RPT Realty Q1 2023 Earnings Call
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 Benigno Senior analyst Investor Relations. Thank you Sir you may begin.
Good morning, and thank you for joining us for Rpt's first quarter 2023 earnings Conference call. At this time management would like me to inform you that certain statements made during this conference call, which are not historical maybe deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095 additional.
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.
Certain of these factors are described as risk factors in our annual report on Form 10-K for the fiscal year ended December 31, 2022, and in our earnings release for the first quarter 2023, certainly these statements made on today's call also involve non-GAAP financial measures listeners are directed to our first quarter 2023 press release.
<unk>, which includes definitions of these non-GAAP financial measures and reconciliations to the nearest GAAP measures and which are available on our website in the investors section lastly, this quarter, we are introducing our earnings presentation, which we will reference throughout the call to highlight key messages for the quarter you can find the first quarter of 2023 earnings pre.
<unk> on our website in the investors section I would like to now turn the call over to President and CEO , Brian Harper and CFO , Mike Fitzmaurice for their opening remarks, after which we will open the call for questions.
Thanks, Craig Good morning, and thank you for joining our call today, we continue.
We experienced strength in the leasing environment highlighted by our third consecutive quarter of over 500000 square feet of signed activity compelling newly re leasing spreads of about 25% and substantial progress on back filling our bed Bath concepts, where we have strong demand and activity on all local.
<unk>.
As mentioned on the prior earnings call, we have been treating our bed bath boxes as vacant for some time as we worked on re leasing plans well ahead of their bankruptcy filing.
In some ways our industry like the hospitality sector needs to have hands on active day to day management to drive Alpha and operational results.
Given our proactive approach, we believe we can create significant value with top tier tenants that better credit higher rent stronger sales and more relevance with our consumer.
We are engaged with several retailers across the country about these locations, giving us a substantial head start on backfill with single user tenants, which limits capex and downtime.
Our in place rents for bed Bath or near the lowest in our industry at about $11 50 per square foot, which we expect to grow by 30% to 40%.
At the end of 2022, we had eight bed Bath <unk> beyond leases and four bye bye babies.
Since then we have released three of our bed Bath <unk> beyond locations to strong national tenants, capturing a mark to market spread of nearly 50% highlights.
Highlighted by our home goods lease at River city marketplace in Florida.
For the 50% spread is sizable and our kinder industrial spreads.
Surprising given the mark to market story, we have been communicating and executing on for the last several years.
Expected downtime on these deals is minimal with rent expected to commence on the Homegoods deal in the fourth quarter 2023 and on the other two deals in the second quarter of 2024.
Additionally, we are negotiating leases or Lois on five other locations at a weighted average rent spread between 30% to 40% and are in active tenant discussions on our remaining <unk> exposures two of which are being considered as part of a larger redevelopment plan.
The lack of quality new supply is driving broad based demand that includes grocers off price general merchandise home improvement health and beauty medical and sporting goods tenants.
Given this demand we expect to have signed leases in the next few months for all remaining bed Bath and bye bye locations in the event, we get the spaces back.
Please see slide 10, and our earnings presentation for additional details about our bed Bath exposure.
In March we were happy to announce the appointment of Amey Sands as executive Vice President and head of investments based in our New York City Office.
Jamie is well known and well respected within the real estate community and brings over 20 years of transactions experience, having last served as senior managing director co head of the Chicago office at <unk> capital markets.
Amy brings a deep network and a proven track record and will be a great cultural fit at RPT.
With $1 7 billion of committed capital to deploy between our two joint venture platforms. We are excited to see the efficiencies of our now consolidated investments team under her leadership.
I would like to take a moment to highlight Miami, which represents 8% of our ABR and is now our fourth largest market.
We have been actively expanding our presence in Miami due to the incredible growth the areas experiencing.
Our leased to occupied spread of 630 basis points in the market provides a clear path to further expansion.
Just one of the largest Miami shopping center owners in the public REIT space and just 83% leased.
We have a unique opportunity to capitalize on one of the fastest growing markets in the country, where rents are up 25% over the past five years, including an 8% increase in 2022.
Over the last two years, we have been replacing older leases in our Miami portfolio that we're paying little to no brand.
At Mission Bay Plaza in Boca Raton, we replaced a former office depot with Baptist Health <unk>.
A double a minus rated credit health care facility, which we highlight on slide 16 of our earnings presentation.
Additionally, we are finalizing a lease with the market dominant grocer to replace a save a lot that was paying $6 per square foot in rent.
We are also in lease negotiations with a leading retailer.
To replace a Winn Dixie had been in the portfolio for over 25 years and was paying $6 50 per square foot.
On the small shop side and to put into context, the mark to market opportunity in our Miami portfolio. We are replacing an older restaurant concept with a nationally recognized restaurant at close to a 70% spread which equates to an ABR of $60 per square foot.
Miami and the rest of Florida will be a meaningful driver to our internal growth for 2024 and beyond.
See slides 14, and 15 in our earnings presentation for more details on why we're so bullish about this market in the near term opportunity there.
The crown jewel of our Miami portfolio as Mary Brickell village.
Our investment thesis was simple.
By Great real estate at great value in a market, we know well.
Our plans to unlock this value are beginning to take shape in the form of a phased redevelopment of the western parcel that we will realize the embedded mark to market opportunity in the near term.
Today, The center is 94% occupied up from 78% when we bought the asset last summer.
Sales are over $500 per square foot up nearly 63%.
Since 2019.
Which equates to a low 4% cost of occupancy reflective of the significant future mark to market upside at <unk>.
The challenge here is not filling vacancy it's curating the optimal mix of tenants that will generate the highest level of sales and allow us to maximize rents.
We are targeting best in class wellness, food and beverage services and soft good retailers, including top international restaurant groups. We are in active negotiations with new and existing tenants at rents in the 120 to $150 per square foot range, which compares to our blended in place rent of 47.
Per square foot and our initial underwriting rents and the $75 range.
Fundamentals are clearly exceeding our expectations and we now expect to drive Unlevered IRR that are several hundred basis points better than we initially underwrote.
Longer term our plans include a mixed use vertical densification of the eastern parcel, we continue to evaluate our densification options and have been working with a top tier architect.
On our vision to unlock the air about the site.
While the timing of this specific opportunity as a few years away.
Spending time now to understand and evaluate our options to maximize value for our shareholders with an eye on creating an unlevered IRR well into the double digits.
See slide 17, and 18 of the earnings presentation for additional color on our plans at MPV.
With that I'll turn the call over to Mike.
Thanks, Brian and good morning, everyone.
Recent tenant bankruptcy filings the elevated rate environment and concerns of a potential recession serve as reminders of the importance of disciplined balance sheet management.
On this front, we continued to be proactive and control the controllable.
Our investment grade rated balance sheet is in a position of strength with no debt maturing until 2025.
$470 million of liquidity, only 5% of our debt tied to floating rates and our leverage continues to tick down towards our target level of six times net debt to adjusted EBITDA.
Turning to our first quarter results operating <unk> per share of <unk> 25 was slightly ahead of our internal plan for the quarter and up <unk> versus last quarter, primarily due to lower G&A.
Same property NOI growth for the quarter came in ahead of plan as well at three 8% fueled by 3% base rent growth after adjusting for some offsetting an accounting movements between base rent and rental income not probable of collection highlighted on slide 20 in our earnings presentation and.
In the first quarter, we signed leases covering approximately 506000 square feet, resulting in a signed not commenced balance of $9 6 million, which equates to about 6% of first quarter NOI or.
<unk> pipeline was down slightly versus last quarter as we opened almost $3 million of gross rent schedule, partially offset by $1 2 million of new leasing activity.
Pipeline is largely comprised of high quality grocer and discount tenants that we expect will add an incremental benefit of <unk> 10 per share of annualized operating <unk> by 2025. Please see slide seven of our earnings presentation for additional details on the trajectory of our SNL upside or <unk>.
<unk> pipeline continues to be robust with $10 million, plus and lease or LOI negotiation.
We ended the quarter with a strong 95, 3% same property leased rate up 150 basis points year over year.
Carriage you to focus on our same property lease rate as you assess the quality of our portfolio we.
We are tactically recapturing substantial space at three properties that are in active redevelopment or being prepared for one which is temporarily impacting our leased and occupancy rates for our aggregate portfolio.
Crossroads in the Miami market, we demolished are smaller or older Publix last year, representing 42000 square feet or 30% of the property GLA and are set to open a brand new Publix flagship store later this year that we expect to drive incremental sales and rent growth. Additionally.
Additionally, at our Delray Beach asset in Florida, we proactively recaptured 53000 square feet mid last year or 25% of the center GLA that was previously leased to a below average grocer and are in active discussions with an investment grade rated national tenant as a backfill.
In Oakland County, Michigan at our Hunter score asset, we purposely recaptured about 100000 square feet. During the first quarter of this year or 30% of the center GLA to be Redeveloped. We are in active discussions with a top tier grocer and two class a national retailers, we look forward to sharing more details.
<unk> under hunters and <unk> projects in the coming quarters.
During the quarter. We also continued to realize the benefits of our below market rents, achieving a 39% and 23% rent spread on new leases over the trailing 12 months and during the quarter respectively.
Renewal spreads improved to 7% in the first quarter and were also up 7% on a trailing 12 month basis.
In mid 2018, our red spread on new leases has averaged 31% and we see no near term slowdown, particularly in light of the bed Bath opportunity. We also continue to drive contractual rent growth with escalators on new leases, averaging 2% over the last 12 months as we realize the benefit.
<unk> of our high quality portfolio.
These escalators will contribute to a rising and sustainable NOI growth profile over time.
Given our outperformance during the first quarter and with the bankruptcy environment playing out roughly as expected we are maintaining our operating <unk> per diluted share guidance range of 97.
$2, one per diluted share and our expectation of same property NOI growth of one 5% to three 5%.
The midpoint of our operating <unk> guidance continues to assume lost rent totaling 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 bankruptcies, primarily for Regal and bed Bath and beyond are operating in.
<unk> and same property NOI range contemplates that we recapture all of our remaining bed Bath <unk> beyond and buy buy baby locations by the end of July .
We do expect our operating <unk> and same property NOI to accelerate in the second quarter as we recapture space from bed Bath and beyond but to Reaccelerate in the back half is our signed not commenced tenants begin to open and payroll.
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.
Confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
A moment, please while we poll for questions.
Thank you. Our first question comes from the line of Derrick Johnson with Deutsche Bank. Please proceed with your question.
Hey, everyone. Good morning, Thank you.
Brian how are the other five bed bath and beyond that those progressing I know you touched on it briefly in the opening remarks, but any additional details here since it's obviously a point of concern would be helpful.
Sure. Thanks, Eric So those other five let me start with US we have leases out on the majority of those call it 80%.
At significant spreads as I said, 30% to 40% higher rent.
This is a very rare opportunity they get under market leases back and are really supply constrained limited vacancy environment.
I'm more than pleased with the leasing team's execution and our proactive approach.
This resulted in really Homegoods only.
Having seven months downtime.
<unk> earlier, our Cds, we highlighted second quarter openings of those could very well move to first quarter of 2024, which is less than well less than 12 months.
In some cases to this approach allowed us to see five to six loi's for one box, we literally have no vacant boxes at many of these centers.
So as I said the majority of these are single users, which means less downtime and less Capex I think two I talked about the five.
And leases.
But the other two where we're really exploring non single users.
First is that shops at Layne.
Two anchor shopping center whole foods, they're doing $200 a square foot.
Small shops rents here command $45 Triple net.
So we could divide that.
And have significant value creation, and we have enormous demand coming from athleisure, F&B and service oriented retailers, and then second which could be part of a larger development is in Bellevue in Nashville, We bought this asset in 'twenty, one as you recall for less than the land was worth this has always been a covered land play.
And bed Bath here controls the largest box so should we get that back.
Residential demand is through the roof and we are exploring opportunities on adjacent land for that.
Thank you that's very helpful mutually.
I just wanted to switch gears and you guys have been active in the private markets historically.
And I'm thinking it has been so slow, but with the likely fed pause.
Do you see maybe a tightening.
<unk>.
The pretty wide bid ask spread and are we close to seeing volumes pick up and you think that this year event or how are you looking at private markets and what are you seeing on the ground.
Yes, I think with the fed yesterday and hitting at a pause.
And I do think with more certainty around bed Bath.
We're not going to be selling any vacancies, we see enormous growth from those boxes in 'twenty four and beyond.
But I do see back half of the year, if I were to guests now a much more higher volume acquisition market at large.
Say for RP.
RPT for.
For our capital allocation, we're really focused on lease lease lease we can.
Any near these double digit yields.
Anywhere else.
Will all hit mostly 24 will be a major beneficiary and we have them under market portfolio, where our single is highest and best use right now is putting capital towards that second is we still have a large amount of money with our gmg, We love those returns and love the fees, that's a focus and I could see us.
Playing in more of the medicine prep on a very small number we already have a prep position with Zimmer in monarch and <unk> venture and could look to do more of this if it's the right opportunity.
Thanks, everyone I'll pass the Baton Thats It for me.
Thanks Derek.
Our next question comes from the line of Todd Thomas with Keybanc. Please proceed with your question.
Okay.
Hi, Thanks, Good morning, I, just wanted to circle back to some of the comments that you made around bed Bath and.
I think last quarter, Brian you characterized the mark to market on.
Re leasing the bed bath boxes at around 20% now you're projecting.
30% to 40% as demand and sort of the replacement rents that youre anticipating are they actually improving now that bed Bath filed and I guess the timeline to signed leases.
Our retailers getting in.
That changed at all.
Yes, I mean, let me the pricing has changed the rents higher there's more demand.
With certainty.
Retailers now are spending time.
And money on design and legal costs to put their resources to us.
I would let me talk about time.
That really is the way we started it really starting this process of treating it vacancy like vacant for the last year.
That's going to really greatly impact 'twenty four.
If we didn't do that you're really not getting tenants opening until mid to late 'twenty four with that without that proactive approach.
So rents rents much higher than we projected and the timeline is same as last quarter, just based on our proactive asset management approach.
That really is the way we started it really starting this process of treating it vacancies like vacant for the last year.
Okay and are you seeing competition for these boxes I guess, how much competition or can you characterize the competition that youre seeing or are they mostly youre talking about and we're hearing a lot about single tenant backfill single user backfill.
Is it sort of a very surgical process, where there is one interested retailer or are you starting to see some competition really bought up for these for these spaces.
How do you how do you get higher rent.
It's getting tension in the market and as I say to the leasing team all the time.
It's bidding to the highest bidder and obviously we're focused on credit to this is not just the highest rent credit sales performance the merchandising with the rest of the center.
But in the cases of I can give you some specific examples Midwest center.
Uh huh.
Six LOI.
Six for one box the only vacancy only box vacancy within that center six LOI for that.
And then in Florida, you had four.
And river city had enormous amount of interest and still asking about that but that box. So this is coming not just.
One or two years there is.
Multiple users for this box and I think as we're allowed to say these names.
Given permission by the retailers of which we have signed leases already.
They are household names.
Many are investment grade and they'll do.
A lot higher sales performance, then obviously bed bath.
Okay, and then just last one on bed Bath.
So the leases that you signed.
After the quarter end and some of the activity there.
Okay.
Whats the exposure look like I guess, if we look at the financial shop today, we see your exposure as of March 31 has there been any change subsequent to the end of the quarter in terms of additional space or boxes that you've recaptured since then.
Yes, the quick answer Todd, it's lower but I'll bring it back to last year and bridge it to where we are at as we sit here today. So at the end of 'twenty. Two we had 12 locations were bed Bath concept for were bye Bye said equate to about 2.3% of our rents and then during the first quarter, we recaptured tube.
Bed Bath, one as part of the larger redevelopment that Brian alluded to in.
And the other one we have already re leased to national retailer a subsequent to the quarter and in April we captured an additional location that has already been released to the home goods that we highlighted in the release last night.
So today, we have nine locations.
For them.
<unk>.
We do expect to recapture two more locations one part of the large redevelopment. The other one that Brian mentioned and then one is already signed to another national tenant. So as we sit here today, we will be left with seven locations and only about one 3% of ABR.
Alright, great that's helpful and then.
In terms of Hunter square and marketplace of Delray.
How much incremental dilution are you anticipating beyond what.
In the in the run rate today.
And can you talk a little bit more around the timeframe for those redevelopments and also discuss the cost and scope for those projects.
What you are anticipating.
Sure I'll start that all of the dilution.
Occurred so we had it all we recaptured the the old Winn Dixie.
Del Rey last year, and then we recaptured about 100000 square feet at hunters.
During the first quarter. So you should expect no more dilution from those two projects as we move forward. It will be all incrementally positive as we get signed leases and Redeveloped, both those centers and I'm going to say like especially with Delray since Ive got here I've been trying to buy many of those tenants out and so this was all proactive on.
<unk> parts here.
So del Rey and hunters will give your project cost coming up soon in the next supplemental.
Yields are good the demand is good at hunters.
Have.
Grocery off price national retail credit type call it 120000 square feet.
Lease an LOI negotiating and then im pretty marquee lease with a tenant and del Rey with another tenant a large tenant in LOI. So we're really excited about the value creation and incremental NOI is.
At both assets considering that.
One asset was really 40 years old and Delray and Thats sitting in a $45 AVR market and Hunter is was really converted mall into a power center and now is the time to replace and remerchandise that into retailers that are thriving in today's environment.
So we will get back to you on costs and yields at a later date provide that with clear.
Numbers in our sub.
Alright, thank you.
Yep.
Our next question comes from the line of Hondo. Thank you with Mizuho. Please proceed with your question.
Yeah.
Hi, Good morning. This is Ravi the underline for hornbill.
Hope you guys are doing well just wanted to follow up one more here on bed Bath can you comment on the capex requirements and Ti spend required to release the boxes, particularly when you look at a single backfill or more broader redevelopment, where you're cutting it up.
Yes, I mean, you really go on from there.
Minimal capex to call it a 100 bucks.
And that varies between the single users and.
And cutting it up and then.
Cutting it up I really focus on really the only way we are looking to do this as shops Atlanta.
Yes.
150000 square feet of interest for not a lot for a 30000 square feet of real estate.
So if we proceed to go down that route at Layne and divide the boxes.
Fox.
That will be significant.
<unk>.
Or if not there are number of single users that would take the box.
<unk>.
So really I would think of this as zero to 100 bucks to depending on depending on the box and tenant.
Got it that's helpful.
More than 90% of your leases this quarter were renewals could you comment on the broader supply demand dynamics within your markets and can we expect this as a run rate going forward, where the proportion of renewals for total leases.
Let me.
Thanks for asking that question, it's an important one.
Our leasing pipeline is robust obviously, we have a significant on the higher end of SNL and our peer set we have.
Approximately $13 million and the pipeline with $10 million of that already in legal.
Square footage of that new leases 681000 square feet, which is really sizable for our portfolio size of ours. The spreads are similar to what we've been printing.
And they are extremely high quality nature of tenants.
Being national a majority are investment grade category has run the gamut from grocery.
Off price home improvement and F&B.
So.
It's a robust pipeline our foot on the gas.
Legal and leasing.
Our extremely focused seven days a week.
Producing and knowing that this is a window where windows that are back in this environment.
Ravi is we look forward.
Just the renewals we just there is no ta.
And then maybe over the longer period of time.
A quarter with no contributions.
Youre anticipating.
Holiday should take place.
Okay, Thanks and and.
Hi, <unk>.
Just with the announcement on <unk> and kind of get ahead of.
Good morning, yet this year, it's about $2 million in savings, which is embedded within our guidance range and going into next year, it'll be a little growth annualized basis about $2 5 million.
The newly consolidated investment platform.
Can you remind us again the cost savings you have been targeting for the full year. This year and then you know maybe over the.
Yeah.
Great. Thank you.
The longer period of time.
Yes.
You're anticipating the consolidation to take place.
Hi.
Yeah, Hey, guys two quick ones for me I guess the first one is what was the run rate of your bad debt expense in the first quarter in relation to the 200 basis points of guidance.
Good morning, yet this year, it's about $2 million in savings, which is embedded within our guidance range and going into next year it'll be at a little bit on annualized basis about $2 5 million.
It was low hog.
Great. Thank you.
We'd be outperformed.
Yeah.
And on the bad debt, we had about 425000.
Our next question comes from the line of Hong Zhang with Jpmorgan. Please proceed with your question.
Or so which is which equates to about 100 basis points of NOI of 200 basis points shy of the 300 that we had estimated for the full year and continue for.
Yeah, Hey, guys two quick ones for me I guess the first one is what was the run rate of your bad debt expense in the first quarter in relation to the 200 basis points of guidance.
For the full year, but to give you a breakdown of the 425. So I think it's very important to understand is 400 of that was related to our reserve for bed Bath.
It was low hog.
We would be outperformed.
And on the bad debt, we had about 425000.
Party city, and a little bit of Tuesday morning, only 25000 was related to the rest of the portfolio, which is a great data point.
Or so which is which equates to about 100 basis points of NOI. So 200 basis points shy of the of the 300 that we had estimated for the full year and continue for.
To look at again, when assessing the quality of the portfolio and the strength of the cash flows.
It's been such a low low amount and as we think about the rest of the year. It will it will accelerate as we.
For the full year, but to give you a breakdown of the $4 25. So I think it's very important to understand is 400 of that was related to a reserve for bed Bath.
Take back bed baths embedded in our guidance as we take back all while remaining locations, including our buys.
Party city, and a little bit of Tuesday morning, only 25000 was related to the rest of the portfolio, which is a great data point.
In July so you will see that number accelerate but again I think it's important to note that the majority of this quarter was related to at risk tenants. Those three that are in bankruptcy.
To look at again, when assessing the quality of the portfolio and the strength of the cash flows.
Being such a low low amount and as we think about the rest of the year. It will it will accelerate as we can.
Very little amount to the rest of the portfolio.
Got it and then I guess as it relates to the 225 basis points tied to bankruptcies. If I do my math right I think that that closing in July would account for a third of that can you talk about the about your assumptions for Regal and other any other tenants in that bucket.
Take back bed baths embedded in our guidance as we take back all all remaining locations, including our buys.
In July so you'll see that number accelerate but again I think it's important to note that the majority of this quarter was related to at risk tenants. Those three that are in bankruptcy and the.
Yes, yes, we have we do.
Believe we do.
There's a very little amount to the rest of the portfolio.
We expect based on events at least negotiations that.
Got it and then I guess as it relates to the 225 basis points tied to bankruptcies. If I do my math right I think that that closing in July would account for a third of that can you talk about the about your assumptions for Regal and other any other tenants in that bucket.
Leasing is currently working through to assume our our three regal locations.
We will have slight.
Rent concessions there that are embedded in the in the.
300, or 225 basis points.
Also were taken back one of our five party cities.
Yeah, Yeah, we have we do.
And then also we have Tuesday morning to that we're taking back a few locations. So that really closes the bridge up to year 225 basis points.
Believes and we fully expect based on events lease negotiations.
Leasing is currently working through to assume our our three regal locations.
Got it thanks.
Okay.
We will have slight <unk>.
Yes.
Our next question comes from the line of Kayo Alco Sanya with credit Suisse. Please proceed with your question.
Rent concessions there that are embedded in the in the <unk>.
300, or 225 basis points.
Also were taken back one of our five party cities.
Hi, Yes, good morning, everyone.
In regards to the acquisition outlook could you just.
And then also.
Tuesday morning to that we're taking back a few locations so that really closes the bridge it up to your 225 basis points.
Give us a sense of across all three platforms.
You are most likely to kind of put capital to work.
Got it thanks.
Okay.
Specifically just around some of the JV platforms, just given again they tend to be higher leveraged entities, how you kind of think about.
Yes.
Our next question comes from the line of Kayo Alco Sanya with credit Suisse. Please proceed with your question.
Putting capital to work on those platforms.
Hi, Yes, good morning, everyone.
Hey, Tayo.
In regards to the acquisition outlook could you just.
Just wanted to again just to reemphasize, we are leasing leasing leasing so that's a lot where our capital is going to be going.
Give us a sense of across all your three platforms, where you're most likely to kind of put capital to work.
Now, let's go to your direct question on acquisitions.
Specifically just around some of the JV platforms, just given again they tend to be highly leveraged entities, how you kind of think about.
Really <unk> Z.
Sure.
That's going to be hopefully a law.
<unk>.
Putting capital to work on those platforms.
Powder put out by the team this year and next.
Yeah, Hey, Tao.
Just wanted to again, just reemphasize, we're leasing leasing leasing so that's a lot where our capital is going to be going.
There is disruption.
And that space yields are creeping up.
Amongst the Triple nets, and we think there is alpha to be had by buying shopping centers.
Now, let's go to your direct question on acquisitions.
Yes.
Really <unk> Z.
With 70, 80% of their cash flows coming from investment grade, partially an amount in the fund owns that.
Sure.
That's going to be hopefully a.
Lot of power.
Powder put out by the team this year and next.
The grocery.
<unk>.
There is disruption.
That is something that we are looking at.
And that space yields are creeping up.
We're very very.
Amongst the Triple nets, and we think there's alpha to be had by buying shopping centers with 70, 80% of their cash flows coming from investment grades and partially on them out in a fund owns that.
Has it been just given the capital markets has clearly given their signal of patients is key.
But for the most part grocery deals, especially the smaller check sizes have kind of held steady I mean thats been around the edges 10 to 25 bps of cap rate expansion, but not a lot.
The grocery.
That is something that we are looking at.
And really I think the combination of the platforms I look at north barrel, where now that.
We're very very.
Has it been just given the capital markets has clearly given their signal of patients is key for.
That yield cap rate of what we bought is 13 14 cap and that was after spinning off for parcels and most of that cash flow. Our five T. J Maxx concepts now which will be the only centre in the U S with all five T J X brands. So.
For the most part grocery deals, especially the smaller check sizes have kind of held steady I mean, that's been around the edges 10 to 25 bps of cap rate expansion, but not a lot.
And really I think the combination of the platforms I look at North borough, where now that.
If we could hit those type of yields.
And have those type of investment grade cash flows with that same quality in our core markets.
That yield cap rate of what we bought is 13 14 cap and that was after spinning off for parcels and most of that cash flow. Our five T. J Maxx concepts now which will be the only centre in the U S with all five T J X brands. So.
That would be opportunistic to find another north Roe.
Yes.
Okay.
Thanks next question. Our next question comes from the line of Alex Degen. Please with Baird. Please proceed with your question.
If we could hit those type of yields.
And have those type of investment grade cash flows with that same quality in our core markets.
Hi, and thank you for taking my question you guys highlighted the Miami market is seeing strong demand, but I'm curious if there are any other regions or specific shopping center types that are also seeing high tenant demand.
That would be opportunistic to find another northborough.
Yep.
Okay.
It's really broad based.
Thank you next question. Our next question comes from the line of Alex Vegan. Please with Baird. Please proceed with your question.
I was looking at just traffic data.
Last night and it is it as broad I mean, obviously in Miami, but.
Hi, and thank you for taking my question you guys highlighted the Miami market is seeing strong demand, but I'm curious if there are any other regions or specific shopping center types that are also seeing high tenant demand.
Lakeland Park in Lakeland, Florida up 32% year over year.
Providence marketplace in Nashville, 22% up year over year denim in Boston up 20% year over year.
It's really broad based.
And it goes hand in hand, with just the demand of tenants in those markets. So there is massive demand and youll see some announcements in the Detroit or the world Theres massive demands in the Cincinnati is a the world, obviously, Florida and Boston.
And I was looking at just traffic data.
Last night and it is it as broad I mean, obviously in Miami, but.
Lakeland Park in Lakeland, Florida up 32% year over year.
Providence marketplace in Nashville, 22% up year over year denim in Boston up 20% year over year.
Which.
We absolutely love the demand from both small shop and box is ripping up here. So it is not.
And it goes hand in hand, with just the demand of tenants in those markets. So there is massive demand and youll see some announcements in the Detroit's of the world Theres massive demands in the Cincinnati is a the world, obviously, Florida and Boston.
It's kind of geography agnostic.
And just the demand is really broad brush and I think thats really how we set up the portfolio I'm a believer in top 40 msas.
The retailers, where you have most pricing power is by density.
Which.
And where you can look at that as a compared to secondary markets I think the top 40 markets will outpace those secondary markets for rent growth.
We absolutely love the demand from both small shop and boxes is wrapping up here. So it's not.
It's kind of geography agnostic.
And just the demand is really broad brush and I think thats really how we set up the portfolio I'm a believer in top 40 msas.
And I think Thats, what we have sold since 2018 all of that secondary market stuff and we've really left with 90, 899% top 40 msas.
The retailers, where you have most pricing power is by density.
Okay. Thank.
Thank you on that and I guess on the second part is what's your visibility on specific site level reporting for the portfolio.
And where you can look at that as a compared to secondary markets I think the top 40 markets will outpace those secondary markets for rent growth and I think that's what we've sold since 2018 all of that secondary market stuff and we've really left with 90, 899% top 40 msas.
How well do you guys know the tenants.
What are some other tenants that are on your watch list.
<unk>.
Got it.
Yes.
I mean, we have a very active.
Okay. Thank.
Active hands on asset managers, we have a very robust.
Thank you on that and I guess on the second part is what's your visibility on specific site level reporting for the portfolio.
Kind of a system that the local managers speak.
Speak with the managers of the national tenants, the local tenants and speak on sales speak on renovations provide data is where I'm going there is a very data analytic approach to how we look at tenants the small shop tenants, we'd like to have as much visibility. How do you have visibility you have to.
How well do you guys know the tenants and when.
What are some other tenants that are on your watch list.
Please.
John .
Yeah.
I mean, we have a very active.
Active hands on asset managers, we have a very robust.
Kind of a system that the local managers speak.
Have a conversation and you can't have a conversation managing a portfolio out of New York. So we haven't.
Speak with the managers of the national tenants the local tenants.
On the ground hands on asset team that provides feedback to us.
Speak on sales speak on renovations provide data is where I'm going there is a very data analytic approach to how we look at tenants. The small shop tenants, we like to have as much visibility. How do you have visibility you have to have a conversation and you can't have a conversation managing a portfolio out of.
The second question on that from watch list.
I mean listen we are we're looking at.
Everything from from Entertainment and Thankfully, we don't have any amcs thankfully, we don't have any 24 hour fitness as those are what I've just been hearing from people in the credit markets their concerns.
In New York, So we have an on the ground hands on asset team that provides feedback to us.
But I think outside of the party city is in the Tuesday morning, there's things around the edges thankfully, we don't have a lot of exposure to that.
The second question on that from watch list.
I mean listen we are we're looking at.
But where there is.
Everything from from Entertainment Thankfully, we don't have any amcs thankfully, we don't have any 24 hour fitness says those are what I've just been hearing from people in the credit markets have their concerns.
Lower sales volumes with near term expirations is really where we're focused as well and we are well ahead of any of those.
I appreciate it thank you for that.
But I think outside of the party city is in the Tuesday morning, there's things around the edges thankfully, we don't have a lot of exposure to that.
Thank you.
Thank you we have no further questions at this time, Mr. Harper I would now like to turn the floor back over to you for closing comments.
But where there is.
Thank you operator, so despite the uncertain macro environment return of select national retailer bankruptcies, we believe RPT is the balance sheet.
Lower sales volumes with near term expirations is really where we're focused as well and we are well ahead of any of those.
And internal growth levers to strengthen our cash flows.
I appreciate it thank you for that.
Continued robust leasing demand and our track record of quickly back filling spaces vacated by troubled tenants at superior economics.
Thank you.
Thank you we have no further questions at this time, Mr. Harper I would now like to turn the floor back over to you for closing comments.
US great confidence that 2023 will be another year of solid performance for the company.
Thank you operator, so despite the uncertain macro environment return of select national retailer bankruptcies, we believe RPT is the balance sheet.
Looking forward to seeing many of you at ICSC and NAREIT have a great day.
And internal growth levers to strengthen our cash flows.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Continued robust leasing demand and our track record of quickly back filling spaces vacated by troubled tenants at superior economics.
US great confidence that 2023 will be another year of solid performance for the company.
Looking forward to seeing many of you at ICSC and NAREIT and have a great day.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.