Q1 2022 Urban Edge Properties Earnings Call
Okay.
Greetings and welcome to the oven each properties first quarter 2022 earnings conference call.
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I'd now like to turn the conference over to your host Jennifer home. Please go ahead.
Good morning, and welcome to urban edge properties first quarter earnings Conference call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer, Mark Langer, Chief Financial Officer, Chris Wall Minster, Chief operating Officer, Danielle Davita EVP of development Herb I'll Berg.
Chief Investment Officer, and Rob Milton General Counsel.
Please note today's discussion may contain forward looking statements about the companys views of future events and financial performance, which are subject to numerous assumptions risks and uncertainties and which the company does not undertake to update our actual future results financial condition and business may differ materially.
Please refer to our filings with the SEC, which are also available on our website for more information about the company.
In our discussion today, we will refer to certain non-GAAP financial measures reconciliations of these measures to GAAP results are available in our earnings release and supplemental disclosure package in the investors section of our website.
At this time it is my pleasure to introduce our chairman and Chief Executive Officer, Jeff Olson.
Great. Thank you Chad and good morning, everyone.
We are pleased to report a strong start to the year with <unk> as adjusted of <unk> 28 per share for the first quarter up 8% compared to prior year.
Driven by a five 5% increase in same property NOI and external growth through approximately $250 million of acquisitions completed over the past year.
We ended the quarter with same property leased occupancy of 93, 9% up 280 basis points year over year <unk>.
Including three anchor leases, we executed since the end of the first quarter. Our occupancy is now 94, 5% up 40 basis points compared to December 31 2021.
The gap between our leased versus physical occupancy in our same property pool is now 380 basis points.
Opening these tenants continues to be a top priority and will be a significant contributor to NOI.
In total we have $22 million of future gross revenue coming from executed leases not yet rent commenced representing approximately 10% of our current NOI, which may be the highest percentage among our peers.
The open Air shopping center sector is performing exceptionally well.
<unk> look at the share performance of our 40 largest tenants who are publicly traded and comprise 52% of our total rents.
Since February 2020, right before Covid shut the world down there.
Stock prices of these 40 companies are up 33% on a weighted average basis led by our top five tenants home depot T J X Lowe's best buy and Walmart.
Leasing momentum is strong as we head to ICSC with over a million square feet of leases under negotiation at spreads that exceed 20%.
Our strategic plan is focused on improving retail real estate and first ring suburban markets, primarily throughout the DC to Boston corridor.
There are four pillars to our plan.
The first pillar is upgrading our properties through adding new anchor tenants that not only provide a good return on current capital, but also provide further upside from leasing surrounding vacant space securing higher rents from adjacent tenants and from achieving cap rate compression.
We have $207 million of active projects underway expected to generate an 8% unlevered yield.
In addition, we expect to activate another $100 million of projects within the next year.
The second pillar is growing our occupancy rate from our current rate of 94, 5% to at least 96%.
On this point our progress is encouraging as demand is strong across a number of sectors.
In many cases, we have multiple tenants competing for the same space.
The third pillar is monetizing non income producing land. This is a unique aspect of our portfolio as our properties are concentrated in the most densely populated market in the country, namely the New York Metropolitan area.
We have identified opportunities, where the highest and best use for the land could be for residential industrial or medical office.
The greatest opportunities include the 77 acres of land at Sunrise Mall in Massapequa, New York that is zoned for industrial use and eight acres of land adjacent to Bergen Town center that could accommodate 450 to 500 multifamily units.
Our fourth pillar pertains to value, we can capture from refinancing loss Catalina small in Puerto Rico.
Our mortgage provides us with a discounted payoff option starting in August 2023, and about $50 million less than the current carrying value of the debt.
Based on the anticipated opening of sector 66 next year.
And the leasing momentum we are seeing at the property, we expect to exercise this option once replacement financing is secured.
In addition to the growth we can achieve within our existing portfolio further upside can be achieved through external growth.
We currently have a $33 million grocery anchored center under agreement to acquire and will provide additional details after we close on the property.
I am proud to see our team executing our plan with such a spirit of teamwork and collaboration.
We are making great progress on our four strategic pillars of delivering value add anchor repositioning projects, increasing occupancy to exceed 96% monetizing non income producing land and extracting value from a debt refinancing.
I will now turn it over to our Chief operating officer, Chris while Mr.
Thank you, Jeff and good morning, everyone I am happy to see the solid leasing momentum continue into 2022 with 33 leases totaling 308000 square feet executed in the first quarter and same space leases generating an average cash rent spread of 5%.
Equally exciting is our 1 million square foot leasing pipeline expected rent spreads of 20%. This pipeline includes important anchor back filling at Bruckner Hudson Mall and Monte Adra.
At <unk>, we have made great progress on leasing the majority of the former Kmart store to a high profile national retailer and the former toys box to another national retailer, we look forward to sharing the details of this activity upon lease execution.
We are also leasing the former <unk> box to two discount retailers and Aldi grocery store once completed Bruckner will solidify its position as one of the most dominant retail destinations in the Bronx.
At Hudson Mall, we are back filling the toys box with a national grocer and are negotiating leases with well recognized retailers to re tenant and renovate a significant portion of the property.
The enhancements we plan to make at Hudson Mall will transform the property located in Jersey city in a manner consistent with what we are accomplishing our partner.
At Monte behavior, where backfill in the Kmart box with three tenants, including a grocer.
Soft goods discount retailer and a medical service provider, we remain on track to execute these leases during the second and third quarter of this year.
Demand is being driven by a broad range of retailer categories, including grocers soft goods retailers general merchandise retailers sporting goods home improvement health and beauty retailers medical and personal service providers restaurants, especially in the fast casual concept niche.
Fitness operators and we are seeing large entertainment concepts back looking for growth opportunities.
Retailers continue to focus on improving product offerings, strengthening customer engagement with seamless bricks and mortar and digital marketplace initiatives, while using data to improve efficiencies in their operating models.
Dick's Sporting goods and best by our recently announced online sales declines, while showing positive sales growth in bricks and mortar locations, while Amazon wafer and Paypal have reported tempered guidance as demand decreases in customer acquisition and delivery costs continue to rise.
As Geoffrey radar cofounder and CEO of <unk> zinc states. The Internet is a great place to transact, but it's not great to discover everyone's working on that in the digital world, but there is something thats just amazing about in person discovery, we agree retailers continue to seek well located opportunities that provide.
A great shopping experience for their customers.
Based on the current leasing velocity I am confident we will achieve leased occupancy of 96% by end of the year and then we'll turn our sights to restoring the portfolio to historical occupancy of 97% 98%.
Turning to consumer behavior, we are pleased to see that our customer traffic throughout the portfolio continues to strengthen.
The total portfolio saw customer traffic increased 11% in Q1, 'twenty two versus Q1, 'twenty, one and 8% versus Q1 19, our portfolio is attracting more customers than it did pre COVID-19 and should materially increase as occupancy returns to historical levels.
Jeff mentioned, the four pillars of our strategic plan.
And I can assure all of you that our property management and leasing teams are laser focused on doing everything possible to reach our 96% occupancy goal this year.
We are working hand in hand, with Danielle and our development team to enhance our properties with a mix of leading retailers, including specialty and shop tenants in an environment that appeals to a consumer who is increasingly focused on convenience safety and experience.
<unk>.
Thank you Chris Good morning, I'll start by covering some of our financial highlights for the first quarter and then provide an update on business fundamentals, including our NOI and earnings expectations and will close with comments on our balance sheet and liquidity.
Starting with our results for the quarter.
We reported <unk> as adjusted of <unk> 28, a share slightly better than our expectations, primarily due to the benefit of earning an additional $700000 or percentage rent related to 2021 tenant sales, which we now disclose in our supplement.
NOI growth was strong during the first quarter up five 5% on a same property basis, when compared to the first quarter of 2021 and up three 8% when including properties in redevelopment.
The first quarter results. This year included $1 $3 million of recoveries for amounts previously reserved.
And expected decline compared to quarterly levels throughout 2021, including $3 $3 million recognized in the first quarter of last year.
One positive trend, we continue to see regarding the strength of the retail recovery is embedded in the high collection rates, we have achieved on the rent deferrals, we executed during the pandemic.
Of the nearly $12 million of total deferrals our collection rate is currently at 98%.
This is a real testament to our receivable and collections team and also to our tenants who are honoring their commitment to pay amounts that were deferred during the height of the pandemic.
In addition, our collections on base rents this quarter exceeds 99% and is now at pre pandemic levels.
In terms of items impacting future NOI and earnings growth. It is helpful to note the following.
The biggest driver of future growth comes from our lease but not commenced pipeline that Jeff highlighted which currently consists of approximately $22 million in future annual gross rent that reflects the 380 basis point spread between our same property physical to leased occupancy.
We added a table in our supplement on page 21, which highlights at approximately $5 million of this revenue is expected to be recognized this year, primarily weighted to the back half of the year in.
An additional $11 million of annual gross rent is expected to be recognized during 2023, which will gradually buildup as rents commence throughout the year.
During our earnings call last quarter I described the puts and takes that are expected to impact NOI this year, including tailwind from new leasing contractual bumps bad debt reversals and improvements in recovery ratios as physical occupancy grows.
We also noted the headwinds that we will face from some expected anchor fallout.
Overall, considering changes in bad debt levels, we continue to expect that NOI will be positive this year.
This factors in our current expectation of future bad debt reversals, where we believe we can collect an additional one 5% to $3 million of amounts previously reserved which will help offset the more than $8 million of reversals, we recorded in 2021.
Prior to adjusting for reversals, our internal forecast for the remainder of 2022 assumes that new bad debt reserves are in line with pre COVID-19 levels equating to <unk> 75 to 100 basis points of gross revenues.
One item I want to highlight this quarter is our reporting related to Sunrise mall.
Given the unique aspect of this property, where the value of the asset is not at all correlated to traditional occupancy base rent and NOI metrics. We have separately identified the $1 4 million first quarter net operating loss for the property on page six of the supplement.
Within our reconciliation of net income to same property NOI.
We expect this to be a good proxy for subsequent quarters. This year with the mall at 47% occupancy.
We do not include Sunrise within our headline same property, our retail occupancy figures due to the repositioning plans for this asset.
In terms of our balance sheet and liquidity, we ended the quarter with almost $200 million of cash and have no amounts drawn on our $600 million line of credit.
We are currently in the process of refinancing our two mortgages that come due this quarter that aggregate $82 million, we expect to utilize our cash on hand to fund our redevelopment projects.
For acquisition opportunities.
I Echo the sentiment noted by Jeff and Chris as it pertains to our focus on achieving our operational and financial goals, while simultaneously advancing our goals related to ESG.
We are making great progress on all fronts and are seeing the benefits of our past efforts pay off as we repositioned the portfolio with stronger national tenants, who are providing us with a more durable and growing stream of cash flows.
We look forward to meeting with many investors at the upcoming NAREIT conference.
I will now turn the call over to the operator for questions.
Thank you.
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Okay.
The first question, we heard from Rich Hill from Morgan Stanley .
Hey, good morning, guys.
I really like in your press release, where you talked about getting back to 96% occupancy, maybe even a little bit higher than that.
I think it's really nice to be front footed about that.
Can we maybe just talk through the cadence of getting back to those levels I recognize there's a lot of moving parts between redevelopment and leasing but for our modeling purposes. I think it would be helpful for us and maybe others to just maybe understand how the cadence of getting back to that 96 plus level.
Yes, I'll turn it over to Chris <unk> good morning.
Okay.
Our goal to get back to 96% from a timing perspective is by the end of this year.
So we have a specific path to get their lease by lease.
We do expect that we will be higher than that as we go into the outer years into 2003, and 2004 and if you recall, we averaged 97% to 98% for quite some time periods. So our expectation is we'll probably be back at those levels within 24 months.
Chris do you want to add to that sure sure good morning rich.
We have a lot of activity right now with regard to fee.
Some of the anchor spaces in our small shop at our smaller anchor spaces.
Lot of activity with retailers and we think by the end of the second quarter, we're going to be able to report to <unk>.
Large chunk of that GLA to be leased up Opex, that's close to three we've got over 300000 square feet and we've got activity on all of that space right. Now so that's a big piece on the anchor side on the small shop side or on the shop side leasing we've got about 42 transactions, we need to get done and we're making very good progress on those as well it's hard.
To get into it because there's a lot more transactions, but we're finding a lot of activity in the F&B side, and the health and beauty side and the personal services side. The medical side. Those are all driving that occupancy on the small shops. So we think we can pick up 300 plus basis points in small shop occupancy from what's been reported and get that done.
By year end, what you will which will push us hopefully over the finish line on the 96% and were certainly not focus to stick on 96, I mean, we think that once we get there that there is a good pathway over the next couple of years to find our way back up to our more traditional occupancy of 97 plus percent.
Got it and maybe just one.
Accounting housekeeping item.
In Las Colinas small recognize that's financed and the MBS deals.
Are there any sort of accounting nuances, we should be aware of because I do recognize there's going to be.
Pretty attractive gain relative to the loan balances if I'm, if I'm thinking about that correctly.
Yeah Rich this is mark I think the only nuance is that we can't recognize that gain Jeff referenced until we actually execute and fully refinance it so its not like Theres no contingent gains. So we'll book it once it's executed okay. Thanks, guys. Congrats on a nice quarter.
Thank you rich.
Thank you.
Question Carl.
EMEA panel from Evercore ISI.
Hey, good morning, everybody.
This NOI, that's going to come through I think it's $22 million, which is higher.
From the prior quarter.
I think the breakdown if I heard this correctly was $5 million for this year is there any if you take the other side of this I know, it's all positive but is there any way that timing could sort of slipped given the macro issues out there.
Distribute labor issues, we hear about.
Sure sure well first of all the $22 million when you add in the 100000 square feet of leases that we just signed since the end of the quarter that actually goes up to 24 million. So its actually increased.
But yes, I think theres, a little bit of risk. We certainly have built in contingencies and these numbers just because of the supply chain issues. Both respect to our development costs, but also to to the timing of getting these tenants opened so what we've outlined on page 21 in the supplement which goes through the timing.
Year by year, we feel very good about about those numbers as of today.
Okay got it and then I guess on the <unk>.
Just on the transaction market here and it sounds like you have something under contract on the grocery side.
Maybe just give us sort of a general view kind of what youre seeing in terms of pricing with bond yields going up.
Kind of an overview on the transaction market and not only grocery anchor centers. What are you starting to see some trades on.
Maybe a bit more box your centers as well any any color would be helpful. Yeah, no happy to provide some and I'll, let her comment as well, but in terms of cap rate, even though interest rates have gone up we have not seen any significant movement in cap rates.
And when we look at trades.
There is a $400 billion portfolio in Boston, that's trading in the very low fours thats, probably the most active comp thats out there.
But there had been a couple large portfolios in long island, I think totaling around $500 million that have also traded in the four ish cap rate range call. It the mid to I would call it the mid to high fours.
And obviously this is well below the mid to high sixes that our cap rate is trading at based on our current price. According to the math behind your numbers and many others, but our herb do you want to make a comment on cap rates, yes, sure and good morning.
Just echoing what Jeff said.
We really haven't seen much movement, particularly in the higher quality.
Institutional quality assets again.
Tend to be lower leveraged transactions, so that makes sense.
And some of the secondary markets, we are starting to see some impact those tend to be more levered buyers. So as natural there that you'd see some widening of cap rate.
I think the headline is there's no shortage of demand for good retail assets certainly much more so than in recent years and that trend seems to be continuing so we think that that.
That wave of capital is going to mitigate any real impact from from higher interest rates.
That's it for me thank you.
Great. Thank you Samir.
Thank you.
And gentlemen.
Reminder, if you would like to ask a question.
The next question we have is from.
So I'm going to go ahead.
One morning.
I'm curious can you provide different pieces of information.
Occupancy.
And what's the whole core thank you.
Okay.
90% that you are expecting and for he is talking about.
For example here.
I'm, sorry, I didn't quite get that Paulo can you repeat that question.
Yes, so youre expecting and by the end of the year to reach <unk>.
96% right.
Correct.
What are you expecting for fiscal occupancy.
For physical occupancy do you have that number Jim.
Yes.
I mean, the way I would model it I don't have the exact number off the top of my head, but the way I would model. It is again I would look at this.
This.
The chart on page 21 that shows $4 $9 million of rent coming in in 2022 from the leases that have been executed, but not yet rent commenced.
And then in 2023 that number is $15 million. So those but those are the numbers that you are ultimately looking to get at but we can get back to you with the actual expectation of physical occupancy.
Thank you.
And the other question.
Can you provide an only mind me.
Your expectation is for acquisition dispositions.
And in the intermediate term I.
I know back in 2019, you had and sort of guidepost, but.
But im not sure if that guidance.
Today.
I mean, historically, we've done $2 million to $300 million of acquisitions each year, but we don't have a specific target because it's very much opportunistic based.
But I think over the course of the next five years, that's a reasonable goal.
In terms of dispositions I think we've stated that.
Likewise, we've sold about $50 billion, a year and I think that's probably within the range.
Thank you.
Extended time period.
Uh-huh.
You mentioned that you of course, you highlight your Pakistan, Ian Boston Corridor.
To say it was the ability to target other infill.
At Submarkets and curious what other.
Mark outside the corridor have you seen any.
Either it or are you having a later.
Correct Yeah.
Right.
Well first of all we have nothing identified at the moment in the pipeline.
But we do have a lot of expertise and we have some properties in California, and we have a lot of expertise in Florida as well, we'd like those two markets just in principle, because theyre highly densely populated markets consistent with our theme of <unk>.
Operating in the most densely populated market today, which is the New York Metro area.
But in order to get to those markets, we really would want to have critical mass in size and we realized that there are challenges in making that happen.
Daily It would come from a portfolio transaction very similar to the way we expanded when Mark and I were at equity one with the capital and counties deal.
It got us into California.
Got it thank you.
Thank you.
Okay.
Thank you.
<unk>.
From Jacob.
Okay.
Good morning, guys. Thanks for taking my question.
Yeah.
I would be interested maybe Jeff if you can comment a little bit on there is still.
Reticence from investors to really recognize the growth in urban markets and certainly.
New York.
In San Francisco, and DC, and Boston are still viewed as sort of.
A little bit with disdain, but with a lot of people, who think that everybody is moving away.
Maybe if you could talk about why demand should grow and then.
Particular, you talked about getting your overall occupancy up your your shop occupancy.
81, 9%.
Where what was the peak for your shop occupancy and obviously truck stop rents are are double what they are for approximately for for your anchor occupancy where do you think you can push that and can you push that higher than where it was in the past and then also how do those leases look today.
Sorry, it's a multifaceted question, but are you being able to drive higher fixed bumps on those rents as there is now more competition to lease space.
Alright, let me take the first part of your question.
<unk>.
In terms of urban markets.
The name of our company as urban edge properties and our properties are located on the edge of these urban markets and they are in first ring suburban markets principally outside of the New York Metro area and what we have seen since COVID-19.
As we have seen.
More activity at our centers Theyre busier today than they were before Covid in part because people are working from home so they're they're visiting our centers more frequently.
And what the retailers are telling us is that they need more stores throughout our markets and because our markets are so densely populated and supply constrained. They are having a hard time, finding boxes and thats. The whole thesis of the company is operating in <unk>.
Ensley populated markets, where it's hard to find space, which should allow us over time to push rents and get tenants to do unconventional things outside of their typical prototypes because they have no other options and all you have to do is drive up and down Central Avenue in Jan.
<unk> to see what the big box tenants are doing to get into that market. So when we talk to retailers retailers are not telling us they favor the sunbelt markets over getting more stores in the northeast.
Secondly, when you look at the productivity behind the retailers that operate throughout our portfolio I mean on average according to place or they are in the 75th percentile within their chain averages. So the northeast and our stores in particular are producing.
Some of the highest sales within the respective chains of our tenants. So.
So we are very bullish on.
On the northeast corridor, particularly these first ring suburban markets for retail demand.
Chris or Mark did you want to take the second part yes.
What I would tell you that.
Where historically, where we were at anchor at about 99% occupancy on the anchor side and.
About 93% on shop space that would get us up to.
That would get us up to the 98.
Yes that would get us up to.
Sorry, I just lost my train of thought the Asics, the 96 that would get us up to the 98% occupancy I apologize I was confusing that with the 96, but that gets us up to 98%.
Getting back to the historical question and then on the ranch, where we're doing the shop space. We're definitely seeing annually that we are able to get we're pushing hard to get the three plus percent increase range, depending on who the tenants are on the anchor still seem to be stuck on that 10%, but we push and every angle possible.
Chris can you just comment on the demand for shop space today that allows us to get back up to that 93% where are you seeing are coming from and.
And how is it now compared to three years ago in the remarks as I as I mentioned over and over about the categories, the food and beverage categories.
Health and beauty categories, the personal services categories fitness categories, I think of people left the workforce and found other opportunities to make money. They invested in franchises around concepts, we're seeing a lot of demand from those types of categories and it's much more robust.
Post COVID-19 than it was pre Covid and where there's just no doubt with regard to the activity and as we also look at the fact with the cost of construction being where it is there's very little new supply coming into the market. So as space as Phil has just been saying for the past year as we see occupancy increase across the board in this.
Centers in our in our core markets, we're able to secure these types of tenants and these tenants are looking for quality real estate and so even the ones that are already in market are looking to move from a CRB up Q&A type property, we're seeing a lot of that traffic. So we're very confident in our ability to grow that small shop leasing backup into the low to mid.
90% and that that'll be a key to getting us up to that that historical occupancy level of 97, plus 98% occupancy 96, again barring something catastrophic beyond our control in the markets, where we're really pushing hard and feel very confident about reaching that 96%.
Occupancy rate by the end of this year.
And Florida, what I'm most excited about is as the market gets back to full capacity.
We will there will then be a much smaller subset of spaces available for those tenants wanting to get into the market. So.
We should be able to push rents higher than what we've been able to do over the last year, just because there's less space available.
So I mean, it sounds like.
Just back of the envelope if you if you increase your small shop.
Just over 10% just alone on that your your operating margins are going to be massively higher rents and thats assuming just on on.
Current rents that's going to be even significantly higher if youre able to push rents.
Maybe.
One last question for me, which is key.
<unk>.
They are three 7% of your rents, but they are paying very low average rents and 50, a square foot or something like that but maybe talk or comment on the whole situation and sort of.
Is that a risk or is that an opportunity for you guys.
Look I do think it's an opportunity I mean, most of our kohl's locations.
Our stores that they opened when they came to new Jersey, a long time ago and as I look through our rankings and see that on average our coals are operating in the <unk> percentile of their chains with respect to.
Sales and consumer traffic, we feel very good about.
How how they're performing I mean, we have some of the top performers in the chain, we're particularly excited about relocating.
What place or identify us as the <unk> most visited site out of 1100 39 stores in the chain and Paramus, New Jersey to Bergen Mall. So.
So we do believe in the concept we believe.
They operate in great locations within our portfolio and.
And relative to the rent that they pay.
We feel very good about the inherent value of the real estate in those locations.
Okay.
Thanks, Jeff and that's it for me.
Okay. Thank you.
Thank you.
Ladies and gentlemen.
Linda if you would like to ask a question. Please press star and then one now.
Next question, we have is from Chris Lucas.
With capital one securities.
Good morning, guys.
Two questions from me one is going back to the philosophy question and I apologize if you've talked about this.
<unk>.
Look for them.
Is there a component of the sort of 19 to 18, 1% of vacant shop space Thats effectively not reasonable right now because it's redevelopment.
Or you are waiting for anchors to sort of position this space to be.
<unk>.
These.
There is one that we are repositioning and taken some small shop at at Hudson Mall Thats one thats.
<unk>.
The numbers that Youre looking at where we're going to consolidate and roll them in the anchor space. So as we look to reposition or a little bit back of Yonkers, as well, but those would be.
The two Yonkers and Hudson.
Okay, and then I.
I guess the other question from me Mark I'm going to ask this one for you and then there's a series of questions, but I'll do it one at a time, which is related to percentage rents and just the inflationary environment, we find ourselves in right now.
Was there much percentage rent in your overall rental revenue I don't know how important it is to sort of.
Revenue story.
Yes. The answer is historically it has not been kind of averaging $1 million to $2 million, but given the trend that's happened.
Picked up which is what you saw and it's also the reason Chris why we decided we would add that disclosure because it has been a bit lumpy.
And we expect it to be so while we had a good chunk of this quarter. It really pertained to sales that came in from last year end reports. So I think when you look at that trend, while we had about $1. Two in Q1, we expect very modest levels. In Q2 Q3, just because of the timing of reporting in Q4, we should see.
<unk>.
Moderate pick up call it a $5 million. So all in we would expect to have $2 million to $3 million for the full year, but mark the $1. Two in Q1 compares to what of Q1 last year about half a million dollars. So it was up 700000.
Okay, and then Mark just.
If I stick with this and the forecasting out and I'm not looking for guidance, but I'm just trying to figure out if I think about next year. So Q1 'twenty. Three are there are there tenants that are getting close to that breakpoint and then just given the inflationary environment you will see some kick in.
You can see that that breakpoint.
That sort of or do you feel like that's fairly stable number going forward relative to sort of what we saw this year.
Well given the trends we made we certainly would hope it's stable so from a year over year basis, you are saying kind of look in Q1 of this year to Q1 of next year, we would hope.
To see that same pick up just based on the trends.
Okay, and then Chris just on the same topic are you having conversations with tenants. This is an area of focus for you guys or is it really still just about maximizing base rent bumps.
Alright. It is we're using all of that sales trend is important to us because we want to that helps us get maximization and bumps and pushing out of the tenants who want to do business with so it is all it is.
All important we pay attention to it very much.
Okay.
Thank you that's all I had this morning.
Great. Thank you.
Sure.
Thank you.
Ladies and gentlemen, just a final.
If you would like to ask a question. Please press star and then one.
Sure.
No further questions.
Can I hand over back to Jay.
Great well. Thank you everyone. We look forward, we look forward to seeing you both at ICSC and NAREIT. So please call us if you have any questions on this call. Thank you.
Thank you ladies and gentlemen concludes today's conference. Thank you for joining US you may now disconnect your lines.
Right.