Q4 2022 Retail Opportunity Investments Corp Earnings Call
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
[music].
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
[music].
Yeah.
Yeah.
Welcome to the retail opportunity investments 2022 fourth quarter and year end conference call participants are currently in a listen only mode. Following the company's prepared remarks, the call will be opened up for questions now I'd like to introduce Lori sneak the company's chief accounting officer.
Thank you before we begin please note that certain matters, which we will discuss on today's call are forward looking statements within the meaning of federal Securities Law. These forward looking statements involve risks and other factors, which can cause actual results to differ significantly from future results that are expressed or implied by such forward looking statements.
Spends should refer to the company's filings with the SEC, including our most recent annual report on Form 10-K to learn more about these risks and other factors. In addition, we will be discussing certain non-GAAP financial results on today's call reconciliation of these non-GAAP financial results to GAAP results can be found in the company's quarterly supplemental which is posted on our web.
Right now I will turn the call over to Stuart towns, the company's Chief Executive Officer, Stuart. Thank you Lori and good day everyone.
Here with me today is Michael Haines, our Chief Financial Officer, and Rich <unk>, our Chief operating officer.
We are pleased to report that during 2022 through implementing our long standing strategic property operations leasing and investment initiatives. We continue to enhance long term intrinsic value and competitive position of ROIC <unk> portfolio and business.
In the face of significant economic headwinds and uncertainty.
Throughout 2022, our grocery anchored portfolio again proved its resilience.
Brazilians to get value and.
<unk> capitalizing on the longstanding appeal and strength of our portfolio in West Coast markets. We had one of the best most active year to date in terms of property operations and leasing setting a new number of new records.
We achieved a new record high portfolio lease rate, surpassing 98% at year end.
Our record high lease rate was driven by the ongoing strong demand for space and our ability to capitalize on that demand.
Step with achieving a record high lease rate. We also achieved a new record for the company in terms of our overall leasing activity.
Additionally, we continue it achieved strong rent growth.
In fact 2022 represented our 10th year in a row of achieving rent growth on both new leases signed during the year as well as renewals.
With respect to new leases 2022 was also our 10th consecutive year of achieving double digit rent growth and it is all our all source fixture, where we achieved rent increases in excess of 20%.
In short 2022 proved to be a stellar year on the leasing front again in the face of challenging and uncertain economic environment.
While we work to enhance the underlying value of our existing portfolio through our leasing initiatives. We also continue to work on enhancing our leadership position and presence on the west coast through a relationship driven investment program.
During 2022, we continue to capitalize on our off market sources to gain unique access to acquire exceptional irreplaceable properties. In total we acquired five excellent grocery anchored shopping centers encompassing over a half a million square feet of space in total.
These new acquisitions that fit our disciplined risk adverse strategy in our existing portfolio perfectly.
They are well situated in our core markets three being located in the Seattle market, one in Portland, and one in the San Francisco market.
Within each of these markets the properties are well established in the heart of affluent communities. All five shopping centers feature strong grocery operators that are long standing existing tenants of ours, along with a broad range of necessity service and destination tenants many of which are existing tenants of ours as well.
While the new acquisitions provide a stable base of cash flow. They also offer a wealth of opportunities to increase cash flow and enhance the underlying value going forward.
Within just a few short months of having acquired the properties, we have already leased the bulk of the available space.
Looking ahead, there is an abundance of opportunities to re lease below market space over the next several years.
There's also a number of opportunities to reconfigure expiring space and attract new tenants at higher rents as well as potential expansion in pad opportunities.
In summary, our 2022 acquisitions are an excellent strategic fit by all measures and enhance the value of our overall portfolio and presence on the west coast. Additionally, our investment activities together with our leasing accomplishments serve to generate solid financial results.
I'll turn the call over now to Michael Haines, our CFO to take you through those details Mike.
Thanks Stuart for the year ended 2022 total revenues increased by 10, 1% over 2021.
Operating income excluding the gain on sale from property dispositions increased by 15, 6% over 2021 with.
With respect to property level net operating income on a same center comparative cash basis NOI for the year 2022 increased by four 6% over 2021, including a 5% increase in the fourth quarter.
Turning to GAAP net income for the full year 2020 to GAAP net income attributable to common shareholders was <unk> 42 per diluted share as compared to GAAP net income of 44 cents per diluted share for 2021.
Included in 2021, GAAP net income was $22 $3 million gain on sale of real estate as compared to $7 $7 million gain in 2022.
In terms of funds from operations <unk> for the year 2022 increased by 13, 6% over 2021.
On a per share basis, <unk> was a $1 10 per diluted share for 2022, representing a 10% increase over 2021 and for the fourth quarter of 2022, <unk> increased by 8% to 27 per diluted share.
Turning to our financing activities. During 2022, we're a $61 4 million of capital, including $36 2 million from our property disposition and $25 2 million that we raised through our ATM program issuing approximately $1 3 million common shares.
With respect to our debt profile, we continue to reduce secured debt. During 2022, we retired two mortgages totaling $23 5 million today, we only have two mortgage loans remaining on our balance sheet, meaning 91 out of our total 93 shopping centers are unencumbered and secured debt is now down to a new record low of just four 3% of our total.
Debt outstanding at year end and.
In addition to lowering our secured debt during 2022, we continue to work on enhancing the company's financial ratios, including the company's net debt ratio.
I recall that back during the height of the pandemic in 2022, the company's net debt to annualized EBITDA ratio had reached seven nine times, which we successfully lowered down to seven times by the fourth quarter of 2021.
During 2022 was successfully lowered the ratio further down into the mid sixes ending the year with a net debt ratio of six six times for the fourth quarter of 2022, which has lowered our fourth quarter net debt ratio has been since 2016.
Looking ahead in terms of our initial guidance for 2023 on the positive side, we expect same center NOI growth to grow in 2% to 5% range for 2023 with a good portion of that growth being driven simply by contractual rent increases. However, we expect that property level growth will be offset by higher interest costs.
Based on the forecast of yield curve of 2023, we currently expect that the company's interest expense will be in the $68 million to $73 million range for 2023 spending in part upon our investment activity during the year.
And with respect to the company's investment activities. The low end of our initial guidance assumes that we acquire $100 million, while selling 200 million of properties and effectively utilizing the sale proceeds to fund acquisitions or pay down debt.
Which if the year plays out that way, we expect that our net debt ratio will drop down to the low sixes.
High end of our guidance assumes that we acquired 200 million, while selling $50 million of properties, we finance acquisitions with a combination of sale proceeds.
And equity the goal being to maintain our net debt ratio in the mid sixes.
These and other various assumptions into consideration we have set our initial <unk> guidance range for 2023 at a $1 five to $1 11 per diluted share. Additionally.
Additionally, in terms of rental revenue recognition you may recall that back during the pandemic, we did not move any tenants to being on a cash basis. As a result as it relates to 2023, there is no additional or incremental rental revenue guidance coming from reinstating cash basis tenants.
Lastly, with respect to the bonds that mature at the end of 2023. We're currently exploring a variety of refinancing strategies. However, it's too early to say definitively what strategy, we will pursue as it will depend in part on the market conditions as we move through the year.
Our guidance assumes that we refinance the bonds in the fourth quarter.
<unk> our goal is to lower our floating rate debt exposure by reducing a portion of our term loan market conditions permitting now I will turn the call over to rich solar CFO rich. Thanks, Mike as Stuart highlighted 2022 proved to be one of the best most active years on record for the company in terms of leasing.
One of the core drivers of our success is the fact that more and more necessity service and destination tenants continue to gravitate towards open air shopping centers, especially grocery anchored centers and especially those properties that are located in desirable highly protected markets such as ours on the west coast.
At the start of 2022, our portfolio lease rate stood at a very strong 97, 5%.
Taking full advantage of the ongoing demand for space, we steadily increased our portfolio lease rate as we move through the year, reaching a new all time record high of 98, 1% at year end.
Along with being very pleased to achieve a new record high lease rate. We are also equally gratified that we have maintained our portfolio lease rate above 96% for 10 consecutive years now even surpassing our leasing accomplishments dating back to our time at Pan Pacific.
Breaking the 98, 1% down between anchor and non anchor space, our anchor space remained at 100% leased throughout 2022 and.
In fact, we have maintained our anchor space at 100% leased every quarter for the past six years now.
In terms of non anchor space, we increased our shop space lease rates steadily as we progressed through 2022, ending the year at a new record high of 96%.
Our record high lease rate was driven by our record leasing activity.
Back at the beginning of the year, we had 745000 square feet scheduled to expire during all of 2022.
Thanks to our team working aggressively and creatively maneuvering and optimizing existing tenant spaces to free up new space, along with proactively recapturing space and renewing space early we leased a record $1 6 million square feet of space during 2022, representing the 12th consecutive year, where we once again leased approximately.
<unk> doubled the amount of space originally scheduled to expire.
While leasing a record amount of space. We also continue to achieve solid rent growth our 10th consecutive year in fact as Stuart highlighted.
Specifically during 2022, we achieved a strong 23% increase in same space comparative cash base rents on new leases and we achieved an 8% increase in cash base rents on renewals.
In addition to our record leasing activity 2022 also proved to be our most active and successful year in terms of getting new tenants open and operating.
During 2022, new tenants, representing $9 $5 million of incremental annual base rent on a cash basis open and commence paying rent.
Again, a new record.
Taking into account all of our new leasing activity during 2022 at the start of 2023, the amount of annual incremental base rent from new tenants that haven't yet opened and commence paying rent stood at $7 6 million.
We are working proactively to get these tenants open and expect that the bulk will do so as we move through the new year.
And speaking of the new year demand for space continues to be strong across our portfolio such that we expect to have another solid year in.
In terms of our portfolio lease rate, we expect to maintain our overall leased rate and the 97% to 98% range as we move through the year.
In terms of lease rollover, specifically anchor expirations a year ago at the outset of 2022, we had 25 anchor leases scheduled to expire in 2023 totaling 723000 square feet.
During this past year, we renewed and released early very early in fact 12 of the 25 anchor leases such as the start of 2023. We are just 13 anchor leases scheduled to expire totaling 393000 square feet.
And we have already renewed six of these anchor leases, including five that were not scheduled to expire until the second half of 2023, and we are close to finalizing for other anchor renewals.
Lastly in terms of non anchor space at the start of 2023, we had 466000 square feet of shop space scheduled to expire.
The merger our anchor releasing activity, we're already hard at work and having good success renewing and releasing shop tenants now I will turn the call back over to Stuart.
Rich.
As our operating and leasing results firmly indicate our grocery anchored portfolio continues to perform at a strong level, we expect that to continue in 2023.
Being consistently above 96% leased every year for the past 10 years and leasing two times the amount of space scheduled to expire year. After year speaks not only the strength and appeal of our portfolio. It also speaks to our hands on approach.
Additionally, it serves to create an important fundamental favorable leasing dynamic for us.
<unk> essentially fully leased with consistent demand for space year. After year means that we are able to be disciplined and selective in terms of the tenants we lease to <unk>.
Always with a strong eye towards managing downside risk and making sure that we maintain a strong and stable base of necessity service and destination tenants, which is the cornerstone of our business as wed like to say.
Over the years this risk adverse strategy has proven to be instrumental in our ability to generate a revenue stream that is consistent and reliable year after year.
In terms of the prospects of growing our portfolio in 2023, while the acquisition market has been essentially idle since mid 2022, we've continued to maintain an active dialogue with our off market sources, some of which here recently have been increasingly proactive in reaching out to us which.
We view as a positive sign.
Additionally, we are beginning to hear from brokers that both buyers and sellers are interested in starting to possibly enter the market again, which we also view as a positive sign.
That said until there's greater clarity in terms of pricing and greater clarity in terms of interest rates in the capital markets, we intend to continue being patient and cautious.
With respect to the potential acquisition and disposition activity in our guidance. We are assuming that takes place during the second half of 2023.
Finally, as we head into a year that is expected to again be challenging in terms of economic pressure and uncertainty. We believe that we're well positioned to face the challenges. Our team has successfully operated grocery anchored shopping centers on the west coast for nearly 30 years now through all kinds of challenges.
We believe that we have the skill set and experience to continue operating our portfolio at a high level. Additionally, based on our experience over the years challenging times, often create unique opportunities, which we believe we are well positioned to capitalize on.
Most important we intend to stay focused and true to our longstanding disciplined business plan that has and always will be focused on carefully building long term value.
Now we will open up the call for your questions.
Operator.
Thank you, ladies and gentlemen, if you'd like to ask a question. Please press star one one on your telephone again to ask a question. Please press star one one.
Our first question comes from Wes Golladay of RW Baird. Your line is open.
Good morning, everyone, Hey, Stuart.
To go back to the floating rate, it's about 27% of the debt right now I think it's a big area of concern for investors.
Curious.
Time.
Particular time, you want to address that yes can you take advantage of the inverted yield curve.
You did mentioned about paying down secured debt, but could you do secured debt and would there be any prepayment penalty on the term loan.
Hey, Ross, it's Mike with regard to the floating rate exposure and we'd like to refinance the bulk of that as we move through the year and possibly will pay down some of them utilizing a mix of fixed rate debt sale.
Sale proceeds and possibly some equity depending on market conditions, but to be conservative our guidance assumes that the floating rate debt remains outstanding.
No prepayment on the term loans at certain terminals pre payable at any time.
But yes, there are other options secured debt or other or other alternatives that we are looking at as well.
And I guess, where could you borrow at call. It a five year seven year term because at the timeframe you'd be looking at would you go 10 year what are the what's on the menu here.
I think all of those are basically available less near the fives are probably a little bit less expensive than the tonnes, but youre, probably looking at the high fives low sixes for five seven or 10 year deal.
Okay Fantastic and then Stuart I think you mentioned that acquisitions would be back half loaded just curious.
Comment is also for dispositions and do you expect to have a positive spread between where your asset recycling is there any non income producing assets and part of that disposition plan.
Yes, I mean non income producing assets would be some of the densification. The land that we have entitled we are moving that to the market over the next several weeks.
We waited we thought it would be patient to wait for this time, where there is more clarity in the market.
And in terms of acquisitions and dispositions, yes, we are planning to move through the year with an emphasis on the second half of the year, where there will be more clarity in terms of pricing, but more importantly.
We intend to be buying accretively to our cost of capital.
Got it and then just one last one I think you have a bad debt reserve, that's about $1 million higher versus how you started last year is this just a general macro concern or do you have any known bankruptcies at this moment.
Our bad debt reserve.
Conservative we generally budget bad debt has shared about one 5% of total revenue, but that said historically, our actual better than typically below 1% of each each year the loan of our guidance was up $5 million.
All of our bad debt guidance is assuming takes into account all of our tenant base.
And at the current time rich, we don't really have anyone on our watch list just so you know.
Fantastic Thanks, everyone.
Yes.
Thank you.
One moment please.
Our next question comes from the line of Craig Schmidt.
Of Bank of America. Your line is open.
Alright, good morning, Craig.
Good morning. This is lithium lithium ion on for Craig This morning.
I wanted to ask about the moving pieces to your same store NOI guide of.
It just seems like a wider range of <unk> to 5%.
And if you could just talk about the moving pieces there really in terms of occupancy contractual rent bumps.
<unk>.
Impact from from bad debt.
Just wanted to see what might be swinging that to the lower end versus the higher end.
Well I've got some prepared remarks to walk you through so you start with our fourth quarter 2020 to <unk> 27, a share and you annualize that.
$1 eight so the low end of our guidance assumes that we sell $100 million properties more than we acquire in 2023, so the dilutive impact of that together with our assumptions of higher interest costs higher G&A and higher bad debt.
Partially by 2% NOI growth for 2023 is reflective of $1 five at the low end of the range to $1 11 at the high end takes into account acquiring $150 million more properties than we sell plus 5% NOI growth. So it's kind of a range there together with bad debt and G&A staying comparable to 2022, while being partially offset by added interest expense.
So it's.
Look different NUPLAZID, primarily a range of internal growth.
And adjusted for interest expense G&A and bad debt.
Okay got it thanks for that detail.
And then on the occupancy front just with the.
Youre continuing to see new record highs.
You're at 98, 1%.
I believe you mentioned seeing.
Continued range within 90, 798% this year.
Just curious on.
There, where the upside is and.
This is really.
You see the opportunity more so on the small shop side versus.
Anchors.
<unk>.
The room for growth here. Thank you.
Sure. This is rich yet we still see a lot of opportunities throughout the portfolio, whether it's shop space our anchor space there.
Several leases that are way below market.
<unk>.
We continue to work to recapture and re lease at the current market rent. So we still see.
Good rental spreads going forward, while maintaining that occupancy.
Okay, Thanks, and if I could ask one more.
Just going back to acquisitions without being more back weighted.
It looks like you assume fairly steady amount from the prior couple of years is this based on visibility you have on current opportunities are.
Are there anything kind of.
Any opportunity if you have more visibility on based on your discussions.
Yes, no the.
Pipeline.
Certainly building and it is based on a number of discussions we've had over the last several months with owners on the West coast.
No.
When it look when you look at the the guidance out there we are anticipating again bill.
Building the acquisition pipeline as we get through.
This quarter and next.
But we anticipate that a number of these transactions will typically close and we will and we'll get the benefit of that NOI in the second half of the year.
Okay. Thank you.
Thank you one moment.
One moment.
Our next question comes from the line of one <unk> of BMO. Your line is open.
Good morning.
Good morning.
Just hoping you could speak a little bit about.
How bullish you are given the record leasing you've had and seemingly is continuing into 'twenty, three and maybe holding back space in pushing rate a little bit more and be willing to let retention slip just to try to capture some of that.
Mark to market or are you not really just because the macros uncertain and you're just really water.
Keep things steady and avoid any potential pitfalls.
Yes, I mean look the market is very strong in terms of tenant demand and I think I've said in my remarks.
That the focus here is to take advantage of this high occupancy as it relates to getting a bit more aggressive with the tenant base. That's the advantage of being so well leased so.
The answer is yes, we will get more aggressive that may generate a touch more vacancy through the portfolio, but on the other hand, we're expecting you know.
Lease.
Spreads as you might say to be as good or better given this high occupancy as we move through 'twenty three.
Okay, and maybe a question for Richard could you provide any color on the cadence of.
Economic occupancy are both occupancy should we expect to dip seasonally in the first quarter and maybe any comments on where we expect to end the year for rail economics perspective.
Sure I mean, I don't think that were expecting a dip in the beginning part of the year I think that we're expecting to steadily be bringing in this income throughout the year. There are a few.
Large leases that are commencing in the first quarter, but as we always do every year, we're doing other leasing in the meantime, so while we'll be bringing that online we will also be adding to the number.
Okay, and maybe just last one for me in terms of the entitlements.
How should we be thinking about the various opportunities and what you are looking to monetize and what that could represent.
The large disposition range.
You are looking to keep on balance sheet the crossroads, perhaps.
Crossroads is still moving through the permitting process and that's taken longer because of the municipality more than anything else. So theres not much capital spend this year at the crossroads.
As it relates to Densification of that particular project the other two.
<unk> fully entitled and again, we have.
Pretty good offer on it right now, but we are taking it to the market.
Shortly and that will hopefully sell and close in the second or third quarter of the year and Nevada right behind that both those properties will account for about 2000 $25 million in proceeds.
And we're expecting to have both of those transactions done in 'twenty, three which we'll use that cash obviously to pay down debt on the balance sheet.
Thank you.
Thank you one moment please.
Our next question comes from the line of Craig Mailman of Citi. Your line is open.
Yes, good morning, Craig.
Good morning, just wanted to go back Mike to your comments on the variable rate data.
I understand you guys are going to pay down but going forward should we expect kind of your variable rate exposure to be really.
Kind of subject to the line balance are you guys going to move away from from using this and kind of shifting more towards fixed rate.
Yes, I think we're going to definitely move more towards fixed variable daily like the turmoil that out I'm not sure about that.
Thanks.
Primarily through public bond offerings as we move through the year. The terminal itself is floating with doesn't mature for a couple of years. So we have got some timed.
If all and settle down until we get the more favorable pricing.
But.
We allowed us to go floating for flexibility.
But the idea is we prefer to have mostly fixed rate debt.
Okay, and if you guys decided not to pay off the turmoil.
Just given the uncertainty in the rate market would you guys look to put a swap on or cap or something.
Just to lock it in essentially a swap I mean, the rates have already moved up in the swaps have moved up accordingly. So.
It depends on what the market conditions.
Okay.
And then Stuart moving back to your commentary on the acquisition market I mean, what's what's driving do you think the move for sellers to kind of come back in the market that exploration driven or something else.
It's primarily.
Debt expirations.
As well as.
The fact that capital is constrained out there for these sellers.
And we still have some <unk> transactions that we had a pretty well in the back last year that were still.
In contact with so I think we may see some of that as we move through the year as well which would be.
Which would be good for the balance from a balance sheet perspective, but all in all it's really being driven through the dynamics of the overall capital markets as well as the financing side or the debt side as you would say.
And you know from our required return perspective kind of where are you thinking about your hurdles just given where your cost of capital is where the debt market has moved to.
Versus maybe where you are having conversations today like is there a recognition that.
The new hurdle rates are the norm or kind of what's the resistance to that from sellers.
Well I mean, theres no real norm to speak of at this point, because theres really been no benchmark that formal benchmark that's been set on the west coast for high quality grocery anchored centers have cap rates moved up yes, but there's been nothing that has really shown us that theres been a material move in valuations. So is.
We look forward in terms of growing the company. We are much more focused on buying assets probably in the high fives low sixes.
More importantly accretive.
Not so much on day, one, but pretty quickly given our management team's ability to really drive value through an increase in either vacancy or rollover as you might say that that's really how we're going to continue to deliver as we have in the past a nice punch to NOI in growing the company this year.
And again as you probably know we've been doing this for a long long time, so we've got a pretty good view.
Few of the market as to how we're going to create that value in terms of what we're buying or what's in the pipeline.
What is that five to six kind of translate to on an unlevered IRR perspective, just given kind of what's happening on the rent market. How are you guys are underwriting that et cetera.
On an unlevered basis.
Our goal within 18 months of acquiring this asset is the mid sixes or the high sixes.
Tough to tell you where that entry point is but that's our criteria and thats. The goal that we set on every transaction that we do.
And then just one more for me on the leasing side you guys are.
Very far along on the anchor side of things, but maybe as it pertains to just like the grocery side, just given what's happening with inflation and consumer preferences what.
As you guys look to push rents on those kind of what does that equate to.
And occupancy costs for those grocers and how much room do you think you have to push rents in this environment given what's happening on the expense side.
Well I mean again this is Richard.
A lot of these grocery leases are fairly old and below market, where several of them are coming up with no options remaining which is creating opportunities through us.
For us throughout the portfolio where.
We may have one lease with a grocer, that's expiring with no options and they're asking to reset that lease and then we look at the entirety of the portfolio and are able to drive rents get people to take down options early or get additional rent at other locations. So we continue to see good opportunities to continue capturing that.
Rent and some of these anchor leases are expiring at single digit annual rent numbers. So there's a lot of room there.
Okay. Thank you.
Thank you one moment please.
Our next question comes from the line of Todd Thomas of Keybanc. Your line is open.
Hey, good morning, Todd.
Hi, good morning.
I just wanted to see.
<unk> back to the dispositions real quick here Stuart I appreciate the added color around the land sales that you are looking to monetize.
The retail centers that you may sell or are you targeting.
Noncore assets that are maybe a little bit higher yielding within the portfolio or are they lower cap rate deals that that might help a little bit more with.
The debt reduction efforts.
And sort of maybe non dilutive basis as I look at the variable rate debt. That's at a cost of above five 5% today likely heading a little bit higher can you sell assets at a lower cap rate than that.
Yes, you can sell assets at a lower cap rate and.
We are looking at assets that primarily have very little internal growth over the next several years as you. Obviously know taught a lot of the portfolio is 100% occupied.
But the good news is the most sought after segment up.
After his grocery anchored shopping centers, so we feel pretty good in terms of.
Moving these assets.
And again, it will be really generated.
On the profile of the asset and its internal growth.
Okay, and and so our dispositions going to be used.
To match fund acquisitions, I mean or is it sort of separate right, where the dispositions that you might look to execute throughout the year or our independent of acquisition activity that you may or may not really see materialize later in the year.
Yes, I mean, it's a combination of.
Paying debt down and funding growth will be a combination of both depending on how much we sell in the velocity of those some of those assets.
Okay. So so but you are moving forward with disposition.
Plans again independent of acquisitions, I mean, there are assets that you're looking to monetize throughout the year, whether or not any acquisition opportunity surface that meet your return.
Requirements.
Is that right that is that.
That is correct. Okay, and then and then also just with regards to assets that you might look to sell or there are there certain markets, where you might want to reduce exposure.
Some of those those sales might be.
Target.
No not really we're looking at all of the markets. We're in and again, we're looking at the whole portfolio you may get more than one market than the other but the reality is is that all of our markets are performing extremely well.
So you know we're in a good place in terms of picking and choosing which assets, but primarily focused on the fact that these assets.
Deliver a better return than most of the rest of the portfolio over the next several years.
Okay, Alright thats helpful. Thank you.
Thank you one moment please.
Our next question comes from the line of Michael Mueller of J P. Morgan again, Michael Mueller of Jpmorgan. Your line is open.
Yes, hi, good morning, Mike Hey, Good morning, Good morning, two quick ones.
So what does guidance assume for physical occupancy at year end compared to $93 three where you ended 22, and then I guess just following up on the acquisition and disposition questions that you've had so far.
Would you issue equity at these levels.
Deal flow was there maybe dispositions didn't materialize.
Well I mean I'll answer to the equity question I'll, let rich answer the first part of the question, but no we're not issuing equity in terms of where our stock is trading at.
At the present time rich do you want to answer well I mean, you're asking about.
Build occupancy at the end of the year or built.
Bill.
I don't think we have that number in front of us here.
We'd expect that it would be in the same range.
It has been historically.
Hopefully a touch a touch higher let's just say if all all $7 6 million came in.
I've taken the majority of it is supposed to start by the end of September but that will be replaced by the leasing activity. So incrementally so entire but it's always being replaced by new opportunities to release.
Okay. Thank you.
Thanks, Mike.
Thank you one moment please.
I'm showing no further questions at this time, let's turn the call back over to Stuart <unk> for any closing remarks.
In closing thanks to all of you for joining us today as always we appreciate your interest in ROIC.
If you have any additional questions. Please contact Lori Mike Richard or myself directly also you can find additional information in the company's quarterly supplemental package, which is posted on our website as well as our 10-K, thanks again and have a great day everyone.
Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect have a great day.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.