Q4 2022 RPT Realty Earnings Call
Greetings and welcome to the RPT Realty fourth 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 star.
Zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Craig Nino Senior Analyst Investor Relations. Thank you. Sir you may begin good morning, and thank you for joining us for Rpt's fourth quarter 2022 earnings Conference call. At this time management would like me to inform you that certain.
Payments 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 1095.
Additionally statements made during the call are made as of the date of this call listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made.
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. Certainly. These factors are described as risk factors in our annual report on Form 10-K for the fiscal year ended December 31, 2022 that will be filed later today.
And in our earnings release for the fourth quarter 2022.
Certain of these statements made on today's call also involve non-GAAP financial measures listeners are directed to our fourth quarter 2022 press release, which includes 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 <unk>.
Brian Harper and CFO , Mike supports for the opening remarks, after which we will open the call for questions.
Thank you Craig good morning, and thank you for joining our call today.
The start of 2020 to uncertainty around the economic environment, specifically inflation began to take shape.
It's only a matter of time before inflation took over the headlines.
As I say often to the team control the controllable act with urgency and turned risk and the opportunity simply put play offense.
We leaned into our playbook and focused on five areas lease lease lease strengthen and diversify our cash flows through our three differentiated investment platforms increase our assets under management.
Add duration to the balance sheet, and lastly, reduce short and long term floating rate risk.
Our team quickly became a line leading us to execute with excellence across all business units.
We finished the year on a great note with top and bottom line growth. In addition to another dividend raise.
2022 same property NOI growth was four 3%.
And operating <unk> per share growth was nine 5%.
Given the high level of visibility into our growth trajectory over the next few years, we raised our first quarter dividend by 8%.
Over the last two years, we have experienced not only an acceleration of our portfolio transformation into a wealthy in growing markets, such as Boston and Miami.
We have also seen a reacceleration of demand from retailers do we do a very low supply environment, coupled with our well located in affluent open air shopping center locations.
We had another banner year across all operational metrics, our leasing team remain locked in as we ended the year, signing 69 leases covering 500000 square feet during the fourth quarter.
Culminating in full year activity of $2 2 million square feet, the highest annual leasing volume achieved since 2014.
This activity pushed our lease rate to 93, 8% up 70 basis points year over year, and putting us near our pre pandemic levels.
Embedded in our lease rate is about 390 basis points of occupancy growth one of the highest levels in our peer set which translates to over $11 million of rent and recovery income that is yet to come online.
We also continued to drive rent increase annual escalators and retain our tenant base.
Over the trailing 12 months, we produced a new comparable releasing spread of 43%.
And annual escalators of nearly 200 basis points for the new leases signed during the year.
Retention was 88% in 2022, and so we're seeing retailers pay a premium to remain within our revamped portfolio, which is predominantly located in the top 40, msas as they face limited new supply and increase move out cost.
A significant portion of our leasing activity is related to our value enhancing re merchandising redevelopment and outlet expansion pipeline.
But we haven't built a track record of replacing struggling retailers with more credit worthy tenants at double digit returns.
In the fourth quarter, we delivered three projects totaling $11 million and an average return on cost of 11%.
Today, our active value enhancing pipeline totals $45 million at blended returns of 9% to 11% with top tier retailers, including Publix.
Marshalls Homegoods Alta Bj's wholesale Baptist health in Sephora.
Regarding our redevelopment pipeline and we expect to share more details later this year in connection with projects at Hunter Square asset in Oakland County, Michigan.
In marketplace at del Rey in the Miami market.
We are in discussions with high credit national and essential tenants for both sides.
As we look ahead demand across the portfolio remains very strong from national retailers looking to expand their footprints and high quality locations.
We continue to see the most demand from discount apparel club stores grocers restaurants, wellness and medical gowns.
Given this demand our new leasing pipeline remains robust totaling over $7 million.
This activity will be a key driver of occupancy growth as we stabilize our portfolio to our targeted occupancy level of 95% plus over the long term.
In fact, we expect to eclipse nearly 2 million square feet of lease Commencements in 2023 for the second year in a row.
Bankruptcies have been in the headlines of late tenant fallout is a natural part of the retail environment and nothing new.
Our experience experienced landlords such as us.
Our.
To recapture space provides us with the opportunity to showcase the quality of our portfolio and our operating platform as we anticipate releasing these spaces with significantly better tenant credit on an earnings accretive basis.
At the end of the year, we had eight bed bath concepts and for bye Bye babies, while their situation remains fluid. It is not a surprise we have been preparing for this situation internally for several years and I've put a strategy in motion to create meaningful value through the re merchandising of these sites.
Our leasing team has been cultivating a pipeline of replacement tenants.
And our very low embedded rents of about $11 50 per square foot provide us with an opportunity to drive rents in the mid teens range favorably positioning us to aggressively recapture our location.
Well, we already have significant interest on all bed bath and buyback locations.
We are in advanced negotiations on four of them, which we maintain control of.
We were at least with a leading off price retailer to backfill one at a 40% releasing spread with.
With the locations set to open in the fourth quarter of this year.
For the three remaining locations were out for lease with top national retailers at Winchester Center, and Hunter Square in Oakland County, Michigan and are in negotiations for at least for another.
Average rents for these locations were $10 50.
With new rents being discussed in the 15 to $16 range with minimal expected downtime of 12 months on these four deals.
Of the remaining locations it's important to note that for our buyback concepts. However, if we were to get the opportunity to recapture all of them. We would expect downtime to range between 12 to 18 months at re leasing spreads of 20%.
We have multiple backfill off options for these locations that are in various stages of negotiations with categories, including discount grocer medical health and beauty and liquor stores to name a few.
Regarding Regal, we have three locations in the portfolio and none are on the closure list and each is current on rent payments.
At this point, we believe all three locations will be assumed by the surviving entity based on advanced negotiations.
We had another strong year on the investment front, we finished within the top quartile of U S. Open Air shopping center buyers in 2022, completing $375 million of acquisitions across all three investment platforms.
Our two year acquisition volume to $921 million.
At yearend, our AUM was $3 6 billion up 57% since 2018.
During the fourth quarter, we closed on the contributions of two core stabilized Midwest assets shops, Atlanta, and Columbus, and Troy marketplace in Detroit.
These were contributed to our grocery anchored joint venture platform, which provided the funding for our share of the acquisition of Mary Breco village.
Although we curtailed our investment activities in the second half of the year as we wait for markets to adjust to the new rate environment.
We continue to actively scour our target markets for potential acquisitions.
The good news is that we have excellent liquidity between cash and revolver availability and no debt maturities for the next two years.
Which puts us in a great position to quickly respond to changing market conditions.
Also our joint ventures remain a competitive advantage that provides us with long term capital.
How's us to generate above market returns, while also expanding the breadth of opportunities that we can pursue.
Let's touch on Mary Bracco.
<unk> continues to exceed our expectations.
Today occupancy is 83% up 5% since we closed on the asset last summer and we expect it to exceed 90% by the end of 2023.
Street level rents are currently in the 150 to $200 range versus our in place average rent per square foot in the mid Forty's.
We have multiple opportunities to recapture leases on both the east and West side of Miami Avenue that will help us deliver a best in class iconic property and capture the growing mark to market opportunity over the next few years.
Beyond this we continue to evaluate long term densification plans that will potentially unlock tremendous value for shareholders as we capitalize on the flexible zoning at the site that allows for up to $4 1 million square feet of.
Residential office or hotel use in the heart of Miami's Brooklyn neighborhood.
Finally, we initiated operating <unk> per diluted share guidance of 97.
To one dollar one which includes our expectation of same property NOI growth of one 5% that's three 5%.
Included in our outlook is a prudent level.
Bad debt considering the current situation with a few at risk tenants.
Mike will provide more details on how we're thinking about bad debt and our overall outlook for 2023 in his prepared remarks.
With that I'll turn the call over to Mike.
Thanks, Brian and good morning, everyone today, I'll discuss our fourth quarter 2022, operating and financial results in more detail provide an overview of our financing activities completed during the year and end with commentary to help everyone understand the business expectations embedded in our 2023 earnings outlook.
Fourth quarter operating <unk> per share of <unk> 24.
Was ahead of our internal plan for the quarter, but down <unk> <unk> from last quarter, primarily due to the impact of contributions of our shops on lane and Troy marketplace properties into our grocery anchor joint venture and higher G&A expense.
Same property NOI growth for the quarter came in ahead of plan at one 1% driving full year same property NOI growth of four 3% just above the high end of our expected range, our stronger than expected performance for the year was fueled by 2% base rent growth after adjusting for some offsetting.
Accounting movements between base rent and bad debt as we regained occupancy drove rent and pushed our annual escalators or.
Our signed not commenced backlog remains elevated at $11 2 million or about 7% of annualized fourth quarter NOI provided us visibility on future earnings growth.
Also continue to open tenants on time and on schedule. Despite the challenges facing the construction market. This.
This quarter, we commenced leases covering over $4 million of rent as a result of the high level of rent commencements during the fourth quarter, our occupancy rate increased 100 basis points sequentially as we continue to stabilize portfolio toward our target of 95% plus over the long term.
Our ethanol backlog will continue to provide earnings tailwind through 2025, the total incremental benefit to operating <unk> expect it to be about <unk> 12 per share we expect the cadence to be <unk> in 2023, six and 2024 and one in 2025.
Yes.
I was very pleased with our balance sheet management 2022, we prudently and Opportunistically access the debt equity and derivative markets to keep leverage in check improve duration and reduced floating rate risk.
Ahead of the disruption in the capital markets, we refinanced and Upsized, our credit facility and paid off all near term debt maturities.
In December after inflation, starting to show signs of easing coupled with a highly inverted yield curve, we entered into forward starting swaps that lock rate on all of our term loans through their respective maturities and earlier this week Fitch reaffirmed our triple B minus investment credit grade ratings with a stable outlook.
Today, we have over $470 million of liquidity no debt maturing until 2025, and only 5% floating rate debt exposure. We ended the fourth quarter with net debt to annualized adjusted EBITDA of six nine times down from 7.0 times last quarter, including our site.
Not commence backlog our leverage would be six three times, giving us confidence that we will be near our long term target of six point all times in the next couple of years moving on to our initial 2023 outlook. We are establishing an operating <unk> per diluted share guidance range of 97.
Two one dollar one.
Embedded in this range is an expectation of same property NOI growth of one 5% to three 5% with about 75% of our 2023 leasing plan already completed and a healthy ethanol backlog, we start the year on great footing, the wildcard will be the impact of <unk>.
<unk> bankruptcies.
Mid point of our operating <unk> guidance assumes washed Fred totalling 300 basis points of NOI, which is comprised of our typical bad debt reserve of 75 basis points as well as an additional 225 basis points tied to Regal bed Bath and beyond.
Party City, and Tuesday morning, which covers the impact of both loss rent from recently recaptured spaces as well as additional forecasted lease rejections and rent reductions.
To get to the high end of our operating <unk> per diluted share range, we would need to have a more favorable outcome on lease rejections and rent reductions.
The low end of the range assumes that we recapture all eight of our bed Bath concepts.
Five of our party city leases and both Tuesday morning locations in the second quarter of this year.
Do you think about the bridge from the dollar for per share we reported in 2022 to the 99 midpoint of our 2023 operating <unk> per diluted share guidance keep in mind, the filing timing and one time headwinds we realized a one cent benefit in 2022 from the reversal.
All of straight line rent reserves and termination income that we do not project in forward periods and <unk> due to the timing of net investment activity in 2022, as we Frontloaded acquisition and back loaded dispositions. In addition, we have three from NOI coming offline from prop.
<unk> that are being prepared for redevelopment, notably Hunter square in Oakland County, Michigan, and marketplace and del Rey in the Miami market.
These headwinds are partially offset by expected same property NOI growth and adds about <unk> <unk>.
The elevated levels of bad debt embedded in our outlook.
G&A net of management fee income is expected to be roughly flat year over year as inflationary pressures on G&A are largely offset by rising management fee income from our joint ventures, and with that I will turn the call back to the operator to open the line for questions.
Thank you we will now be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May press star two if he would like to remove your question from the queue.
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One moment, please while we poll for questions.
Our first question comes from Todd Thomas with Keybanc Capital markets. Please proceed with your question.
Hi, Thanks, good morning.
First I appreciate the detail around the guidance and.
What's embedded in the guidance for the reserve and I realize some of the potential disruption may impact occupancy but.
Mike Brian you both mentioned that.
<unk> targeted occupancy rate of 95% for the portfolio, that's a little more than 500 basis points of upside.
What's sort of embedded in the guidance for occupancy throughout the year.
And where do you expect to maybe be at year end, just given the potential near term disruption that you discussed and.
If you could just share. Some details are just trying to get a sense of that and maybe how long you you would expect to achieve that that occupancy rate.
Sure Good morning side and then thanks for the question.
We were very healthy sign that commenced pipeline of $11 million, which is coming online over there over the next couple of years, which is really going to push our occupancy.
Towards that 95% over the over the long term, but we ended the year just south of 90% at 89, 9%.
We do expect it to end the year between 91, five and 92, 5% despite the potential disruption that we could experience.
For our at risk tenants three of which are in bankruptcy.
And Todd I would just add to outside of the $11 million <unk>, we have about $7 million in legal.
And more even in advance negotiations behind that in LOI and these are iconic game changing assets more grocers more wholesale more more off price more restaurants more wellness.
We're really they bring a halo effect, but theyre occupying either vacant or.
Yeah.
Underutilized space today, so that's going to help bring this occupancy up as well and those are pretty much are going to be hitting 'twenty four 'twenty five.
One one.
Additional comment Todd is around the small shop, we ended the year right around 83, 5% and half are about half our ethanol of 11, a $11 $2 million is tied to small shops. So we should expect small shop.
To rise over the course of the year between 86 and 87%.
Alright, Thats helpful and then.
What's driving sort of the relatively faster back sales I realize leasing demand is strong but.
For some of these these larger boxes 12 months to 18 months.
Seems relatively.
Fast 12 months in particular, there's obviously been.
Sort of delays around.
Permitting and equipment deliveries and things of that nature I am just wondering.
Why you think sort of 12 months at the low end of the range there.
<unk>.
Again, it seems a little bit fast for the cycle.
Todd I think a couple of things.
We've been treating all let's start with bed Bath, we've been treating all of these as vacant since pre COVID-19.
Just like we did with the gap just like we did with Athena just like we did with pier one and I think we were one of the fastest backfill of those three concepts.
We have been negotiating leases.
Even we didn't have occupancy.
No control of that space.
So right now we have four of our eight bed Bath stores are soon to be gone or being placed with tenants with superior credit and sales per square foot profiles.
I mentioned on my prepared remarks, the 43% releasing spread for and off price tenants.
And later this year, so that leaves us with really four tenants and we've been mining each of those tenants for each of these locations, but like I said forever.
So we have got a quick jumpstart on this that's what I hope with the 12 months.
We have tenants in lease and drawing plans. So this wasn't waiting for the recapture this was proactive asset management.
Yeah.
Okay. That's helpful. And then just lastly, Brian and moving over to investments.
I was just wondering if you could talk a little bit about what youre seeing out there.
Deal flow is starting to pick up.
How we should think about.
Investments during the year across the platform and also how we should think about funding investments.
In the current environment today.
Sure.
So we really haven't given guidance on investments prior.
What I will say on that note you know over the last two years, we've bought almost a $1 billion across our platforms.
While there are internal reemerge redevelopment deals serving up double digit spreads that's our best use of capital we are still scouring our markets for all three platforms.
Let me start with our <unk> Z.
We expect to deploy a lot of capital this year.
<unk> been very patient, there's not been much cap rate expansion in the triple net sector.
But what I can see us buying are these larger centers, where we can chop up the triple net components and seed them into the fund and then sell the remaining a center at a later date.
That's creating alpha for those investors.
<unk>.
Really straight down the fairway.
Core grocery our partner gives us an edge as well as an enhanced yields.
We are looking for with that being said you saw what we did with Troy and lane.
Could there be more of that like an accordion feature where we can deploy assets.
And buy Accretively.
Potentially.
And then RPT.
C RPT really benefiting from all platforms working together similar to what we did up in north Boro and Covid, where we seeded for parcels and we're left with double digit yields and really after now thats even expanded further just due to our leasing platform, where we have now five T J <unk>.
<unk> is at the center only one in the country that has all <unk> brands.
And essentially that center serves asset T J F bond for our shareholders.
I see it more in north Roes for RPT.
Certainly, but we will get more updated guidance.
At first quarter.
Okay alright, thank you.
Yes.
Our next question is from Wes Golladay with Baird. Please proceed with your question.
Oh, Hey, good morning to everyone.
Balanced playing offense in sites like Mary Brickell, and delray versus having to allocate resources and capital to backfill into potential vacancies you sided with bed Bath Regal then.
Tuesday morning.
It's a balance.
Its returns.
There is deals that we'll hopefully be announcing soon at delray that are very low capex call. It.
Very large ground lease numbers that will be minimal capex for us.
Brickell.
The power of Brickell is theres more demand than supply currently.
That just driving pricing that's driving restaurant volumes were three of the top restaurants in the U S.
Next year will be in the Brickell neighborhood. So this is a <unk>.
Deal West where.
Les Ta than we even underwrote and probably almost two <unk> the rent of which we underwrote.
Balancing that with the bed Bath <unk> of the world.
Bass is we're getting very very attractive yields.
The four that I mentioned that we have control over the average rent is $10 46.
Where our spreads on those are 43, 3% blended.
We have a deal in Michigan, where there was a $7 25 gross deal.
We are applying $14 $15 rent with a tenant and lease that will do.
Several.
20th the sales volume.
<unk> as.
Bed Bath was doing.
So this is all about capital allocation and driving as much return internally as we can possibly get and west I'll just I'll just add this to Bryan's point earlier from Todd's question as we've been working on these these bed bath recaptures and releasing for quite some time, so it's not really <unk>.
Mental work for the company and then the second thing I would comment on is we hired a highly highly talented individual.
In the Miami market to focus solely on Mary Brickell. So we have the we have the right talent.
The the right focus on not only our new assets like Mary BRCA, but also the release of our at risk locations.
Got it and then looking at the.
An example of the marketplace. The bill rates and are you doing this in a lot of your centers, where you're just replaced the anchor and you've kind of gone from one extreme to the other at that center and it looks like the areas pretty vibrant local centers around also redeveloped I mean, it seems like you could turn the shop base over the next I don't know.
Your or is it the next two years like how long does it take you, though once you get the anchor in to activate the rest of the center.
It's about 12 months.
Right now and I think some of it especially in a place like Delray Beach.
Yeah.
People are scouring for locations you know that was a deal I think it was 14 Bucks ABR in a $40 market.
Especially after a couple of anchor deals that we'll announce here soon.
A lot of people want to be involved on the front end and secure space even before those tenants open.
Doesn't happen everywhere that will happen in Delray Beach. So we're very confident that we can lease simultaneously even before the anchors open.
Got it that makes sense and then you talked about additional zoning that Mary Burke or do you think you'll have an announcement this year or is it gonna be a multiyear process what are your expectations there.
Really focused on the western parcel really were publix and up to moxie and north as kind of our.
Leaving that as iconic trophy.
Retail, we're doing a lot of deals with wellness and F&B.
But for the most part that'll be a modernization of what's currently there. The eastern portion is really where we could maximize the GLA and really where the tenants have the least amount of work. So I think this is a multiyear approach Wes we're laser focused on making this.
It's a place where.
People.
Flock in an oasis in the jungle, if you will in the urban jungle and just the demand as I said in my prepared remarks is unlike anything I've ever seen in my career.
Got it thanks for the time everyone.
Thank you.
Our next question comes from Derek Johnston with Deutsche Bank. Please proceed with your question.
Hi. Thank you this is kind of peaks on with Derek.
On the leasing environment and given 2022 was at record levels since the new year have you seen any change in tenant demand behavior.
Any change in Ti conversation or are forward indicators.
No.
It's S healthy from what we've seen and maybe thats due to a new portfolio.
It's a healthy at 22.
In fact <unk>.
Some of the Ta requests have come down just because we've had four tenants battling for one space I'd like to say you got to create tension in the market to drive prices up and Capex down and that was where we applied the proactive mindset and assuming.
These will be vacant one day, and not waiting and being reactive but being proactive in driving rent when we have the controllable in our favor and kind of one of the one of the metrics that we monitor very very closely within our four walls here as retention rate.
In 'twenty, one it was high Eighty's and point to it was high it is.
We expect the same result in 'twenty three 'twenty four 'twenty five based on our projections today, Brian as Brian said in his opening remarks tenants are willing to pay the premium to stay where they're at within our portfolio because it's much more costly to move somewhere else given the.
The rise in construction costs.
Thank you.
And then on private market liquidity, we touched on it a little bit earlier, but are you seeing any standout regional differences in either market depth or cap rate expansion.
Not really I mean, the core grocery has been sticky I talked about the triple net sticky I mean core power, even it's been sticky, especially if it's mostly cash flow from from TJ Maxx Ross like the investment grade tenants.
It hasnt been much geographically, obviously, Florida is an anomaly by itself.
And in some ways, maybe even see compression.
But outside of that it's been it's been it hasnt really moved that we can see.
And any geographic concentration.
Thank you.
Our next question comes from R. J Milligan with Raymond James. Please proceed with your question.
Hey, good morning, guys.
Prepared remarks, you mentioned you were in advanced discussions with Regal and you expect those leases to get affirmed through bankruptcy I'm, just curious if theres any associated or anticipated rent cuts those properties.
Hi, good morning, RJ. So we have three locations one in Ohio, one in.
Down in Nashville, and then one in the.
Boston market, all three are very well performing locations on two of the three we expect to take a slight haircut on rent.
Will effectuate some time.
Late second quarter into the third quarter.
And so one of the three you expect to get assumed at full rent and can you quantify the rent reduction on the two.
In terms of the rent reduction on that.
Two you're looking at right around 500000 on an annualized basis.
Okay, and then you guys increase the dividends.
At a time when Capex spend is a pretty significant just given all the leasing that's been done and some of the repositioning.
I'm curious, where you anticipate your <unk> payout ratio ending the year.
Yes, I think this year it'll be it'll be slightly elevated.
As most of the capital RJ is connected to our signed not commenced a balance of about $11 million. So we're looking to spend approximately.
$40 million to $50 million on leasing capex in that 75% of that is tied to our our signed not commenced so while it will be a bit outsized. This year from an <unk> payout ratio. We do expect next year to be in the mid eighties and then subsequent here in 2025, we expect to be in the mid seventies.
So we have very high visibility given our signed not commenced signed leases that the air full payout ratio will come down and that was the calculus that went into the dividend raise that we announced last night.
That's helpful. Thanks, guys.
Yes. Thank you.
Our next question comes from Hong Zhang with Jpmorgan. Please proceed with your question.
Yeah, Hey, guys I think you mentioned <unk>.
Redevelopment drag when you take Hunter square in marketplace that del Rey offline.
Roughly when when in the year that would happen.
Yes.
Early in the year, so we've recaptured.
Few locations.
Hunter square and we have already recaptured.
The former grocer Winn Dixie.
El Rey.
Got it and I guess that curiosity. So if we think about that.
Three categories when you make acquisitions your wholly owned yard to junior <unk> Z platforms.
I guess, which which one would you expect activity to pick up the fastest.
I think it's too early to say.
I mean, I think we've been very patient.
Buyers.
We are scouring daily.
And you know out of the retail ecosystem of these three platforms, where they reside.
I can't answer, which one is going to pick up.
The bulk of balance.
To RTG tomorrow, and that can pick up but kebab RPT too. So I think the beauty of this is all three are complementary and all three gives us a competitive edge in the marketplace.
Got it thank you.
Thank you.
Our next question comes from Floris Van <unk> with Compass point. Please proceed with your question.
Thanks Scott.
Question.
Yes, two questions number one.
Hi.
Note that your shop occupancy it's a.
<unk>, 6.8% Youre leased occupancy that is and there is 330 basis points of that to note there but.
What gives you confidence that you can increase and do you have a target for your shop occupancy.
We do.
Target long term florists and good morning by the way.
91%, 92% given that half of our signed not commenced pipeline, so roughly $5 million to $6 million is that it is tied to our small shop space. So we ended the year right around on an occupied level 83, 5%. We do expect that to end the year between 80, 687%, which kind of gives you a clear path.
Way to get closer to 90, 192% over the long term and then that $7 million thats in leases.
30, 35, 40% the small shop, so add that in.
And then there is another several million dollars even at the LOI is that we think will be in legal here in the next month.
And about 50% small shop.
Thanks.
One other thing I noticed you touched upon this certainly regarding Mary Mary Brickell, saying that it was 83% leased but if I look at your overall Miami exposure, it's 83% leased as well.
Driving which I think is the lowest in your overall portfolio and for any of the markets could you maybe.
Go through what's going on in Miami in particular, because I would imagine.
<unk> is a big part of that but but maybe talk a little bit about where you see the upside there.
So vehicles, certainly 83% Delray.
We've been buying out tenants.
Two.
Effectuate, our redevelopment with two iconic anchor tenants.
And new small shop space and potentially even some ramsey, which.
Which a partner with you.
Maybe thats a contribution like we did in Jacksonville, where we contributed our land and became a 50% owner of 375 units and we're going through entitlements on that but the large driver on that is.
It is delray.
Got it and then and then in terms of Austin I noticed I mean, it's only one asset, but I noticed you had sub 90% leased occupancy.
I know that you were pretty positive when you made that acquisition I think it was a year and a half ago or something like that maybe if you could talk a little bit about what's going on in Austin as well.
Yes, 2019, we made that acquisition five five cap we've expanded it quite nicely NOI has moved.
30%, 40%.
We've taken back a couple of tenants have.
I have two asked their rents and so that's where you see some of the 89, which should be 98% here at least in the next several.
Couple of quarters.
Thanks, Brian .
Yep. Thank you.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad. Our next question comes from Linda Tsai with Jefferies. Please proceed with your question.
Yes, hi.
Part of your bad debt forecast.
It is not we don't assume any disruption there and we only have two.
At homes Linda.
Okay and then just on the earlier comment why was the buy buy baby take 12 to 18 months.
Backfill versus.
The bed Bath, taking less time.
Well I think I mean, a couple of things I think every site is different.
And so the buy buy baby.
Had different.
Components of complexities, where those specific centers.
Where one might be combining spaces. Another one might be chopping up spaces. So it's not some of them are not all as is as opposed to <unk>.
Bed Bath are really taking up the.
The deals we are taking the space as is.
So those nuances Linda I think that around the edges, a few months more than the bed Bath deals.
Got it and then just on the earlier comment that it's important to create tension in the market to get multiple parties interested in this space is your view that leasing capex for <unk>.
It goes down this year.
Certainly.
On selective deals of.
Previous box deals, where we have <unk>.
Three or four people buying for a space for those deals yes. It would go down.
Where there are centers, where we are combining spaces.
That could be up but this is all about.
Getting that tension driving rents and driving capex down.
And then just the last one just on the bed Bath <unk> beyond boxes.
Is your view that more of those go to single tenants or that gets divided up.
Single tenants.
Yes. The four we have recaptured every single one is going to a single tenant.
Got it thank you.
Yes.
Our next question comes from Craig Schmidt with Bank of America. Please proceed with your question.
Hi, good morning.
On for Craig.
I kind of wanted to go back to.
Questions around small shop.
And I totally understand.
Outlet.
Or anything.
And then.
Being online for 90, 192% long term.
Was just hoping to get additional color around that.
Both the leased and occupied.
During the quarter.
Just seeing if there are specific markets or tenant sites.
Whereas.
You know most of your peers.
Again in that.
Thank you.
So we had in Lake Hills in Austin, we had at <unk>.
10000 square foot tenant that.
That we proactively moved out.
And doubled the rent so that's really what the mover was for this quarter.
Yeah remember the small denominator, we have with the <unk>.
<unk> shop to.
So when you have a deal like that upsize of nine to 10000 square feet.
It's going to move the number it's tough to focus on quarter to quarter.
Got it.
Thanks.
And on your net.
Net debt to EBITDA is six nine times.
It did tick down a bit from last quarter.
Yeah.
Just wondering what the priorities are this year in terms of.
Yeah.
Line with your expectation.
Given.
You have no debt maturities until 'twenty five.
Thanks.
He never component.
Term loan debt.
You know what.
It's a priority.
Sure.
Sure.
Yes, there have been done a wonderful job of on the balance sheet clear enough maturity for the next couple of years. So we can fully focus on growth in EBITDA, which is all tied to sign I commenced as we alluded to.
In our prepared remarks in a few questions today.
So short answer is gets net debt to EBITDA down we want to get within a range of $5 five from six eight times and based on our.
<unk>.
At the midpoint of our range already at pretty close to the top end of the range of around six five times and then from there. We do believe in 'twenty four 'twenty five we'll be well within our range at the midpoint of $6 at all times. So.
A metric and focus for the company and we will get it done.
Just a quick one on Kroger albertsons.
If there was any update or change in thought.
Around that you know given the latest update.
On the store closing plan, if you can remind us what your.
Hum.
We have zero overlap.
At all so it's really.
The offline for RPG thankfully.
Okay got it.
Yes. Thank you.
Okay.
It appears that there are no further questions at this time I would now like to turn the floor back over to Brian Harper for closing comments.
Thank you operator, we relentlessly pursued excellence in 2022 and are ready to do the same in 2023, although the current retail environment presents some near term uncertainties, we entered the new year on very solid footing.
Leasing momentum remains robust our balance sheet and liquidity are in great shape, and our investment platforms give us competitive advantages with regard to potential acquisition opportunities.
It is times like these when we believe the significant improvements we've made to our portfolio over the past several years will prove themselves out as we continue to build more durable cash flows.
And we expect to deliver very solid results.
We look forward to seeing many of you at upcoming conferences and hope you all have a great day.
This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.
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