Q1 2022 RPT Realty Earnings Call
Greetings and welcome to the RPT Realty first quarter 2022 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press <unk>.
Sorry zero on your telephone keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host Vin Chao. Thank you.
Good morning, and thank you for joining us for Rpt's first quarter 2022 earnings Conference call. At this time management would like me to inform you that certain statements made during this conference call, which are not historical maybe deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Additionally statements made during the call are made as of the date of this call listeners to any replace you understand that the passage of time by itself will domestic quality of the savings plan. Although we believe that the expectations reflected in any forward looking statements are based on reasonable assumptions factors and risks could cause actual results to differ from expectations.
These factors are described as risk factors in our annual report on Form 10-K.
Full year ended December 31, 2021, and in our earnings release for the first quarter 2020 to.
Certain of these statements made on today's call also involve non-GAAP financial measures. The terms are directed to our first quarter of 2022 in fourth quarter 2021 press releases, which include definitions of those non-GAAP measures and reconciliations to the nearest GAAP measures and which are available on our website in the investors section.
I would now like to turn the call over to President and CEO , Brian Harper and CFO , Mike Fitzmaurice for their opening remarks, after which we will open the call for questions.
Thanks, Dan Good morning, and thank you for joining our call today too.
2022 started off much like we ended in 2021.
Positive leasing momentum success on the investment front and continued access to capital.
And my four years at the company I've witnessed tangible transformation and the quality of our tenants markets portfolio people and processes all of which has significantly improved the quality of our cash flows.
Our first quarter leasing volume was the best quarterly level in over a decade, while our investments team continues to find accretive deals after a record breaking 2021.
We are reshaping our geographic mix in real time, and our success on the operating and investment front is translating into financial success.
Our first quarter same property NOI growth of nine 9% and O F F O. It.
Per share growth of 37% is reflected of the RPT transformation and was consistent with our expectations.
Arctic or it might be the same.
But our company is very different from what it was just a few years ago.
As had been saying for the past few quarters, the leasing environment remains robust across property types markets and tenant categories. As the pandemic has reinforced the importance of brick and mortar as a key and profitable component of retailers distribution channels.
Reflective of this demand during the first quarter, we signed 716000 square feet of leases across 82 transactions.
And it's more than the last two quarters combined and is the highest quarterly level since the first quarter 2010, putting us on track to exceed the $1 7 million square feet, we signed last year.
Leasing activity for the quarter included 19 anchor deals highlighted by our new lease with a national wholesale club at River city marketplace in Jacksonville.
And key leases with Dick's sporting goods and Ross at Providence marketplace to T. J Maxx, Louise leases and three dollar tree leases.
Further highlighting the strength of the market is our ability to drive price. In addition to volume in the first quarter, we achieved a new lease spread of 20% and 25, 7% on a trailing 12 month basis.
Reflective of the attractive mark to market opportunity in the portfolio that we will continue to harvest over the next several years.
The high single digit renewal spreads that we have been reporting also reflected the improved retail landscape with a retention ratio hitting 93%.
Consistent with last year, but above pre COVID-19 levels.
Tenants that were previously struggling had been exercising renewal options as their business has improved and the value of their real estate became more apparent in the wake of the pandemic it.
It is worth noting that our average annual expiring rent per square foot in 2023 through 2027 are all below our in place portfolio average.
Older leases on great real estate like ours should allow us to continue to drive strong releasing spreads and achieve elevated tenant retention rates over the next few years.
Strong leasing demand is also resulting in upgrades to our tenancy as retailers flocked to the highest quality real estate like ours.
This is allowing us to improve the quality and the value of our cash flows.
In the first quarter, we signed a deal with a national wholesale club at River city marketplace in Jacksonville that will replace the Regal cinema.
Not only will this solidify the stability of the center for many years, but it will also create significant value through cap rate compression.
Another notable.
This concludes sweet cream that Troy marketplace in Detroit.
The deal was signed on the back of our double a rated grocery deal is scheduled to commence later this year.
We also signed Sephora town and country in St. Louis that along with an Rei that we signed earlier in the year combine to replace a former Stein Mart box and yet. Another example of how the downturn has benefited our business by allowing us to upgrade our tenancy and attractive economics and with investment grade credit.
Yeah.
Strong demand is also resulting in more opportunities to redevelop our centers often with a grocery anchor leading the way.
We continue to make great progress with our redevelopment plans at marketplace of del Rey in Delray Beach.
And Hunter square in Oakland County outside of Detroit, where we're working with leading grocery was to upgrade the centers.
While our publics expansion projects at the Crossroads in Palm Beach is slated to break ground later this month.
We were also zeroing in on another grocery deal to anchor redevelopment at our West Broward property in Miami that will significantly upgrade the tenancy of the center, replacing a former save a lot, which we believe will compressed cap rates by as much as 300 basis points once the new grocery is in place.
One in my opening remarks on investments, where we continue to flex the power of our grocery anchored net lease and wholly own investment platforms as evidenced by our increased 2022 acquisition guidance to $225 million up a $100 million from last quarter.
We are rapidly reshaping the portfolio towards higher growth markets, like Boston, Atlanta, Nashville, and Florida, which collectively now account for about 51% of the company's total property value with our three Florida markets, Tampa, Miami and Jacksonville.
Accounting for 28% of the total.
Just after the end of the quarter, we closed on the acquisition of the crossing shopping center near the high barrier coastal city of Portsmouth, New Hampshire in the greater Boston MSA.
With this acquisition Boston, Boston moves up to our second largest market and about 12% of ABR.
The asset fits nicely into our last mile Credit Center bucket.
The crossings is a market dominant 510000 square foot center that benefits from a lack of sales of state sales tax and year round tourism and both the true trade area of 251000 with higher average three mile income of 114000.
The center has two strong groceries, and aldi and trader Joe's who's doing $2500 per square foot in sales.
Other strong credits include Dick's Sporting goods, Bestbuy, Kohl's, Mcdonald's Alta Chipotle and five below.
Centres cash flow has proven to be very durable S. The average tenant has been here for over 22 years.
We acquired the crossings for $104 million or just $204 per square foot, which is well below replacement cost.
When combined with several parcels sales to our net lease platform expected later this year, we expect to generate an attractive unlevered IRR that is within our targeted 8% to 10% range.
The SaaS. It also comes with 25000 square foot vacancy, which we believe we can realize attractive upside in the near term.
We are dividing up the space in order to drive contractual annual rent increases based on tenant demand some of which is coming from a mall that is adjacent to our center.
As we have mentioned previously we have been very focused on the strategy for infill Street real estate in existing markets.
High Street real estate, such as back Bay, Boston or Soho is not the focus here.
We're targeting first string neighborhoods and highly fragmented markets with real estate that can't be replicated.
Subsequent to the end of the quarter, we went under contract on Brookline village, a small 11000 square foot collection of properties on Harvard Street, and Brookline mass just outside of Cambridge for $5 million.
This is the deal I alluded to on our last call.
Brookline village is located at an enviable market that both three mile population of 450000 household income of 122000.
Our scale in the greater Boston area. It gives us the ability to source. These types of first string neighborhood Street properties, where we can generate strong annual growth with little to no capex, which equates to solid Unlevered IRR is.
This type of product is abundant and fractured which provides us with a long runway to create a lot of value for our shareholders.
We expect to share a lot more about first string of acquisitions in upcoming quarters.
Finally, our net lease platform closed on the acquisition of two single tenant properties from two of RPT shopping centers during the quarter for $11.6 million.
Early in the second quarter the platform closed on the acquisition of Starbucks in Ridgeland, Mississippi for $2 2 million and I'm, then Sonya landing just outside of New Haven, Connecticut for $14 million.
Tony is a 91000 square foot stop and shop anchored neighborhood center, where the net lease platform can realize significant upside through Liza lease up and sale of the small shop portion of the center, while keeping the stop and shop and a market that is outside of Rpt's core.
2022 has started off on the right foot S. We execute across all aspects of the business.
Our transformation is accelerating.
We continue to improve our tendency or geographic mix in our portfolio quality. While also driving same property and <unk> per share growth that we believe will lead to substantial shareholder value creation.
With that I'll turn the call over to Mike.
Thanks, Brian and good morning, everyone. Today, I will discuss our first quarter results provide an update on our balance sheet and liquidity at the end with commentary on our guidance.
We're very encouraged by our first quarter results first quarter operating <unk> per diluted share of <unk> 26 cents was up one sent over last quarter, primarily due to higher income from net acquisition activity and management fees.
As we move further into 2022, we expect bad debt to revert to pre pandemic historical levels of collections continued to hold steady.
Our operating portfolio delivered strong same property NOI growth of nine 9% over last year. This growth was driven by lower bad debt expense, which contributed seven 8% at a minimum rent growth of one 7% comprised of occupancy gains re leasing spreads and annual rent escalators.
Leasing velocity also continues to accelerate and exceed our expectations as Brian mentioned, we signed 82 leases totaling 716000 square feet driving our signed not commenced balance including leases negotiations to $10 $3 million with a weighted average ABR per square foot of over $18.
Representing a 15% increase over our portfolio average this upside will continue to provide tailwind to the 23 and 24 with a total incremental benefit to operating episodes, but expect it to be about 11 cents per share.
This quarter's leasing surge resulted in a sequential uptick in our lease rate to 93, 2%. Despite the expected recapture of a couple of anchor spaces, one of which has already been re leased to an investment grade grocery giant are holding well.
Also very pleased with an increased our small shop leased rate to 85, 5% up from year end 2021, which is atypical at this point in the year as it is customary for this number to dip in the first quarter post holidays.
This is yet another indicator of strong tenant demand and our transformed portfolio based on our current leasing pipeline, we continue to see upside to our lease rate as the March 295% occupied level.
We ended the first quarter with net debt to annualized adjusted EBITDA of $6 eight times unchanged from last quarter, However, including our signed not commenced and leases in advanced negotiation of $10 3 million, our leverage would be a half turn better at six three times given the timing of our expected acquisitions and dispositions there could be some volatility in our reported.
Leverage levels.
Quarter to quarter, but we continue to expect a leverage default towards our target range as COVID-19 related impacts continue to burn off and has a strong ethanol backlog comes online over the next few years.
Our liquidity remains strong as we continued to opportunistically access the debt and equity markets at the end of the quarter, we had total liquidity of $383 million, including revolver capacity of $350 million $17 million of four basis equity and $60 million of cash.
<unk> allows us to take advantage of opportunistic acquisitions across our three investment platforms in terms of funding in 2022 assumed acquisitions, we will continue to be opportunistic with all of our capital allocation options, including non core asset sales contributions to our grocery and net lease JV platforms debt and equity issuance.
Under our ATM, all with an eye, creating sustainable growth and shareholder value, while keeping leverage in check regarding their activities through our grocery anchored JV, we obtained a commitment on a mortgage on our denim shopping center in Boston totaling $53 million or $27 million at our share with a 10 year term and a.
Fixed interest rate of 335%, we expect to close this loan in the second quarter subject to customary closing conditions today, we have zero debt maturing in 'twenty, two and less than 20% and 23 and 24 in conjunction with our credit facility recast in the second half of this year, we plan to address all of our debt maturing through 'twenty four.
Sure Ali.
As a reminder, virtually all virtually all of our debt was fixed at quarter end mitigated any material risks to interest rate headwinds over the next couple of years.
Moving out of the guidance given our strong leasing performance, we are raising the low end of our same property NOI growth guidance by 50 basis points. We are also raising our operating <unk> per share guidance to 101 to one five from $1 even to one O five as we look forward, we expect our year over year same property base rent growth.
To accelerate in the back half of the year as our ethanol backlog comes on line. However, given tougher bag that comps that include prior period reversals in 'twenty. One we do expect same property NOI growth to decelerate for the remainder of the year also as a reminder, we have not assumed any favorable or unfavorable adjustments from prior year.
Bad debt adjustments in our 2022 guidance and lastly, as Brian noted, we did increase our 2022 investment guidance to roughly $225 million and acquisitions and up to 200 million of dispositions and with that I'll turn the call back to the operator to open the line for questions.
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Your first question comes from Derek Johnston with Deutsche Bank. Please go ahead.
Hi, Good morning, everybody Hi, Brian .
The Brookline deal first Green Street retail you know this is certainly you know a smaller acquisition.
It's probably one that a lot of your competitors wouldn't be interested in but would love to hear more about your justification.
Since it was pretty small is there a potential to you said it didn't need much capex, but nor the rents below market and do you see the size and I think you alluded to it a reasonable growth Avenue for the company going forward, where these small deals can move the needle.
Yeah, Good morning, Derek and thank you for that question generally speaking.
I like to believe in real estate investments that have a moat.
In our case. An example is our deal on Port Smith, well, that's not street. It has a moat because of its high barrier to entry coastal market that it's in and there is zero threat of anything ever being built.
Tenant relocation options.
Regarding Brookline iconic first ring street neighborhoods like that.
They have downtowns that can't be replicated.
We really have a takeaway four kind of key attributes of kind of my conviction on those first ring suburban is now number one theres a large runway to scale given the fractured ownership and the core cities that RPT operates in today.
This is an investment as you said that requires.
Very little Capex.
But also it requires on the ground investment our leasing professionals meeting with these families are firms that own these single buildings.
This could really move the needle.
For our company, we are extremely confident in these geographic areas and know the MSA is extremely well.
As you've seen I believe in being extremely disciplined and having local markets in selective cities instead of 40 cities and really being in an index fund.
The second attribute as healthy Irr's.
Juruti of these deals are signed and areas are targeting our first ring strategy require no ta or capex have significant mark to market opportunities and usually have at least 3% annual escalators in their leases as.
As we also gained scale in these communities, we can even create more cap rate compression given the portfolio of premiums on portfolio sales.
I think the third in and something that we can all.
<unk> is the pandemic shift you know as the pandemic is likely permanent permanently shifted the work environment from ever being a inoffice five day, a week environment again.
It has increased visit frequency and dwell time to these first ring suburban communities such as Brookline in Cambridge.
And fourth is we followed the retailers or retailers are the ones that often point us to where they want to be having this first ring strategy is extremely complementary to our other suburban centers.
<unk> as an example may Wanna be in Bedford at our whole Foods Center denim at our stop and shop Center.
<unk>.
At our shores center, but they also be looking at in Brookline in Winchester, we've seen this throughout our portfolio and we see that same pluck playbook occurring in this first ring initiative.
Thank you. Thank you, Brian I know that that was very helpful.
And the next question is you guys, obviously have a pipeline of deals did raise acquisition guidance. We know that's just a placeholder.
But one avenue, we've noticed through the ATM issuance is being used a bit more and I think it was raised to 150 million from $100 million. So outside of that could you discuss the varying funding strategies given the pipeline that you're seeing the opportunities your partners.
And your thoughts there.
Sure. This is Mike good morning, Eric at this point keeping leverage in mind.
Our lowest cost of capital continues to be our disposition currency.
To your point there a second ago, we did lift our disposition guidance about 100 million to about 200 million. We still currently sit in a very attractive environment for asset sales specifically our assets.
Not only do we have the ability to sell an asset out right, but we also have the option to contribute assets toward two JV platforms that still have about $2 billion to deploy and thats.
It's great for us because we can get the retaining the management and then really enhance our fee income while still only in very very quality institutional assets and all of these options are on the table for for 2022. So you will see that the 200 million that we have out there it'll be a mix of.
These various options I just mentioned, but with that said we have full use of the revolver.
$350 million and we have been absolutely opportunistic with with equity issuance through our ATM.
But simply our goal is to always strive for the right.
Formulaic mix of debt equity and disposition currency to redeploy into acquisitions to really complete the buy box for us and that's improved portfolio quality.
To be accretive to earnings and keep leverage in check.
Excellent. Thank you.
Thank you.
Next question comes from Todd Thomas with Keybanc capital markets.
Hi, Thanks, Good morning, I, just wanted to follow up a little bit on the first string neighborhood Street retail deals that you're targeting here I realize it's a relatively small initial investment but two.
Questions I'm curious what the initial yield was like on the $5 million investment in and how you know initial yields.
You know sort of compare to what you are buying otherwise and and then how much capital.
Do you envision allocating to the strategy as you sort of think about the overall portfolio and begin to move a little bit further in that direction.
Yeah, I mean, it really were IRR focus as we've said on every call. This Brookline deal was was north of a seven IRR. There are other deals you know were high single digit IRR is and really what's driving that is very low and unabated mark to market rents.
These were single owned property for quite some time, you have a top performing Starbucks in the region.
Tenants in tow to really put in and really maximize that value.
The street or being more 10% to 15% of our buys we are actively looking at other deals in our target msas.
Such as your St Pete's and Tampa is of the world and as well as Miami.
But there is great.
Unlevered IRR is to achieve here and at the end of the day, that's what we're striving for for our shareholders.
Okay.
And then you know as you kind of think about allocating capital.
Deploying capital from here you know across our you know.
The different sort of buckets that you're looking to invest in.
Does the increase in borrowing costs.
You know I guess have an impact on on return hurdles for <unk>.
Our G M Z in any way such that there are implications for RPT and its ability to execute and be in the market buying assets in and contributing parcels is is there any impact on pricing and economics for RPT.
There hasnt been at all yet.
I can tell you.
All three platforms.
Our our hungry.
With a large appetite as I said should say large disciplined appetites.
<unk> Z with the Triple net platform, obviously that is a volatile world around triple nets. So we're being very patient and thankfully, we have patient capital in that fund.
We think theres going to be enormous opportunities to deploy that and Tyler and his team are focused on a lot of.
Large larger deals that that.
Should come in later this year and into next year.
But as far as our T G.
With GIC.
Unlevered buyers I think that's another additive way for us of all cash and as we're seeing in the markets today.
Rooms are being send out yes.
They're wanting all cat our sellers are wanting all cash buyers as opposed to buyers with.
Required debt and you may be even be able to get a discount on that so we think having the lowest cost of capital sovereign wealth fund out there as a partner is a very big advantage in this environment.
Okay got it and then and then one last one Mike.
You mentioned in your comments that you see a path toward achieving 95% occupancy. So it's a little over 400 basis points of upside.
Can you what with with regards to the to the outlook as it stands today is there an update to the time frame that you anticipate to.
To achieve that portfolio occupancy rate and then whats in the guidance.
You know for 22 at year end, where do you think occupancy.
Shakes out at the end of the year.
Sure. So we ended the quarter at 96% and 93, 2% on the lease rate by the end of the year, we're going to be between 91, and 91 and a half and 92%. So nothing nothing has changed there from our original guidance that we gave back.
In February we do fully expect to get to pretty close to the 95% level by the end of 2024 based on the visibility we have today, we've talked a lot about in our disclosure last night and a bit in our prepared remarks that we do have $10 3 million.
Sorry, not commence which it does include some leases in negotiation I was going to come online over the next three years are really about 11 operated but behind that side, we have about $8 million to $9 million.
Additional ABR and recovery income.
That will come online during that time as well that's currently occupied by spaces. So it's not necessarily incremental but at least gives you a directional.
Vacation and accretive for us to get to that 95% level and we had a really really good start to the quarter.
For the year this year with over 700000 square feet leased.
Two onwards to our towards our goal to about 2 million square feet leased this year. So we have a lot of conviction.
To get to that 95% level and another thing thats supporting that as well as the retention rate during the quarter as Brian mentioned in his prepared remarks was at about 93% we'll be at about 85% for this year, that's what's embedded in our guidance.
Given some of the proactive.
Anchor Recaptures that we're doing to remerchandise remerchandise, though it's a much better but our tenants and we continue to see that retention ratio over the next two years based on the visibility that we have today.
Around 90% and to kind of give you the historical context on that for this portfolio, which is little bit different than it was two years ago. It was about 80%.
So between the retention ratio the signed not commenced in the eight to 9 million behind that we feel very very good about getting 95% level by the end of 'twenty four.
Okay. That's helpful. Just just to clarify what's the $8 million to $9 million of ABR and recovery income attributes.
Yes that is for.
That's rent recovery income for spaces that are currently occupied today that will be taken back over the next several several months.
Okay, So hi, hi.
You know an increase in and sort of re re tenant them.
Correct.
Increase in Mark to market opportunity there, Okay, correct got it alright.
Alright, thank you.
You bet. Thanks.
Thank you. Your next question comes from Honda. Thank you with no that'll help. Please go ahead.
Hey, good morning.
So maybe you could spend a second or two on the balance sheet here.
I guess a question on the debt maturity you mentioned.
Theres no debt maturing this year, there's a couple of smaller term loans next year and in 2024 60 million each.
And you talked about a plan to address those.
I think an unsecured issuance last quarter I'm curious if that's still the thinking given the move in rates and maybe a sense of what spot pricing would be for you today.
Yes. Thanks.
Good question.
So 100% of our debt is fixed today.
We have.
Our our complete term loan.
Component of our debt stack, which is about $310 million.
That's all fixed today and nothing none of those hedges roll off until next year. So we're going to have a modest impact to interest rates.
To that $60 million that will run naked in 'twenty, three but maybe half a penny.
Most given where that rate is up today, which is about 3%.
But in terms of what we're doing in the recast we're going to take that 310 million that matures from 23 through 2027. It really just is a duration play so we're going to put it out between 26 through 29.
Adam.
The year to our total duration for our capital stack, we expect to do that.
In the second half.
This year, so really there isn't any interest rate headwinds for RPT, just given we have.
Currently 100% of our debt that is hedged currently all the way out through 2027.
Great. Thank you for that color.
And then maybe some thoughts on kind of J D versus balance sheet capital as we go forward in terms of acquisitions.
Acquisitions.
The move in rates what are you seeing your cost of capital curious, how we should think about maybe the split.
In terms of what's on balance sheet.
Balance sheet.
Yes, I mean, it's very opportunistic driven.
We do like this first string strategy.
As I said earlier to Todd that we will dedicate 10% to 15% of our acquisitions towards towards that.
Same time, we love GIC and the grocery platform and we're spending a lot of time on deals and not end market, both marketed and off market deals.
And so I would say this is like a two to one ratio of what balance sheet first our jv's, but that could change.
So a lot of this is very dependent on.
Deal specific.
Got it got it good to have Optionality.
And forgive me if I missed this but the cadence of that 11, I'm, sorry, the $7 5 million.
Including the snow rents I guess whats under negotiation the split between this year and next year, maybe quarterly cadence of how we should think about you achieving that 11 incentive.
Sure. So in 2022, Youll have a <unk> <unk> incremental benefit to your quarterly run rate.
From Q1, and 2023 Youll have a seven incremental benefits of about $6 $2 million or so.
And then 24, you'll have a a.
<unk> benefit.
There, which is about $1 4 million.
Mall or benefit maybe a half penny or so.
So in 2025.
Great. Thank you guys.
You bet. Thank you.
Next question comes from Wes Golladay with Baird.
Yes. Good morning, guys can you give us a update on west left on the known tenant move outs.
The note so yes, so for this year.
During the quarter, we recaptured two of the spaces that we previously discussed.
On earlier conference calls one was the shoppers world. There was about 54000 square feet that are crossing center in Baltimore and took that that back in the first quarter that as I mentioned in our prepared remarks West that's already released to China hold the second one that we took back during the quarter first.
It was a 28000 square foot space at one of our Michigan assets that we're prepping for a redevelopment.
The additional spaces that will take back are going to be primarily in the second quarters, that's about 200000 square feet or so.
All of which has been already released two premier tenants over half of that 200000 square feet Wes is the.
The wholesale lease that we did down at our River City project in Florida, That's backfill in a Regal theater. So very excited about that and then the remaining 100000 ourselves square feet is already released to you.
Tenants, we got about three grocers.
Total why in a couple of TGF concepts and another discount so when you kind of add all that up.
The rest is coming offline is about $3 $4 million. The rest is coming back online is about 4 million that represents about a high teens.
Re leasing spreads that's going to come on line between 23 and 25.
Got it and then turning to the acquisition front.
Pricing changing for larger centers versus smaller centers and are you still seeing a lot of cash buyers that are winning deals.
It's it's very kind of under $50 million less.
The cash buyers are still there and we have a few dispositions out in and have one event, whereas very competitive on selling where you had some extremely large deposits of $5 million in some cases, so let's say that it's under 50 and even under 30.
It's very competitive on the cash front I think obviously as you get into the higher altitude of prices.
Becomes less cash buyers and more reliant on that so we think that's an opportunity in the future both with GIC.
And with us.
So it's.
Cap rate compressions are still happening. This is power of this community. This street this is grocer.
And I think we're in a we're in a very good situation with our three platform to take advantage of that.
Got it one last one for me.
I know the asset recyclers, that'd be highly quality accretive, but can you talk about the spread between the cap rates for acquisitions and dispositions.
Yes.
It's relatively neutral based on our based on our visibility today.
So not that much different than what we've got to historically.
Got it thanks guys.
Thank you.
Next question comes from Linda Tsai with Jefferies.
Hi, good morning.
Are you still embedding 100 basis points of bad debt for the whole year, because it sounds like bad debt came in lower than expected.
It did come in a little bit lower than expected, but just given where we're at in the year. Linda we are still embedding a total of about 100 basis points, which is about 131 4 million for the year for bad debt.
Got it.
In terms of suburban Street retail you noticed you noted less capex required more rent upside.
As your overall approach to scale. This strategy for example, one of your peers purchases contiguous.
Street retail assets to control merchandising.
Do you happen to approach scale is to gain efficiencies.
Sure I mean.
It really depends on the MSA, but we do like scale for efficiency sake.
Where we really like to try to curate this ourselves and not be buying the portfolios.
All.
Together.
I think thats, creating more shareholder value of buying these one offs and really curating and creating a portfolio of out of that we have boots on the ground in each of those markets, but there are opportunities out there throughout the southeast and then Boston northeast where maybe.
There are five or six or seven deals to be had in our portfolio. So it's a little bit of both.
But I really think theres, just great value creation in.
US doing the buying individually and.
And creating a portfolio from that.
As opposed to.
Our broker led.
2025 building portfolio.
<unk> already leased we wanted to do the buying we wanted to get the upside from the under market rents.
And then are there other retail formats. You're also considering currently like you know what are your thoughts towards power or lifestyle centers since the overall retailer environment has improved.
We want we want really.
Great real estate and that comes in all shapes and sizes. If you have the real estate retailers now are agnostic on product type. They will go to power. They will go to lifestyle. They will go to grocery they will go to St. Jude.
They just want the best real estate.
And so having these deep tenant relationships.
They really lead us to where they want to be.
There's really no science at all of that sure we use data analytics and use our market intelligence.
But it's mostly the retailers that really lead us.
To these sites.
Ample of that is this deal in Highland Lakes, where.
Yes, It was 50% occupied center Stein Mart was vacant.
We had a double a rated grow share.
Two other grocers tell us that that is a site that they would very much want to be in.
We tied up that center and had a lease sign would that double ache.
We had a grocer on the day, we close.
So stabilizing that a seven and a half call it.
Can trade that at a low four cap.
Retailers are a partner to us and they are very very.
Sure.
Important to our investment decisions.
Thank you.
You.
Next question, Craig Schmidt with Bank of America.
Thank you.
Just wondering given the elevated level of acquisitions do you think this could be a source of additional redevelopment opportunities going forward.
It could I mean, it really depends Craig.
On the asset level.
In many ways.
We've proven like we did in Jacksonville, where we contribute land to a residential bill.
Builder, and Debartolo, and we own 50% of roughly 375 units.
There could be densification opportunities, particularly in Florida and Boston.
But it's relatively a re merchandising efforts.
All of that I mean, we're getting double digit yields on that so we certainly want to extract the lowest.
Paying rent tenants and bring in the highest paying rent tenant with a great investment grade tenants. So.
We do look for ways to achieve the highest IRR and if that's redevelopment that goes into that we will look at doing that yeah, and then based on our estimates today and the opportunities that are in front of us Brian .
Brian point re merchandising is the highest.
Yield that we're getting on our.
At our capital allocation.
So between that and redevelopment, we'll spend probably about 10% to $30 million over the next three years on re merchandising and some redevelopments.
We just disclosed in our in our Sop over the next two years, that's a year.
Correct, yes.
That's per year, yes, correct, okay. So.
Okay.
So in total for the next few years, yes, yes, 20% to 30 per year.
Okay, great. Thank you.
You bet.
Next question.
Aqua Sarnia with credit Suisse.
Good morning, everyone.
So I wanted to go back to this kind of the first ring strategy.
7% Unlevered IRR.
I assume there is no cap rate compression off the back of that deal.
Or is it kind of accomplish exit valuations.
When I look at that it seems that maybe your first year cash NOI yield is probably mid <unk>.
<unk> also so should we be kind of thinking the more of the stuff you do.
Kind of like the first year or so it's actually going to be dilutive to <unk>.
Yes.
Call It mid fives and really on this one for example, we can we can get at that cash flow.
Within that first several months.
With new leases.
So it really depends on.
This one would be not dilutive from an IRR perspective, but it really depends on each each asset that can tell yeah. There's one.
Moving around right now.
10 on Levered that really hits.
Cash flows very quickly and then it's in one of the hottest markets and fastest growing markets in the country.
So we are very much.
What high IRR high IRR is.
I don't want them quickly.
So we don't look at buying.
Real estate, and saying, Oh, well, we'll get that back and we'll get that lease back in year four or five we're really looking at this as like a one or two years on hopefully getting a crack at that lease.
Okay. That's helpful.
And then the second question you your JV partners and then your acquisition volume guidance, Let's go up for the year, but just kind of curious is most of that on balance sheet.
And just hydro JV partners are thinking about kind of putting capital to work just given the current uncertainty.
Uncertainty around capital markets in general and possibly even cap rate.
That's that's one.
The guidance is really one to one from a balance sheet and our JV partner I think from and as I alluded to before the Triple net fund.
Very patient, we think cap rates will move much.
A much wider in that sector today.
And are being very disciplined in that approach and.
For GIC.
We're really looking at the best real estate the highest IRR is.
<unk> real estate I talked about the.
Philosophy earlier in my spending my first question.
Had that same conviction around that.
So they do like all shapes and sizes of great real estate.
And I think you'll be seeing some stuff hopefully soon.
That JV announced.
Okay. Thank you.
I will now turn the floor over to Brian for closing remarks.
Thank you operator, so as I mentioned in my opening remarks, we had the same ticker, but RPT is a much different company today than it was just a few years ago changes made to our people processes portfolio and our platform. Since 2018 are now being reflected in tangible improvements in.
Our geographic mix, our tenancy our portfolio quality.
Most importantly to our operating and financial performance that we believe will again be amongst the top of the pack amongst the open Air shopping center REIT in 2022.
Our sector is great tailwind coming out of the pandemic and RPT is uniquely positioned to capitalize on these tailwind given our differentiated strategy and complementary investment platforms. Thank you all so much for joining have a wonderful day.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
Okay.
[music].
Yes.