Federal Realty Investment Trust Q1 2023 Earnings Call
Good day and welcome to the Federal Realty Investment Trust first quarter 2023 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then Vito.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded.
I'd now like to turn the conference over to Leah Brady. Please go ahead.
Good afternoon. Thank you for joining us today for federal Realty's first quarter 2023 earnings conference call.
Joining me on the call are Don Wood, Angie Jasper guess when these year, John we know that.
They will be available to take your questions at the conclusion of our prepared remarks.
A reminder, that certain matters discussed on this call may be deemed to be forward looking statements.
Within the meaning of the private Securities Litigation Reform Act of 19 any forward looking statements include any annualized or projected information as well as statements, referring to expected or anticipated events or results, including guidance, Although federal Realty believes the expectations reflected in such forward looking statements are based on reasonable assumptions federal Realty.
Future operations and its actual performance may differ materially from the information in our forward looking statements and we can give no assurance that these expectations.
The earnings release and supplemental reporting package that we issued this afternoon. Our annual report filed on Form 10-K, and our other financial disclosure documents provide a more in depth discussion of risk factors that may affect our financial condition and results of operation given the number of participants on the call. We I only ask you to limit yourself to one question during the.
The Q&A portion if you have additional questions. Please ratio.
That I will turn the call over to John which again, our discussion of our first quarter results Don.
Thanks, Les and good afternoon everybody.
Strong start to 2023 year with $1 59 first quarter earnings per share result.
Both consensus and internal expectations at 6% growth over last year's first quarter.
Also happens to be the best first quarter result, we've ever posted.
The best part, we signed 101 comparable leases for more than half a million square feet at $34.72 afoot.
Per cent higher debit cash basis rent the previous tenant.
And the final year of their lease 24% on a straight line basis.
Amanda was exceptional with momentum encouragingly strong at the end of the quarter like March.
As you know I've been expecting the inevitable tail off of leasing activity for months and months now is the portfolio leases up.
These activity levels exceed historical levels by 20% to 30%, we just plainly havent seen that tail off.
The retail demand for the products that we offer is in lockstep with what today's consumers and retailers the man and he's off one first ring suburbs of major metropolitan areas.
One of the larger drivers of that leasing performance. This quarter was the signing of four grocery deals three new deals and one renewal.
I know, but does that imply the Boston suburb with star market and Albertsons Brad.
The new deals included giant food, replacing shoppers food warehouse.
In suburban Baltimore.
I'm not allowed to announce yet, placing michaels and fresh meadows Queens.
And how old are you, replacing Barnes and noble on long Island.
Together. These four deals started $3.3 million of base rent or $17 81.
The $4 $4 million of base rent or $23 40.
Strong rents and rent growth and proven productive centers and northeast densely populated populated suburbs, the timing and the more getting done in the first quarter bodes well for the future.
The bed Bath bankruptcy filing news well not exactly welcome was inevitable and frankly better than the band data is being ripped off so we can get on with creating incremental value in our shopping centers.
There are many more productive retailers in this one and shouldn't be serving our customers.
Deals are in the works for all of our bed Bath boxes and replacement rent should start to ramp up in late 2024.
With average bed that basically base rent at $15 a foot rest assured that federal's portfolio will be more valuable not less.
Once these locations where retention Dan will provide more detail on what we've assumed in our numbers.
The natural lease expiration of a large format bed bath and beyond stores Wynwood shopping center in suburban Philly was in January I was expected and was the primary cause of a modest 20 basis point drop in occupancy in the quarter.
That closure along with at Tuesday morning in suburban Boston. It also flows when the lease expired.
January Beverly overshadowed the many store openings elsewhere throughout the portfolio.
Meanwhile, small shop occupancy gains continued unabated during the quarter.
And increased 50 basis points, that's a total increase in small shop occupancy Q1, and 70 basis points since Q1 2022.
Quality of workshop tenants and discerning way that we choose them at our properties, where we create a ton of value all small shop tenancy is not really.
And as much as I loved the grocery deals I mentioned earlier, it's the retail side of the big four mixed use communities that I find most impressive taken.
Taken together.
Emily Row, Bethesda row, Pike, <unk> rose and Santana row are real companies differentiate your bedroom and more in demand than ever before.
With retail leased occupancy at 98% and tenant sales well above 2019 levels. These properties are humming with estimated foot traffic in excess of 28 million shoppers in the trailing 12 months.
That's a big number and it comes from the database in place for AI.
Roughly two thirds of tenants report sales of big four so the numbers are representative overall sales per foot totaled $700 with total food and beverage sales per foot in excess of a thousand dollars an.
In our estimation. This is the product and the markets that consumers in a post COVID-19 world want the most.
I know you've heard me say it many many times before but it bears repeating demographics matter, especially in times of economic pressure and especially now.
I'm Gonna have trillions of dollars of government stimulus that propped up the economy during the pandemic yours is waning.
Past cycles are convinced of the family simply have to have money to spend for retail real estate cash flow to grow.
68000 households, with average annual household income of $150000 sit within three miles of federal Realty's centers.
That's $10.2 billion of family income generated within a three mile radius and more than half of those people have a four year college degree or better.
I know no other significantly sized retail portfolio that can say that.
It was a late quarter on the transaction, where we sold a small grocery anchored shopping center in the quarter for $13 million.
And it was an entity that center located in very suburban New Britain, Pennsylvania, and one of the latest three mile population demos in our portfolio with an obvious candidate for sale.
More interesting was our acquisition of the fee interest in the anchor tenant leases at Huntington Square shopping center on long island from start their drilling trusts for 35, and a half million dollars.
Back in 2010, we had purchased the leasehold interest in the shop tenants with the hope that someday finding a way to consolidate the anchors and the sea.
With this first quarter transaction, we now fully controlled as 18 acre parcel in affluent east North Port Long Island.
Mentioned earlier, just replace Barnes and noble with an aldi grocery store, you're getting another grocery anchored property in the portfolio.
With a $5 million plus annual income stream on our $56 million all of the investments we've created a much more valuable property with an unlevered IRR in the low teens, and arguably $20 million plus immediate incremental value.
Yeah.
You might have also noticed that after the quarters end, we refinanced our $275 million in bonds coming due June 1st with a new five year $350 million of green bonds at five 375%.
The offering was significantly oversubscribed demand helped by our lead Boulder better investments.
Next up will be the financing or the refinancing of our $600 million bonds coming due next year, we would expect to be opportunistically in the market the important points in the second half of this year.
For an additional source of growth in 'twenty 'twenty, four and beyond you only need to look at the $600 billion plus of.
Construction in process on the quarter end balance sheet, we identified a large source of future income on capital already in the launch of at least not yet reflected in the results what.
Well it was reflected in the quarterly result was a $10 million of property operating income contribution from the latest completed phases of somewhat more mixed use operating priorities, namely Assembly row Phase III 909 rose at Pike, <unk> rose and a full quarter of stabilized Coca wall, which contributed.
And finally, our floor by floor build out of Santana west seems to be attracting more interest in the marketplace as inquiries and property tours seen renewed life in the lab.
Last 30 to 60 days.
Sector in Silicon Valley is far from certain what the increased activity is certainly well we continue to see our fully minutes.
Based on our mixed use communities to be the product of choice in their respective markets.
Okay. That's about it for my prepared remarks, this morning, and I'll turn it over to Dan for opening it up to your questions.
Thank you, Don and Hello, everyone or $1 59 per share reported <unk> was a first quarter record federal and solidly above our expectations and last year's dollar 50 years old representing 6% annual increase.
Our performance again was broad based across all facets of our business continued to contribute.
Specific drivers, which deserve mention.
Average percentage rent continues to outpace expectations as 10 sales demonstrate the strength and resilience.
<unk> revenues also saw gains above forecast as customer traffic at our large mixed use assets continues to drive higher <unk>.
Small shop occupancy again showed gains and we saw lower expenses, both at the property and corporate level.
This was offset modestly by higher collectability impact or bad debt expense that was broadcast.
Our GAAP base comparable POI growth metric was three 6% coming in at the upper end of the range of our 2% to 4% initial guidance on a cash basis comparable comparable excluding prior period rent term fees. It was five 2%.
Cash basis comparable minimum rent grew by 4%.
Term fees in the comparable pool this quarter were essentially flat.
First quarter 2022, and one 4 million in each period.
Prior period rent this quarter was 1.3.
3 million versus $2 4 million in the first quarter last year.
Please note that we have added all of these figures to pages 10, and 11 of our sub 8-K supplemental disclosure.
Youre welcome Steve.
Year over year occupancy results were also solid with our overall occupied metric rolling 140 basis points year over year.
91, 2% to 92, 6% and our lease percentage, increasing 50 basis points from $93 seven to 94 point too.
Sequentially, we took a small but anticipated step backwards given once you seasonality and two known anchor departures in January at lease expiration, which were reflected in our guidance.
Our signed not occupied spread in the existing portfolio stands at 160 basis points as we continue to show progress and getting tenants open and renting.
This spread represents roughly $18 million of incremental total rents.
Our signed not occupied in our non comparable pool stands at $18 million as well total rent, bringing total signed not occupied to $36 million.
This effectively brings our S N O percentage, so a total of 3%.
These executed leases will continue to drive bottom line results over the next two years with roughly 65% coming online over the remainder of 'twenty three and the balance primarily 2024.
When you include new lease deals in our pipeline for currently unoccupied space. This increase in DSO figure even higher.
[noise] rollover for the quarter was 11% on a cash basis and 24% on a straight line basis.
The second consecutive quarter to have cash the cash number and double digits in the straight line number.
And so the low to mid twenties.
I'll highlight the straight line number as it reflects sector, leading contractual annual rent increases embedded.
Rent increases embedded in our leases.
Both anchor and small shop blended roughly two one a quarter percent across the portfolio.
Year to date small shop rent bumps.
About 3%.
Now to the balance sheet.
We ended the first quarter with $1 3 billion of total available liquidity at quarter end comprised of $1 2 billion available under our revolver and 100 million of cash.
As many of you saw we successfully accessed the unsecured market subsequent to quarter end with 350 million about five and three it's green bonds and as a result, no maturities until early 'twenty four.
Also keep in mind that for our term loan. The initial maturities also in 2020, we have two one year extensions.
At our option taking that maturity into 2026.
With respect to our leverage metrics, our net debt to EBITDA ratio was roughly six times as adjusted we fully expect to be back toward targeted level in the mid five times 2020.
Additionally, we are targeting free cash flow after dividends and maintenance capital to return to pre COVID-19 levels by next year.
Our in process pipeline of active Redevelopments and expansions now stands at $740 million.
With only $250 million remaining spend against our $1 3 billion of available liquidity.
Now onto guidance.
With initial guidance to start the year, showing a growth of two 5% at the midpoint and 4% at the top of the range.
And a solid first quarter under our belts, we are affirming guidance for 2023, and 638 to $6 58 per share.
While we continue to see strength and resiliency in our business.
With three quarters left for the year. It is rare that we would modify guidance at this point.
For the first time in almost two years, we are seeing tenant bankruptcies in retail.
Selected businesses struggled to compete in a challenging economic environment of higher interest rates and diminished the government subsidies from the agenda.
Despite the bankruptcies to date, where we have very manageable exposure, we still feel comfortable with our initial 100 to 135 basis points of total credit reserve comprised of roughly 75 basis points General reserve and.
25 to 60 basis points of specified bad debt reserve.
Now given where we started in may and the expected range of outcomes. This bed Bath reserve has now been reduced to 20 to 45 basis points given the cash rents we've already she on eight of our nine anchor boxes that have not yet been rejected including May rent.
That range will depend on the timing of the bankruptcy process, which leases are affirmed endorsed them if any.
From a comparable growth perspective, given our solid first quarter metric, we are affirming the 2% to 4% range for comparable NOI growth as well as our 3% to 5% range on a cash basis adjusting proprietary events in Germany.
Page 27 in our 8-K provides an updated summary of the key assumptions for our guidance.
Now in addition to the expanded disclosure on term fees from prior period rent that I previously highlighted we'll also noticed several other additions to our 8-K relating to revenues comparable D E. L y growth that occupancy and leasing metrics, demonstrating our commitment to continuing to span expand.
Our disclosure to provide the information we believe is most relevant for investors to analyze our business actively inefficiently.
With that operator, you can open up the line for questions.
Yeah.
Thank you.
We'll now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
We are using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been after and you would like to withdraw. Your question. Please press Star then two in the interest of time. Please limit yourself to one question at this time, we will pause momentarily to assemble our roster.
Our first question comes from Juan Sanabria with BMO capital markets. Please go ahead.
Hi, Thank you for the time.
I'm just curious on the renewals those popped up in the fourth quarter. If you look relative to the trailing 12.
Had lower Ti, it's got a mix.
Or is that kind of a new normal I know you mentioned some anchor leasing just curious if you can comment on that thank you.
Yeah.
It was it was essentially a mix would.
With regards to just what got done during the quarter one of them was a the grocer renewal.
We had and denim, but also just a broader Nixon and obviously D. G is.
Again.
A mix of beliefs that got done.
The next question comes from Craig Schmidt with Bank of America. Please go ahead.
Yeah. Thank you.
Kind of wanted to talk about mixed use and added Ramsey I noticed on your future development.
Opportunity page you've gone from six mixed use projects that could add residential now we have 14.
What I'm wondering is you know I've heard you say it a third of your properties or mixed use now where do you think you might be in five years' time.
And the second news will mixed used assets grow faster than their rents than strictly retail ones.
And what are retailers, telling you about mixed use.
What are the rescue people, telling you about mixed use.
Boy, Craig that's pretty funny I Love, how you know we limit it to one question you have to have a whole white paper and that are in that question. There are best So a couple of hundred apologize upfront did own. It all don't apologize at all it's just to have a little but listen the what you see in the 8-K is is a.
<unk> of what we believe and that is the ability wherever we can to maximize the use of the real estate that are that.
That we own.
Especially when we're talking about successful retail shopping centers with and you know what ours are on bigger piece of the plant and so the ability to to.
Add other uses it's something that it's just part of our DNA and something we'd like to be able to do no I don't I would not you should not expect us to be running in and putting shovels into the ground over the next 912 months at that at those projects because the economics don't make any sense to that.
I do expect him to make some sense in the future and that's what that is supposed to come back now with respect to the overall mixed use properties. The what we have clearly found clearly found is that the demand for lots of users.
You know office and retail and Randy.
I would tell frankly.
Really well done mixed use property is a real differentiator, it's where people want to be it's why in the comments I made I'm talking about traffic counts that are really enormous ease or these are a lot of there's a lot of visits there a lot of sales. They also seem to have the ability to raise their prices in <unk>.
<unk> like that more than that more value oriented properties and I guess, you would expect that apple in areas. The Lulu lemons of the world et cetera, They can raise prices and as a result, we see the ability to charge higher rents. There now if we did that right on the ground floor and we should also see outside.
The returns both in the form of occupancy and the rates that we're getting upstairs in a in the other uses that's been our experience frankly since COVID-19 I think it's even stronger than it was before COVID-19.
The next question comes from Steve Sochua with Evercore ISI. Please go ahead.
Yeah. Thanks.
Don or maybe Wendy just on the leasing side I mean, I know the strength has probably surprised Saddam things have remained healthy consumer spending has held up I'm. Just wondering what you guys are hearing from tenants and you mentioned, maybe bankruptcies picking up I'm just wondering how you feel about the 75 basis point General reserve and.
You know might you not use all of that as you sit here today, just as you survey the landscape.
Steve Let me, let me just kind of add some color first before Dan talks about the numbers, but you're right. We're seeing great demand on the retail leasing side, specifically in the small shops.
We have not seen a decline.
Anything considerable as it relates to the ability to fund projects and make.
Decision, making decisions for the long term and understanding that the team's recession discussion.
These headwinds that we're facing decisions that they're making are critical to their livelihood and especially for the mom and pops. So again, it's a flight to quality that continues to happen in our portfolio. So I'm feeling very bullish about what I see in our pipeline again is I I honestly I was expecting it.
Level off a little bit and it has not it is as robust as ever so I'm very encouraged.
I guess, Steve I would only add to that.
Yeah, there might be some room in the 75 basis points, but you know I read the same things in the newspapers that you do and it's may 5th or.
Fourth or whatever it is.
By the way, Steve My 20th anniversary at least you know happy.
A university town right.
It makes me laugh, though because the the power of the small shop tenants and that that Wendy mentioned is something I really want to make sure that you understand a little bit we don't do it.
First time mom and Pops, we don't have those type of businesses here there they are almost always.
Adding a store or adding a food use from a place that from from strong cash flow in another location, whereby they're expanding into the third and the fourth or the fifth.
There is that flight to quality that is a critical component. So if this is anything like whenever it happens this year and next year is anything like that.
You know.
Prior recessions this is going to be one of the strongest parts of our of our portfolio and in the place that differentiates us.
The next question comes from Greg Mcginniss Scotiabank. Please go ahead.
Good evening.
Happy 20th that's done.
It's Greg Yeah, you're welcome to celebrate a let's talk about office demand.
Can you just talk a little bit more about the interest you're seeing in Santana west or do this feels like serious inquiries at all tech a whole building or by floor.
And so any additional color is helpful. There and then we'd also appreciated our updated info on 909 lease up and initial rent contribution expectations. Thanks, sure, Yeah, Hey, Greg and stuff I mean, let me start off on the web.
West Coast.
And then in our dog jumping out of me out.
Part of your question. So the business decision, we made late last year or two.
Allow the building to be leased four by four and to start building out. The building. So we were a great alternative to the sublease space Thats coming on the market, but I'm sure you've heard about.
It is working out for us that combined I think with a little bit more of a.
At least in the close call it mid sized market as what theyre going to use in the way of the office space.
Cause scores to check out and we have paper going back.
A couple of tenants so they're not full building tenants for their multi floor tenants.
I don't know, whether we will get any of them that of course at this point, but there is activity and I would call. The activity is very good.
I'll be happy when we made the decision that we made to start building.
Yeah and Greg.
Say the obvious that is a difference that is a difference in feeling I don't think we could have said that a in fact, we didn't say it on the February call or maybe last November so really happy about that decision at this point to hopefully it's a you know it bears fruit, but time will tell and with respect to 919919, you know its really.
It's it's it's it's really interesting.
Uh huh.
Thanks, a J, we havent done I would not yet [laughter].
915, we've turned the building over the floors over to choice.
Then they are building out their space, we will have a contribution from them next starting next year.
And then this year. So Dex also which has you know sign the lease we're almost ready to turn the space over to a sedan that is going really well and then so then so that's the 60 some odd percent of the building that is is completely leased we have.
Sirius back and forth on a number of tenants for most of the rest of the building at this point so it's pretty interesting at a time when as you know.
There can't be a dirty word than than office.
The country is is it possible that a sub component of office is actually under supplied and that's up component would that be mixed use properties, where you have a new building and that first ring suburb, which is obviously all all we have so I'm pretty encouraged by by what we're seeing here at Pike <unk> Rose certainly the same.
Up at Assembly row, and with new activity at Santana West I Hope, we have some target.
The next question comes from Connor Mitchell with Piper Sandler. Please go ahead.
Hey, Thanks for taking my question.
So now that you've entered Hoboken, Phoenix and <unk>.
I know you've mentioned you're not rushing to start doing anytime soon but as you deploy more capital do you see more urban infill or population growth areas. So maybe just how you think about these are these two different market types.
Conor I you know, it's it's I'm [laughter].
It certainly wouldn't be areas with big population growth the problem with big population growth means that theres, usually room for a for a lot more supply to be added and we want to be in supply constrained areas nothing more bolt supply constrained in Washington Street in Hoboken, and love the investment we've made there.
We're just getting into an on you know the the one redevelopment there whether we can effectively make the numbers work I'm very encouraged by by that fact, I would not again expect to see those under construction in the next month or two or something like that but that project is going to is very likely to pencil. It makes some sense to the X.
And we can find more in may if it makes sense and in markets, where we already are like that well, we will look at it all day long.
But that's the type of thing that that's far more attractive.
Attractive to us than than chasing head count.
The next question comes from Craig Mailman with Citi. Please go ahead.
Hi, This is Seth on for Craig.
The active mixed use redevelopments all have a 6% protected returns how are you thinking about return thresholds for incremental projects starts given the elevated cost of capital.
Yeah, no. It's a it's a very good question.
And I think I've answered this a couple of more but what I.
Think about it this way, we need incremental returns or incremental returns on top of our cost of capital in terms of development of at least 150 basis points.
From an IRR perspective, more like 200 basis points basis points from an IRR perspective, the reason I keep saying IRR perspective is because of the stuff that we do and those projects, we won't do unless they grow faster.
Our experience has shown us that those projects are we are able to increase rents faster the residential component is important.
With respect to that but incrementally once we get comfortable with what our cost of capital is going to be I'd like a little more clarity from the fed maybe we're getting there getting a little bit closer to that way on the on the debt side on top of that.
150 to 200, depending on the risk of the particular project for it from an IRR perspective, well that's helpful.
The next question comes from Floris, One day comes that Congress point. Please go ahead.
Hey, good evening, I guess could I.
Ask about your shop occupancy at 90% leased what is the gap between occupied and leased and how much more will that number can you drive that over the next two years and how much more do you think that will increase.
Even this year.
Yeah, the on Q E occupied percentage of small shop was 88.
And yeah, we would expect to be able to drive both of those up higher.
I think that's a real opportunity.
Yes.
Why are you up towards Oh, the occupied percentage above 90 and up towards 90 North of 92 on the lease side I think there's still more room to run.
On that in our portfolio.
The next question comes from Derek Johnston with Deutsche Bank. Please go ahead.
Hi, good afternoon, everybody I'm one of the touch on capital recycling, you know primarily because it's such an important growth tool for reach and you know really it's been hampered as you know, especially this year, but you know Don with with the fed you know striking a pause here.
And you know some calling for you know, perhaps a first round of cuts in and maybe <unk>.
Q1, 'twenty four somewhere around that timeframe do you think there's visibility and rates and somewhat of a stability in rates.
Can you know condense or narrow.
What must be a wide bid ask spreads. So you know you can maybe do some accretive acquisitions and reignite that growth engine.
Dinner I I do Derek I mean, you said the word.
Yeah.
You know when you're in your question is there has to be some level of stability there has to be predictability.
And without that is there hasn't been as you know it's it's Sean.
Sure. The bid ask is is very different that will that will change now it'll change you know.
Over time and there are other things than just fed policy that dictate whether dictate whether there is or are they a acquisition market that makes sense for a disposition market that makes sense, but it's not gonna stay the way. It is so yeah. I mean, you know we run this business. We run this business for a long time long time, we'll continue to do that.
And during those during those cycles.
And there will be a reversion to some level of stability that allows us to.
To get stuff done no questions.
Thank you.
The next question comes from Michael Goldsmith with UBS. Please go ahead.
Hi, good evening. Thanks, a lot for taking my question. Dan you you had a slight beat on F. F O a relative to the consensus you you're not touching guidance because its still earlier in the year I guess what are you looking for.
Over the next three months or or when we next speak on an earnings call was that we would give you more confidence that that you can take the year's expectations higher and then separately like what what are you looking for which would maybe give you a little bit more caution in terms of the outlook for the year. Thanks.
Yeah look I think the biggest driver would be continued strong leasing volumes our pipeline is as strong as this large.
Or what's been executed to date this quarter and what's in the pipeline of executed LOI.
Never been higher.
And so if that continues that we could see that continue I think that obviously will have some some confidence on the flip side look I think the market is got some risk out there, particularly with regards to.
Tenants and whether or not the tenants are will you'll be able to weather. This.
It's difficult economic environment, whether or not we see a continued uptick in bankruptcies and I think that balance we've done very well balancing that.
That we managed that have very little exposure or on a relative basis, certainly, but just in absolute terms in terms of our exposure to those bankruptcies, we hope that continues.
The next question comes from Handel St. Jude with Mizuho. Please go ahead.
Hi, This is Ravi the idea on the line for Honeywell I Hope you guys are doing well.
Wanted to comment and ask about the snow spread you're currently around 160 bps would.
Would you view this as a long term steady state for what snow could be.
Well, we we we've done an exceptional job I think of bringing our S. N O.
<unk> metric down from north of 300 basis points in our existing portfolio down to 160 basis points, we'd like to get that tighter if you'd like to get that down to a hundreds of 125 basis points one of our differentiators, though just so we have an S. N O space that is yet to be delivered from our large redevelopment and.
From a pipeline that is equal to that size of each so we have $18 million in the existing portfolio $18 million of total rent and our development redevelopment and expansion pipeline and that equates to over 300 basis points.
I think that's pretty compelling and I don't think anybody has a redevelopment pipeline that has the pre leasing that's that's that's been done.
Where it's it's something that is a real differentiator because we've got scale and that are truly I think oh the equivalents.
What's in the existing portfolio and what's in our redevelopment portfolio is effectively 300 basis points or more.
The next question comes from Hong Zhang with Jpmorgan. Please go ahead.
Yeah, Hey, guys. Just a quick question on occupancy I think last quarter, you talked about potentially pushing economic occupancy above 93% maybe in the mid 90 threes by year end just wondering if that's changed given the bed Bath announcement and your views on near term bankruptcy risk in general.
Yeah, No I think look it depends on you know so far.
You know anchor boxes, we've only had one lease rejected well see how it plays out obviously, if there's a full liquidation and we're not going to be.
At 93% occupied percentage.
Yeah, we'll be probably closer to 92.
But we'll see how that all plays out what gets to what just yet.
In terms of what leases get purchased in there and they'll liquidation.
And from that perspective, we would hope to.
Yeah. They are.
A sense out of it.
From that number you know as the bankruptcy and unfolds.
The next question comes from Colin I realize Rod Smith with Green Street. Please go ahead.
Hello.
And then you have talked about how you believe your portfolio would outperform peers in an economic downturn.
And you have highlighted how and.
I have one school good demographics are a key driver behind that.
But then they we have perceived perhaps that's a vulnerability easier a slightly higher exposure to more cyclical categories.
Restaurants, and a little bit more of a full price apparel. So could you. Please provide a little bit of a history lesson and how these segments have performed historically in downturns in your portfolio.
We'll have a better understanding of how that overlaps between high demographics and cyclical categories perform.
I cant Paulina. Thanks for asking that you know, it's kind of why in my prepared remarks, I wanted to make a distinction of how those mixed use properties with generally higher end tenants, how how effectively they too.
And what we have found and look retailers or I'm, sorry, real estate is local so in the specific markets where they are operating.
Both historically and currently what we're seeing is increased sales and importantly, very importantly in a period of inflation those tenants have the ability to raise prices.
When I sit and I think about I don't know the answer to this but I ask you to consider something like this it if you'd take aspirational tenants.
You know the Lulu lemons of the world people like that effect.
And imagine how much they've been able to increase price prices over the next last two years of inflation and compare that and more to you know maybe the big lots of the world or something that that is that is.
You know aiming for a lower demographic.
It's harder to press its harder to push price increases that's a really important thing for us in all parts that includes restaurants etcetera, no I don't know whether weather.
I've told you this before or not I don't remember, what but everybody was worried about federal realty going into the 2008 2009.
Oh, great financial crisis, because we had more restaurants, because we had more lifestyle. If you will everybody was worried about federal and it turned out that those were the best performing categories in the company going back.
And when I look today at our company and I look at the restaurant performance in the mixed use properties.
They are generating over a thousand dollars a foot.
Hum.
Sales and part of that is because they've been able to raise prices part of that is because there's a there's a huge amount of volume that goes through there, but that gives them the ability to certainly cover the rents that we are charging them and more.
And when you think about that in those type of areas. We would expect that to continue to happen. The conversations we have and we are very tight.
We're a smaller company in terms of number of properties than our competitors, we have very close relationships with our tenants. We understand you know what it is that they are doing to be able to work through difficult more difficult economic times and so those things give me confidence.
Because we have been doing this a long time and there are cycles and and I expect it to behave similar to the way it behaves.
Historically I hope that's helpful.
The next question comes from Tayo Okusanya with.
Credit Suisse. Please go ahead.
Hi, yes, good afternoon, everyone.
Congrats on the solid quarter.
Dawn I last quarter, when you kind of talked about dispositions. It it sounded like there was a pipeline of kind of a little bit over 100 million or so you were working on.
I think this quarter, you kind of announced $13 million of this done could you just talk about like the rest of the pipeline and what's kind of happening there.
Whether it's kind of taken a little bit longer to close deals because of the the shakeout in the on the debt markets or just give us a sense of maybe what's kind of happening on that front.
Yeah, we have and continue to have.
A list of assets that that we would recycle as a component of our business plan and frankly, we have that list in good times and bad times.
You know in terms of what it is those are not a lot of problems properties.
There's a few that are that we looked at the that's what we talked about last quarter last year, etcetera, and we got to get comfortable that we're going to get paid well and so in going through that process, we couldnt get comfortable and as many of those assets as we thought we could that doesn't.
They come off the table. So that just means pursuant to the question that was asked a little bit earlier once there's some stability and some understanding of of the general market conditions, you'll see a pickup in our in the disposition side of our business.
I don't know Dan or.
Yesterday, you answer that.
I think that's it.
The next question comes from Linda Tsai with Jefferies. Please go ahead.
Hi, I'm not sure if you look at it this way, but I think one of your peers talked about the average rents in their S. N O pipeline I was just wondering if you had a number for that for yours.
It's probably on a oh total rent basis, and the kind of the low to mid forties.
In the upper thirties on a.
No mid to upper Thirty's AR on a base rent basis, but we can come back to you with more precise numbers I don't have them exactly here.
Yeah.
Our next question comes from Alexander Goldfarb.
Please go ahead.
Oh, Thank you good evening.
Don can you a number of years ago, you guys expanded into the Hispanic Ah Ah centers out in California.
And just sort of looking for an update on that and then also you know the the Korean like the H Mart to the World seems to also be a pretty powerful anchor and those shopping centers also seem to have that coal type. Following so do you see expanding into more in the Asian. Hispanic.
Centers or you know is your experience so far with what you bought a number of years ago, maybe not panned out the way you thought.
Yeah. Thanks, Alex.
It has panned out the way we bought in fact, probably better than we thought and sort of given the fact that we didn't consider a global pandemic and those those properties performed exceptionally well.
During the pandemic what the answer to your question really depends on the right local partner it really depends on the market of course that we need to be comfortable with.
And a partner that we would need to be.
We would need to be aligned with with respect to our.
Views and the way we can manage a property prime store has been that it's been a very good partnership we've had.
Had trouble, adding more to it than we would've liked to have added more to it but those are individual deal by deal and they've got to make some sense and we didn't find any of that that made sense. It made sense, but those assets perform real well I'll actually be out there on Monday of next week with Prime store. So.
So that part has worked out really well in terms of E any other.
You know property type with a with a demographic that we're not as comfortable with as I say, we need the right partner because these are real estate decisions that have to be operated and has to be leased and has to be grown.
Specific to to a market that we're not familiar with we will get hurt.
So we better have the right partner and we've not found out at this time.
Okay.
This concludes our question first question I would like to turn the conference back over to Leah Brady for any closing remarks.
We look forward to seeing many of you in the coming weeks, thanks for joining us today.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may all now disconnect.