Q4 2021 Acadia Realty Trust Earnings Call

Thank you for standing by and welcome to the fourth quarter 2021, Acadia Realty Trust earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during that <unk>.

Speaker 1: Thank you for standing by and welcome to the fourth quarter 2021 Acadia Realty Trust Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during that portion of the call you will need to press star 1 on your telephone.

<unk> of the call you will need to press star one on your telephone. Please be advised that today's conference may be recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your host Joe <unk>. Please go ahead.

Speaker 1: please be advised that today's conference may be recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your host, Joe Rizzoli. Please go ahead.

Good afternoon, and thank you for joining us for the fourth quarter of 2021, Acadia Realty Trust earnings Conference call. My name is Joe <unk> and I am a property accountant in our accounting Department.

Speaker 2: Good afternoon and thank you for joining us for the fourth quarter 2021 Acadia Realty Trust earnings conference.

Speaker 2: My name is Joe Rizzoli and I am a property accountant in our accounting department.

Speaker 2: Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking.

Before we begin please be aware that statements made during the call that are not historical maybe deemed forward looking statements within the meaning of the Securities and Exchange Act of 1934 and actual results may differ materially from those indicated by such forward looking statements due.

Speaker 2: within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by such forward-looking statements.

Due to a variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-K , and other periodic filings with the SEC forward looking statements speak only as of the date of this call February 16th 2022, and the company undertakes no duty to update them.

Speaker 2: including those disclosed in the company's most recent Form 10-K and other periodic filings with the SEC. Forward-looking statements speak only as of the date of this call.

Speaker 2: During this call, management may refer to certain non-GAV financial measures, including funds from operations and net operating.

During this call management may refer to certain non-GAAP financial measures, including funds from operations and net operating income please.

Speaker 2: see Acadia's earning press release posted on its website for reconciliation of those non-GAAP financial measures with the most directly comparable GAAP financial measures.

Please see Acadia as earnings press release posted on its website for reconciliations of those non-GAAP financial measures with the most directly comparable GAAP financial measures once.

Speaker 2: Once the call becomes open for questions, we ask that you limit your first round to two questions per caller to give everyone the opportunity to participate. You may ask further questions by reinserting yourself.

Once the call becomes open for questions. We ask that you limit your first round to two questions per caller to give everyone. The opportunity to participate you may ask further questions by Reinsert yourself into the queue and we will answer as time permits.

Speaker 2: Now it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer who will begin today's management.

Now it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks.

Speaker 3: Thanks, Joe. Good job. Welcome, everyone. Good afternoon. We had a strong quarter, and we will delve into the details in a minute, but first, a few observations.

Thanks, Joe good job.

Welcome everyone. Good afternoon, we had a strong quarter and we will delve into the details in a minute, but first a few observations.

Speaker 3: while not ignoring the impact of Omicron on our healthcare system and the lives of many from the perspective of our portfolio performance and our business plan.

While not ignoring the impact of <unk> on our healthcare system and the lives of many from the perspective of our portfolio performance and our business plan.

Speaker 3: We remain very much on track as evidenced by our fourth quarter results and our forecast for this year. We did not see an impact on our collection.

We remain very much on track as evidenced by our fourth quarter results and our forecast for this year, we did not see an impact on our collections on our tenant interest on leasing progress or investment efforts.

Speaker 3: on our tenant interest, on leasing progress or investment efforts.

Speaker 3: if anything from a transactional perspective, it may have helped nudge certain sellers off the sidelines and we're seeing that reflected in our increasing investment volume.

Anything from a transactional perspective, it may have helped nudge certain sellers off the sidelines and we're seeing that reflected in our increasing investment volume.

In terms of leasing and tenant performance last quarter, we continue to see a many a meaningful improvement in fundamentals after a very scary 2020, and frankly, a few years of <unk>.

Speaker 3: In terms of leasing and tenant performance, last quarter we continued to see a meaningful improvement in fundamentals after a very scary 2020 and frankly a few years of headwinds for many of our retailers even prior to that.

<unk> for many of our retailers have even prior to that.

The reopening that began in early 'twenty one.

Speaker 3: The reopening that began in early 2021 The reopening that began in early 2021

Gained steam throughout the year.

Speaker 3: As a result, our second half NOI last year increased over 5% and it looks like this above average growth has several more...

As a result, our second half.

NOI last year increased over 5% and it looks like this above average growth.

Has several more years in front of us.

Speaker 3: These longer term tailwinds have several important drivers. On a macro level, our retailers' performance, their balance sheets and business models are with few

These longer term tail wins have several important drivers.

On a macro level.

Our retailers' performance.

Their balance sheets and business models are with few exceptions.

Stronger today than pre Covid.

And the recognition by our retailers.

Speaker 3: of the critical importance of brick and mortar real estate in an omnichannel world.

The critical importance of brick and mortar real estate in an Omnichannel world.

It's certainly clearer today than it has been for many years.

Speaker 3: is certainly clearer today than it has been for many years.

Speaker 3: This re-embracing of physical stores is happening faster than we expected.

This re embracing of physical stores is happening faster than we expected.

Speaker 3: and we are seeing this from a wider range of our retailers and formats.

And we are seeing this from a wider range of our retailers AD formats for instance, as it relates to Acadia and our street retail portfolio. We are seeing it from luxury retailers, who are doubling down in our carter's ranging from Melrose place in Los Angeles to the Gulf Coast, and Chicago as well as here.

Speaker 3: As it relates to Acadia and our street retail portfolio, we are seeing it from luxury retailers who are doubling down in our corridors ranging from Melrose Place in Los Angeles to the Gold Coast in Chicago as well as here in Soho.

So.

Speaker 3: Last year we expanded YSL in Chicago, had solid renewal spreads in Marrow's place, and are busy signing leases in Sofa.

Last year, we expanded YSL and Chicago had solid renewal spreads in Melrose place in our busy signing leases.

And so.

Speaker 3: We're also seeing it with our digitally native retailer.

We're also seeing it with our digitally native retailers.

Speaker 3: the Warby, Parkers, and Allbirds of the world, as well as those brands who thrive around them.

<unk> Parkers and all parts of the world as well as those brands, who thrive around them.

Speaker 3: These DTC, direct to consumer retailers, are now showing up in force on many of our...

These DTC direct to consumer retailers are now showing up.

In forest on many of our corridor as for instance.

Speaker 3: on M Street in Georgetown. Last quarter we added Glossier, Cerla Tabla, and Gloss Lab. And in Soho we added Fila.

On M Street in Georgetown last quarter, we added glossy a cellular tabla and glass lab and in Soho, we added filler.

Speaker 3: and we continue to see it at our Armitage Avenue assemblage in Chicago as well, which continues to benefit from our curating a critical mass of the right retailers and where last quarter we profitably added Jenny Kane and Fared.

And we continue to see it at our Armitage Avenue assemblage, and Chicago, as well, which continues to benefit from our Curating a critical mass of the right retailers and where last quarter, we profitably added jenni Kayne and Faraday.

Speaker 3: and especially as it relates to those markets that were hit hard during the pandemic.

And especially as it relates to those markets that were hit hard during the pandemic. We are seeing a significant rebound in tenant activity and given this increase in tenant demand.

Speaker 3: We are seeing a significant rebound in tenant activity. And given this increase in tenant demand.

Speaker 3: beginning to look like the rental growth trajectory will be stronger than we had previously anticipated. And that obviously bodes well for our forecast of multi-year and a wide growth.

It's beginning to look like.

Rental growth trajectory will be stronger than we had previously anticipated and that obviously bodes well for our forecast of multi year NOI growth.

Speaker 3: For instance in Soho, after several years of rental headwinds that started around 2017, 10 and c advisor

For instance in Soho after several years of rental headwinds that started around 2017.

Tenant performance and rents are now.

Speaker 3: in many instances exceeding pre-COVID levels. And the reopening and acceleration of demand, it's still in its early stages. So as it relates to our SOHO assets...

In many instances exceeding pre COVID-19 levels, and the reopening and acceleration of demand it's still in its early stages.

So as it relates to our Soho assets.

Given our current in place rents.

Speaker 3: and available occupancy even before any further market rent growth, we have nice embedded NLI growth that we have begun harvesting. And then assuming increased tenants demand...

And available occupancy even before any further market rent growth, we have nice embedded NOI growth that we have begun harvesting and then assume it.

Increased tenant demand continues.

Speaker 3: that growth will likely be even stronger than we anticipated.

That growth will likely be even stronger than we anticipated.

Speaker 3: Keep in mind that given the headwinds of the last several years...

Keep in mind that given the headwinds of the last several years market rents in Soho could increase by an additional 50% from where they are today.

Speaker 3: market rents in Soho could increase by an additional 50% from where they are today.

And still not be at prior peaks.

But tenant sales performance for many of our retailers is already.

Speaker 3: for many of our retailers is already well on its way to priority.

Well on its way to prior peaks.

Speaker 3: Now, some folks will say that rents will never get back to prior.

Now <unk>.

Some folks will say that rents will never get back to prior peaks.

Speaker 3: Well, given the recovery we're seeing, I doubt that.

Well given the recovery, we're seeing I doubt that.

Speaker 3: But if one defines never as being five years from now...

But if one defines endeavor.

As being five years from now.

Well then.

Speaker 3: If you do the math, that still looks pretty encouraging to us.

If you do the math that still looks pretty encouraging to us.

Drilling further into our portfolio, we see tailwind that above average growth for multiple drivers. This will first come from the lease up of valuable vacancy in our portfolio over the next year or so as well as the profitable re tenants of other spaces example of both of these last quarter include in Lincoln Park.

Speaker 3: Drilling further into our portfolio, we see tailwinds and above average growth from multiple drivers. This will first come from the lease up of valuable vacancy in our portfolio over the next year or so.

Speaker 3: as well as the profitable retenancing of other spaces. Example of both of these last quarter include in Lincoln Park, Chicago, on North Avenue last quarter we signed a lease with Backcountry to replace a former Pier 1 and adjacent tenant.

Chicago North Avenue last quarter, we signed a lease with that country to replace a former pier one in adjacent tenant.

Speaker 3: Then in the suburban side of our portfolio last quarter, we signed BJ's Wholesale Club at our Westchester, New York Crossroads Shopping Center. That will replace our Kmart at that center at triple digit spread.

And then in the suburban side of our portfolio last quarter, we signed Bj's wholesale club at our Westchester New York Crossroad shopping center that will replace our Kmart at that center at Triple digit spreads.

Speaker 3: Now while the short term impact of Omicron is passing quickly...

Now while the short term impact of Omicron is passing quickly.

Speaker 3: We certainly will be focused on supply chain and longer term inflationary pressures on both our retailers as well as our portfolios.

We certainly will be focused on supply chain and longer term inflationary pressures on both our retailers as well as our portfolios.

Speaker 3: And as we think about which segments of our retailers and our portfolios that are likely to be the most resilient in an inflationary environment, ultimately it's going to come down to where consumers spend their money.

And as we think about which segments of our retailers at our portfolios that are likely to be the most resilient in an inflationary environment.

Ultimately, it's going to come down too.

Where consumer spending will remain strong.

Which retailers have.

Speaker 3: pricing power to hold onto their margins, and then which real estate portfolios can capture that growth.

Pricing power to hold onto their margins, and then which real estate portfolios can capture that growth.

And from that perspective.

Speaker 3: While I think most segments of our portfolio should be in good shape.

While I think most segments of our portfolio should be in good shape.

Speaker 3: Our street portion of our portfolio seems to be particularly well positioned.

<unk> Street portion of our portfolio seems to be particularly well positioned.

First of all from a structural perspective, our street leases generally have stronger contractual growth.

Speaker 3: from a structural perspective are street leases generally have stronger contractual growth.

Speaker 3: and more fair market value resets than in our suburban efforts.

And more fair market value resets than in our suburban assets. Thus.

Speaker 3: Thus we'll have the ability to capture inflation-related growth sooner.

Thus, we will have the ability to capture inflation related growth sooner.

Speaker 3: Additionally, operating expenses are a much lower percentage of occupancy costs for our street-based retailers, so the inevitable rise in operating expenses should be less than half the letter.

Additionally, operating expenses are a much lower percentage of occupancy cost for our street based retailers. So the inevitable rise in operating expenses should be less impactful at our streets.

Speaker 3: Now since inflation will likely result in increased top line sales, the rent to sales match As states become an enormous under everyone Princes

Now since inflation will likely result in increased top line sales the rent to sales metrics.

Speaker 3: which have been a headwind during the deflationary period of the last decade, should reverse.

Which had been a headwind during the deflationary period of the last decade should reverse.

Speaker 3: That means the discussion with tenants will be less about top line sales growth and then more about their bottom line. And here again.

That means the discussion with tenants will be less about topline sales growth and then more about their bottom line and here again.

Speaker 3: street and flagship stores have an advantage in an omni-channel world where those national retailers whether they're luxury or advanced contemporary operate at higher margins and seem to be able to absorb this.

Street and flagship stores have an advantage in an omnichannel world.

Were those national retailers, whether they are luxury or advanced contemporary operate at higher margins and seem to be able to absorb this impact.

But while we will ponder the pros and cons of inflation keep this in mind.

Speaker 3: But while we'll ponder the pros and cons of inflation, keep this in mind.

Deflation is worse.

Speaker 3: it is becoming increasingly clear that we are past the highly promotional and deflationary pricing environment that existed in the past decade, where the consumer was trained.

It is becoming increasingly clear that we are past the highly promotional promotional and deflationary pricing environment that existed in the past decade, where the consumer was trained.

That if they waited almost everything would be less expensive.

Speaker 3: that if they waited, almost everything would be less expensive.

Speaker 3: This decade-long trend was a significant contributor to the retail Armageddon, and most retailers seem to understand that this race to the bottom...

This decade long trend was a significant contributor.

To the retail Armageddon and most retailers seem to understand that this race to the bottom.

Speaker 3: It diluted their brands. It reduced their connection with their customer. And it was just not sustainable.

It diluted their brands it reduced their connection with their customer.

And it was just not sustainable.

Speaker 3: going forward in conversations with our retailers, they seem to understand the importance of curation and the risks of ubiquity.

Going forward in conversations with our retailers they seem to understand the importance of curation and the risks of ubiquity most.

Speaker 3: Most importantly, they understand the critical nature of their physical stores in terms of customer acquisition and retention.

Importantly, they understand the critical nature of their physical stores in terms of customer acquisition and retention.

As well as profitability.

Speaker 3: So as we look out over the next few years, from an internal growth perspective, whether from LISA

So as we look out over the next few years from an internal growth perspective, whether from lease up.

Speaker 3: retenanting or contractual growth, we are increasingly encouraged by the rebound and rental growth trajectory we're seeing.

Tenant thing or contractual growth, we are increasingly encouraged by the rebound.

Rental growth trajectory, we're seeing.

Then turning to the new investment side.

Speaker 3: after a very quiet 2020 when lenders were highly accommodative and owners were fairly frozen.

After a very quiet 2020, when lenders were highly accommodative and owners were fairly frozen.

Speaker 3: In the last quarter and now looking forward, we are seeing a nice growth in investment opportunities at attractive prices, both for our fund platform as well as for our core portfolios.

In the last quarter and now looking forward, we are seeing a nice growth in investment opportunities at attractive prices.

Both for our fund platform.

As well as for our core portfolio of investments on.

On the fund side and as Amy will discuss.

Speaker 3: Last quarter we added a $72 million investment and have an additional $120 million under contract where we have completed our diligence, but the closing is still subject to the typical closing condition.

Last quarter, we added a $72 million investment and have an additional $120 million under contract, where we have completed our diligence, but the closing is still subject to the typical closing conditions.

Speaker 3: These deals continue to be consistent with our Fund 5 higher yielding investment strategy that we have been successfully executing over the past several years.

These deals continue to be consistent with our fund five higher yielding investment strategy that we have been successfully executing over the past several years.

Then with respect to core acquisitions, we closed on $66 million and having meaningful pipeline under agreement, but here our pipeline is still subject to our completing our review.

Speaker 3: Then with respect to core acquisitions, we closed on 66 million and have a meaningful pipeline under agreement, but here our pipeline is still subject to our completing our review.

Speaker 3: The deals already closed are in markets we're very familiar with in Soho. We added one of the best corners on Green Street and in Washington, D.C. We added to our portfolio there with our acquisition of a portfolio of buildings on 14th Street.

The deals already closed our end markets, we're very familiar with in Soho. We added one of the best corners on Greene Street, and in Washington D. C. We added to our portfolio there with our acquisition of a portfolio of buildings on 14th Street.

So in short we are pleased with the external growth activity, we're seeing and as John highlighted in our guidance, we are still seeing accretion levels.

Speaker 3: So in short, we are pleased with the external growth activity we are seeing and as John highlights in our guidance, we are still seeing accretion level.

Speaker 3: of about 1% per $100 million of investment activity, whether it be core or fund. So this activity can really move the needle for us.

Of about 1% per $100 million of investment activity, whether it be core or fund. So this activity can really move the needle for us.

Finally.

Speaker 3: I want to thank our entire team for their hard work last year during a year of recovery but also a year of whiplash.

I want to thank our entire team for their hard work last year during a year of recovery, but also a year of whiplash.

Speaker 3: We are now clearly seeing the fruits of your labor and I'd like to congratulate those of you who received much deserved promotion.

We are now clearly seeing the fruits of your labor and I'd like to congratulate those of you who received much deserved promotions and last but not least I'd like to thank Chris Conlon for his over a decade of contribution to Acadia is performance.

Speaker 3: And last but not least, I'd like to thank Chris Conlon for his over a decade of contribution to Acadia's performance.

Speaker 3: Chris as COO, oversaw our leasing and development areas, and so much more.

Chris as COO oversaw our leasing and development areas and so much more he will be missed.

Speaker 3: But of all of his great contributions, none was more important than the pipeline of talent he built. Talent that is ready, willing and able to step up and continue the efforts that Chris started. And with that, I will turn the call over to John . Thanks Ken and good evening.

But of all of his great contributions none was more important than the pipeline of talent he built <unk>.

Talent that is ready willing and able to step up and continue the efforts that Chris started.

And with that I will turn the call over to John .

Thanks, Ken and good afternoon.

Let me first start by addressing the 8-K that we filed last evening.

Speaker 2: As outlined in the filing, during the course of our year-end audit, actually within the past few days, we identified two funded best-

As outlined in our filings during the course of our year end audit actually within the past few days, we identified two fund investments acquired about a decade ago that were incorrectly recorded as consolidated investments rather than as equity method investments within our GAAP financial statements.

Speaker 2: about a decade ago that were incorrectly recorded as consolidated investments rather than as equity method investments within our gap.

Speaker 2: In plain English, this means we need to amend our prior year GAAP financial statements to show these two fund investments on a net basis rather than growth.

In plain English this means we need to amend our prior year GAAP financial statements to show these to fund investments on a net basis rather than gross.

Speaker 2: And in terms of impact, while we need to fix this, the netting down of these two fund investments does not change any of our previously reported pro rata financial information or any individual line items within our pro rata financial statements or any of our prior operating methods.

And in terms of impact while we need to fix this the netting down of these to invest these to fund investments does not change any of our previously reported pro rata financial information or any individual line items within our pro rata financial statements or any of our prior operating metrics.

Speaker 2: Furthermore, this does not change any of our pro rata share of core or fund net operating income, our net income, our FFO per share, or our net worth.

Furthermore, this does not change any of our pro rata share of core our fund net operating income or net income or <unk> <unk> per share or net worth.

Speaker 2: Rather, they simply reflect reclassifications between individual line items within our GAAP financial statements, and our team is actively working through the process of updating all of our financial statements.

Rather they simply reflects reclassifications between individual line items within our GAAP financial statements and our team is actively working through the process of updating all of our filings we fully expect to meet the SEC reporting deadlines enable us to access the capital markets in the ordinary course.

Speaker 2: fully expect to meet the SEC reporting deadlines, enabling us to access the capital markets in the ordinary course.

Now moving onto our results.

Speaker 2: We have had an incredibly active few months with our fourth quarter, full year 2021, along with our 2022 guidance exceeding our expectations on all.

We have had an incredibly active few months with our fourth quarter full year 2021, along with our 2022 guidance exceeding our expectations on all fronts.

Speaker 2: As Ken mentioned, we are continuing to see elevated demand for our space with over $13 million of executed leases to date, representing approximately 10% of our core aviation industry.

Ken mentioned, we are continuing to see elevated demand for our space with over $13 million of executed leases to date representing.

Approximately 10% of our core ABR.

Speaker 2: along with meaningful amounts of external growth in both our core and fund businesses.

Along with meaningful amounts of external growth in both our core and fund businesses.

Starting with the quarter.

Speaker 2: Our fourth quarter earnings of $0.29 a share came in ahead of our expectations. And this was driven by rank commencement on new leases, an improved credit environment, core cash collections exceeding 98.

Our fourth quarter earnings of 29, a share came in ahead of our expectations and this was driven by rent commencement on new leases and improved credit environment with core cash collections exceeding 98%.

Speaker 2: along with the accretive impact from the approximately $250 million of external investments that we closed during the year, including $100 million in the fourth quarter.

Along with the accretive impact from the approximately $250 million of external investments that we closed during the year, including $100 million in the fourth quarter.

Speaker 2: And for the full year 2021, we generated $1.10 of FFO, which came in 10% above the high end of our initial range after adjusting for the fund promotes that were included in our guidance. And this meaningful beat in our earnings.

And for the full year 2021, we generated $1 10 of <unk>, which came in at 10% above the high end of our initial range. After adjusting for the fund promotes that were included in our guidance and this meaningful beat in our earnings was playing out throughout the year.

Speaker 2: and it was driven by a combination of our core portfolio rebounding at a pace and velocity well beyond our expectations along with a meaningful accretion from our external...

And it was driven by a combination of our core portfolio rebounding at a pace and velocity well beyond our expectations, along with a meaningful accretion from our external investments.

Speaker 2: As Ken mentioned, our core portfolio started its rebound in the second half of the year, with our six months SameStore NOI growing approximately 5%. and over three decades since the development of the Core portfolio.

As Ken mentioned, our core portfolio started its rebound in the second half of the year with our six month same store NOI growing approximately 5%.

Over 3% in the fourth quarter.

Speaker 2: I want to focus on a few points within our same store results for the fourth quarter.

I wanted to focus on a few points within our same store results for the fourth quarter at.

Speaker 2: As highlighted in our release, our same store growth this quarter was driven by a street and urban portfolio, outperforming our suburban portfolio by over 300 basis.

As highlighted in our release, our same store growth this quarter was driven by our street and urban portfolio.

Our performing our suburban portfolio by over 300 basis points.

It's also worth noting that our percentage increase this quarter is fairly clean meaning that it was not materially impacted by current or historical cash recoveries as the amount of recoveries in the fourth quarter of 2021, roughly approximated what was recognized in the comparable fourth quarter of the prior year.

Speaker 2: It's also worth noting that our percentage increase this quarter is fairly clean, meaning that it was not materially impacted by current or historical cash recoveries, as the amount of recoveries in the fourth quarter of 2021 roughly approximated what was recognized in the comparable fourth quarter of the prior year.

Speaker 2: And more importantly, we are seeing the strength continuing into 2021, and in fact for the next several years with growth expectations ranging from 5 to 10%.

And more importantly, we are seeing the strength continuing into 2021 and in fact for the next several years with growth expectations, ranging from 5% to 10%.

Now transitioning to our 2022 guidance.

Speaker 2: At $1.23 midpoint, we are projecting overall FFO growth of approximately 12% in 2022, or a 10% growth in our FFO run rate when adjusting for anticipated fund profits and the one-time benefits from cash recovery.

At $1 23 midpoint, we are projecting overall <unk> growth of approximately 12% in 2022 or 10% growth in our <unk> run rate when adjusting when adjusting for anticipated fund profits and the onetime benefits from cash recoveries.

Our 2022 guidance reflects the continued strength that were seeing across our key earnings drivers, meaning strong internal growth for both lease up and profitable leasing spreads meaningful accretion on our external investments and the monetization of profits from our from our fund business starting with internal growth.

Speaker 2: Our 2022 guidance reflects the continued strength that we are seeing across our key earnings drivers, meaning strong internal growth from both lease up and profitable leasing spreads, meaningful accretion on our external investments, and the monetization of profits from our fund business.

Speaker 2: Our core NOI is anticipated to grow 5% at the midpoint of 2000.

Our core NOI is anticipated to grow 5% at the midpoint in 2022.

Speaker 2: And this is the number that we actually intend to report, meaning it incorporates the expected headwinds from cash recovery accounting that occurred in 2008.

This is the number that we actually intend to report, meaning and incorporates the expected headwinds from cash recovery accounting that occurred in 2021.

And as highlighted our supplemental we anticipate that our core NOI, excluding cash recoveries will grow approximately 10% when including the redevelopment and our new acquisitions.

Speaker 2: and is highlighted in our supplemental, we anticipate that our core NOI, excluding cash recoveries, will grow approximately 10% when including the redevelopment and our new...

Speaker 2: The projected internal growth in 2022, as well as we are expecting for a lease in the next several years, is poised to be above trend. And this growth is driven by a continuation of lease up, profitable spreads of new and renewed leases, along with contractual rental growth.

The projected internal growth in 2022, as well that we're expecting for at least for the next several years is poised to be above trend and this growth is driven by a continuation lease up.

Profitable spreads on new and renewed leases along with contractual rental growth.

In terms of growth from lease up our hats are signed but not yet occupied spread within our core portfolio is at a historic high of $325 320 basis points, representing approximately $5 million of pro rata ABR.

Speaker 2: Our sign, but not yet occupied spread within our core portfolio, is at a historic high of 320 basis points, representing approximately 5 million...

Speaker 2: And this includes key street leases across all of our geographies that are anticipated to commence in the first half of this year, including many of the names that Ken mentioned.

This includes key street leases across all of our geographies that are anticipated to commence in the first half of this year, including many of the names that Ken mentioned.

Speaker 2: including on Lincoln Park and Armadillo Avenue in Chicago, Soho in New York City and Washington.

Including on Lincoln Park, and Armitage Avenue in Chicago, Soho in New York City, and Washington D C.

Speaker 2: And keep in mind that in addition to the $5 million of signed but not yet occupied space, this excludes the incremental amounts from any locations that have been pre-leased in advance of an existing tenant vacating, such as the profitable retenanting of 565 Broadway and Hollywood Bulgance There's a million other PCs available, includingORT floating, including the

And keep in mind that in addition to the $5 million of signed but not yet occupied space. This excludes the incremental amounts from any locations that have been pre leased in advance of an existing tenant vacating such as the profitable re tenant in and $5 65 Broadway in Soho.

So at a 93% leased occupancy we still have several hundred basis points of growth with high quality space remaining in our leasing team is off to a great start to the year with an additional $6 million or roughly 5% of our core ABR in advanced stages of lease negotiation again on some of our key street locations in Soho Lincoln Park.

Speaker 2: So at a 93% leased occupancy, we still have several hundred basis points of growth with high quality space remaining and our leasing team is off to a great start.

Speaker 2: with an additional $6 million, or roughly 5% of our core ABR, in advanced stages at least in the GOSHI.

Speaker 2: again on some of our key street locations in SoHo, Lincoln Park, Chicago, along with several deals at our suburban shopping center in Westchester, New York, following the profitable recapture of Kmart and our retenting...

Cargo along with several deals at our suburban shopping center in Westchester New York following the profitable recapture of Kmart and a re tenant to bj's.

Speaker 2: I also wanted to highlight that 30 basis points decline in our core build occupancy this quarter. This is actually an...

I also wanted to highlight that 30 basis points decline in our core build occupancy this quarter.

This is actually an incidence of addition by subtraction Vista.

Speaker 2: This decline was driven by the recapture of Kmart at Crossroads in December , representing approximately 100 basis points of build physical occupation.

This decline was driven by the recapture of Kmart at Crossroads in December representing.

Approximately 100 100 basis points of build physical occupancy.

And we replaced this roughly $6 rent at multiples of that with the new Bj's lease that is expected to commence in the fourth quarter of 2022.

Speaker 2: And we replaced this roughly $6 rent at multiples of that with a new BJ's lease that is expected to commence in the fourth quarter of 2000.

Speaker 2: And from the fund perspective, we are seeing similar strength in our leasing efforts with a signed but not yet occupied spread of approximately 200 basis points, representing approximately $2 million of ABR at our-

And from the fund perspective, we're seeing similar strength in our leasing efforts with a signed but not yet occupied spread of approximately 200 basis points.

Representing approximately $2 million of ABR at our share.

Speaker 2: Secondly, we are seeing strong spreads on both new and renewed leases, with cash spreads on our new leases in excess of 200%.

Secondly, we are seeing strong spreads on both new and renewed leases with this cash spreads on new leases in excess of 200% this quarter.

As outlined in our release in addition to the triple digit spread we recognized on the <unk> of Kmart at Crossroads we.

Speaker 2: As outlined in our release, in addition to the triple digit spread we recognized on the retenting of Kmart at Crossroads,

Speaker 2: We also reported high double digit spreads in our street portfolio, primarily within our New York Metro portfolio. Lastly, our point of view is that our

Also reported high double digit spreads in our street portfolio, primarily within our New York Metro portfolio.

Lastly, our portfolio benefits from strong contractual growth.

Speaker 2: As a reminder, our in-place street leases typically provide for 3% contractual growth, which when blended with our suburban assets, results in blended annual contractual growth for proxy laughed at by theEFFECTSOadi Sim DG

As a reminder, our in place street leases typically provide for a 3% contractual growth.

When blended with our suburban assets results in blended annual contractual growth of approximately 2%.

Speaker 2: Lastly, I want to spend a moment on the profit expectations from our fund business. As out drinkings srir Abdul

Lastly, I want to spend a moment on the profit expectations from our fund business.

As outlined during our 2022 guidance.

Speaker 2: we anticipate six to 10 cents of profits, with an expectation that roughly half of this will come from fund investments other than from our ownership interest in Alberts.

We anticipate six to 10 cents of profits with an expectation that roughly half of this will come from fund investments.

Other than from our ownership interest in Albertsons and.

Speaker 2: And we should be able to operate at this similar run rate for the next several years as our team works to harvest the embedded promotes across our various fun platforms.

And we should be able to operate at the similar run rate for the next several years as our team works to harvest the embedded promotes across our various fund platforms.

Speaker 2: So when we put the pieces together, Core NOI is expected to be strong in 2022 and well poised to strengthen even further in 2023.

So when we put the pieces together.

Core NOI is expected to be strong in 2022, and wealth and well poised to strengthen even further in 2023 and beyond we have a strong and growing external investment pipeline with over $135 million of deals completed since our last call.

Speaker 2: strong and growing external investment pipeline with over $135 million of deals completed since our last meeting.

Speaker 2: And as Ken mentioned, we capture about a penny of FFO for every hundred million dollars that we invest, whether it's a core fund deal, which means that we don't have to buy large portfolios to generate meaningful levels of accretion from our external asset.

And as Ken mentioned, we capture about a penny of <unk> for every $100 million that we invest whether it's a core fund deal, which means that we don't have to buy large portfolios to generate to generate meaningful levels of accretion from our external investments.

Speaker 2: So between our strong internal growth and our growing external pipeline, we are well poised to deliver above trend growth for the next several years.

So between our strong internal growth and a growing external pipeline, we are well poised to deliver above trend growth for the next several years.

Lastly, I wanted to touch on our balance sheet.

Speaker 2: As outlined in our release, we issued approximately $150 million of equity under ATM since our last

As outlined in our release, we issued approximately $150 million.

$1 of equity under our ATM since our last call at a gross issuance price of approximately $22 52.

Speaker 2: at a gross issuance price of approximately $22.50 to fund our external

To fund our external growth.

Speaker 2: including those investments that have closed to date, as well as to pre-fund our core pipeline on a leverage neutral basis. Our balance sheet isn't great.

Including those investments that have closed to date as well as to pre fund our core pipeline on a leverage neutral basis, our balance sheet is in great shape with no meaningful to core debt maturities of capital funding needs ample liquidity on our corporate facilities, along with various avenues to access capital.

Speaker 2: no meaningful cords at maturities or capital funding needs, ample liquidity on our corporate facilities, along with various avenues to access capital.

Speaker 2: And this puts us in a position of strength as we continue to see actionable and creative investment opportunities.

This puts us in a position of strength as we continue to see actionable and accretive investment opportunities.

Speaker 2: Lastly, and as outlined in our release, we have increased our quarterly dividend by 25%

Lastly, and as outlined in our release, we have increased our quarterly dividend by 20%.

Speaker 2: And at this payout level, I expect our AFFO payout ratio to be in the mid-

And at this payout level I expect our <unk> payout ratio to be in the mid sixties.

Speaker 2: enabling us to retain meaningful amounts of operating cash flow to accretively fund our internal and external...

Enabling us to retain a meaningful amount of operating cash flow to Accretively fund, our internal and external growth.

Speaker 2: And assuming that our business continues to achieve the growth goals that I have outlined, we are well positioned to have similar growth in our dividend over the next few years in order to meet our taxes.

And assuming that our business continues to achieve the growth goals that I have outlined we are well positioned to have similar growth in our dividend over the next few years in order to meet our tax requirements.

In summary, we had a strong quarter with an optimistic outlook on our 2022 earnings with increased optimism on our expectation of multiyear internal and external growth.

Speaker 2: In summary, we had a strong quarter with an optimistic outlook on our 2022 earnings. With increased optimism on our expectation of multi-year internal and external...

Speaker 2: I will now turn the call over to Amy to discuss our fund business. Thanks, John . Today I'd like to provide a brief update on our fund platform beginning with Fund 5.

I will now turn the call over to Amy to discuss are funded.

Thanks, John today, I would like to provide a brief update on our fund platform beginning with fungicides.

Speaker 4: First, Dealplo remains strong. During the fourth quarter, and as detailed in our press release,

First deal flow remains strong during the fourth quarter and as detailed in our press release.

Speaker 4: We completed a $70 million acquisition located in a suburb of New York City.

Completed a $70 million acquisition located in a suburb of New York City.

Speaker 4: We acquired the property at a cost of approximately $180 per square foot, which represents a substantial discount to replace the property.

We acquired the property at a cost of approximately $180 per square foot, which represents a substantial discount to replacement cost.

The 385000 square foot open Air shopping center is anchored by a high performing shop right supermarket. In addition to petsmart and bestbuy.

Speaker 4: The 385,000 square foot open air shopping center is anchored by a high performing shop right supermarket. In addition to PetSmart and Best.

Speaker 4: Not only was the property acquired at an attractive going in yield, but also we have an opportunity to add value through the retenting of two junior anchors totaling 60,000 square feet.

Not only was the property acquired at an attractive going in yield, but also we have an opportunity to add value to the re tenant ing of two junior anchors totaling 60000 square feet.

Looking ahead, we have $120 million of fund acquisitions, and our near term pipeline.

Speaker 4: Looking ahead, we have $120 million of fund acquisitions in our near-term pipeline.

Speaker 4: The thesis here is consistent with the properties in our existing high yield portfolio.

The thesis here is consistent with the properties in our existing high yield portfolio.

Speaker 4: Overall in Fund 5, we've been acquiring properties in the 7s and 8s on an unlevered basis and have been able to generate a mid-teens current return on our invested equity using two-thirds leopard.

Overall in fund five we've been acquiring properties in the Sevens and eights on an unlevered basis and have been able to generate a mid teens current return on our invested equity using two thirds leverage.

Speaker 4: As a result, over our typical five-year hold, we can generate most of our total return from operating cash flow.

As a result of our typical five year hold we can generate most of our total return from operating cash flow.

Speaker 4: Since 2016, we have been assembling a $1 billion portfolio of hand-picked, high-yielding suburban shopping centers in Fund 5.

Since 2016, we have been assembling a $1 billion portfolio of handpicked high yielding suburban shopping centers and some size.

Speaker 4: As previously discussed, we see a tangible opportunity for outsized performance in this fund due to cap rate compression.

As previously discussed we see a tangible opportunity for outsized performance in this fund due to cap rate compression.

Speaker 4: In fact, based on our current projections, an eventual sale of the Fund 5 portfolio at a blended 7% cap rate would bring our projected IRR into the low 20s and our projected multiple to a 2x on equity.

In fact based on our current projections and eventual sale of the <unk> portfolio at a blended 7% cap rate would bring our projected IRR into the low twenty's and our projected multiple to a two X on equity.

Speaker 4: While it's still too early to declare victory, our cost basis in these assets is attractive, and we are well positioned to execute on a variety of opportunistic transactions at the right time.

While it's still too early to declare victory our cost basis. In these assets is attractive and we are well positioned to execute on a variety of opportunistic transactions at the right time.

Speaker 4: Including this pipeline, we have now allocated approximately 85% of our $520 million of Fund 5 capital commitment.

Including this pipeline, we have now allocated approximately 85% of our $520 million.

<unk> capital commitments.

Speaker 4: This is now the appropriate time for us to be engaging with our existing investors on Fund 6, and it comes at a good time given the strong recovery and operating fundamentals for retail real estate and the strengthening appetite for this product type in the capital market.

This is now the appropriate time for us to be engaging with our existing investors on fund six and it comes at a good time, given the strong recovery in operating fundamentals for retail real estate and the strengthening appetite for this product type in the capital markets.

Speaker 4: In the meantime, we still have approximately $200 million of gross buying power in Fund 5, which we expect to deploy before the end of the fund's investment period in August of this year. On the disposition front –

In the meantime, we still have approximately $200 million of gross time power in fund size.

Which we expect to deploy before the end of the funds investment period in August of this year.

On the disposition front, we have also been quite active before.

Speaker 4: For example, in February , we completed the $66 million sale of Fund 3's Cortland Crossing, a 130,000 square foot ShopRite Supermarket Anchored Property in Westchester County, New York. And there are still embedded profits and a couple of remaining investments in this fund.

For example in February we completed the $66 million sale of fund III Cortland crossing a 130000 square foot shop, right supermarket anchored property in Westchester County, New York.

And there are still embedded profits and a couple of remaining investments in this fund.

Speaker 4: Additionally, in January we completed the $24 million sale of Fund 4's Mayfair Shopping Center, a 115,000 square foot supermarket anchored property in Philadelphia.

Additionally in January we completed the $24 million sale of Suncor has made their shopping center, a 115000 square foot supermarket anchored property in Philadelphia.

Speaker 4: This was one of two remaining shopping centers in our original eight property Northeast grocery portfolio and the last center is also under contract for $22 million.

This was one of two remaining shopping centers in our original eight property northeast grocery portfolio and the last center is also under contract for $22 million.

Speaker 4: Turning to the balance sheet, as of year end 2021, the fund platform had $860 million of debt maturing in 2022, of which $590 million has no extension option.

Turning to the balance sheet as of year end 2021.

<unk> platform had $860 million of debt maturing in 2022 of which $590 million has no extension options.

Speaker 4: excluding mortgages on properties sold in 2022 or currently under contract, as well as the outstanding balances on two subscription facilities which are used as short-term bridges for debt and equity. We have $420 million of expiring debt to address this year.

Excluding mortgages on properties sold in 2022 or currently under contract as well as the outstanding balances on to subscription facilities, which are used as short term bridges for debt and equity we have $420 million of expiring debt to address this year.

Speaker 4: of this amount, approximately 40% or $160 million, is spread over six months and is expected to be refinanced or extended in the normal course of business.

Of this amount approximately 40% or $160 million is spread over six months and is expected to be refinanced or extended in the normal course of business.

Speaker 4: The balance, or $260 million, pertains to City Point, our mixed-use property in downtown Brooklyn. The City Point debt mature...

The balance or 260 million pertains to city point, our mixed use property downtown Brooklyn.

The city point that matures during the third quarter.

Speaker 4: Although we are still several months away from the maturity, we are currently in the market to refinance the property and are pleased with our progress so far.

Although we are still several months away from the maturity. We are currently in the market to refinance the property and are pleased with our progress so far.

Speaker 4: At the property level, we continue to see strong momentum. On the sales front, those tenants who report sales had a very strong December . For example, Han Dynasty, Lululemon, and McNally Jackson all registered all-time sales highs.

At the property level, we continue to see strong momentum on the sales front those tenants who report sales had a very strong December for example, Han dynasty, Lulu Lemon and Mcnally Jackson all registered all time sales highs.

Speaker 4: And as it relates to new leasing, construction is well underway on our new Primark, so it's expected to open in the second half of this year replacing Century 21.

And as it relates to new leasing construction is well underway on our new Prime Mark who is expected to open in the second half of this year, replacing century 21.

Speaker 4: Additionally, in February , we executed a 4,000 square foot lease with six point brewery adjacent to DeKalb Market Hall on the concourse level.

Additionally in February we executed a 4000 square foot lease with six brewery adjacent to Dekalb market Hall on the concourse level.

Speaker 4: In addition to new tenants, downtown Brooklyn is welcoming new residents with 22,000 new residential units completed or actively under construction.

In addition to new tenants downtown Brooklyn is welcoming new residents with 22000, new residential units completed or actively under construction.

Speaker 4: A new skyline with the tallest tower in Brooklyn topped off as of last fall and located adjacent to our Fulton Street entrance.

Our new skyline with the tallest tower in Brooklyn topped off as of last fall and located adjacent to our Fulton Street entrance.

Speaker 4: A new green space with a one-acre park currently under construction adjacent to our Gold Street entrance. And even New York Fashion Week with City Point hosting its first runway show last weekend. If you haven't been to downtown Brooklyn in a while, you may have seen the

Our new Green space with a one acre park currently under construction adjacent to our gold Street entrance and even New York fashion week with city hosting its first runway show last weekend.

If you haven't been to downtown Brooklyn, NOI I'll come visit us.

Speaker 4: So in conclusion, heading into 2022, our fund platform remains well positioned with a successful capital allocation strategy and a portfolio of existing investments that continue to march towards stabilization. Now we will open the call to your...

So in conclusion heading into 2020 to our fund platform remains well positioned with a successful capital allocation strategy and our portfolio of existing investments that continue to March towards stabilization now we will open the call to your questions.

Speaker 1: Thank you and as a reminder to ask a question simply press star 1 on your telephone. To withdraw the question press the pound or hash key. Please stand by while we...

Thank you and as a reminder to ask a question simply press star one on your telephone to withdraw your question press the pound or hash key.

Please standby, while we compile the Q&A in order.

Speaker 1: first question comes from Flores Van Didkom with Compass Point. Your question, please.

First chunk comes from Floris Van did come with Compass point your question. Please.

Speaker 3: Great. Hey, guys, thanks for taking my question.

Great.

Guys. Thanks for taking my question.

Speaker 3: You know, Ken, maybe if you could touch on, you know, a lot of your competitors have been talking about the compression of cap rates.

Okay.

Ken maybe if you could touch on.

A lot of your competitors have been talking about.

The compression of cap rates as.

Speaker 3: as growth expectations are rising. How does that relate to the streets and urban portfolio? And are you seeing signs of that? And how will you plan to operate or how does your investment philosophy change as a result of maybe higher growth or lower cap rates?

As growth expectations are rising.

How does that relate to the street and urban portfolio are we see are you seeing signs of that.

And how will you plan to.

To operate or how does your investment philosophy.

Change is a result of.

Maybe higher growth or lower cap rates.

Sure.

Speaker 5: Sure, and obviously they're correlative, meaning if you have better visibility as to growth, your going in yield arguably could be less and still achieve your returns. With that said, please click the link below for a variety of videos like these to find

And obviously, they're correlative, meaning if.

If you have better visibility as to <unk>.

Rose.

Youre going in yield arguably could be less and still achieve your returns what I would tell you is.

Speaker 5: we tend to do better when you have a more liquid market. In 2020, things were frozen. What we're seeing now is better visibility in terms of street and urban growth rates, but folks are still fairly cautious or scared in terms of competition.

We tend to do better.

You have a more liquid market in 2020.

Things were frozen what we're seeing now.

Is better visibility in terms of street and urban growth rates, but folks are still fairly cautious are scared in terms of competition. So we actually think this is a unique window right now.

Speaker 5: So we actually think this is a unique window right now.

Speaker 5: where if we can buy assets in some of the key streets, we mentioned we acquired a building in the corner of Soho, so to pick Soho for instance, but were you guys thinking about it soon because we know that. Will they marry or need to track this product? From now us, Soho will give us the idea to see what actions we can produce in the next several mil Let's start

Where if we can buy assets.

In some of the key streets, we mentioned we acquired.

Building in the corner of so so.

To pick Soho for instance, but it's true for many markets.

Speaker 5: if you can buy an asset at today's market rent.

If you can buy an asset at today's market rents.

We believe that youre going to see substantially higher growth, both contractual because street rents have higher growth.

Speaker 5: that you're gonna see substantially higher growth, both contractual, because street rents have higher growth, and then mark-to-markets, which happen sooner, just because of the bounce back. And as I mentioned, that bounce back, rents could increase 50%, and you're still not at the prior peak.

And then mark to market, which happened sooner just because of the bounce back and as I mentioned that bounce back rents could increased 50% and you're still not at the prior peaks.

Speaker 5: So we have that conviction. There's some other folks out there, so it's not as if there's no competition, but there's far less than for some of the other areas that institutions are starting to pile into.

We have that conviction there is some other folks out there. So it's not as if there's no competition, but there is far less than for some of the other areas.

That institutions are starting to pile into.

Speaker 5: We welcome the capital markets recovering the way they are, but we do think we will see, with increased conviction, good buying opportunities.

We welcome the capital markets recovering their way they are but we do think we will see.

With increased conviction good buying opportunities.

Speaker 3: Great. And maybe if you could touch on the billion of basically higher yielding suburban assets in your Fund 5. And as you think about monetizing that, and I know Amy talked about a cap rate at 7% would basically double your equity already, or roughly.

Great and maybe if you could touch on the dib.

The $1 billion of.

Basically higher yielding suburban.

Assets in your fund five and as you think about.

Monetizing that in.

I know Amy talked about the cap rate at 7% wood.

Basically double your equity already.

Roughly.

But I mean, we're hearing in the markets and what we're seeing in terms of other cap rate evidence.

7% yields appears to be fairly conservative how do you.

Are there any near term things that might once you caused you to pursue a portfolio trade or is this more likely to be split off.

In parcels overtime.

So I'm not going to predict.

Speaker 5: what avenue we choose over the next year or two, but your numbers are correct, and I agree with Amy's analysis as well. Let's start with, what was our thesis around this? And keep in mind, it's somewhat of a barbell approach. On one hand, we like, very much so, the growth potential that we see in the street and urban market.

What Avenue, we choose over the next year or two.

But your numbers are correct and I agree with Amy's analysis as well, let's start with what was our thesis around that.

And keep in mind.

Somewhat of a barbell approach on one hand, we we like very much so the growth potential that we see in the street and urban markets.

Speaker 5: We prefer not to have gone through a global pandemic, but we already are seeing rents that are pre-pandemic levels, and we see strong, strong growth rates.

We prefer not to have gone through a global pandemic, but we already are seeing rents that are pre pandemic levels and we see strong strong growth rates. There. The other end of the spectrum is what we have been doing in fund five over the last several years.

Speaker 5: The other end of the spectrum is what we have been doing in Fund 5 over the last several years.

Speaker 5: where we were able to buy out of favor retail.

Where we were able to buy out of favor retail.

Speaker 5: not counting on much, if any, NOI growth, and it has lived up to our expectations. And by that I mean, not a lot of growth, but that's just fine when you're buying in the 7s and 8s, when you're levering 2 to 1, you're clipping mid-teens return.

Not counting on much if any NOI growth and it has lived up to our expectations and by that I mean, not a lot of growth, but thats just fine when you are buying in the sevens and eights when you're levering two to one youre clipping mid teens returns.

Speaker 5: What do we do with that portfolio as there is recognized cap rate compression? Does it get recapitized? Does it get sold one off? Well, as Amy pointed out, we still have a couple hundred million dollars, a few hundred million more of acquisitions that we've got to get done before we really have that fund fully invested. But I do feel like that thesis has been well validated.

What do we do with that portfolio as there is recognized cap rate compression does it get recapitalized as it gets sold one off well as Amy pointed out.

We still have.

Couple of hundred million dollars of few hundred million more of acquisitions that we've got to get done before we really have that fund fully invested but I do feel like that thesis has been well validated.

Speaker 5: The team has done a great job executing it, and we'll have a lot of different choices to ponder as to the best way to maximize the value for all of our stakeholders.

The team has done a great job of executing it and we will have a lot of different choices to ponder as to the best way to maximize the value for all of our stakeholders there.

And does that lead you to raise more money fund six is that is that the thought process.

Speaker 3: And does that lead you to raise more money in Fund 6? Is that the thought process?

Speaker 5: Well, we'll see. So if you dial back six to twelve months ago, not only was the $72 million acquisition not done, but the next $120 million, and we still have another $200 above that, and our investors at that point would say, well, what is the recovery look like? Now that volume is renormous,

Well, we'll see.

If you dial back six months to 12 months ago, not only was the $72 million acquisition not done, but the next $120 million and we still have another 200 above that and our investors at that point, let's say well what does the recovery look like now that volume is re normalizing.

Speaker 5: I feel as though we have a very good thesis to continue the execution for Fund 6 of what we're doing on Fund 5 and I'll leave it at that for now.

I feel as though we.

Have a very good.

Thesis to continue the execution on for fund six of what we're doing upfront and I'll leave it at that for now.

Thanks, Kevin that's it for me sure.

Speaker 1: Thank you. Our next question comes from Todd Thomas with Keyban Capital. Your question, please.

Thank you. Our next question comes from Todd Thomas with Keybanc Capital. Your question. Please.

Speaker 6: Hi, thanks. Good afternoon. First question. So, you know, look, it sounds like there is, you know, a lot more activity in the core and in the funds and then you've seen in some time. And so I just wanted to circle back to. Um, cap rates a bit. Can you share the going in cap rates on investments? Uh, completed in both the core and in the funds since the start of the fourth quarter, I guess, and what you expect maybe to achieve during the year. Um, if there's sort of a way to bracket, um, you know, pricing or provide a sense of pricing, that would be helpful. And then what does the three to 500 million dollar investment assumption.

Hi, Thanks, good afternoon.

First question. So look it sounds like there is a lot more activity in the core and in the funds and then <unk> seen in some time and so I just wanted to circle back to.

Cap rates a bit can you share the going in cap rates on investments.

Completed in both the core and the funds since the start of the fourth quarter, I guess and what you expect maybe to achieve during the year.

If there is sort of a way to bracket.

Pricing or provide a sense of pricing that would be helpful. And then what does the $3 million to $500 million investment assumption.

Speaker 6: that's in the guidance look like for the year between the two segments of the portfolio.

And the guidance look like for the year between the two segments of the portfolio.

Speaker 5: So let me touch on the last question first so that I don't forget it. And the answer is I don't know Todd the nice thing about the dual platform.

So let me touch on the last question first so that I don't forget it and the answer is I don't know Todd the nice thing about the dual platforms.

Speaker 5: is we can respond to opportunities as we see them, but not feel overly obligated to do something we don't want to do for instance.

Is we can respond to opportunities as we see them, but not feel overly obligated to do something we don't want to do for instance, if the public markets are not open for us to acquire assets accretive to NAV accretive to <unk>.

Speaker 5: If the public markets are not open for us to acquire assets accretive to NAV, accretive to SFL, we're not going to push that and then you probably see us be more active on the fund side. But in general, over any extended period of time, it is generally a nice split of about 50-50, but in any given year it's never 50-50.

We're not going to push that and then you probably see us be more active on the fund side.

But in general over any extended period of time is generally a nice split.

About 50 50, but in any given year it never $50 50, so that's that piece of it.

Speaker 5: In terms of cap rates, and you touched on this and I'll try to answer it, but it's a moving target. To state the obvious, a lot of cap rates...

<unk> of cap rates and you've touched on this and I'll try to answer it but it's a moving target to state the obvious a lot of cap rate.

Speaker 5: Pricing is dependent on what's the growth rate look like what's your levered returns look like and all of the moving pieces? Around that as well as then what is the competitive bid we tend not to be particularly? Impacted by what the competition is doing as much as does the pricing work? in terms of

Pricing is dependent on what's the growth rate look like whats your Levered returns look like in all of the moving pieces around that as well as then what is the competitive bid we tend not to be particularly impacted by what the competition is doing as much as does the pricing work.

In terms of fund yields.

Speaker 5: for the assets we have been successfully acquiring. And there's an increased percentage of off market and private sellers as opposed to during the.

For the assets, we have been successfully acquiring and there is an increased percentage of off market and private sellers as opposed to during the.

Speaker 5: earlier days of the retail Armageddon where we're mainly buying from public REITs. That marketplace we've been able to hold onto are going in cap rates in the sevens, perhaps eights. But the difference is those cap rates may be down a bit where we see more lease up, more value add, more growth.

Earlier days of the retail Armageddon were mainly buying from public Reits.

That marketplace, we've been able to hold onto our going in cap rates in the sevens, perhaps a.

But the differences those cap rates may be down a bit where we see more lease up more value at more growth.

Speaker 5: But I don't really care for that thesis, whether you buy at eight with no growth or perhaps even a little negative growth, or you buy in the sixes and sevens with growth, as long as we can get a decent chunk of our return out of levered cash flow with potential upside, and in the case of Fund Five, it looks to be somewhat asymmetrical upside, great. And-

But I don't really care for that thesis, whether you buy at eight with no growth or perhaps even a little negative growth or you buy in the sixes and sevens with growth as long as we can get.

A decent chunk of our return out of Levered cash flow with potential upside and in the case of fund five it looks to be somewhat asymmetrical upside great.

And.

Speaker 5: There are going to be well-marketed trades that get a lot of bidders that you'll point out that cap rates are substantially lower. Well, fine.

There are going to be well marketed trades that get a lot of bidders that youll point out that cap rates are substantially lower fine.

Speaker 5: you won't see us be the winning bidder on that stuff. So that's the fun side of the business.

You won't see us be the winning bidder on that stuff. So that's the fun side of the business.

Same similar math, when we think about our core but much higher growth rate.

Speaker 5: Same similar math when we think about our core, but much higher growth.

Speaker 5: as we've outlined our internal growth at least for the next few years is looking 5% plus. So that's a pretty high hurdle. What we're shooting for on acquisitions is probably about a 4% growth rate.

As we've outlined our internal growth at least for the next few years is looking 5% plus so that's a pretty high hurdle.

What we're shooting for on acquisitions is probably about a 4% growth rate.

For the foreseeable future through a combination of contractual growth.

Speaker 5: for the foreseeable future through a combination of contractual growth. Think of contractual growth as somewhere between 2 and 3%.

Of contractual growth is somewhere between two and 3%.

Speaker 5: and then mark to markets depending on the assets, the leases, the timing, etc. And so far in the pool of assets that we have either acquired or are in our pipeline, that looks readily attr-

And then mark to markets, depending on the assets the leases the timing et cetera.

And so far in the pool of assets.

That we have either acquired.

Or are in our pipeline that looks readily achievable not every single asset not every single day, but overall blending to a 4% growth rate feels pretty good and exciting to us.

Speaker 5: Not every single asset, not every single day, but overall blending to a 4% growth rate feels pretty good and exciting to us.

Going in yields therefore.

Speaker 5: range in the fours and fives. The pool of assets that we have either acquired or are looking to acquire probably going to blend to a going in five.

Range in the fours and fives.

Pool of assets that we have either acquired or looking to acquire its probably going to blend to a going in five.

But this again, we are using our network of <unk>.

Speaker 5: This again, we are using our network of sellers. These are significantly off market deals.

Sellers these are.

Significantly off market deals.

Where you are now seeing a.

Speaker 5: where you're now seeing a fair amount of activity around lenders forcing transactions, whether through foreclosure or otherwise, partners forcing transactions, and I give our team credit that we are one of the first calls for those kind of assets especially.

Fair amount of activity around lenders, forcing transactions, whether through foreclosure or otherwise partners, forcing transactions and I give our team credit that we are one of the first call for those kind of assets, especially.

Speaker 5: We are one of the first calls and thus there is enough price discovery for us that we can get in at a fair price.

We are one of the first call and thus there is enough price discovery for us that we can get in at a fair price.

Speaker 6: Okay, that's real helpful.

Okay.

That's real helpful.

And John .

Speaker 6: John , the question for you on the guidance, last quarter you commented that you thought 25 to 27 cents was...

Question for you on the guidance.

Last quarter, you commented that.

You saw 25% to 2007 was.

Speaker 6: the right range to think about from an FFO standpoint, excluding the promote income and ACI stock sale gains. You did a little better than that this quarter. Does that imply that the run rate heading into 2022 is a little higher or should we still be thinking about that 25 to 27 cent range to start the year, just given some of the move outs that you previously discussed in Soho, San Francisco? Will we see that sort of step back a bit or has the range potentially changed?

On the right range to think about from an <unk> standpoint, excluding the promote income in ACI stock sale gains you did a little better than that this quarter does that imply that the run rate heading into 'twenty. Two is a little higher or should we still be thinking about that 25% to 27% range to start the year just given some of the.

Maybe some of the move outs that you previously discussed in Soho San Francisco.

We see that sort of step back a bit or has.

The range potentially changed.

Speaker 2: Yeah, Todd, thanks. So yeah, I think the range has changed, I think for the reasons outlined in the script. So I think the short answer is yes. So between we're in an improved credit environment, the investments that we put to work and the leasing that we've done, I think that that range certainly has improved since the 25 to 27 cents that I said for the first half of next year. I think this feels like the new normal.

Yes, Todd to AG. So, yes, I think the range has changed I think for the reasons outlined in the script. So I think.

So the short answer is yes, so between where an improved credit environment. The investments that we put to work in the leasing that we've done.

That range certainly has has improved since the 25 to 27 and I said for the first half of next year I think this feels like the new normal.

Okay, great. Thank you.

Speaker 1: Our next question comes from Linda Tsai with Jefferies. Your question, please. Yes. Hi. Ken, back to your comments on rents being able to grow another 50% and not being at prior peak, but sales being well on its way to prior peak, what does this translate to in terms of a current occupancy ratio, and what do you think the market is willing to bear in terms of a steady state occupancy cost ratio?

Our next question comes from lean that tie with Jefferies. Your question. Please.

Yes, hi.

And back to your comments on rents being able to grow another 50% and not being at prior peak.

Sales being well on its way to prior peak what does this translate in terms of what the.

Does this translate to in terms of current occupancy ratio and what do you think the market is willing to bear in terms of a steady state occupancy cost ratio.

Speaker 5: And so let me point out a few things. My 50% comment is factual, it's just math. Meaning, RANS peaked in 2017, they dropped in it very building by building and deal by deal, but they dropped significantly. We've been talking about that for five years now. And so the rebound of 50% is just pure math and that doesn't get you to the prior peaks. But sales.

Okay.

So let me point out a few things Mike 50% comment is factual. It's just math, meaning rents peaked in 2017 day drop then it Barry building by building and deal by deal, but they dropped significantly we've been talking about that for five years now.

And so the rebound of 50% is just pure math and that doesn't get you to the prior peaks.

But sale.

Speaker 5: for those retailers that have figured out how to use these streets. And Linda, you can remember a few years ago, even pre-COVID, the jury was out as to whether luxury retailers were going to continue to dominate these streets. And the answer is yes, they will. The jury was still out as to whether the Warby Parker and Allbirds of the world and the other digitally native were ever going to need stores. And yes, they will. So let me explain now occupancy costs.

For those retailers that have figured out how to use these streets and Linda you can remember a few years ago, even pre COVID-19 . The jury was out as to whether luxury retailers were going to continue to dominate the street and the answer is yes. They will the jury is still out as to whether the warranty Parker and <unk>.

All birds of the world and the other digitally native we're ever going to need stores and yet they will so let me explain now occupancy cost.

Speaker 5: When you're talking about occupancy cost for luxury, it's very different than when you're talking about occupancy cost for digitally natives or advanced contemporaries. I don't want to give a one percentage, one size fits all.

When you are talking about occupancy cost for luxury is very different than when you were talking about occupancy cost for digitally natives or advanced contemporary so I don't want to give a one percentage one size fits all.

Correct.

Speaker 5: If you just intuitively do the math, occupancy cost as a percentage tend to now be 20, 30, 40, 50 percent less.

If you just intuitively do the math.

Occupancy cost as a percentage tend to now be 2030, 40, 50% less than what retailers were bearing during the prior peak different world different choices.

Speaker 5: than what retailers were bearing during the prior peak. Different world, different choices.

Speaker 5: But what we are sensing from retailers is they've got a lot of glide path if their top line and bottom line continues to grow. And this is before we even think about things like inflation.

But what we are sensing from retailers.

Is they've got a lot of glidepath their topline and Bottomline continues to grow and this is before we even think about things like inflation. So what does this mean for rates. While there are two things that drive our leasing teams ability to rent space.

Speaker 5: So, what does this mean for rent? Well, there's two things that drive our leasing team's ability to rent space.

Speaker 5: One is rent to sales, and it's an important one to watch because just because a retailer wants the space if they can't do the business, sooner or later that comes back to haunt.

One is rent to sales and it's an important one to watch because just because the retailer wants the space that they can't do the business sooner or later that comes back to haunt us.

Speaker 5: But the other then is supply and demand. And that is a key driver and so when you have 10, 20, 30% vacancy on a given street, doesn't really matter how strong the retailer's sales are. And in some instances we saw that. They're gonna negotiate for low rent.

But the other than is supply and demand and that is a key driver and so when you have 10 20, 30% vacancy on a given street doesn't really matter how strong the retailer sales are and in some instances we saw that.

They're gonna negotiate below rents.

Thankfully.

Speaker 5: You didn't see a lot of long-term leases getting done during the COVID crisis and otherwise. Thankfully.

You didn't see a lot of long term leases getting done during the COVID-19 crisis and otherwise.

Thankfully retailers.

Speaker 5: held onto the 3% contractual growth more often than not, and have allowed fair market value resets. So assuming we see increased demand, which we are seeing many of our streets.

Held onto the 3% contractual growth more often than not and have allowed fair market value resets.

Assuming we see increased demand, which we are seeing many of our streets.

Speaker 5: The spaces are spoken for. If you want to come to Rush Walton corridor you kind of have to call us. If you want to be on Green Street, you kind of have to call us. Armitage Ave the same so.

The spaces are spoken for if you want to come to Rush Walton card are you kind of have to call us. If you want to be on Greene Street, you kind of have to call Us Armitage Avenue the same.

So.

Speaker 5: We're past the rent to sales conundrum. The rent to sales ratios, the tenant health ratios are much stronger than they used to be. We're back to a good supply demand dynamic and the right retailers are showing up and that's why.

We're past the rent to sales conundrum, the rent to sales ratios. The tenant health ratios are much stronger than they used to be we're back to a good supply demand dynamic and the right retailers are showing up and Thats why.

Again.

Speaker 5: We don't have to get to Prior Peeps tomorrow. I don't even wish that. What I wish is over the next five years.

We don't have to get to prior peaks tomorrow, I don't even wished that what I wishes over the next five years you.

Speaker 5: you get a rational layer of growth, which will be higher in our street portfolio than in the other components and that expect.

You get a rational layer of growth, which will be higher than our street portfolio than in the other components and that excites us.

Speaker 7: Thanks for that color and then just 1 more follow up in terms of the. Century 21 at city point that's 70% back filled by Primark. Any updates on the 30% of the space remaining.

Thanks for that color and then just one more follow up in terms of the.

Century, 21 at city point that 70% backfill by Hi, Mark.

Any updates on the 30% of the space remaining.

Speaker 4: You know, the good news is we're seeing solid momentum at the asset, like I mentioned, with six-point coming as well as other tenants in our pipeline. So we look forward to continuing to share updates there. Great. Thanks.

The good.

Solid momentum at the asset like I mentioned with six point coming as well as other tenants in our pipeline. So we look forward to continuing to share updates there.

Great. Thanks, Amy.

Jamie doesn't want to tell you whats in our pipeline.

Yes.

Thank you. Our next question comes from keeping Kim with twist. Your question. Please.

Speaker 1: Thank you. Our next question comes from Kibin Kim with Truist. Your question, please.

Speaker 8: Thanks, to actually kind of follow up on that last question, do you provide some more details or color in terms of what you're seeing in your forward leasing pipeline? Not necessarily for CityPoint, but I'm asking more about the screen and urban segment of your portfolio. Sure. And Amy, now you're off the hook.

Thanks, Tom that you kind of follow up on that last question can you just provide some more details or color in terms of what youre seeing.

In your forward leasing pipeline.

Ali if I see your point, but.

I'm asking more about the screen in urban setting.

Segment of your portfolio.

Sure.

And Amy now you're off the hook.

So.

What has been a pleasant surprise.

Speaker 5: If you dial back to pre-COVID, there was a lot of concern, we felt like, you know what, after...

If you dial back to pre Covid, there was a lot of concern and we felt like what after.

Speaker 5: three or four years of rental declines that retailers were ready to step up. But then COVID happened.

Three or four years of rental declines that retailers were ready to step up.

But then COVID-19 happened.

And now, let's see where we are.

Speaker 5: as a result of a combination of the cleansing process that had occurred during the retail Armageddon, the confirmation process that had occurred as a result of omni-channel actually working.

As a result of a combination of the cleansing process that had occurred during the retail Armageddon. The confirmation process that had occurred as a result of omnichannel actually working.

We are now in a position where.

Speaker 5: Luxury retailers are stepping up and meaningfully so. And they're stepping up in ways that are different than you saw five, 10 years.

Luxury retailers are stepping up and meaningfully so and they are stepping up in ways that are different than you saw 510 years ago.

Speaker 5: The luxury retailers are not simply counting on their mall based tendency. They're not simply counting on their department store sales. They're recognizing they need to get in front of their important customers in these key areas. And the sales are supporting this. These are not just showrooms.

The luxury retailers are not simply counting on their mall based tenancy theyre not simply counting on their department store sales. They are recognizing they need to get in front of their important customers.

In these key areas and the sales are supporting this these are not just showrooms. So expect to see in many of the Carter's we're active in and other quarters that we are not yet active in luxury continuing to show up Thats trend number one and our leasing team is excited by that.

Speaker 6: So expect to see in many of the corridors we're active in and other corridors that we're not yet active in, luxury continuing to show up. That's trend number one, and our leasing team's excited by that.

Speaker 6: Trend number two is that because omni-channel has worked for so many of the digitally native

Trend number two.

Is that because.

The channel has worked for so many of the digitally native what you are seeing today compared to two three years ago, where some of those online retailers said, we never need to open stores as they've been going public as they have been growing because they're all acknowledging that the store is the most.

Speaker 5: What you are seeing today compared to two, three years ago, where some of those online retailers said, we never need to open stores, as they've been going public, as they've been growing, they're all acknowledging that the store is the most profitable channel for them. And so expect to see the Warby Parker in all parts of the world.

Profitable channel for them and so expect to see the war be Parker in all parts of the world.

Speaker 6: open up stores in these corridors and that combination plus everything in between.

Open up stores in these corridors and that combination plus everything in between.

Is leading to a much stronger leasing environment.

Speaker 5: is leading to a much stronger leasing environment than we certainly expected a few years ago or feared during COVID. And we're in a position because we have enough vacancy to lease up, we have enough of the right spaces, we're in a position to cap.

Then we certainly expected a few years ago or fear during COVID-19 and we're in a position because we have enough vacancy to lease up we have enough of the right spaces, we're in a position to capture that.

Speaker 2: So how does that all translate into dollars and cents? Meaning your street and urban retail portfolios at 90% leave today as a 4Q. I'm not trying to get as specific as exactly what's embedded in your guidance for 2022, but I'm just trying to figure out when does that get back to 94%, 95%?

Alright.

So how does that all translate into dollars and cents meeting your street and urban retail portfolio is at 90% lease today at <unk>.

I'm not trying to add specific.

Exactly embedded in your guidance for 2022, but I'm just kind of.

Figure out like when does that get back to 94% 95%.

Speaker 2: John ? Yeah, keeping the way I would think about it is, you know, we put out multi-year, multi-year guidance that, you know, we think we grow to 5 to 10%. So rather than expecting when do we RCD and what period.

John Yes, keeping the way I would think about it is we put out multiyear multiyear guidance that we think we grow to 5% to 10% so rather than expecting when we RCD what period.

Speaker 2: I would say the late 23-24 timeframe is where I would model that we should be at that level that we view the full occupancy, the 94-

I would say.

Late 'twenty three 'twenty four time frame is where I would model that we should be at that level that we'd be at full occupancy to 90, 495%.

Speaker 8: Okay, and just last question for me. In your past 2021 lease rolls, you know, how much of high price?

Okay and just last question for me.

In your past.

'twenty one lease rolls.

How much of high priced.

Speaker 8: street retail has rolled and what does that mark to market look like for those group of assets and I realize you're not rolling a ton of leases every year. So I'm asking more specifically about like if you know more about mark to market event by investing or making a timeline for growth on a Agron durum.

Street retail has ruled and what is that mark to market look like for dose group a factor then.

Any of that rolling kind of leases every every year.

So I'm asking more specifically about like.

More about mark to market on.

Speaker 8: lease role in places like Soho versus like Flatbush, right? So more Gold Coast versus some more suburban type of location. So the higher price point leases that have rolled, what has your experience been so far on mark to mark?

Lethal in places like Soho versus likes that Bush right.

More gold coast versus some more suburban type locations, where the higher price.

Price point leases that have broad what have you.

We're experiencing so far.

The market.

Speaker 6: Let me take a first stab at that, John . But so let's be clear, it really depended on vintage in and vintage out. If you were talking about a 2017 lease...

Let me take a first stab at that Sean but so.

Let's be clear it really dependent on vintage inn and vintage out if.

If you were talking about.

2017 lease vintage signed rolling out during Covid, Oh, my gosh that would have been horrific.

Speaker 5: rolling out during COVID. Oh my gosh, that would have been horrific.

Speaker 5: Thankfully we're really careful of not buying into that 2017 peak, so we avoided the peak and along the way we've had our fair share of valleys, but nothing as precipitous as that would be.

Fully we're really careful.

Not buying into that 2017 peak, so we avoided the peak.

And along the way we've had our fair share of valleys, but nothing as precipitous as that would be.

Rents dropped.

Speaker 5: buy anywhere from 20 to 50 percent in the different markets that you just touched on. Less so on Armitage Avenue, less so in Melrose Place, but somewhere in that range. And if you were capturing that peak and valley in a Soho, boy that would hurt. Thank goodness we avoided that. And so what we have said is, we've cleansed through in Soho for it.

By anywhere from 20% to 50% in the different markets that you've just touched on less so on Armitage Avenue less so in Melrose place, but somewhere in that range and if you were capturing that peak and valley.

In a Soho boy that would hurt thank goodness, we avoided that and so what we have said is we've cleansed through in Soho for instance.

Speaker 5: We cleansed through most of the above market and even at today's market rents without further appreciation.

We've cleansed through most of the above market and even at today's market rents without further appreciation.

Speaker 6: and I expect further rental growth. Even at today's, we have material upside through, the lease up of some of those spaces that we lost over the last few years as well as positive market.

And I expect further rental growth even at today's we have material upside through the lease up of some of those spaces that we lost over the last few years as well as positive mark to markets.

Speaker 2: So John , what might you want to say? Yeah, I think that explains it. Maybe give a couple of examples to think about and keep in. So if we look at the Gold Coast in Chicago, where we did have high lease rollovers. So we lost Marc Jacobs on the corner of Rush and Walton. And we back filled that profitably with our existing tenant expanding in that space, as well as adding Veronica Beard there at a positive spread. So I think that's one example where we've been able to see what's going on in the area.

So John what might you want.

That explains it maybe give a couple of couple of examples to think about it came in so if we look at the gold coast in Chicago, where we did have high lease rollover. So we lost Marc Jacobs on the corner of Rush and Walton.

And we backfill that profitably with our existing tenants expanding.

Expanding in that space as well as adding Veronica beard, there at a positive spread so I think thats.

One example, where we've been able to see SEC rules.

Speaker 2: Again, we look at Melrose, similar, and we talked about the spread that we saw at Melrose, but also a hyper labs.

Again, we look at Melrose similar and we've talked about the spread that we saw Melrose also a hybrid.

Speaker 2: a higher dollar lease. And then I think the last thing I'd point out to SOHO in general is that we put out, and I'm losing track of years when we put this out, but it's still a relevant data point, is that we showed that our NOI from our SOHO assets.

A higher dollar lease and then I think the last thing I'd point out just Soho in general is that we put out and I'm, losing track of years. When we put this put this out but it's still a relevant data point is that we showed that our NOI from our sort of our.

Core from our Soho assets.

Speaker 2: doubles over between, I have to remember the exact time period, but during this period of the 23-24 that I mentioned.

Doubles over between I'm going to have to remember the exact time frame, but during this period of the 'twenty three 'twenty four that I mentioned to you and we're on pace to do that so I think again theres. Some theres some occupancy fill up in there, but that's also driven by rental rates as we're replacing.

Speaker 2: And we're on pace to do that. So I think, again, there's some occupancy fill up in there, but that's also driven by rental rates is we're replacing tenants that were at a basis that we are now exceeding that basis of rents that they were.

Tenants that were at a basis that we are now exceeding that basis and rents that they were paying at that period of time. So we are seeing positive.

Speaker 2: So we are seeing positive spreads and roll as we roll in our experiences.

Positive spreads enroll as we will in our experiences is supporting that final point on this.

Speaker 6: Final point on this, not every single store will be positive spread. In our numbers basically EVERY Admiralty will be positive spread.

Not every single store will be positive spread in our numbers.

Speaker 5: taking into account the growth we see are gonna be wins and losses. It's just we're now seeing far more wins than we either thought and we're seeing fewer losses.

Taking into account the growth, we see are going to be wins and losses. It's just we're now seeing far more wins than we either thought and we're seeing fewer losses.

Okay. Thank you sure.

Speaker 1: Thank you. Our next question comes from Katie McConnell with Citi. Your line is open.

Thank you. Our next question comes from Kevin <unk>.

Katy Mcconnell with CD.

<unk> is open.

Speaker 9: Great, thank you. Just wondering if you could walk us through your additional capital-raising plans for this year to fund external growth, and what are the main drivers of the higher interest expense that you're assuming for this year?

Great. Thank you.

Wondering if you could walk us through your additional capital raising plans for this year to fund external growth and what are the main drivers of the higher interest expense that you're assuming for this year.

Speaker 2: So I think that the capital drivers, one is we've raised a decent amount of equity to fund what we think is our near-term pipeline. So with $115 million, that we're confident gets us to closing what we have expected in the near-term. And you think of the various capital sources within our portfolio.

So I think the capital drivers one is we've we've raised a decent amount of equity to fund what we think is our near term pipeline, so with $115 million.

And that where we're confident gets us too to closing what we have.

Expected in the near term Additionally, and you've taken at various capital sources within our business.

Speaker 2: We have some structured finance loans that we're continually getting proceeds from. So that's a source of capital. And also our dividend payout ratio, given where it's at, even with the 20% raise is enabling us to retain cash flow as well as, as Amy mentioned, as we monetize some of the fund investments, that is a source of capital for us. So that's just internal cash flow. And then we need a cost of capital on the equity side. We've seen, we have issued at a 2250 price.

We have some structured finance loans that that we're continually getting proceeds from so thats a source of capital and also our dividend payout ratio given where it's at even with a 20% raise is enabling us to.

To retain cash flow as well as Amy mentioned as we monetize some of the fund investments that as a source of.

Capital for it so thats just internal cash flow and then we need a cost of capital on the on the equity side, you've seen we have issued at a $22 50 price and we're able to deploy that accretively. So I think that's the other.

Speaker 2: and we're able to deploy that accretively. So I think that's the other piece of it. And our higher debt assumption factors in, again, the investments that we, I'm sorry, jumping to your second question in terms of the higher interest expense.

The other piece of it and our higher debt assumption factors in.

Again, the investments that we are jumping to your second question in terms of the higher interest expense first of all we're hedged. So if you look at our <unk>.

Speaker 2: First of all, we're hedged. So if you look at our long term debt profile, we have long dated interest rate swaps that are locking in our interest over a very extended period of time. But as we added the nearly $250 million worth of investments throughout 2021, that's the biggest driver of, on a go forward basis, we added those. Throughout the year, that's sort of the full year impact of those investments.

A long term debt profile, we have long dated interest rate swaps that are are locking in our interest our interest over a very extended period of time, but as we added nearly $250 million worth of investments throughout 2021, that's the biggest driver on a go forward basis, we added those throughout the year, that's sort of the full year <unk>.

<unk> of those investments in 2010.

Got it that's helpful and then it sounds like the overall tenant health and leasing environment continues to be really strong, but just wondering within your same store NOI guidance, what youre, assuming for new bad debt expense in 2022 and are there any specific closures or watch list tenants to be aware of so far for the first quarter.

Speaker 9: Got it. That's helpful. And then it sounds like the overall tenant health and leasing environment continues to be really strong. But just wondering within your same store and why guidance what you're assuming for new bad debt expense in 2022. And are there any specific closures or watch list tenants to be aware of so far for the first quarter?

Speaker 2: Yeah, and I think we're at a point in the cycle, Katie, where our watch list is...

Yeah, and I think we're at a point in the cycle, Katy where our watch list is.

Speaker 2: want to say virtually nonexistent, but it's virtually nonexistent. And I think the weaker retailers have moved out. And what we're seeing, and I look at them very closely, our tenant sales are strong and growing. So what I would say the way I would think about our, or the way I did think about our credit reserve is that I am assuming, in our revenue advantage, that ourfare

I want to say virtually nonexistent, but it's virtually nonexistent in I think the the.

The weaker retailers have have moved out and what we're seeing and I look at them very closely our tenant sales are strong and strong and growing so what I would say the way I would think about or what it the way I did think about our credit reserve is that.

I am assuming.

In our what I'll call, our low case that we stay at a 98% collection rate and a roughly 2%, 2% reserve and our higher case is going to go back to historic norms, where we have ranged between 50 to 125 basis points. So that's.

Speaker 2: what I'll call our low case, that we stay at a 98% collection rate and a roughly 2% reserve. And our higher case is going to go back to historic norms where we have ranged between 50 to 125 basis points. That's the way that we have modeled our 46% range as well as the NOI range.

That's the way that we have we have modeled our 46% range as well as the NOI range.

Great. Thank you.

Speaker 1: Thank you. Our next question comes from Mike Mueller with JP Morgan. Your question, please.

Thank you. Our next question comes from Mike Mueller with JP Morgan Your question. Please.

Yeah, Hi, I guess following up on keeping <unk>.

Speaker 10: Yeah, hi, I guess following up on key bins, you don't have a lot of street expirations in 22. But in 2023, it looks like about 20% or so rolls. And you give us like a rough sense of a bracket as to where you think that group would roll to.

You don't have a lot of street explorations in 'twenty, two but in 2023, it looks like about 20% or so rolls can you give us a rough sense of a bracket as to where you think that group would roll too.

Speaker 10: And does anything in particular stand out during that year?

And does anything particular stand out during that year.

Speaker 6: It really runs the gamut mic and it's a bit early. So I don't have any.

It really runs the gamut, Mike and it's a bit early.

So I don't have any.

Speaker 6: specific numbers around it. There's there's some tenants that we're going to expect.

Specific numbers around it.

There are some tenants that were going to expect.

Speaker 6: Getting the space back and retenancing and then there's others where we're in conversation right now. About extending long term. So I yeah, my guess is over the next six months we'll have much better visibility.

Getting the space back and re tenant thing and then there is others, where we're in conversation right now about extending long term site.

Guess is over the next six months, we'll have much better visibility.

Speaker 10: Got it. Okay. That was it. Thank you. Sure.

Got it okay.

That was it thank you.

Sure.

Speaker 1: Thank you. Our next question comes from Craig Smith with Bank of America. Your question...

Thank you and our next question comes from Craig Smith with Bank of America. Your question. Please.

Speaker 11: Yes, thank you. I'm just thinking about Fund 6. Will you continue with the existing investor base, or are you going to try to bring in some new names?

Yes. Thank you.

Just thinking about thanks.

Will you continue with the.

Yes.

<unk> Investor base or are you going to try to bring in some new names.

Speaker 5: What we have found historically, and it varies fun by fun, but usually there are new investors that come join in. The world evolves, the core.

What we have found historically and it varies fund by fund, but usually there are new investors that come join in the world evolves.

Core.

Speaker 6: fund investors that have been with us over the decades are the endowments and foundations, but then there's always new folks and we welcome that. So the first key was we had to find profitable investments to put the money to work because until Fund 5 was well on its way, hard to talk about 6, we're now at that point and Amy and I are looking forward to starting those conferences.

Fund investors that have been with us over the decade.

Are the endowments and foundations, but then theres always new folks and we welcome that so.

The first key was we had to find profitable investment to put the money to work because until fund five was well on its way hard to talk about six we're now at that point.

Amy and are looking forward to starting those conversations.

Speaker 11: And thinking about the more seasoned endowment investors, how do they react during the COVID crisis?

And Ed.

Thinking about the more seasoned.

Investors.

How do they reactor in the Covid.

Prices.

Speaker 5: you know it ran the gamut because to some degree there are also heavy investors in tech and did quite well there.

It ran the gamut because to some degree they are also heavy investors in tech and did quite well there.

They have been supportive of us over the decade, so they know that.

Speaker 6: supportive of us over the decade so they know that.

Speaker 6: were watching carefully, but we were trying to communicate with them as regularly as we were communicating with all of you because it was a scary time period.

We are watching carefully, but we were trying to communicate with them as regularly as we were communicating with all of you because it was a scary time period when all.

Speaker 5: when a large percentage of retailers

A large percentage of retailers stopped paying rent for a period of time, but thankfully, we're past that thankfully our collection rates are where we want them and retail pre COVID-19 . There was questions about whether retail wasn't investable asset class now as it relates to the kind of stuff we do the.

Speaker 5: stop paying rent for a period of time. But thankfully we're past that. Thankfully our collection rates are where we want them. And retail, pre-COVID, there was questions about whether retail was an investable asset class. Now as it relates to the kind of stuff we do, the...

Speaker 6: The answer is yes it is. And so the question is what's price, what returns, what does the profile look like going forward and we're looking forward to having that conversation.

The answer is yes. It is and so the question is what's price what returns what is the profile look like going forward and we're looking forward to having that conversation.

Okay. Thanks.

Sure.

Speaker 1: Thank you and I'm not showing any further questions. Thank you. Great, thank you.

Thank you and im not showing any further questions. Thank you.

Great. Thank you all for your time, we look forward to speaking with all of you again soon.

Speaker 1: And with that, we close our program today. Thank you for your participation. You may now disconnect. Have a wonderful day. ["Pomp and Circumstance"]

And with that we close our program today. Thank you for your participation you may now disconnect have a wonderful day.

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Okay.

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Yes.

Okay.

[music].

Thank you.

Yes.

Yes.

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Yes.

Yes.

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Okay.

Speaker 12: ["Pomp and Circumstance"] ["Pomp and Circumstance"]

[music].

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Speaker 1: Thank you for standing by and welcome to the fourth quarter 2021 Acadia Realty Trust Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that portion of the call, you will need to press star 1 on your telephone.

Thank you for standing by and welcome to the fourth quarter 2021, Acadia Realty Trust earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during that portion of the call you will need to press star one.

One on your telephone please be advised that today's conference maybe recorded.

Speaker 1: please be advised that today's conference may be recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your host, Joe Rizzoli. Please go ahead.

If you require any further assistance. Please press star zero I would now like to hand, the conference over to your host Joel Rizzoli. Please go ahead.

Speaker 13: Good afternoon and thank you for joining us for the fourth quarter 2021 Acadia Realty Trust earnings conference.

Good afternoon, and thank you for joining us for the fourth quarter of 2021, Acadia Realty Trust earnings Conference call. My name is Joe and I am a property accountant in our accounting Department.

Speaker 13: My name is Joe Rizzoli and I am a property accountant in our accounting department.

Speaker 13: Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking.

Before we begin please be aware that statements made during the call that are not historical maybe deemed forward looking statements within the meaning of the Securities and Exchange Act of 1934 and actual results may differ materially from those indicated by such forward looking statements due.

Speaker 13: within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by such forward-looking statements.

Due to a variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-K , and other periodic filings with the SEC forward looking statements speak only as of the date of this call February 16th 2022, and the company undertakes no duty to update them.

Speaker 13: including those disclosed in the company's most recent Form 10-K and other periodic filings with the SEC. Your looking statements speak only as of the date of this call.

Speaker 13: During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating.

During this call management may refer to certain non-GAAP financial measures, including funds from operations and net operating income please.

Speaker 13: the ACADIA's earning press release posted on its website for reconciliation of those non-GAAP financial measures with the most directly comparable GAAP financial measures.

Please see Acadia as earnings press release posted on its website for reconciliations of those non-GAAP financial measures with the most directly comparable GAAP financial measures.

Speaker 13: Once the call becomes open for questions, we ask that you limit your first round to two questions per caller to give everyone the opportunity to participate. You may ask further questions by reinserting yourself.

Once the call becomes open for questions. We ask that you limit your first round to two questions per caller to give everyone. The opportunity to participate you may ask further questions by Reinsert yourself into the queue and we will answer as time permits.

Speaker 13: Now it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer who will begin today's management session.

Now it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks.

Thanks, Joe Good job welcome everyone. Good afternoon, we had a strong quarter and we will delve into the details in a minute, but first a few observations.

Speaker 6: Thanks Joe, good job. Welcome everyone, good afternoon. We had a strong quarter and we will delve into the details in a minute, but first a few observations.

While not ignoring the impact of omicron on our health care system and the lives of many from the perspective of our portfolio performance and our business plan.

Speaker 6: while not ignoring the impact of Omicron on our healthcare system and the lives of many from the perspective of our portfolio performance and our business plan.

Speaker 5: We remain very much on track as evidenced by our fourth quarter results and our forecasts for this year. We did not see an impact on our collection.

We remain very much on track as evidenced by our fourth quarter results and our forecast for this year, we did not see an impact on our collections on our tenant interest on leasing progress or investment efforts.

Speaker 5: on our tenant interest, on leasing progress or investment efforts.

Speaker 5: if anything from a transactional perspective, it may have helped nudge certain sellers off the sidelines and we're seeing that reflected in our increasing investment size.

Anything from a transactional perspective, it may have helped nudge certain sellers off the sidelines and we're seeing that reflected in our increasing investment volume.

Speaker 5: In terms of leasing and tenant performance, last quarter we continued to see a meaningful improvement in fundamentals after a very scary 2020 and frankly a few years of headwinds for many of our retailers even prior to that.

In terms of leasing and tenant performance last quarter, we continue to see a many a meaningful improvement in fundamentals. After a very scary 2020, and frankly, a few years of headwinds for many of our retailers have even prior to that.

Speaker 5: The reopening that began in early 2021 The reopening that began in early 2021

The reopening that began in early 'twenty one.

Gained steam throughout the year.

Speaker 5: As a result, our second half NOI last year increased over 5% and it looks like this above average growth has several more...

As a result.

Our second half.

NOI last year increased over 5% and it looks like this above average growth.

Has several more years in front of us.

Speaker 5: These longer term tailwinds have several important drivers. On a macro level, are retailers performance, their balance sheets and business models, are with few

These longer term tail wins have several important drivers.

On a macro level.

Our retailers' performance there.

Their balance sheets and business models are with few exceptions.

Stronger today than pre Covid.

And the recognition by our retailers of the critical importance of brick and mortar real estate in an Omnichannel world.

Speaker 5: of the critical importance of brick and mortar real estate in an omnichannel world.

Speaker 5: is certainly clearer today than it has been for many years.

Is certainly clearer today than it has been for many years.

This re embracing of physical stores is happening faster than we expected.

Speaker 5: This re-embracing of physical stores is happening faster than we expected.

Speaker 5: and we are seeing this from a wider range of our retailers and formats.

And we are seeing this from a wider range of our retailers and formats for instance, as it relates to Acadia and our street retail portfolio. We are seeing it from luxury retailers, who are doubling down in our carter's ranging from Melrose place in Los Angeles to the Gulf Coast, and Chicago as well as here.

Speaker 13: As it relates to Acadia and our street retail portfolio, we are seeing it from luxury retailers who are doubling down in our corridors ranging from Melrose Place in Los Angeles to the Gold Coast in Chicago as well as here in SoHo.

So.

Speaker 6: Last year we expanded YSL in Chicago, had solid renewal spreads in Marrow's place, and are busy signing leases in SoFi.

Last year, we expanded YSL and Chicago had solid renewal spreads in Melrose place in our busy signing leases.

And Soho.

Speaker 5: We're also seeing it with our digitally native retailer.

We're also seeing it with our digitally native retailers.

Speaker 13: the Warby, Parkers, and Allbirds of the world, as well as those brands who thrive around them.

<unk> Parkers and all birds of the world as well as those brands, who thrive around them.

Speaker 5: These DTC, direct to consumer retailers, are now showing up, in force on many of our...

These DTC direct to consumer retailers are now showing up.

In forest on many of our card ours for instance.

Speaker 5: on M Street in Georgetown. Last quarter we added Glossier, Cerla Tabla, and Gloss Lab. And in SoHo we added Fila.

On M Street in Georgetown last quarter, we added glossy a cellular tabla and glass lab and in Soho, We added feeler.

Speaker 5: and we continue to see it at our Armitage Avenue assemblage in Chicago as well, which continues to benefit from our curating a critical mass of the right retailers and where last quarter we profitably added Jenny Kane and Fared.

And we continue to see it at our Armitage Avenue assemblage, and Chicago, as well, which continues to benefit from our Curating a critical mass of the right retailers and where last quarter, we profitably added jenni Kayne and Faraday.

Speaker 5: and especially as it relates to those markets that were hit hard during the pandemic.

And especially as it relates to those markets that were hit hard during the pandemic. We are seeing a significant rebound in tenant activity and given this increase in tenant demand.

Speaker 6: We are seeing a significant rebound in tenant activity. And given this increase in tenant demand.

Speaker 6: beginning to look like the rental growth trajectory will be stronger than we had previously anticipated. And that obviously bodes well for our forecast of multi-year and a wide growth.

It's beginning to look like the rental growth trajectory will be stronger than we had previously anticipated and that obviously bodes well for our forecast of multi year NOI growth.

Speaker 5: For instance in Soho, after several years of rental headwinds that started around 2017,

For instance in Soho.

After several years of rental headwinds that started around 2017.

Tenant performance and rents are now.

Speaker 5: in many instances exceeding pre-COVID levels. And the reopening and acceleration of demand, it's still in its early stages. So as it relates to our SOHO assets...

In many instances exceeding pre COVID-19 levels, and the reopening and acceleration of demand. It is still in its early stages.

So as it relates to our Soho assets.

Given our current in place rents.

Speaker 6: and available occupancy even before any further market rent growth, we have nice embedded NLI growth that we have begun harvesting. And then assuming increased tenants demand as growing how we ago created ISO held record

And available occupancy even before any further market rent growth, we have nice embedded NOI growth that we have begun harvesting and then assuming.

Increased tenant demand continues.

Speaker 6: that growth will likely be even stronger than we anticipated.

That growth will likely be even stronger than we anticipated.

Keep in mind that given the headwinds of the last several years market rents since Soho could increase.

Speaker 6: Keep in mind that given the headwinds of the last several years,

Speaker 5: market rents in Soho could increase by an additional 50% from where they are today.

By an additional 50% from where they are today.

And still not be at prior peaks.

But tenant sales performance for many of our retailers as well.

Speaker 5: for many of our retailers is already well on its way to priority.

Already <unk>.

Well on its way to prior peaks.

Speaker 5: Now, some folks will say that rents will never get back to prior...

Now some folks will say that rents will never get back to prior peaks.

Well given the recovery, we're seeing I doubt that.

Speaker 5: Well, given the recovery we're seeing, I doubt that.

Speaker 5: But if one defines never as being five years from now...

But if one defines endeavor as being five years from now.

Well then.

Speaker 5: If you do the math, that still looks pretty encouraging to us.

If you do the math that still looks pretty encouraging to us.

Speaker 6: Drilling further into our portfolio, we see tailwinds and above average growth from multiple drivers. This will first come from the lease up of valuable vacancy in our portfolio over the next year or so.

Drilling further into our portfolio, we see tailwind and above average growth from multiple drivers. This will first come from the lease up of valuable vacancy in our portfolio over the next year or so as well as the profitable re tenant thing of other spaces example of both of these last quarter include in Lincoln Park.

Speaker 6: as well as the profitable retenancing of other spaces. Example of both of these last quarter include in Lincoln Park, Chicago, on North Avenue last quarter we signed a lease with that country to replace a former Pier 1 and adjacent 10.

Chicago North Avenue last quarter, we signed a lease with that country to replace a former pier one in adjacent tenant.

Speaker 6: Then in the suburban side of our portfolio last quarter, we signed BJ's Wholesale Club at our Westchester, New York Crossroads Shopping Center. That will replace our Kmart at that center at triple digit spread.

And then in the suburban side of our portfolio last quarter, we signed Bj's wholesale club at our Westchester New York Crossroad shopping center that will replace our Kmart at that center at Triple digit spreads.

Speaker 6: Now while the short term impact of Omicron is passing quickly...

Now while the short term impact of Omicron is passing quickly.

Speaker 6: We certainly will be focused on supply chain and longer term inflationary pressures on both our retailers as well as our portfolios.

We certainly will be focused on supply chain and longer term inflationary pressures on both our retailers as well as our portfolios.

And as we think about which segments of our retailers at our portfolios that are likely to be the most resilient in an inflationary environment.

Speaker 6: And as we think about which segments of our retailers and our portfolios that are likely to be the most resilient in an inflationary environment, ultimately it's going to come down to where consumers spend their money, where consumers spend their money, where consumers

Ultimately, it's going to come down too.

Where consumer spending will remain strong.

Which retailers have.

Speaker 6: pricing power to hold onto their margins, and then which real estate portfolios can capture that growth.

Pricing power to hold onto their margins, and then which real estate portfolios can capture that growth.

And from that perspective.

While I think most segments of our portfolio should be in good shape.

Speaker 6: While I think most segments of our portfolio should be in good shape.

Speaker 6: Our street portion of our portfolio seems to be particularly well positioned.

<unk> Street portion of our portfolio seems to be particularly well positioned.

First of all from a structural perspective, our street leases generally have stronger contractual growth.

Speaker 6: from a structural perspective are street leases generally have stronger contractual growth.

Speaker 13: and more fair market value resets than in our suburban assets.

And more fair market value resets than in our suburban assets. Thus.

Speaker 6: Thus we'll have the ability to capture inflation related growth sooner.

Thus, we will have the ability to capture inflation related growth sooner.

Additionally, operating expenses are a much lower percentage of occupancy costs for our street based retailers. So the inevitable rise in operating expenses should be less impactful at our streets.

Speaker 5: Additionally, operating expenses are a much lower percentage of occupancy costs for our street-based retailers, so the inevitable rise in operating expenses should be less than past the letter.

Speaker 5: Now since inflation will likely result in increased top line sales, the rent to sales-"

Now since inflation will likely result in increased top line sales the rent to sales metrics.

Speaker 5: which have been a headwind during the deflationary period of the last decade, should reverse.

Which had been a headwind during the deflationary period of the last decade should reverse.

Speaker 5: That means the discussion with tenants will be less about top line sales growth and then more about their bottom line. Here again.

That means the discussion with tenants will be less about topline sales growth and then more about their bottom line and here again.

Speaker 13: street and flagship stores have an advantage in an omni-channel world where those national retailers whether they're luxury or advanced contemporary operate at higher margins and seem to be able to absorb this.

Street and flagship stores have an advantage in an omnichannel world.

Were those national retailers, whether they are luxury or advanced contemporary operate at higher margins and seem to be able to absorb this impact.

Speaker 5: But while we'll ponder the pros and cons of inflation, keep this in mind.

But while we'll ponder the pros and cons of inflation keep this in mind.

Deflation is worse.

Speaker 6: it is becoming increasingly clear that we are past the highly promotional and deflationary pricing environment that existed in the past decade, where the consumer was trained.

It is becoming increasingly clear that we are past the highly promotional promotional and deflationary pricing environment that existed in the past decade, where the consumer was trained.

Speaker 6: that if they waited, almost everything would be less expensive.

That if they waited almost everything would be less expensive.

Speaker 6: This decade-long trend was a significant contributor to the retail Armageddon, and most retailers seem to understand that this race to the bottom...

This decade long trend was a significant contributor.

To the retail Armageddon and most retailers seem to understand that this race to the bottom.

Speaker 5: It diluted their brands. It reduced their connection with their customer. And it was just not sustainable.

It diluted their brands at reduced their connection with their customer.

And it was just not sustainable.

Speaker 5: going forward in conversations with our retailers, they seem to understand the importance of curation and the risks of ubiquity.

Going forward in conversations with our retailers they seem to understand the importance of curation and the risks of ubiquity most.

Speaker 6: Most importantly, they understand the critical nature of their physical stores in terms of customer acquisition and retention.

Importantly, they understand the critical nature of their physical stores in terms of customer acquisition and retention.

As well as profitability.

Speaker 6: So as we look out over the next few years, from an internal growth perspective, whether from lease up

So as we look out over the next few years from an internal growth perspective, whether from lease up.

Speaker 13: retenancing or contractual growth, we are increasingly encouraged by the rebound and rental growth trajectory we're seeing.

<unk> or contractual growth, we are increasingly encouraged by the rebound and rental growth trajectory we're seeing.

Then turning to the new investment side.

Speaker 6: after a very quiet 2020 when lenders were highly accommodative and owners were fairly frozen.

After a very quiet 2020, when lenders were highly accommodative and owners were fairly frozen.

Speaker 6: in the last quarter and now looking forward we are seeing a nice growth in investment opportunities at attractive prices. For our fund platform as well as for our core portfolio.

In the last quarter and now looking forward, we are seeing a nice growth in investment opportunities at attractive prices.

Both for our fund platform.

As well as for our core portfolio of investments on.

On the fund side and as Amy will discuss.

Speaker 6: Last quarter we added a $72 million investment and have an additional $120 million under contract where we have completed our diligence, but the closing is still subject to the typical closing condition.

Last quarter, we added a $72 million investment and have an additional $120 million under contract, where we have completed our diligence, but the closing is still subject to the typical closing conditions.

Speaker 13: These deals continue to be consistent with our Fund 5 higher yielding investment strategy that we have been successfully executing over the past several years.

These deals continue to be consistent with our fund five higher yielding investment strategy that we have been successfully executing over the past several years.

Speaker 6: Then with respect to core acquisitions, we closed on 66 million and have a meaningful pipeline under agreement, but here our pipeline is still subject to our completing our review.

Then with respect to core acquisitions, we closed on $66 million and having meaningful pipeline under agreement, but here our pipeline is still subject to our completing our review.

Speaker 13: The deals already closed are in markets we're very familiar with in Soho. We added one of the best corners on Green Street and in Washington, D.C. We added to our portfolio there with our acquisition of a portfolio of buildings on 14th Street.

The deals already closed our end markets, we're very familiar with in Soho. We added one of the best corners on Greene Street, and in Washington D. C. We added to our portfolio there with our acquisition of a portfolio of buildings on 14th Street.

Speaker 13: So in short, we are pleased with the external growth activity we're seeing and as John highlights in our guidance, we are still seeing accretion level.

So in short we are pleased with the external growth activity, we're seeing and as John highlighted in our guidance, we are still seeing accretion levels.

Speaker 6: of about 1% per $100 million of investment activity, whether it be core or fund. So this activity can really move the needle for us.

Of about 1% per $100 million of investment activity, whether it be core or fund. So this activity can really move the needle for us.

Finally.

Speaker 6: I want to thank our entire team for their hard work last year during a year of recovery but also a year of whiplash.

I want to thank our entire team for their hard work last year during a year of recovery, but also a year of whiplash.

Speaker 6: We are now clearly seeing the fruits of your labor and I'd like to congratulate those of you who received much deserved promotion.

We are now clearly seeing the fruits of your labor and I'd like to congratulate those of you who received much deserved promotions and last but not least I'd like to thank Chris Conlon for his over a decade of contribution to Acadia is performance.

Speaker 6: And last but not least, I'd like to thank Chris Conlon for his over a decade of contribution to Acadia's performance.

Speaker 5: Chris as COO, oversaw our leasing and development areas, and so much more.

Chris as COO oversaw our leasing and development areas and so much more he will be missed.

Speaker 6: But of all of his great contributions, none was more important than the pipeline of talents he built. Talent that is ready, willing and able to step up and continue the efforts that Chris started. And with that, I will turn the call over to John . Thanks Ken and good night.

But of all of his great contributions none was more important than the pipeline of talent he built <unk>.

Talent that is ready willing and able to step up and continue the efforts that Chris started.

And with that I will turn the call over to John .

Thanks, Ken and good afternoon, let.

Let me first start by addressing the 8-K that we filed last evening.

Speaker 2: As outlined in the filing, during the course of our year-end audit, actually within the past few days, we identified two funded best-

As outlined in our filings during the course of our year end audit actually within the past few days, we identified to fund investments acquired about a decade ago that were incorrectly recorded as consolidated investments rather than as equity method investments within our GAAP financial statements.

Speaker 2: about a decade ago that were incorrectly recorded as consolidated investments rather than as equity method investments within our gap.

Speaker 2: In plain English, this means we need to amend our prior year GAAP financial statements to show these two fund investments on a net basis rather than growth.

In plain English this means we need to amend our prior year GAAP financial statements to show these to fund investments on a net basis rather than gross.

Speaker 2: And in terms of impact, while we need to fix this, the netting down of these two fund investments does not change any of our previously reported pro rata financial information or any individual line items within our pro rata financial statements or any of our prior operating methods.

And in terms of the impact while we need to fix this the netting down of these to invest these to fund investments does not change any of our previously reported pro rata financial information or any individual line items within our pro rata financial statements.

Any of our prior operating metrics.

Speaker 2: Furthermore, this does not change any of our pro rata share of core or fund net operating income, our net income, our FFO per share, or our net worth.

Furthermore, this does not change any of our pro rata share of core our fund net operating income or net income or <unk> <unk> per share or a network.

Speaker 2: Rather, they simply reflect reclassifications between individual line items within our GAAP financial statements, and our team is actively working through the process of updating all of our financial statements.

Rather they simply reflects reclassifications between individual line items within our GAAP financial statements and our team is actively working through the process of updating all of our filings we fully expect to meet the SEC reporting deadlines enable us to access the capital markets in the ordinary course.

Speaker 2: fully expect to meet the SEC reporting deadlines, enabling us to access the capital markets in the ordinary course.

Now moving onto our results.

Speaker 2: We have had an incredibly active few months with our fourth quarter, full year 2021, along with our 2022 guidance exceeding our expectations on all.

We have had an incredibly active few months with our fourth quarter full year 2021, along with our 2022 guidance exceeding expectations on all fronts as Ken mentioned, we are continuing to see elevated demand for our space with over $13 million of executed leases to date.

Speaker 2: As Ken mentioned, we are continuing to see elevated demand for our space with over $13 million of executed leases to date, representing approximately 10% of our core aviation industry.

Representing approximately 10% of our core ABR.

Speaker 2: along with meaningful amounts of external growth in both our core and fund businesses.

Along with meaningful amounts of external growth in both our core and fund businesses.

Starting with the quarter.

Speaker 2: Our fourth quarter earnings of $0.29 a share came in ahead of our expectations, and this was driven by ranked commencement on new leases, an improved credit environment with core cash collections exceeding 98.

Our fourth quarter earnings of 29, a share came in ahead of our expectations and this was driven by rent commencement on new leases and improved credit environment with core cash collections exceeding 98%.

Speaker 2: along with the accretive impact from the approximately $250 million of external investments that we closed during the year, including $100 million in the fourth quarter.

Along with the accretive impact from the approximately $250 million of external investments that we closed during the year, including $100 million in the fourth quarter.

Speaker 2: And for the full year 2021, we generated $1.10 of FFO, which came in 10% above the high end of our initial range after adjusting for the fund promotes that were included in our guidance. And this meaningful beat in our earnings.

And for the full year 2021, we generated $1 10 of <unk>, which came in at 10% above the high end of our initial range. After adjusting for the fund promote that were included in our guidance and this meaningful beat in our earnings was playing out throughout the year.

Speaker 2: and it was driven by a combination of our core portfolio rebounding at a pace and velocity well beyond our expectations along with a meaningful accretion from our external...

And it was driven by a combination of our core portfolio rebounding at a pace and velocity well beyond our expectations, along with a meaningful accretion from our external investments.

Speaker 2: As Ken mentioned, our core portfolio started its rebound in the second half of the year, with our six months SameStore NOI growing approximately 5%. And over three…

As Ken mentioned, our core our core portfolio started its rebound in the second half of the year with our six month same store NOI growing approximately 5% and over 3% in the fourth quarter.

Speaker 2: I want to focus on a few points within our same store results for the fourth quarter.

I wanted to focus on a few points within our same store results for the fourth quarter.

Speaker 2: As highlighted in our release, our same store growth this quarter was driven by our street and urban portfolio, outperforming our suburban portfolio by over 300 basis.

As highlighted in our release, our same store growth. This quarter was driven by our street and urban portfolio outperforming our suburban portfolio by over 300 basis points.

Speaker 2: It's also worth noting that our percentage increase this quarter is fairly clean, meaning that it was not materially impacted by current or historical cash recoveries, as the amount of recoveries in the fourth quarter of 2021 roughly approximated what was recognized in the comparable fourth quarter of the prior year.

It's also worth noting that our percentage increase this quarter is fairly clean meaning that it was not materially impacted by current or historical cash recoveries as the amount of recoveries in the fourth quarter of 2021, roughly approximated what was recognized in the comparable fourth quarter of the prior year.

Speaker 2: And more importantly, we are seeing the strength continuing into 2021. And in fact, for the next several years with growth expectations ranging from 5 to 10%.

And more importantly, we are seeing the strength continuing into 2021 and in fact for the next several years with growth expectations, ranging from 5% to 10%.

Now transitioning to our 2022 guidance.

Speaker 2: At $1.23 midpoint, we are projecting overall FFO growth of approximately 12% in 2022, or a 10% growth in our FFO run rate when adjusting for anticipated fund profits and the one-time benefits from cash recovery.

At $1 23 midpoint, we are projecting overall <unk> growth of approximately 12% in 2022 or 10% growth in our <unk> run rate when adjusting when adjusting for anticipated fund profits and the onetime benefits from cash recoveries.

Speaker 2: Our 2022 guidance reflects the continued strength that we are seeing across our key earnings drivers, meaning strong internal growth from both lease up and profitable leasing spreads, meaningful accretion on our external investments, and the monetization of profits from our fund business.

Our 2022 guidance reflects the continued strength that were seeing across our key earnings drivers, meaning strong internal growth from both lease up and profitable leasing spreads meaningful accretion on our external investments and the monetization of profits from our from our fund business starting with internal growth.

Speaker 2: Our core NOI is anticipated to grow 5% at the midpoint of 2000.

Our core NOI is anticipated to grow 5% at the midpoint in 2022.

Speaker 2: And this is the number that we actually intend to report, meaning it incorporates the expected headwinds from cash recovery accounting that occurred in 2008.

And this is the number that we actually intend to report, meaning it incorporates the expected headwinds from cash recovery accounting that occurred in 2021.

Speaker 2: and is highlighted in our supplemental, we anticipate that our core NOI, excluding cash recoveries, will grow approximately 10% when including the redevelopment and our new...

And as highlighted our supplemental we anticipate that our core NOI, excluding cash recoveries will grow approximately 10% when including the redevelopment and our new acquisitions.

Speaker 2: The projected internal growth in 2022, as well as we are expecting for at least the next several years, is poised to be above trend. And this growth is driven by a continuation of lease up, profitable spreads are new and renewed leases, along with contractual rental growth.

The projected internal growth in 2022, as well and we are expecting for at least for the next several years is poised to be above trend and this growth was driven by a continuation of the lease up profitable spreads on new and renewed leases along with contractual rental growth.

In terms of growth from lease up our are signed but not not yet occupied spread within our core portfolio is at a historic high of $325 320 basis points, representing approximately $5 million of pro rata ABR.

Speaker 2: Our sign, but not yet occupied spread within our core portfolio, is at a historic high of 320 basis points, representing approximately 5 million...

Speaker 2: And this includes key street leases across all of our geographies that are anticipated to commence in the first half of this year, including many of the names that Ken mentioned.

And this includes key street leases across all of our geographies that are anticipated to commence in the first half of this year, including many of the names that Ken mentioned, including on Lincoln Park, and Armitage Avenue in Chicago, Soho in New York City, and Washington D C.

Speaker 2: including on Lincoln Park and Armadillo Avenue in Chicago, Soho in New York City and Washington.

Speaker 2: And keep in mind that in addition to the $5 million of signed but not yet occupied space, this excludes the incremental amounts from any locations that have been pre-leased in advance of an existing tenant vacating, such as the profitable retenanting of 565 Broadway and

And keep in mind that in addition to the $5 million of signed but not yet occupied space. This excludes the incremental amounts from any locations that have been pre leased in advance of an existing tenant vacating such as the profitable re tenant in and 565 Broadway in Soho.

Speaker 2: So at a 93% leased occupancy, we still have several hundred basis points of growth with high quality space remaining and our leasing team is off to a great start.

So at a 93% leased occupancy we still have several hundred basis points of growth with high quality space remaining in our leasing team is off to a great start to the year.

Speaker 2: with an additional $6 million, or roughly 5% of our core ABR, in advanced stages of lease negotiation.

With an additional $6 million or roughly 5% of our core ABR in advanced stages of lease negotiation again on some of our key street locations in Soho Lincoln Park, Chicago, along with several deals at our suburban shopping center in Westchester New York following the profitable recapture of Kmart and a re tenant to bj's.

Speaker 2: again on some of our key street locations in SoHo, Lincoln Park, Chicago, along with several deals at our suburban shopping center in Westchester, New York, following the profitable recapture of Kmart and our retentive...

Speaker 2: I also wanted to highlight that 30 basis points decline in our core build occupancy this quarter.

I also wanted to highlight that 30 basis points decline in our core build occupancy this quarter.

This is actually an instance of addition by subtraction.

Speaker 2: This decline was driven by the recapture of Kmart at Crossroads in December , representing approximately 100 basis points of build physical occupation.

This decline was driven by the recapture of Kmart at Crossroads in December representing.

Approximately a 100 per 100 basis points of build physical occupancy.

Speaker 2: And we replaced this roughly $6 rent at multiples of that with the new BJ's lease that is expected to commence in the fourth quarter of 2000.

And we replaced this roughly $6 rent at multiples of that with the new Bj's lease that is expected to commence in the fourth quarter of 2022.

And from a fund perspective, we're seeing similar strength in our leasing efforts with a signed but not yet occupied spread of approximately 200 basis points.

Speaker 2: And from the fund perspective, we are seeing similar strength in our leasing efforts with a signed but not yet occupied spread of approximately 200 basis points, representing approximately $2 million of ABR at our...

Representing approximately $2 million of ABR at our share.

Speaker 2: Secondly, we are seeing strong spreads on both new and renewed leases, with cash spreads on our new leases in excess of 200%

Secondly, we are seeing strong spreads on both new and renewed leases with its cash spreads on new leases in excess of 200% this quarter.

Speaker 2: As outlined in our release, in addition to the triple digit spread we recognized on the retenting of Kmart at Crossroads,

As outlined in our release in addition to the triple digit spread we recognized on the <unk> of Kmart at Crossroads.

Speaker 2: We also reported high double digit spreads in our street portfolio, primarily within our New York Metro portfolio. Lastly, our allele is claiming a positive green pattern at point 1.

We also reported high double digit spreads in our street portfolio, primarily within our New York Metro portfolio.

Lastly, our portfolio benefits from strong contractual growth.

Speaker 2: As a reminder, our in-place street leases typically provide for 3% contractual growth, which when blended with our suburban assets, results in blended annual contractual growth of approximately 10 times higher than expected in a

As a reminder, our in place street leases typically provide for a 3% contractual growth, which when blended with our suburban assets results in blended annual contractual growth of approximately 2%.

Speaker 2: Lastly, I want to spend a moment on the profit expectations from our fund business. at Oh-

Lastly, I want to spend a moment on the profit expectations from our fund business.

As outlined in our 2022 guidance.

Speaker 2: we anticipate six to ten cents of profits, with an expectation that roughly half of this will come from fund investments other than from our ownership interest in Alberta.

We anticipate six to 10 of profits with an expectation that roughly half of this will come from fund investments other than from our ownership interest in Albertsons and.

Speaker 2: And we should be able to operate at this similar run rate for the next several years as our team works to harvest the embedded promotes across our various fun platforms.

And we should be able to operate at the similar run rate for the next several years as our team works to harvest embedded promotes across our various fund platforms.

Speaker 2: So when we put the pieces together, Core NOI is expected to be strong in 2022 and well poised to strengthen even further in 2023.

So when we put the pieces together.

Core NOI is expected to be strong in 2022, and wealth and well poised to strengthen even further in 2023 and beyond we have a strong and growing external investment pipeline with over $135 million of deals completed since our last call.

Speaker 2: strong and growing external investment pipeline with over $135 million of deals completed since our last.

Speaker 2: And as Ken mentioned, we capture about a penny of FFO for every hundred million dollars that we invest, whether it's a core fund deal. Which means that we don't have to buy large portfolios to generate meaningful levels of accretion from our external assets.

And as Ken mentioned, we capture about a penny of <unk> for every $100 million that we invest whether it's a core fund deal, which means that we don't have to buy large portfolios to generate to generate meaningful levels of accretion from our external investments.

Speaker 2: So between our strong internal growth and our growing external pipeline, we are well poised to deliver above trend growth for the next several years.

So between our strong internal growth and a growing external pipeline, we are well poised to deliver above trend growth for the next several years.

Lastly, I wanted to touch on our balance sheet.

Speaker 2: As outlined in our release, we issued approximately $150 million of equity under ATM since our last.

As outlined in our release, we issued approximately $150 million.

Of equity under our ATM since our last call at a gross issuance price of approximately $22 50.

Speaker 2: at a gross issuance price of approximately $22.50 to fund our external

To fund our external growth.

Speaker 2: including those investments that have closed to date, as well as to pre-fund our core pipeline on a leverage neutral basis. Our balance sheet isn't great.

Including those investments that have closed to date as well as to pre fund our core pipeline on a leverage neutral basis, our balance sheet is in great shape with no meaningful to core debt maturities, our capital funding needs ample liquidity on our corporate facilities, along with various avenues to access capital.

Speaker 2: no meaningful core debt maturities or capital funding needs, ample liquidity on our corporate facilities, along with various avenues to access capital.

Speaker 2: And this puts us in a position of strength as we continue to see actionable and creative investment opportunities.

And this puts us in a position of strength as we continuing to see actional, an accretive investment opportunities.

Speaker 2: Lastly, and as outlined in our release, we have increased our quarterly dividend by 25%

Lastly, and as outlined in our release, we have increased our quarterly dividend by 20%.

Speaker 2: And at this payout level, I expect our AFFO payout ratio to be in the mid-

And at this payout level I expect our <unk> payout ratio to be in the mid sixties.

Speaker 2: enabling us to retain meaningful amounts of operating cash flow to accretively fund our internal and external.

Enabling us to retain a meaningful amount of operating cash flow to Accretively fund, our internal and external growth.

Speaker 2: And assuming that our business continues to achieve the growth goals that I have outlined, we are well positioned to have similar growth in our dividend over the next few years in order to meet our taxes.

And assuming that our business continues to achieve the growth goals that I have outlined we are well positioned to have similar growth in our dividend over the next few years in order to meet our tax requirements.

Speaker 2: In summary, we had a strong quarter with an optimistic outlook on our 2022 earnings. With increased optimism on our expectation of multi-year internal and external...

In summary, we had a strong quarter with an optimistic outlook on our 2022 earnings with increased optimism on our expectation of multiyear internal and external growth.

Speaker 2: I will now turn the call over to Amy to discuss our fund business. Thanks, John . Today I'd like to provide a brief update on our fund platform beginning with Fund 5.

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

Thanks, John today, I would like to provide a brief update on our fund platform beginning with some science.

Speaker 4: First, deal flow remains strong. During the fourth quarter and as detailed in our press release,

First deal flow remained strong during the fourth quarter and as detailed in our press release.

Speaker 4: We completed a $70 million acquisition located in a suburb of New York City.

Completed a $70 million acquisition located in a suburb of New York City.

Speaker 4: We acquired the property at a cost of approximately $180 per square foot, which represents a substantial discount to replace the property.

We acquired the property at a cost of approximately $180 per square foot, which represents a substantial discount to replacement cost.

Speaker 4: The 385,000 square foot open air shopping center is anchored by a high performing shop right supermarket. In addition to PetSmart and Best.

The 385000 square foot open Air shopping center is anchored by a high performing shop right supermarket. In addition to petsmart and bestbuy.

Speaker 4: Not only was the property acquired at an attractive going in yield, but also we have an opportunity to add value through the retenting of two junior anchors totaling 60,000 square feet.

Not only was the property acquired at an attractive going in yield, but also we have an opportunity to add value to the re tenant or two junior anchors totaling 60000 square feet.

Speaker 4: Looking ahead, we have $120 million of fund acquisitions in our near-term pipeline.

Looking ahead, we have $120 million of fund acquisitions, and our near term pipeline. The thesis here is consistent with the properties in our existing high yield portfolio.

Speaker 4: The thesis here is consistent with the properties in our existing high yield portfolio.

Speaker 4: Overall in Fund 5, we've been acquiring properties in the 7s and 8s on an unlevered basis and have been able to generate a mid-teens current return on our invested equity using two-thirds le blocking therapies.

Overall in fund side, we've been acquiring properties in the Sevens and eights on an unlevered basis and have been able to generate a mid teens current return on our invested equity using two thirds leverage.

Speaker 4: As a result, over our typical five-year hold, we can generate most of our total return from operating cash flow.

As a result of our typical five year hold we can generate most of our total return from operating cash flow.

Speaker 4: Since 2016, we have been assembling a $1 billion portfolio of hand-picked, high-yielding suburban shopping centers in Fund 5.

Since 2016, we have been assembling a $1 billion portfolio of hand picked high yielding suburban shopping centers in ton size.

Speaker 4: As previously discussed, we see a tangible opportunity for outsized performance in this fund due to cap rate compression.

As previously discussed we see a tangible opportunity for outsized performance in this fund due to cap rate compression.

In fact based on our current projections and eventual sale of the <unk> portfolio at a blended 7% cap rate would bring our projected IRR into the low twenty's and our projected multiple <unk> on equity.

Speaker 4: In fact, based on our current projections, an eventual sale of the Fund 5 portfolio at a blended 7% cap rate would bring our projected IRR into the low 20s and our projected multiple to a 2x on equity.

Speaker 4: While it's still too early to declare victory, our cost basis in these assets is attractive, and we are well positioned to execute on a variety of opportunistic transactions at the right time.

While it's still too early to declare victory our cost basis. In these assets is attractive and we are well positioned to execute on a variety of opportunistic transactions at the right time.

Speaker 4: Including this pipeline, we have now allocated approximately 85% of our $520 million of Fund 5 capital commitment.

Including this pipeline, we have now allocated approximately 85% of our $520 million of fund <unk> capital commitments.

Speaker 4: This is now the appropriate time for us to be engaging with our existing investors on Fund 6, and it comes at a good time given the strong recovery and operating fundamentals for retail real estate and the strengthening appetite for this product type in the capital market.

This is now the appropriate time for us to be engaging with our existing investors on fund six and it comes at a good time, given the strong recovery in operating fundamentals for retail real estate and the strengthening appetite for this product type in the capital markets.

Speaker 4: In the meantime, we still have approximately $200 million of gross buying power in Fund 5, which we expect to deploy before the end of the fund's investment period in August of this year. … on the disposition fund…

In the meantime, we still have approximately $200 million of growth time power in fund size.

Which we expect to deploy before the end of the funds investment period in August of this year.

On the disposition front, we have also been quite active.

Speaker 4: For example, in February , we completed the $66 million sale of Fund 3's Cortland Crossing, a 130,000 square foot ShopRite Supermarket Anchored Property in Westchester County, New York. And there are still embedded profits and a couple of remaining investments in this fund.

For example in February we completed the $66 million sale of fund III Cortland crossing a 130000 square foot shop, right supermarket anchored property in Westchester County, New York.

And there are still embedded profits and a couple of remaining investment in this fund.

Speaker 4: Additionally, in January we completed the $24 million sale of Fund 4's Mayfair Shopping Center, a 115,000 square foot supermarket anchored property in Philadelphia.

Additionally in January we completed the $24 million sale of Suncor has made their shopping center, a 115000 square foot supermarket anchored property in Philadelphia.

Speaker 4: This was one of two remaining shopping centers in our original eight property Northeast grocery portfolio and the last center is also under contract for $22 million.

This was one of two remaining shopping centers in our original eight property northeast grocery portfolio and the last center is also under contract for $22 million.

Speaker 4: Turning to the balance sheet, as of year end 2021, the fund platform had $860 million of debt maturing in 2022, of which $590 million has no extension option.

Turning to the balance sheet as of year end 2021, the fund platform had $860 million of debt maturing in 2022.

Of which $590 million has no extension options.

Speaker 4: excluding mortgages on properties sold in 2022 or currently under contract, as well as the outstanding balances on two subscription facilities which are used as short-term bridges for debt and equity. We have $420 million of expiring debt to address this year.

Excluding mortgages on properties sold in 2022 are currently under contract as well as the outstanding balances on to subscription facilities, which are used as short term bridges for debt and equity we have $420 million of expiring debt to address this year.

Speaker 4: of this amount, approximately 40% or $160 million, is spread over six months and is expected to be refinanced or extended in the normal course of business.

Of this amount approximately 40% or $160 million is spread over six months.

And is expected to be refinanced or extended in the normal course of business.

The balance or 260 million pertains to city point, our mixed use property in downtown Brooklyn.

Speaker 4: The balance, or $260 million, pertains to City Point, our mixed-use property in downtown Brooklyn. The City Point debt mature

The city point that matured during the third quarter.

Speaker 4: Although we are still several months away from the maturity, we are currently in the market to refinance the property and are pleased with our progress so far.

Although we are still several months away from the maturity. We are currently in the market to refinance the property and are pleased with our progress so far.

Speaker 4: At the property level, we continue to see strong momentum. On the sales front, those tenants who report sales had a very strong December . For example, Han Dynasty, Lululemon, and McNally Jackson all registered all-time sales highs.

At the property level, we continue to see strong momentum on the sales front those tenants who reported sales had a very strong December for example, Han dynasty, Lulu Lemon and Mcnally Jackson all registered all time sales highest.

Speaker 4: And as it relates to new leasing, construction is well underway on our new Primark, who is expected to open in the second half of this year replacing Century 21.

And as it relates to new leasing construction is well underway on our new Prime Mark who is expected to open in the second half of this year, replacing century 21.

Speaker 4: Additionally, in February , we executed a 4,000 square foot lease with six point brewery adjacent to DeKalb Market Hall on the concourse level.

Additionally in February we executed a 4000 square foot lease with six brewery adjacent to Dekalb market Hall on the concourse level.

Speaker 4: In addition to new tenants, downtown Brooklyn is welcoming new residents with 22,000 new residential units completed or actively under construction.

In addition to new tenants downtown Brooklyn is welcoming new residents with 22000, new residential units completed or actively under construction.

Speaker 4: A new skyline with the tallest tower in Brooklyn topped off as of last fall and located adjacent to our Fulton Street entrance.

Skyline with the tallest tower in Brooklyn topped off as of last fall and located adjacent to our Fulton Street entrance.

Speaker 4: A new green space with a one-acre park currently under construction adjacent to our Gold Street entrance. And even New York Fashion Week with City Point hosting its first runway show last weekend. If you haven't been to downtown Brooklyn in a while, you may have seen the

Our new Green space with a one acre park currently under construction adjacent to our gold Street entrance.

And even New York fashion week with city point hosting its first runway show last weekend.

If you haven't been to downtown Brooklyn, NOI I'll come visit us.

Speaker 4: So in conclusion, heading into 2022, our fund platform remains well positioned with a successful capital allocation strategy and a portfolio of existing investments that continue to march towards stabilization. Now, we will open the call to your...

So in conclusion heading into 2020 to our fund platform remains well positioned with a successful capital allocation strategy and our portfolio of existing investments that continue to march towards stabilization.

Now we will open the call to your questions.

Speaker 1: Thank you and as a reminder to ask a question simply press star 1 on your telephone. To withdraw the question press the pound or hash key. Please stand by while we...

Thank you and as a reminder to ask a question simply press star one on your telephone to withdraw that question press the pound or hash key.

Please standby, while we compile the Q&A order.

Speaker 1: First question comes from Flores Van Didkom with Compass Point. Your question, please.

First question comes from Floris Van did come with Compass point your question. Please.

Speaker 3: Great. Hey, guys, thanks for taking my question.

Great.

Guys. Thanks for taking my question.

Speaker 3: You know, Ken, maybe if you could touch on, you know, a lot of your competitors have been talking about the compression of cap rates.

Okay.

Ken maybe if you could touch on.

A lot of your competitors have been talking about.

The compression of cap rates as.

Speaker 3: as growth expectations are rising. How does that relate to the streets and urban portfolio? And are you seeing signs of that? And how will you plan to operate or how does your investment philosophy change as a result of maybe higher growth or lower cap rates?

As growth expectations are rising.

How does that relate to the street and urban portfolio and are we see are you seeing signs of that.

And how will you plan to.

To operate or how does your investment philosophy.

Change is a result of.

Maybe higher growth or lower cap rates.

Speaker 5: Sure, and obviously they're correlative, meaning if you have better visibility as to growth, your going in yield arguably could be less and still achieve your returns. I would do

Sure.

And and obviously.

They're correlative, meaning.

If you have better visibility as to growth.

Youre going in yield arguably could be less and still achieve your returns what I would tell you is.

Speaker 5: we tend to do better when you have a more liquid market. In 2020, things were frozen. What we're seeing now is better visibility in terms of street and urban growth rates, but folks are still fairly cautious or scared in terms of competition.

We tend to do better when you have a more liquid market in 2020.

Things were frozen what we're seeing now.

Is better visibility in terms of street and urban growth rates, but folks are still fairly cautious are scared in terms of competition. So we actually think this is a unique window right now.

Speaker 5: So we actually think this is a unique window right now.

Where if we can buy assets in.

Speaker 6: where if we can buy assets in some of the key streets, we mentioned we acquired a building in the corner of Soho. So to pick Soho for instance, but it's

In some of the key streets, we mentioned we acquired <unk>.

Building in the corner of Soho.

Pick Soho for instance, but it's true for many markets.

Speaker 6: if you can buy an asset at today's market rents.

If you can buy an asset at today's market rents.

We believe that youre going to see substantially higher growth, both contractual because street rents have higher growth.

Speaker 5: that you're gonna see substantially higher growth, both contractual, because street rents have higher growth, and then mark-to-markets, which happen sooner, just because of the bounce back. And as I mentioned, that bounce back, rents could increase 50%, and you're still not at the prior peak.

And then mark to markets, which happened sooner just because of the bounce back and as I mentioned that bounce back rents could increased 50% and you're still not at the prior peaks. So we have that conviction. There is some other folks out there. So it's not as if there's no competition, but there is far less than for some of the.

Speaker 5: So we have that conviction. There's some other folks out there, so it's not as if there's no competition, but there's far less than for some of the other areas that institutions are starting to pile into.

Other areas that institutions are starting to pile into.

We welcome the capital markets recovering their way they are but we do think we will see.

Speaker 5: We welcome the capital markets recovering the way they are, but we do think we will see, with increased conviction, good buying opportunities.

With increased conviction good buying opportunities.

Great and maybe if you could touch on the.

Speaker 3: Great. And maybe if you could touch on the billion of basically higher yielding suburban assets in your Fund 5. And as you think about monetizing that, and I know Amy talked about a cap rate at 7% would basically double your equity already, or roughly.

The billion of.

Basically higher yielding suburban.

Assets in your fund five.

And as you think about.

Monetizing that in.

I know Amy talked about the cap rate at 7%.

Basically double your equity already.

Roughly.

Speaker 3: But I mean, what we're hearing in the markets and what we're seeing in terms of other cap rate evidence, I mean, 7% yield appears to be fairly conservative. How do you, I mean, are there any near-term things that might want you, cause you to pursue a portfolio trade, or is this more likely to be split off in parcels over time?

But I mean, we're hearing in the markets and what we're seeing in terms of other cap rate evidence.

7% yields appears to be fairly conservative.

Are there any near term things that might once you cause you to pursue a portfolio trade or is this more likely to be split off.

In parcels overtime.

So I'm not going to predict.

Speaker 6: what avenue we choose over the next year or two, but your numbers are correct and I agree with Amy's analysis as well. Let's start with, what was our thesis around this? And keep in mind, it's somewhat of a barbell approach. On one hand, we like, very much so, the growth potential that we see in the street and urban market.

What Avenue, we choose over the next year or two.

But your numbers are correct and I agree with Amy's analysis as well, let's start with what was our thesis around this in.

And keep in mind.

Somewhat of a barbell approach on one hand, we we like very much so the growth potential that we see in the street and urban markets.

Speaker 6: We prefer not to have gone through a global pandemic, but we already are seeing rents that are pre-pandemic levels and we see strong, strong growth rates.

We prefer not to have gone through a global pandemic, but we already are seeing rents that are pre pandemic levels and we see strong strong growth rates. There. The other end of the spectrum is what we have been doing in fund five over the last several years.

Speaker 5: The other end of the spectrum is what we have been doing in Fund 5 over the last several years.

Speaker 5: where we were able to buy out of favor retail.

There, we were able to buy out of favor retail.

Speaker 6: not counting on much, if any, NOI growth, and it has lived up to our expectations. And by that I mean, not a lot of growth, but that's just fine when you're buying in the 7s and 8s, when you're levering 2 to 1, you're clipping mid-teens return.

Not counting on much if any NOI growth and it has lived up to our expectations and by that I mean, not a lot of growth, but thats just fine when you are buying in the sevens and eights when you're levering two to one youre clipping mid teens returns.

Speaker 5: What do we do with that portfolio as there is recognized cap rate compression? Does it get recapitized? Does it get sold one off? Well, as Amy pointed out, we still have a couple hundred million dollars, a few hundred million more of acquisitions that we've got to get done before we really have that fund fully invested. But I do feel like that thesis has been well validated.

What do we do with that portfolio as there is recognized cap rate compression does it get recapitalized as it gets sold one off well as Amy pointed out we still have.

Couple of hundred million dollars of few hundred million more of acquisitions that we've got to get done before we really have that fund fully invested but I do feel like that thesis has been well validated.

Speaker 6: The team has done a great job executing it, and we'll have a lot of different choices to ponder as to the best way to maximize the value for all of our stakeholders.

The team has done a great job of executing it and we will have a lot of different choices to ponder as to the best way to maximize the value for all of our stakeholders there.

Speaker 3: And does that lead you to raise more money in Fund 6? Is that the thought process?

And does that lead you to raise more money fund six is that is that the thought process.

Speaker 5: Well, we'll see. So if you dial back 6-12 months ago, not only was the $72 million acquisition not done, but the next $120 million and we still have another $200 above that, and our investors at that point would say, well what does the recovery look like? Now that volume is.........

Well, we'll see so if you dial back six to 12 months ago, not only was the $72 million acquisition not done, but the next $120 million and we still have another 200 above that and our investors at that point, we'd say well what does the recovery look like now that volume is re normalizing.

Speaker 6: I feel as though we have a very good thesis to continue the execution for Fund 6 of what we're doing on Fund 5 and I'll leave it at that for now.

I feel as though we have a very good.

Thesis to continue the execution for fund six of what we're doing upfront and I'll leave it at that for now.

Thanks, Kevin that's it for me sure.

Speaker 1: Thank you. Our next question comes from Todd Thomas with Keyband Capital. Your question, please.

Thank you. Our next question comes from Todd Thomas with Keybanc Capital. Your question. Please.

Speaker 6: Hi, thanks. Good afternoon. First question. So, you know, look, it sounds like there is, you know, a lot more activity in the core and in the funds and then you've seen in some time. And so I just wanted to circle back to. Um, cap rates a bit. Can you share the going in cap rates on investments? Uh, completed in both the core and in the funds since the start of the fourth quarter, I guess, and what you expect maybe to achieve during the year. Um, if there's sort of a way to bracket, um, you know, pricing or provide a sense of pricing, that would be helpful. And then what does the three to 500 million dollar investment assumption.

Hi, Thanks, good afternoon.

Question, Ken So look it sounds like there is a lot more activity in the core and in the funds and then <unk> seen in some time and so I just wanted to circle back to.

Cap rates a bit can you share the going in cap rates on investments.

Completed in both the core and the funds since the start of the fourth quarter, I guess and what you expect maybe to achieve during the year.

If there is sort of a way to bracket.

Pricing or provide a sense of pricing that would be helpful. And then what does the $3 million to $500 million investment assumption.

Speaker 6: that's in the guidance look like for the year between the two segments of the portfolio.

In the guidance look like for the year between the two segments of the portfolio.

Speaker 5: So let me touch on the last question first so that I don't forget it. And the answer is I don't know Todd the nice thing about the dual platform.

So let me touch on the last question first so that I don't forget it and the answer is I don't know Todd the nice thing about the dual platforms.

Speaker 5: is we can respond to opportunities as we see them, but not feel overly obligated to do something we don't want to do for instance.

Is we can respond to opportunities as we see them, but not feel overly obligated to do something we don't want to do for instance, if the public markets are not open for us to acquire assets accretive to NAV accretive to <unk>.

Speaker 5: If the public markets are not open for us to acquire assets accretive to NAV, accretive to SFO, we're not going to push that and then you probably see us be more active on the fund side. But in general, over any extended period of time, it is generally a nice split of about 50-50, but in any given year it's never 50-50.

We're not going to push that and then you probably see us be more active on the fund side.

But in general over any extended period of time is generally a nice split of about 50 50, but in any given year. It's never 50 50, so that's that piece of it.

Speaker 5: In terms of cap rates, and you touched on this and I'll try to answer it, but it's a moving target. To state the obvious, a lot of cap rates...

<unk> of cap rates and you touched on this and I'll try to answer it but it's a moving target to state the obvious a lot of cap rate.

Speaker 5: pricing is dependent on what's the growth rate look like, what's your levered returns look like, and all of the moving pieces around that as well as then what is the competitive bid. We tend not to be particularly impacted by what the competition is doing as much as does the pricing work. In terms of...

Pricing is dependent on what's the growth rate look like whats your Levered returns look like in all of the moving pieces around that as well as then what is the competitive bid we tend not to be particularly impacted by what the competition is doing as much as does the pricing work.

In terms of fund yields.

Speaker 5: for the assets we have been successfully acquiring. And there's an increased percentage of off market and private sellers as opposed to during the.

For the assets, we have been successfully acquiring and there is an increased percentage of off market and private sellers as opposed to during the.

Speaker 5: earlier days of the retail Armageddon where we're mainly buying from public REITs. That marketplace we've been able to hold on to are going in cap rates in the sevens, perhaps eights. But the difference is those cap rates may be down a bit where we see more lease up, more value add, more growth.

Earlier days of the retail Armageddon were mainly buying from public Reits.

That marketplace, we've been able to hold onto our going in cap rates in the sevens, perhaps a.

But the difference is those cap rates may be down a bit where we see more lease up more value add more growth.

Speaker 5: But I don't really care for that thesis, whether you buy at eight with no growth or perhaps even a little negative growth, or you buy in the sixes and sevens with growth, as long as we can get a decent chunk of our return out of levered cash flow with potential upside, and in the case of Fund Five, it looks to be somewhat asymmetrical upside, great. And if you look at three examples last week, we have the closing tweet that says,

But I don't really care for that thesis, whether you buy at eight with no growth or perhaps even a little negative growth or you buy in the sixes and sevens with growth as long as we can get.

A decent chunk of our return out of Levered cash flow with potential upside and in the case of fund five it looks to be somewhat asymmetrical upside great.

And.

Speaker 5: There are going to be well-marketed trades that get a lot of bidders that you'll point out that cap rates are substantially lower. Fine.

There are going to be well marketed trades that get a lot of bidders that youll point out that cap rates are substantially lower fine.

Speaker 5: you won't see us be the winning bidder on that stuff. So that's the fun side of the business.

You won't see us be the winning bidder on that stuff. So that's the fund side of the business.

Speaker 5: same similar math when we think about our core, but much higher growth.

Same similar math, when we think about our core but much higher growth rate.

Speaker 13: as we've outlined our internal growth at least for the next few years is looking 5% plus. So that's a pretty high hurdle. What we're shooting for on acquisitions is probably about a 4% growth rate.

As we've outlined our internal growth at least for the next few years is looking 5% plus so that's a pretty high hurdle.

What we're shooting for on acquisitions is probably about a 4% growth rate.

Speaker 13: for the foreseeable future through a combination of contractual growth. Think of contractual growth as somewhere between 2 and 3%.

For the foreseeable future through a combination of contractual growth think of contractual growth is somewhere between two and 3%.

Speaker 13: and then mark to markets depending on the assets, the leases, the timing, etc. And so far in the pool of assets that we have either acquired or are in our pipeline, that looks readily attr-

And then mark to markets, depending on the assets the leases the timing et cetera.

And so far in the pool of assets.

That we have either acquired.

Or are in our pipeline that looks readily achievable not every single asset not every single day, but overall blending to a 4% growth rate feels pretty good and exciting to us.

Speaker 13: Not every single asset, not every single day, but overall blending to a 4% growth rate feels pretty good and exciting to us.

Going in yield therefore.

Speaker 5: range in the fours and fives. The pool of assets that we have either acquired or are looking to acquire probably going to blend to a going in five.

Range in the fours and fives.

Pool of assets that we have either acquired or looking to acquire its probably going to blend to a going in five.

But this again, we are using our network of.

Speaker 5: This again, we are using our network of sellers. These are significantly off market deals.

Sellers these are.

Significantly off market deals.

Speaker 5: where you're now seeing a fair amount of activity around lenders forcing transactions, whether through foreclosure or otherwise, partners forcing transactions, and I give our team credit that we are one of the first calls for those kinds of assets especially.

Where you are now seeing a.

A fair amount of activity around lenders, forcing transactions, whether through foreclosure or otherwise partners, forcing transactions and I give our team credit that we are one of the first calls for those kind of assets, especially.

Speaker 13: We are one of the first calls and thus there is enough price discovery for us that we can get in at a fair price.

We are one of the first call.

Thus there is enough price discovery for us that we can get in at a fair price.

Speaker 6: Okay, that's real helpful.

Okay.

Real helpful.

And John .

Speaker 6: John , the question for you on the guidance, last quarter you commented that you thought 25 to 27 cents was...

Question for you on the guidance.

Last quarter, you commented that.

You saw 25% to 2007 was.

Speaker 6: the right range to think about from an FFO standpoint, excluding the Promote Income and ACI stock sale gains. You did a little better than that this quarter. Does that imply that the run rate heading into 22 is a little higher or should we still be thinking about that 25 to 27 cent range to start the year, just given some of the, you know, maybe some of the move outs that you previously discussed in Soho, San Francisco? You know, will we see that sort of step back a bit or has the range potentially changed?

On the right range to think about from an <unk> standpoint, excluding the promote income in ACI stock sale gains you did a little better than that this quarter does that imply that the run rate heading into 'twenty. Two is a little higher or should we still be thinking about that 25% to 27% range to start the year just given some of the.

Maybe some of the move outs that you previously discussed in Soho San Francisco.

We see that sort of step back a bit or has.

The range potentially changed.

Speaker 2: Yeah, Todd, thanks. So yeah, I think the range has changed, I think for the reasons outlined in the script. So I think the short answer is yes. So between we're in an improved credit environment, the investments that we put to work and the leasing that we've done, I think that that range certainly has improved since the 25 to 27 cents that I said for the first half of next year. I think this feels like the new normal.

Yes, Todd. Thanks, So yeah I think the range has changed I think for the reasons outlined in the script. So I think.

So the short answer is yes, so between where an improved credit environment. The investments that we put to work in the leasing that we've done.

That range certainly has has improved since the 25 to 27 and I said for the first half of next year I think this feels like the new normal.

Okay, great. Thank you.

Speaker 1: Our next question comes from Linda Tsai with Jefferies. Your question, please. Yes. Hi. Ken, back to your comments on rents being able to grow another 50% and not being at prior peak, but sales being well on its way to prior peak, what does this translate to in terms of a current occupancy ratio, and what do you think the market is willing to bear in terms of a steady state occupancy cost ratio?

Our next question comes from lean that tie with Jefferies. Your question. Please.

Yes, hi.

And back to your comments on rents being able to grow another 50% and not being at prior peak.

Sales being well on its way to prior peak what does this translate in terms of what the.

Does this translate to in terms of current occupancy ratio and what do you think the market is willing to bear in terms of a steady state occupancy cost ratio.

Speaker 5: And so let me point out a few things. My 50% comment is factual. It's just math, meaning Rents peaked in 2017. They dropped in it very building by building and deal by deal, but they dropped significantly. We've been talking about that for five years now. And so the rebound of 50% is just pure math, and that doesn't get you to the prior peaks. But sales.

So let me point out a few things my 50% comment is factual. It's just math, meaning rents peaked in 2017, they dropped and it Barry building by building and deal by deal, but they dropped significantly we've been talking about that for five years now.

And so the rebound of 50% is just pure math and that doesn't get you to the prior peaks.

But sales.

Speaker 13: for those retailers that have figured out how to use these streets. And Linda, you can remember a few years ago, even pre-COVID, the jury was out as to whether luxury retailers were going to continue to dominate these streets. And the answer is yes, they will. The jury was still out as to whether the Warby Parker and Allbirds of the world and the other digitally native were ever going to need stores. And yes, they will. So let me explain now occupancy costs.

For those retailers that have figured out how to use these streets and Linda you can remember a few years ago, even pre COVID-19 . The jury was out as to whether luxury retailers were going to continue to dominate the street and the answer is yes. They will the jury is still out as to whether the warranty Parker and all.

Of the world and the other digitally native we're ever going to need stores and yet they will so let me explain now occupancy cost when.

Speaker 5: When you're talking about occupancy cost for luxury, it's very different than when you're talking about occupancy cost for digitally natives or advanced contemporaries. I don't want to give a one percentage, one size fits all.

When youre talking about occupancy cost for luxury is very different than when you were talking about occupancy cost for digitally natives or advanced contemporary so I don't want to give a one percentage one size fits all.

<unk>.

If you just intuitively do the math occupancy cost as a percentage tend to now be 2030, 40, 50% less than what retailers were bearing during the prior peak different world different choices.

Speaker 5: If you just intuitively do the math, occupancy cost as a percentage tend to now be 20, 30, 40, 50 percent less.

Speaker 5: than what retailers were bearing during the prior peak. Different world, different choices.

Speaker 5: But what we are sensing from retailers is they've got a lot of glide path if their top line and bottom line continues to grow. And this is before we even think about things like inflation.

But what we are sensing from retailers.

Is they've got a lot of glide path, if their topline and Bottomline continues to grow and this is before we even think about things like inflation. So what does this mean for rents while theres two things that drive our leasing teams ability to rent space.

Speaker 5: So, what does this mean for rent? Well, there's two things that drive our leasing team's ability to rent space.

Speaker 5: One is rent to sales, and it's an important one to watch because just because a retailer wants the space if they can't do the business, sooner or later that comes back to haunt.

One is rent to sales and it's an important one to watch because just because of retailer wants the space that they can't do the business sooner or later that comes back to haunt us.

Speaker 5: But the other then is supply and demand. And that is a key driver and so when you have 10, 20, 30% vacancy on a given street, it doesn't really matter how strong the retailer's sales are. And in some instances we saw that. They're gonna negotiate for low rent.

But the other than is supply and demand and that is a key driver and so when you have 10 20, 30% vacancy on a given street doesn't really matter how strong a retailer sales are and in some instances we saw that.

They're gonna negotiate below rents.

Well thank fully.

Speaker 5: You didn't see a lot of long-term leases getting done during the COVID crisis and otherwise. Thankfully.

You didn't see a lot of long term leases getting done during the COVID-19 crisis and otherwise.

Thank fully retailers.

Speaker 5: held onto the 3% contractual growth more often than not, and have allowed fair market value resets. So assuming we see increased demand, which we are seeing many of our streets.

Held onto the 3% contractual growth more often than not and have allowed fair market value resets.

So assuming we see increased demand, which we are seeing many of our streets.

Speaker 5: The spaces are spoken for. If you want to come to Rush Walton corridor, you kind of have to call us. If you want to be on Green Street, you kind of have to call us. Armitage Avenue, the same. So.

The spaces are spoken for if you want to come to Rush Walton card are you kind of have to call us. If you want to be on Greene Street, you kind of have to call Us Armitage Avenue the same.

So.

Speaker 5: We're past the rent to sales conundrum. The rent to sales ratios, the tenant health ratios are much stronger than they used to be. We're back to a good supply demand dynamic and the right retailers are showing up and that's why.

We're past the rent to sales conundrum, the rent to sales ratios. The tenant health ratios are much stronger than they used to date, we're back to a good supply demand dynamic and the right retailers are showing up and Thats why.

Again.

Speaker 5: We don't have to get to Prior Peaks tomorrow. I don't even wish that. What I wish is over the next five years.

We don't have to get to prior peaks tomorrow, I don't even wished that what I wishes over the next five years.

Speaker 5: you get a rational layer of growth, which will be higher in our street portfolio than in the other components and that expect.

You get a rational layer of growth, which will be higher than our street portfolio than in the other components and that excites us.

Speaker 7: Thanks for that color and then just 1 more follow up in terms of the. Century 21 at city point that's 70% back filled by Primark. Any updates on the 30% of the space remaining.

Thanks for that color and then just one more follow up in terms of the <unk>.

Century, 21 at city point that 70% backfill by Hi, Mark.

Any updates on the 30% of the space remaining.

Speaker 4: You know, the good news is we're seeing solid momentum at the asset, like I mentioned, with six-point coming as well as other tenants in our pipeline. So, we look forward to continuing to share updates there. Great. Thanks. Thanks, Amy.

The good.

Solid momentum at the asset like I mentioned with $6 coming as well as other tenants in our pipeline. So we look forward to continuing to share updates there.

Great. Thanks, Amy.

Amy doesn't want to tell you whats in our pipeline.

Yes.

Speaker 1: Thank you. Our next question comes from Kibin Kim with Truist. Your question, please.

Thank you. Our next question comes from keeping Kim with twist. Your question. Please.

Speaker 8: Thanks, to actually kind of follow up on that last question, do you provide some more details or color in terms of what you're seeing in your forward leasing pipeline? Not necessarily for CityPoint, but I'm asking more about the screen and urban segment of your portfolio. Sure, and Amy now you're off the hook.

Thanks, Tom could actually have a follow up on that last question can you just provide some more details or color in terms of what youre seeing.

And your forward leasing pipeline not necessarily if I take your point, but.

I'm asking more about the street and urban segment.

Segment of your portfolio.

Sure.

And Amy now you're off the hook.

So.

What has been a pleasant surprise.

Speaker 5: If you dial back to pre-COVID, there was a lot of concern, and we felt like, you know what after.

If you dial back to pre Covid, there was a lot of concern and we felt like you know what after three or four years of rental declines that retailers were ready to step up.

Speaker 5: three or four years of rental declines that retailers were ready to step up. But then COVID happened.

But then COVID-19 happened.

And now, let's see where we are.

Speaker 5: as a result of a combination of the cleansing process that had occurred during the Retail Armageddon, the confirmation process that had occurred as a result of Omni Channel actually working.

As a result of a combination of the cleansing process that had occurred during the retail Armageddon. The confirmation process that had occurred as a result of omnichannel actually working.

We are now in a position where.

Speaker 13: Luxury retailers are stepping up and meaningfully so. And they're stepping up in ways that are different than you saw five, 10 years.

Luxury retailers.

Are stepping up and meaningfully so and they're stepping up in ways that are different than you saw 510 years ago.

Speaker 13: The luxury retailers are not simply counting on their mall-based tendency. They're not simply counting on their department store sales. They're recognizing they need to get in front of their important customers in these key areas. And the sales are supporting this. These are not just showrooms.

The luxury retailers are not simply counting on their mall based tenancy theyre not simply counting on their department store sales. They are recognizing they need to get in front of their important customers.

In these key areas and the sales are supporting this these are not just showrooms. So expect to see in many of the Carter's we're active in and other quarters that we are not yet active in luxury continuing to show up that's trend number one and our leasing team is excited by that.

Speaker 5: So expect to see in many of the corridors we're active in and other corridors that we're not yet active in, luxury continuing to show up. That's trend number one, and our leasing team's excited by it.

Speaker 5: Trend number two is that because omni channel has worked for so many of the digitally native

Trend number two is.

That because omnichannel has worked for so many of the digitally natives. What you are seeing today compared to two three years ago, where some of those online retailers said, we never need to open stores as they've been going public as they've been growing because they're all acknowledging that.

Speaker 13: What you are seeing today compared to two, three years ago, where some of those online retailers said, we never need to open stores, as they've been going public, as they've been growing, they're all acknowledging that the store is the most profitable channel for them. And so expect to see the Warby Parker in all parts of the world.

The store is the most profitable channel for them and so expect to see the war be Parker in all parts of the world.

Speaker 13: open up stores in these corridors and that combination plus everything in between.

<unk> App stores, and these corridors and that combination plus everything in between.

Speaker 13: is leading to a much stronger leasing environment than we certainly expected a few years ago or feared during COVID. And we're in a position because we have enough vacancy to lease up, we have enough of the right spaces, we're in a position to cap.

Is leading to a much stronger leasing environment, then we certainly.

Expected a few years ago or fear during COVID-19 and we are in a position because we have enough vacancy to lease up we have enough of the right spaces, we're in a position to capture that.

Hi.

Speaker 8: So how does that all translate into dollars and cents? Meaning your street and urban retail portfolios at 90% leave today has a 4Q. I'm not trying to get as specific as exactly what's embedded in your guidance for 2022, but I'm just trying to figure out when does that get back to 94%, 95%?

Or how does that all translate into dollars and cents meeting your street and urban retail portfolio is at 90% lease today at <unk>.

Yes.

I'm not trying to add specific I was like what exactly embedded in your guidance for 2022, but I'm just.

Kind of figure out like when does that get back to 94% 95%.

Speaker 2: John ? Yeah, keeping the way I would think about it is, you know, we put out multi-year, multi-year guidance that, you know, we think we grow to 5 to 10%. So rather than expecting when do we RCD at what period.

John .

Keeping the way I would think about it is we put out a multiyear multi year guidance that we think we grow to 5% to 10% so rather than expecting when we RCD what period I would I would say late 'twenty three 'twenty four time frame is where I would model that we should be at that level that we view as low occupancy to $94 95.

Speaker 2: I would say the late 23-24 timeframe is where I would model that we should be at that level that we view with full occupancy, the 94-

5%.

Speaker 8: Okay, and just last question for me. In your past 2021 lease rolls, you know, how much of high price?

Okay and just last question for me.

In your past.

2021 lease rolls.

How much of high priced.

Speaker 8: street retail has rolled and what does that mark-to-market look like for those group of assets and I realize you're not rolling a ton of leases every every year so I'm asking more specifically about like if you know more about mark-to-market

Street retail has ruled and what does that mark to market look like for dose group a factor then.

Realizing that rolling kind of leases every every year.

So I'm asking more specifically about like.

More about mark to market on lethal in places like Soho versus like flat Bush right.

So more gold coast versus.

Some more suburban type locations, where the higher price.

Price point leases that have broad what have you.

Experienced so far on the mark to market.

Let me take a first stab at that Sean, but so let's be clear it really dependent on vintage inn and vintage out.

If you were talking about.

2017 lease vintage signed rolling out during Covid, Oh, my gosh that would have been horrific.

Speaker 13: rolling out during COVID. Oh my gosh, that would have been horrific.

Fully we're really careful.

Not buying into that 2017 peak, so we avoided the peak.

And along the way we've had our fair share of valleys, but nothing as precipitous as that would be.

Rents dropped by anywhere from 20% to 50% in the different markets that you've just touched on less so on Armitage Avenue less so in Melrose place, but somewhere in that range and if you were capturing that peak and valley in a Soho boy that would hurt thank goodness we have.

Speaker 13: buy anywhere from 20 to 50 percent in the different markets that you just touched on. Less so on Armitage Avenue, less so in Melrose Place, but somewhere in that range. And if you were capturing that peak and valley in a Soho, boy that would hurt. Thank goodness we avoided that. And so what we have said is, we've cleansed through in Soho for a minute.

<unk> that and so what we have said is we've cleansed through in Soho for instance.

Speaker 13: We cleansed through most of the above market and even at today's market rents without further appreciation

We've cleansed through most of the above market and even at today's market rents without further appreciation.

Speaker 13: and I expect further rental growth. Even at today's, we have material upside through, the lease up of some of those spaces that we lost over the last few years as well as positive market.

And I expect further rental growth even at today's we have material upside through the lease up of some of those spaces that we lost over the last few years as well as positive mark to markets.

Speaker 13: So John , what might you want to say? Yeah, I think that explains it. Maybe give a couple of examples to make it probably keep in. So if we look at the Gold Coast in Chicago, where we did have high lease rollovers. So we lost Marc Jacobs on the corner of Rush and Walton. And we back filled that properly with our existing tenant expanding in that space, as well as adding Veronica Beard there at a positive spread. So I think that's one example where we'd be able to see what's happening in the future.

So John what might be.

That explains it maybe give a couple of couple of examples to think about it came in so if we look at the gold coast in Chicago, where we did have high lease rollover. So we lost Marc Jacobs on the corner of Rush and Walton.

And we backfill that profitably with our existing tenants expanding.

Expanding in that space as well as adding Veronica beard, there at a positive spread so I think that's that's that's one example, where we've been able to see SEC rules.

Speaker 2: Again, we look at Melrose, similar, and we talked about the spread that we saw at Melrose, also a hyper...

Again, we look at Melrose similar and we talked about the spread that we saw in Melrose also a hybrid.

Speaker 2: a higher dollar lease. And then I think the last thing I'd point out to SOHO in general is that we put out, and I'm losing track of years when we put this out, but it's still a relevant data point, is that we showed that our NOI from our SOHO assets.

A higher dollar lease and then I think the last thing I'd point out to Soho in general is that we put out and I'm, losing track of years. When we put this put this out but it's still a relevant data point is that we showed that our NOI from our sort of our core from our Soho assets doubles over between.

Speaker 2: doubles over between, and I'm going to have to remember the exact time, but during this period of the 23-24 that I mentioned.

I'm going to have to remember the exact time frame, but during this period of the 'twenty three 'twenty four that I mentioned to you and we're on pace to do that so I think again theres. Some theres some occupancy fill up in there, but that's also driven by rental rates as we're replacing.

Speaker 2: And we're on pace to do that. So I think, again, there's some occupancy fill up in there, but that's also driven by rental rates is we're replacing tenants that were at a basis that we are now exceeding that basis of rents that they were.

Tenants that were at a basis that we are now exceeding that basis and rents that they were paying at that period of time. So we are seeing positive positive spreads enroll as we will in our experiences is supporting that final point on this not every single store will be positive spread in our numbers.

Speaker 2: So we are seeing positive spreads and roll as we roll in our experiences.

Speaker 5: Final point on this, not every single store will be positive spread. In our number.

Speaker 13: taking into account the growth we see are gonna be wins and losses. It's just we're now seeing far more wins than we either thought and we're seeing fewer losses.

Taking into account the growth, we see are going to be wins and losses. It's just we're now seeing far more wins than we either thought and we're seeing fewer losses.

Okay. Thank you sure.

Speaker 1: Thank you. Our next question comes from Katie McConnell with Citi. Your line is open.

Thank you. Our next question comes from Kt Kt.

Katy Mcconnell with Citi. Your line is open.

Speaker 9: Great, thank you. Just wondering if you could walk us through your additional capital raising plans for this year to fund external growth. And what are the main drivers of the higher interest expense that you're assuming for this year?

Great. Thank you.

Wondering if you could walk us through your additional capital raising plans for this year to fund external growth and what are the main drivers of the higher interest expense that you're assuming for this year.

Speaker 2: So I think that the capital drivers, one is we've raised a decent amount of equity to fund what we think is our near-term pipeline. So with $115 million, that we're confident gets us to closing what we have expected in the near-term. And you think of the various capital sources within our portfolio.

Okay. So I think the capital drivers one is we've we've raised a decent amount of equity to fund what we think is our near term pipeline, so with $115 million.

<unk>, where we're confident gets us too to closing what we have.

Expected in the near term Additionally, and you've taken at various capital sources within our business.

Speaker 2: We have some structured finance loans that we're continually getting proceeds from. So that's a source of capital. And also our dividend payout ratio, given where it's at, even with the 20% raise is enabling us to retain cash flow. As well as, as Amy mentioned, as we monetize some of the fund investments, that is a source of capital for us. So that's just internal cash flow. And then, you know, we need a cost of capital on the equity side. You've seen we have issued at a $22.50 price.

We have some structured finance loans that that.

We're continuing getting proceeds from so thats a source of capital and also our dividend payout ratio given where it's at even with a 20% raise is enabling us to.

<unk> retained cash flow as well as Amy mentioned as we monetize some of the fund investments that as a source.

Capital for it so thats just internal cash flow and then we need a cost of capital on the on the equity side, you've seen we have issued at a $22 50 price and we're able to deploy accretively. So I think that's the other.

Speaker 2: and we're able to deploy that accretively. So I think that's the other piece of it. And our higher debt assumption factors in, again, the investments that we, I'm sorry, jumping to your second question in terms of the higher interest expense.

The other piece of it and our higher debt assumption factors in.

Again, the investments that we are jumping to your second question in terms of the higher interest expense first of all we're hedged. So if you look at our.

Speaker 2: First of all, we're hedged. So if you look at our long term debt profile, we have long dated interest rate swaps that are locking in our interest over a very extended period of time. But as we added the nearly $250 million worth of investments throughout 2021, that's the biggest driver of, on a go forward basis, we added those throughout the year. That's sort of the four year impact of those investments.

Long term debt profile, we have long dated interest rate swaps that are are locking in our interest our interest over a very extended period of time, but as we added nearly $250 million worth of investments throughout 2021, that's the biggest driver of on a go forward basis, we added those throughout the year, that's sort of the full year.

Pact of those investments in 2010.

Speaker 9: Got it. That's helpful. And then it sounds like the overall tenant health and leasing environment continues to be really strong. But just wondering within your same store and Hawaii guidance, what you're assuming for new bad debt expense in 2022? And are there any specific closures or watch list tenants to be aware of so far for the first quarter?

Got it that's helpful and.

And then it sounds like the overall tenant health and leasing environment continues to be very strong, but just wondering within your same store NOI guidance, what youre, assuming for new bad debt expense in 2022 and are there any specific closures or watch list tenants to be aware of so far for the first quarter.

Speaker 2: Yeah, and I think we're at a point in the cycle, Katie, where our watch list is...

Yeah, and I think we're at a point in the cycle, Katy where our watch list is.

Speaker 2: want to say virtually nonexistent, but it's virtually nonexistent. I think the weaker retailers have moved out and what we're seeing, and I look at them very closely, our tenant sales are strong and growing. So what I would say the way I would think about our, or the way I did think about our credit reserve is that I am assuming in our.

And I want to say virtually nonexistent, but it's virtually nonexistent in I think the.

The weaker retailers have have moved out and what we're seeing and I look at them very closely our tenant sales are strong and strong and growing so what I would say the way I would think about or what is the way I did think about our credit reserve is that.

Im assuming.

Speaker 2: what I'll call our low case, that we stay at a 98% collection rate and a roughly 2% reserve. And our higher case is going to go back to historic norms where we have ranged between 50 to 125 basis points. That's the way that we have modeled our 46% range as well as the NOI range.

Our what I'll call, our low case that we stay at a 98% collection rate and roughly 2%, 2% reserve and our higher case, it's going to go back to historic norms, where we have ranged between 50 to 125 basis points. So that's that's the way that we have we have modeled our 46%.

Range as well as the NOI range.

Great. Thank you.

Speaker 1: Thank you. Our next question comes from Mike Mueller with JP Morgan. Your question, please.

Thank you. Our next question comes from Mike Mueller with JP Morgan Your question. Please.

Speaker 10: Yeah, hi, I guess following up on key bins, you don't have a lot of street expirations in 22. But in 2023, it looks like about 20% or so rolls. Can you give us like a rough sense of a bracket as to where you think that group would roll to

Yeah, Hi, I guess following up on keeping.

You don't have a lot of street explorations in 'twenty, two but in 2023, it looks like about 20% or so rolls can you give us a rough sense for bracket as to where you think that group would roll too.

Speaker 10: And does anything in particular stand out during that year?

And does anything particular stand out.

Yes.

Speaker 5: It really runs the gamut mic and it's a bit early. So I don't have any.

It really runs the gamut, Mike and it's a bit early.

I don't have any.

Specific numbers around it.

Speaker 5: specific numbers around it. There's some tenants that we're going to expect.

There are some tenants that were going to expect.

Speaker 5: Getting the space back and retenancing and then there's others where we're in conversation right now. About extending long-term. So I yeah, my guess is over the next six months. We'll have much better visibility.

Getting the space back and re tenant thing and then there is others, where we're in conversation right now.

About extending long term side my guess is over the next six months, we'll have much better visibility.

Got it okay.

Speaker 10: Got it. Okay. That was it. Thank you. Sure.

That was it thank you.

Sure.

Speaker 1: Thank you. Our next question comes from Craig Smith with Bank of America. Your question...

Thank you and our next question comes from Craig Smith with Bank of America. Your question. Please.

Speaker 11: Yes, thank you. I'm just thinking about Fund 6. Will you continue with the existing investor base, or are you going to try to bring in some new names?

Yes. Thank you.

Just thinking about.

Thanks.

Continue with.

The existing.

The existing Investor base or are you going to try to bring in some new names.

What we have found historically and it varies fund by fund, but usually there are new investors that come join in the world evolves.

Speaker 13: What we have found historically, and it varies fun by fun, but usually there are new investors that come join in. The world evolves, the core.

The core.

Speaker 5: fund investors that have been with us over the decades are the endowments and foundations, but then there's always new folks and we welcome that. So the first key was we had to find profitable investments to put the money to work because until Fund 5 was well on its way, hard to talk about 6, we're now at that point and Amy and I are looking forward to starting those conversations.

Fund investors that have been with us over the decades.

Are the endowments and foundations, but then theres always new folks and we welcome that so.

The first key was we had to find profitable investment to put the money to work because until fund five was well on its way hard to talk about six we're now at that point and Amy and I are looking forward to starting those conversations.

Speaker 11: And thinking about the more seasoned endowment investors, how do they react during the COVID crisis?

And.

Thinking about the more seasoned investors.

How do they react Colby.

Yes.

Speaker 5: you know it ran the gamut because to some degree there are also heavy investors in tech and did quite well there.

It ran the gamut because to some degree they are also heavy investors in tech and did quite well there.

They have been supportive of us over the decades. So they know that we're watching carefully but we were trying to communicate with them as regularly as we were communicating with all of you because it was a scary time period.

Speaker 5: supportive of us over the decade so they know that.

Speaker 5: were watching carefully, but we were trying to communicate with them as regularly as we were communicating with all of you because it was a scary time period.

Speaker 5: when a large percentage of retailers

When a large percentage of retailers stopped paying rent for a period of time, but thankfully, we're past that thankfully our collection rates are where we want them and retail pre COVID-19 . There was questions about whether retail was an investable asset class now as it relates to the kind of.

Speaker 13: stop paying rent for a period of time. But thankfully we're past that. Thankfully our collection rates are where we want them and retail, pre-COVID there was questions about whether retail was an investable asset class. Now as it relates to the kind of stuff we do the...

We do the the answer is yes. It is and so the question is what price what returns what does the profile look like going forward and we're looking forward to having that conversation.

Speaker 5: The answer is yes it is. And so the question is what's price, what returns, what does the profile look like going forward? And we're looking forward to having that conversation.

Okay. Thanks.

Sure.

Speaker 1: Thank you and I'm not showing any further questions. Thank you. Great, thank you.

Thank you and I'm not showing any further questions. Thank you.

Great. Thank you all for your time and look forward to speaking with all of you again soon.

Speaker 1: And with that, we close our program today. Thank you for your participation. You may now disconnect. Have a wonderful day.

And with that we close our program today. Thank you for your participation you may now disconnect have a wonderful day.