Q1 2023 Retail Opportunity Investments Corp.Earnings Call
[music].
Yeah.
Good day and welcome to retail opportunity investments first quarter 2023 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.
Now I would like to introduce Lori sneak the company's chief accounting officer.
Thank you.
For 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 laws.
<unk> looking statements involve risks and other factors, which could cause actual results to differ significantly from future results that are expressed or implied.
We're looking statements.
Participants 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 and Additionally, we will be discussing certain non-GAAP financial results on today's call reconciliations of these non-GAAP financial results to GAAP results can be found in the company's quarterly supplemental which is posted on our website now I'll turn the call over to George.
Chief Executive Officer Stuart Thank.
Thank you Lori and good morning, everyone.
Here with Lori and me today is Michael Haines, our Chief Financial Officer, and Rich <unk>, our Chief operating officer.
As reported in our press release Laurie scheme is retiring in a couple of weeks Laurie and I have worked together for over 20 years.
And then for the past 11 years here at <unk>.
Truly grateful for her invaluable contributions wisdom guidance and leadership over the years.
You'll be missed by everyone at Rois and all of US wish her the very best in her retirement.
With Lori retiring Lawrence silver ore will become chief accounting officer.
Lawrence joined <unk> back in 2013, as the Companys corporate controller.
Important part of the Rois Street team for the past decade.
Mike Rich and I look forward to working with Lauren and her new role.
Turning to our first quarter results, our grocery anchored portfolio and kind of base continue to perform very well in fact in terms of leasing activity notwithstanding our portfolio being essentially full.
At over 98% leased at the start of 2023, we achieved the most active quarter in the company's history leasing a new quarterly record amount of space and driving our portfolio lease rate to an all time high at quarter end.
Additionally, we again achieved solid re leasing rent growth in fact, it was our 45th consecutive quarter over 11 years in a row of achieving re leasing rent growth on both new leases and renewals.
Speaking of renewables, we posted almost.
By far in terms of renewing tenants, including long time value of anchor tenants as well as a broad range of strong non anchor tenants.
You have our expense continue to reach out to us early to execute renewal options with a growing number looking to extend past the typical five year option period.
We think the renewal activities indicative of the strength and long term appeal of our grocery anchored portfolio with its strong location attributes and demographics. It.
It is also indicative of the strength of our tenant base today.
[noise] dampening our record setting leasing during the first quarter, we had several expenses that impacted that fall in same center NOI.
Most notably we incurred an inordinate amount of snow removal costs, primarily as a result of the unusually severe snowstorms up in the Seattle area back in July in February .
We also incurred a one time expense during the first quarter related to concluding an open item with the seller of a property that we had previously acquired.
Notwithstanding these expenses we remain on track in terms of our guidance for the year.
Along with working to enhance our portfolio through our leasing initiatives. We were also working to enhance our financial flexibility, especially in light of the recent banking turmoil.
During the first quarter, we extended the maturity date of our credit facility.
While the facility was scheduled to mature until next year, we extended the maturity date out to four years from now with the flexibility to extend it by as much as five years.
Additionally, watching the interest rates swap market closely during the fourth quarter, we swapped half of our floating rate term loan, reducing our floating rate debt considerably.
Now I will turn the call over to Michael Haines, our CFO to take you through the details Mike. Thanks, Stuart GAAP net income attributable to common shareholders for the first quarter of 2023 was $8 1 million equating to six cents per diluted share.
Funds from operations for the first quarter totaled $33 8 million equivalent to 25 cents per diluted share.
As Stuart touched on during the first quarter, we had several expenses that impacted our first quarter results.
Property level rental revenue for the quarter actually came in above our budget such that actual GAAP operating income for the first quarter was fully in line with our budget notwithstanding the added expenses.
With respect to bad debt for the first quarter was approximately $1 million, which was below our budgeted amount of one 5% of total revenue.
Bulk of the $1 million related to a combination of the one time expenses mentioned in various time account adjustments in other words, the bulk of our first quarter event that was not related to tenant vacancies overall, our tenant base continues to perform well.
In terms of financing initiatives observed noted during the first quarter, we extended the maturity date on our credit line, specifically working with our banking group, we extended the maturity date from February 2024 to March 2027.
Flexibility to extend the maturity for another year to March 2028.
Additionally, borrowings on our line are now based on silver.
We also have the flexibility to double the capacity on the credit line from its current capacity of $600 million up to $1 2 billion.
The end of the first quarter, we had $67 million drawn on the line.
As Stuart highlighted we continue to watch the debt market closely with an eye towards reducing our floating rate debt.
Namely our $300 million floating rate term loan during the first quarter, we capitalized on the favorable window and entered into two interest rate swap agreements fixing the interest rate on $150 million of our $300 million term loan locking in the rate of five 4% through August of next year.
The swaps in place, we lowered our floating rate debt from 28% of our total of that where we were started 2023.
16% as of March 31.
In terms of the company's interest expense our initial budget for 2023 assume that the interest rate on our $300 million term loan with the remaining flooding throughout the year, having put the swaps in place we estimate could lower our overall excellent interest expense for the year by half a million dollars or more depending upon the trajectory of interest rates as the year progresses.
In terms of $150 million still flooding, we purposely held off swapping it out in order to give us flexibility in terms of refinancing options later in the year, including possibly refinancing of 150 million together with the $250 million of fixed rate bonds that mature in December .
Only the term loan is repayable in full or part at any time and doesn't mature until another tiers, which also gives us considerable flexibility regarding refinancing strategies lastly in terms of mortgage debt with a vacuum terminal. There is currently a lot of concern regarding the commercial real estate lending market, particularly as it relates to mortgage refinancings going forward.
Given the original banks over multiple multiple mortgage debt. Fortunately, we only have two mortgage loans on our balance sheet that together total about $61 million, while immature as of next year and the other matures in 2025. Our plan is to refinance 12 months with unsecured debt now I will turn the call over to shovel or rich. Thanks, Mike while the first quarter of each year has.
Traditionally been relatively quiet in terms of leasing activity following the holiday season, as existing and prospective tenants evaluate and set plans for the new year.
Distinct contrast in recent years, the first quarter has become increasingly active across our portfolio with more and more tenants vying for any space that may have become available following the holiday season.
This is especially the case as it relates to shop space, where we continue to see a growing number of franchisees seeking to expand not only in the quick serve restaurant sector for more and more in the medical wellness and self care sectors, along with boutique fitness and child development, a number of which are bringing new concepts to the market and all.
Continue to seek out grocery anchored shopping centers.
Capitalizing on the demand we posted our most active quarter on record for the company leasing over 559000 square feet.
Additionally, our robust leasing activity helped drive our portfolio lease rate to a new record high of 98, 3%.
As Stuart highlighted the bulk of our leasing activity centered around tenant renewals specifically during the first quarter 512000.
Of the 559000 square feet that we leased involved renewing existing tenants.
In terms of anchor space at the start of 2023, we had a total of 393000 square feet scheduled to roll during the course of the year.
And just the first three months alone we've already renewed 384000 square feet of anchor tenants.
Five of the anchor tenant renewals were longstanding supermarket tenants.
Additionally, one of the anchor renewals involved a longstanding tenant whose lease was scheduled to roll until 2028, but they came to us wanting to exercise their five year option now and extend their lease through 2033.
We also had three anchor tenants that came to us about extending their five year renewal options out to seven years.
Taking oliver anchor renewal activity into account.
As of March 31, we now have only three anchor leases scheduled to roll this year two of which we expect to renew with one tenant seeking a seven year extension instead of five and they would also like to extend their leases. Similarly at several other locations within our portfolio that roll in future years.
With respect to the third anchor lease, which is a 17000 square foot space. We are currently in discussions with several prospective new tenants to lease the space, where we expect to achieve a significant increase in rent.
Looking out further in 2024, we currently have 13 anchor leases scheduled to roll of which we expect that 12 will renew.
In terms of non anchor space at the start of the year, we had 466000 square feet of shop space scheduled to roll during.
During the first quarter, we re leased 175000 square feet in total shop space of which about three fourths of that were renewals.
In terms of re leasing rent growth, we posted another solid quarter, achieving an 11% increase and new leases signed during the first quarter and a 6% increase on renewals.
Lastly, with respect to getting new tenants open and operating we had another active successful quarter.
At the start of the year the spread between leased and build space stood at three 9%. According to $7 $6 million of rent from new tenants that had not yet taken occupancy and commence paying rent.
During the first quarter, new tenants, representing $2 $1 million of the $7 6 million took occupancy.
Taking into account new leases signed during the first quarter at March 31, the spread stood at three 2% representing $6 $5 million of rent that has not yet commenced we expect the bulk of the $6 5 million will come online as we move through the year.
Now I will turn the call back over to Stuart.
Thanks Rich.
Our continued success with leasing and the ongoing demand for space against the backdrop of increasingly challenging and uncertain economic environment.
<unk> volumes as to the fundamental strength of our portfolio and the benefits of our hands on approach.
As we continue to capitalize on the demand we are focused on making the most of every opportunity to enhance our already strong assessing and service space tenant mix.
Importantly, as always we continue to be disciplined and selective with the tenants that we are renewing and the new tenants that we are bringing to our portfolio.
In terms of acquisitions and dispositions. We currently have one property under contract to sell it for $15 4 million.
Property up in the Portland market that we acquired back some years ago as a value add weak position play.
Since acquiring the property, we fully re tenanted and re merchandize the center increasingly NOI substantially along the way.
While the center has a stable property. It is one of the few properties in our portfolio that is not grocery anchored beyond this we have several other properties that we are exploring selling however at the moment. We are currently holding off with moving forward until there's more clarity in the market.
Just a few short months ago, the acquisition market was starting to show encouraging signs of becoming active in favorable again.
The sudden banking turmoil has caused traditional mortgage lenders and other capital sources as well as buyers and sellers to pull back significantly.
As a result activity in the market in terms of actual deals being consummated is currently very limited.
With respect to the few transactions that have occurred recently in the grocery anchored sector on the west coast cap rates have been in the low sixes, but there hasnt been enough activity to really know with confidence where the market is heading.
While we are being patient we continue to be proactively engaged and continue to have discussions with our off market sources. So that we are in a strong position to move forward. Once there is clarity in the marketplace.
Based on our experience over many years through numerous challenges market conditions, often change rapidly and opportunities quickly arise, especially in terms of off market acquisitions.
In the meantime, we intend to continue working diligently in enhancing the value of our existing portfolio.
Notwithstanding all of the various macroeconomic challenges our portfolio remains rock solid and the fundamental drivers of our grocery anchored business remains sound.
Now we will open up the call for your questions.
Operator.
Thank you.
To ask a question. Please press star one on your phone and wait for your name to be announced to withdraw. Your question. Please press star one again standby as we compile the Q&A roster.
One moment please for our first question.
Yeah.
Our first question will come from Craig Mailman of Citi. Your line is open.
Good morning, everyone, Hey, Stuart how are you.
<unk> you.
I'm doing good.
I wanted to follow up on on your kind of commentary around tenants looking to extend beyond that five year term and may be coming to you early I guess other than.
The rent spreads that you're getting which has been.
Been healthy kind of what other concessions have you been looking for are they willing to give up.
Go to lock in longer at this point.
Sure I mean, it really depends on the situation and a lot of cases, a tenant may come to us and have limited options remaining and they want an additional option and in exchange for that we will insist on additional committed term in other situations. We may have two anchors that are expiring simultaneously and we want to start splitting those.
Exploration is up so that we don't in the future have.
A bunch of anchor tenants expiring all in the same year. So it really depends on every situation and we evaluate those requests and theres always some form of a trade off where we're getting some form of value for.
That additional committed term.
When you say some for a guy like are you looking or are you able to put in better escalators or are you getting kind of incumbents. We've taken out that they may have had on the.
<unk> field or kind of what's what's your goal to improve the NPV of those leases to go out.
Brian .
There is a number of items that were dealing with in terms of this first one is ESG, we're able to very successfully incorporate now what we need at the property level from an ESG perspective.
Second thing is exclusive or uses in the leases, we're very active on that front to make sure. We can do whatever we can but third is no build ourselves from the anchor tenants give us the ability to build more pads and create more NOI going forward. So it's a really combination of.
A series of different things, but we're trying to obviously and giving them more term incorporate all of this.
In terms of the actual extension.
That's helpful and then moving to the acquisition market. It sounds like you guys don't have anything under contract.
Five of our conference. It sounds like you had one deal can you kind of talk to what happened there.
Then kind of.
Did you have in the market, maybe the buyer pools that you've been talking to you. The the nature of the buyers just a little more color overall.
Sure.
Buyer pool, I think as I mentioned in my prepared remarks, you know obviously has very has thinned out.
So.
As you know as once in a while when we see a very good grocery drug anchored center come to the market.
Our tracking things extremely closely and.
But again the buyer pools are very thin out there.
In terms of the deal that we currently have that deal is still around for us.
We.
We're dealing with a couple of items at the property level, primarily some environmental issues, but.
That particular transaction is still on the table for us.
I will tell you there's been a lot of ongoing discussions on op units again with some of those sellers, which is encouraging and then more importantly, we certainly have our pulse on our pipeline of off market transactions, which we think will play certainly very well into our game plan.
As you move through the balance of the year on the external side.
And those I assume it's still in that low 6% going in cap rate range.
Yes.
Most of the <unk>.
Small number of deals that have which have been primarily 31 buyers.
I have traded in that high fives, low six cap rate range.
Great. Thanks.
Thank you.
Thank you.
One moment please for our next question.
Okay.
Our next question will come from Juan Sanabria of BMO capital markets. Your line is open.
Good morning.
Good morning.
Just hoping if you could spend a little bit more time talking about some of the one time expenses.
Those are included in the P&L just to to.
To have a better sense of what the go forward run rate is and I know you mentioned, the snow removal costs, but anything kind of awkward and thought that would be helpful. Just to have some confidence on how to model in.
And your conviction on the previous same store NOI guidance range.
Yeah.
Well the snow removal costs want its going to be in the operating expense line allows because thats sort of mentioned the significant snowfall that occurred over the Pacific Northwest region, whereas the cloud parking lots numerous times.
So from an operating and then there was a there was a onetime item, where we finally resolved that kind of a disputed issue with the seller of a property that we bought a couple of years ago, and finally came to resolution.
And it took a bit of an expense on that side I think that was an hour.
Other expense net of operating expenses.
So if you exclude those you know I think our operating performance are right in line with budget.
Yes, I mean look in terms of modeling obviously, we do very detailed budgets every year and we incorporate increases in expenses in those buckets. So going forward, one I don't think youre going to see.
Hopefully, we won't see any items like you've seen in the first quarter, which again are very very focused and relative to situations that were out of our control.
And how much was that the one time item there with the dispute with the seller.
Roughly.
Just over 300000 I believe.
Okay.
And then just curious you mentioned bad debt.
<unk> was kind of running in mind, what's assumed for the balance of the year.
Obviously you had some.
Known kind of tenants finally fallout.
If you could remind us of your exposure, which I think is fairly de minimis, but what's assumed for the balance of the year given we're already unless you pay which is kind of crazy to think about but just.
Yeah.
Our <unk> guidance range for the full year is the $3 million to $5 million should more than offset.
More than covers our typical operating at any other onetime items that might pop up to your point I think we have very minimal exposure to any of the headline retailers out there so that $3 million to $5 million range for the entire year should stand.
Well.
Great. Thank you very much.
Thank you.
Again, one moment for our next question.
Our next question will come from Lindsay Duggan of Bank of America. Your line is open.
Good morning, good morning, good morning.
I'm just curious about.
Any changes in your assumptions around the pace or announces acquisitions and dispositions.
With guidance from last quarter.
I guess would you be willing to take on slightly higher leverage towards the priority cell line.
Maintaining net debt to EBITDA in elastic.
Put out last quarter.
Just wanted to see if theres any changes in that.
Our assumption on pace.
Yes, I mean, I'll speak to the and Mike you can answer the question on the second half of the question, but in terms of guidance I mean, we're still on track.
To get $200 million is the goal. This year, obviously that will be funded a lot through sales and other things that we're doing but the.
There is no change to guidance the more important thing is that we have guided and modeled the acquisitions in the second half of the year.
In relation to our <unk>.
Our leverage ratio that's all.
Keeping those attack, where they are or lowering them.
Got it thanks.
And I wanted to dig into the <unk>.
On same store NOI growth just a bit more.
Is are we still assuming that range at 3% to 5%.
And just given that that.
Brad on.
Now seem to remain the same or would that didn't change just wondering if there's any changes to your outlook.
On the assumption of bleeding at the bottom and top end of that range.
No I would say our internal budget actually had same center NOI growth starting out slightly down in the first quarter and then steadily ramping up as they move through the year. So at this point you know four months of the year. We're still on track to achieve same center NOI growth for the full year, that's within that guidance range.
Put out earlier, including protection.
Higher end of the range. So we're still comfortable in that range doesn't stand today.
Okay. Thanks, and lastly, if I could.
Just get the latest update on your Densification effort.
I guess, what's the latest timing.
Gentleman effort that crossroad and then.
Maybe a couple of others you had mentioned last quarter.
Sure.
Yes.
<unk> is fully done and fully entitled to and we're just waiting for the right moment in time to put that on the market and sell it.
We're getting very close to getting final entitlements.
Probably another 60 to 90 days out maybe a bit longer said panel, sorry on Nevada and ethanol.
And then in Bellevue in terms of construction on phase two at the Crossroads. We're currently moving moving through the permitting process, which we now expect to be completed probably by the end of the third quarter, although it's difficult to gauge given the pace that the municipality tends to operate at but once we complete the process at that time, we will determine whether or not to commence.
Construction or wait until there's more clarity in the marketplace.
Okay got it so just to clarify I guess, the biggest hindrance or still the same factor.
At the heart.
Yes.
Okay.
The supply chain.
Uh huh.
I guess the timeline it.
See you guys delayed.
Yes, I mean, its really more related to the city of Bellevue and the process internally than it is to supply chain or other things.
So, but but again, we are anticipating that.
Hopefully we get through that finally get through this process towards the third quarter, maybe the end.
But again its outside of our control.
Okay got it thank you.
Thank you.
Thank you.
And one moment. Please next question.
And one moment.
Our next question will come from Todd Thomas of Keybanc capital markets. Your line is open.
Morning, Scott.
Hi, good morning.
I just had a question back on leasing and sort of the rent spreads. The portfolio is 98, 3% leased and leasing production was very strong in the quarter.
Spreads have been solid over the last several quarters, but just curious why leasing spreads are not even stronger just given how little space you have to lease within the portfolio whether.
Youre, taking a more conservative approach with regard to rent in order to stimulate leasing demand or maybe it's a mix issue can you just talk about that and whether you expect to see.
Pricing power begin to improve a little bit more in the near term.
Sure I mean, obviously some of that is dictated by the specific leases that were getting back.
In terms of where they were at and what the market rents are but there are a lot of.
Leases that are scheduled to roll that are below and significantly below market, where we'll see some really good lifts and then on the renewal side that is also.
Impacted by options, which are already baked in and we don't have any control over those rent spreads.
But as you say with the 98% occupancy.
Occupancy it really does give us the leverage in the right opportunities to drive the rents.
When we have that opportunity.
Okay. If we look ahead to the balance of 2023, and also 2024 explorations whats the mix like between.
Sure.
Leases with with with option rents versus those that you would be able to renew or negotiate a fair market value.
I don't have a specific percentage.
Do not have options, but there are some of these oil properties, where the leases have been in place for a while they are starting to burn off their options. That's what is driving some anchor tenants to come to us.
Early to secure additional options, particularly we are in the situation, where they wanted to invest capital in the space.
So it's hard to give you a specific.
A number of range, but we would expect that it.
It will be consistent with our past performance.
Okay and then.
Mike I think you touched on this briefly but maybe you could just add a little bit more.
Detail or provide some thoughts.
On the remaining $150 million.
A portion of the term loan.
That's still floating.
Weather.
Or if there is an incremental amount of that $150 million variable rate debt that you're you might look to swap out and you talked about.
Unsecured maturity later this year, where do you think pricing would be today for 10.
10 year notes.
Let me address the second part of your question first I think today I think the 10 years around $3 4 million, maybe $3 50, it kind of bounces around.
I would expect to do a 10 year deal probably in the low to mid six range today, given where spreads are.
I'll have to keep an eye on where the 10 year Treasury goes from here, but as far as the Slopping goes we wanted to maintain as much flexibility as possible. Our goal is to is to refinance the $250 million that are due in December with a new public bond issuance.
And to achieve reasonable investor interest and hopefully better pricing we will.
Issue up to maybe $400 million of public bonds, so by refinancing $150 million of the term loan with those 'twenty three bonds you get a total of $400 million.
That leaves the part that a slot that looking into next year, we'll have another 250 million bonds maturing at the end of 2024.
You could again look to do another $400 million bond deal refinancing that along with the $150 million swap, which then become available to pay it off so it's kind of a flexibility issue of doing Scott two back to back $400 million deals.
The term loan.
Refinancing of the two public bond issuance of immature.
Okay got it that's helpful. And then and then I think you said as it pertains to the full year guidance that as a result of the swaps that you put in place during the quarter that interest expense is now expected to be about $500000.
Lower than the initial guide does that is that right yes.
Yes, that's right where the curve was we were really really modeled the term loan b float all year long.
Did the model for the initial guidance Thats, where the curve was at the time and as you know that's been moving around a little bit but based on that original curve. When do you expect or interest expense thats swapping and will soon about the ethanol anymore.
Okay.
Outside of the December maturity, and what you might do there there is no additional capital raising activity embedded in the guidance.
Correct that's correct.
Okay, Great alright, thank you.
Thanks Todd.
Thank you.
One moment for our next question.
Yeah.
Okay.
Our next question will come from Wes Golladay of Baird. Your line is open.
Good morning, good morning.
Hey, good morning Stuart.
A follow up question on that.
Tenant health in the portfolio can you comment on your overall exposure to somebody's bank branches of the banks that are in the news every day or not every day, but every so often and then second.
Second follow up would be exposure to bed Bath <unk> beyond that it looks like you have one buy buy baby I just wanted to make sure that was correct and then just a final one can you comment on the Rite aid exposure and how do you feel about that would you look to recapturing the space this year.
Sure.
Bed Bath <unk> beyond we don't have any of we do have to buy buy baby.
The ABR only accounts for 0.038%.
So less than a half of 1% from an ABR perspective.
These too bye bye babies are in great locations very strong sales.
We don't expect these.
These leases to be rejected however, we certainly have been very active in the market re leasing those spaces and we currently do have some very good tenants lined up if things were to go away.
Rich do you want to comment on bank branches and Rite aid.
Sure.
In terms of Rite aid Theres only they only account for about one 7% of our total base rent.
Which is from about 16 leases.
Which are across our portfolio and all of our markets with many of those leases below market.
One of the leases coming up.
In the next two years as a rite aid lease that is significantly below market as one that we mentioned that is not renewing we expect to have.
Have a very big spread on the replacement rent.
And then in terms of bank branches, we really haven't seen any falloff from regional banks.
You didn't have.
<unk> received notice from some larger banks that theyre, giving back some space, but those spaces that we are getting back all incorporate drive throughs and we're currently.
While the rent is still coming in redesigning those buildings.
To.
Facilitate the strong demand that we have for drive throughs throughout the West coast. So we actually see this as a as an opportunity to.
To re tenant those spaces.
In fact in one situation I think during the quarter rich we had.
<unk> actually release did a new lease on a bank of America branch correct. So although we've seen a bit of fallout. We've also seen some activity on the other side in terms of new leasing.
And then Rite aid I mean, I think as we've mentioned before.
Obviously, a number of our rite AIDS, our newer prototypes, which means they are on pads with drive throughs.
And in terms of sales a number of our Rite AIDS are in the top third in terms of sales so.
We've seen this sort of play out before over the last 20 years.
In terms of dealing with Rite aid.
And we certainly felt quite comfortable where our portfolio stands today in terms of.
Capturing and potentially getting some nice upside of Rite aid were to go away.
Fantastic and then.
I guess a quick modeling question looks like other revenue was abnormally low this quarter anything special going on there.
Actually last year other income was.
A lot higher and was primarily related to an early lease recapture initiative, where we replaced an existing tenants. So that was kind of a it was actually last year was the outlier.
Okay fantastic.
I think that is it for me I appreciate the time guys.
Great. Thank you.
Thank you.
Again, one moment for our next question.
Okay.
Our next question will come from Michael Mueller of Jpmorgan. Your line is open.
Good morning.
He can talk to you.
You mentioned earlier in your comments that there were some other centers that youre thinking about listing for sale and just curious about how big that.
Bucket of centers is it what are some of the attributes of those.
Sure.
We actually have.
I think it's the only other center thats non grocery anchored we actually have on the market as well and we actually do have an LOI that came in yesterday that we may execute on so that potentially gives us another.
I don't know 12 or $14 million of proceeds.
But.
Outside of those two assets, we are looking at putting a couple of other stabilized fully leased assets on the market that have very little internal growth like the one we're currently selling in Portland.
The market as well.
So the bucket did I answer your question is probably 4% to six centers.
Depending on market conditions, and depending on pricing more than anything else.
Got it in that 4% to six exclusive of the two that we know about.
That's correct and that does exclude the densification as well so I'm, hoping that the multifamily market gets a bit better and we're ready to go on selling both of those assets, which could provide another let's call it 20% to $25 million of proceeds.
Got it okay. Thank you thank.
Thank you Mike.
Thank you.
And again one moment please for our next question.
Our next question will come from Linda Tsai.
Jefferies. Your line is open.
Good morning, Linda good morning in.
In terms of the 400 million bond at year end, where would that price today.
Today, we would probably be in the low to mid 6% range, assuming a 10 year at about 350% reported.
Thank you and then how much more does it drive through benefit the cap rate when you're shopping centers.
In terms of our pads.
The drive throughs certainly would.
Certainly I think it certainly helps the process, but it's not going to drive cap rate by any meaningful difference.
And I think drive throughs are more related to leasing and the incremental increase you get in leasing in terms of rent.
But from a from a from an acquisition or disposition perspective, we look at it as part of the overall property in NOI.
Thanks for that and then in terms of your 9% Kroger Albertsons exposure has there been further communication of potential overlap.
While we continue to communicate regularly with both Kroger and Albertsons and conduct business as usual.
Renewing leases.
Just not at Liberty, yet to discuss their consolidation plans.
It's just too early in the process in terms of the government and the FTC in terms of the process.
And then maybe just in terms of the potential buyers for your 4% to six centers.
We're focused are they on potentially inheriting spin co assets.
It Hasnt come up at all in terms of the discussions.
The one or two deals on the market that have albertsons or Safeway.
Hi.
Don't think Thats had much impact either to tell you the truth from a pricing perspective, so it really does.
I mean, obviously there is a lot of noise around this but it really on the ground Hasnt has had very little impact from a pricing perspective, because at the end of the day, you're really looking at the attributes of the real estate and more importantly, the sales and the economic aspects of what youre buying as it relates to Kroger or.
Safeway anchored tenants.
Thank you.
Yes.
Thank you.
As a reminder to ask a question. Please press star one on your phone and wait for your name to be announced to withdraw your question. Please press star one again.
Please go to our next question.
Our next question will come from Paulina Rojas Smith of Green Street. Your line is open.
Good morning, good morning.
Good morning.
My question is about occupancy costs so.
We usually think about occupancy cost for our Chris.
I Wonder do you track that metric at all for your small shop tenants.
And even if you do loosely how would you say that.
Evil or how does it compare relative to the past.
Sure Rich.
Yes, I mean, we always pay close attention to the occupancy cost because that has a big effect on.
How much rent, we can get out of the tenants in.
The things that we have control over.
Such as the operating expenses.
We stay very focused on keeping them as low as possible.
But the the.
Overall the tenants.
Continued to perform well the occupancy costs are sustainable and.
We're not getting any any pushback from tenants on the renewable side in terms of Av.
Their occupancy costs.
Thank you and then one last question you mentioned a couple of times that you have seen very few transactions, but the ones that you have seen close to being the west coast being low sixes.
And I'm curious do you your view has the quality of those assets that have transacted and.
Singer to your portfolio are they representative for your portfolio.
You know again very few transactions to talk about.
<unk> bin Hi, pretty good quality stabilized grocery anchored centers.
I would tell you that.
Certainly the quality of the assets have been there, but these assets are newer in nature.
And therefore rents.
In terms of creating NOI growth at the property level has not been that strong because they're brand new leases.
So we continue to monitor obviously the market very closely but most of these deals and again very few of them that have traded.
These have been very stabilized newer assets. So the cap rate sort of reflect in my view.
Not a lot of internal growth because there's just they're typically 100% occupied.
Thank you that's all.
Thank you.
And I am seeing no further questions in the queue I would now like to turn the conference back to Stuart <unk> for 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 Mike Rich or me directly also you can find additional information on the company's quarterly supplemental package, which is posted on our website as well as our 10-Q and lastly for those of you who are attending ICSC convention in Las Vegas next month, please stop by our Booth, we will.
In the South Hall on level, one specifically booth number 807.
We hope to see you there.
And thanks, again and have a great day everyone.
This concludes today's conference call. Thank you all for participating you may all disconnect and have a pleasant day.
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