a lot of relocations into the market from other parts of the country.

Very impressive.

Thanks.

Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to MS. Leah Brady for closing remarks.

Speaker 13: I would like to turn this call back over to Ms. Leah Brady for closing remarks.

Thanks for joining us today, and we look forward to seeing everybody. It's a conference in a couple of weeks.

Speaker 1: Thanks for joining us today. We look forward to seeing everybody at the city conference in a couple of weeks.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation under the rest of your day.

Speaker 13: At today's conference, you may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.

Okay.

Speaker 14: ...

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