Q3 2023 Retail Opportunity Investments Corp Earnings Call

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Speaker 1: Welcome to Retail Opportunity Investments third 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 I would like to introduce Lauren Silvera, the company's chief accounting officer.

Welcome to retail opportunity investments third 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 I would like to enter T. Lawrenceville Farrah the company's chief of.

Accounting officer.

Speaker 2: Thank you. Before we begin, please note that certain matters which we will discuss on today's call, are forward-looking statements within the meeting as federal securities laws. These forward-looking statements involve risks and other factors which can cause actual results to differ significantly from future results that are expressed or implied by such forward-looking

Thank you before we begin please note that certain matters, which we will discuss on today's call are forward looking statements within the meaning of federal securities laws.

These forward looking statements involve risks and other factors, which can cause actual results to differ significantly from future results that are expressed or implied by such forward looking statements.

Speaker 2: Participants should refer to the company's filings with the SEC, including our most recent annual report on Form 10K, to learn more about these risks and other factors.

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.

Speaker 3: In addition, we will be discussing certain non-depth financial results on today's call. Reconciliation of these non-gupped financial results to gap results can be found in the company's quarterly supplemental, which is posted on our website. Now, I'll turn the call over to Stuart Tans, the company's chief executive officer. Stuart? Thank you, Lauren, and good morning, everyone.

In addition, we will be discussing certain non-GAAP financial results on today's call reconciliation of these non-GAAP financial results to GAAP results can be found in the company's quarterly supplemental which is posted on our website.

Now I'll turn the call over to Stuart's hands, the Companys Chief Executive Officer Stuart.

Thank you Lorne and good morning, everyone.

Speaker 3: Here with Lauren and me today is Michael Haynes, our Chief Financial Officer, and Rick Schobel, our Chief Operating Officer.

Here with Lauren and me today is Michael Haines, our Chief Financial Officer, and Rick <unk>, Our Chief operating officer.

Speaker 3: We are pleased to report that our grocery anchor portfolio continues to perform well. Notwithstanding our portfolio being essentially fully leased at over 98%, we continue to make the most of the ongoing strong demand for space. In fact, to the first nine months of 2023, we have leased a record amount of space thus far.

We are pleased to report that our grocery anchored portfolio continues to perform well.

Notwithstanding our portfolio being essentially fully leased at over 98%. We continue to make the most of the ongoing strong demand for space.

Through the first nine months of 2023, we have leased a record amount of space thus far.

Speaker 3: Additionally, in step with capitalizing on the demand for space to achieve record leasing volume, we are also capitalizing on the demand to continue driving rents higher, posting our strongest quarter year to date in terms of releasing rent growth on both new leases and renewals.

Additionally, in step with capitalizing on the demand for space to achieve record leasing volume. We are also capitalizing on the demand to continue driving rents higher coaching our strongest quarter year to date in terms of re leasing rent growth on both new leases and renewals.

Speaker 3: With respect to acquisitions, the West Coast has largely been idle this year, with only a limited number of grocery-anchored shopping centers trading.

With respect to acquisitions, the West Coast has largely been idle this year with only a limited number of grocery anchored shopping centers trading.

Speaker 3: Interest continuing to rise throughout the year and the related uncertainty and difficulty in terms of obtaining reasonable death financing has compelled many would-be buyers to stay on the sideline.

Interest rates continuing to rise throughout the year and the related uncertainty and difficulty in terms of obtaining reasonable debt financing has compelled many would be buyers just stay on the sidelines.

Speaker 3: Notwithstanding buyers being on the sidelines, certain private owners are starting to become more active in seeking to trans that.

Notwithstanding virus has been on the sidelines certain private owners are starting to become more active in seeking to transact.

Speaker 3: We view this as an opportunity. In fact, we currently have an acquisition that we are close to having under contract. It's an excellent grocery anchored shopping center that we've had our eye on for some time.

We view this as an opportunity in fact, we currently have an acquisition that we're close to having under contract.

Like grocery anchored shopping centers that we've had our eye on for some time.

Speaker 3: Properties located in the Los Angeles market in a densely populated, mature, diverse community.

The property is located in the Los Angeles market in a densely populated mature diverse community.

Speaker 3: centers anchored by a well-established natural food supermarket that is a long time national tentative art.

The center is anchored by a well established natural foods supermarket market that is a longtime national tenant of ours.

Speaker 3: The seller is a private owner who is seeking an efficient closing, which given our knowledge of the market and the specific center and its tenant roster, we are in a position to facilitate their closing of the jet.

The seller is a private owner, who was seeking a Christian closing, which given our knowledge of the market and the specific center in its tenant roster. We are in a position to facilitate their closing objective.

Speaker 3: Beyond this acquisition, we have several other opportunities that we currently have our sights on. Each with stellar circumstances that we are well positioned to capitalize on. Turning to our balance sheet. During the third quarter, we completed a public bond offering, raising 350 million in total.

Beyond this acquisition, we have several other opportunities that we're currently have our sights on each with seller's circumstances that we are well positioned to capitalize on.

Turning to our balance sheet.

During the third quarter, we completed a public bond offering raising $350 million in total.

Speaker 3: The offering to considerable interest in the marketplace and was oversubscribed attracting interest from 60 investors in total, which we think speaks to the long-term strength and stability of our grocery and our portfolio and business.

The offering through considerable interest in the marketplace and was oversubscribed with tracking interest through 60 investors in total, which we think speaks to the long term strength and stability of our grocery anchored portfolio and business.

Speaker 3: Now I'll turn the call over to Michael Haines to take you through the details of the offering and our third quarter results. Mike, thanks to her. Starting with our financial results, for the third quarter, Gapnet income attributable to the common shareholders for the three-month sentence of September 30th, 2023, was 8.4 million, equating to $0.7 per litre chair. And in terms of funds from operations for the third quarter, FFO told with $0.36 million, equating to $0.27 per litre chair.

Now I'll turn the call over to Michael Haines take you through the details of the offering and our third quarter results Mike.

Starting with our financial results for the third quarter GAAP net income attributable to common shareholders for the three months ended September 32023 was $8 4 million equating to <unk> <unk> per diluted share and in terms of funds from operations for the third quarter <unk> totaled $36 million equating to 27 cents per diluted share.

With respect to our financial results for the first nine months of 2023.

Net income attributable to common shareholders totaled $26 5 million or 21 cents per diluted share in terms of <unk>. The company had $105 4 million in total or <unk>.

<unk> 79 per diluted share for the first nine months of 2023.

Speaker 3: In terms of net offering income, NLI on the same center cash basis increased by 8.2% during the third quarter and increased by 3.6% for the first 9 months of 2023.

In terms of net operating income NOI on a same center cash basis increased by eight 2% during the third quarter and increased by three 6% for the first nine months of 2023.

Speaker 3: Our third quarter results were infected by two items. First, other income increased notably, primarily as a result of recapturing tree leases, which we have already lined up new tenants to take the bulk of the recaptured space at notably higher rent.

Our third quarter results were impacted by two items first other income increased notably primarily as a result of recapturing three leases, which we have already lined up new tenants to take the bulk of the recaptured space at notably higher rents.

Speaker 3: Partially offsetting the increase in other income, GAAP rent amortization declined, primarily as a result of removing a buy-buy baby lease from our portfolio during the third quarter. The decline of the one-time non-cash GAAP adjustment

Offsetting the increase in other income GAAP rent amortization declined primarily as a result of removing a buy buy baby lease from our portfolio during the third quarter.

The decline is a onetime noncash GAAP adjustment and.

Speaker 3: And just like to recapture spaces, we already have several lieutenants lined up for the bi-by baby space, both at a higher rent and on the same space cash basis, one of which is already open and operate.

And just like the recaptured spaces, we already have several new tenants lined up for the buy buy baby space. Both at a higher rent on a same space cash basis, one of which is already open and operating.

Speaker 3: With respect to our balance sheet, as Stuart touched on, during the third quarter, we raised 350 million to Republican law offering a senior and skewed note.

With respect to our balance sheet as Stuart touched on during the third quarter, we raised $350 million through a public bond offering of senior unsecured notes.

Speaker 3: It was the first time raising capital in folic bond market in nearly a decade. As such, we made a conservative effort to fully engage with the market having discussions with abroad and diverse mix of investors, a number of which were needed to accompany.

It was their first time raising capital fully bond market in nearly a decade as such we made a conservative effort to fully engage with the market, having discussions with a broad and diverse mix of investors number of which were new to the company.

Speaker 3: We intend to utilize the proceeds to retire the $250 million of senior notes that mature in December . Additionally, we paid down $100 million of our $300 million term loan. Looking out over the next five years, our debt maturity schedule is well-laddered, with approximately $300 million maturing each year on average. Having now re-established ROIC in the public bond market, our objective is to be a more consistent annual issuer going forward.

We intend to utilize the proceeds to retire the $250 million of senior notes that mature in December. Additionally, we paid down $100 million of our 300 million term loan.

Looking at over the next five years, our debt maturity schedule is well lathered with approximately $300 million maturing each year on average having now reestablished our IC and the public bond market. Our objective is to be a more consistent annual issuer going forward.

Speaker 3: Taking into account the bond offering, as of September 30th, over 96% of our debt is effectively fixed rate, over 96% of our debt is unsecured, and over 96% of our portfolio is unencumbered. Additionally, for the third quarter, net debt to annualized divida was 6.4 times, down from 6.6 times from a year ago.

Taking into account the bond offering as of September 30 over 96% of our debt is effectively fixed rate over 96% of our debt is unsecured and over 96% of our portfolio is unencumbered.

Additionally for the third quarter net debt to annualized EBITDA was six four times down from six six times from a year ago.

Speaker 3: Lastly, with the year coming to a close, we elected an air at our FFO guidance range for 2020 TRE. On the positive side, we think activity this year has far too far to use our initial projections of the setback at the beginning of the year. However, the persistent rise and interest rates impacted our initial projected interest expense and our projected investment activity, both of which have been adjusted accordingly interrupted a guidance range for the year. Now I'll turn the color over to show or see you out to discuss property operations, right?

Lastly, with the year coming to a close we have updated and narrowed our <unk> guidance range for 2023.

Positive site leasing activity this year.

As far exceeded our initial projections that we set back at the beginning of the year. However, the persistent rise in interest rates impacted our initial projected interest expense and our projected investment activity both of which have been adjusted accordingly interrupted a guidance range for the year.

Now I'll turn the call over to Rick <unk>, our CFO to discuss property operations rich. Thanks, Mike as Stuart highlighted we achieved another successful active quarter of leasing demand across our portfolio continues to be consistently strong with a broad range of perspective, new tenants actively seeking space.

Speaker 3: Thanks, Mike. As Stuart highlighted, we achieved another successful active quarter of lease.

Speaker 3: Demand across our portfolio continues to be consistently strong with a broad range of perspective new tenants actively seeking space.

Speaker 3: Given our property's location attributes, together with the strong draw of our longtime supermarket anchors and other core service and destination tenants, our centers continue to be sought out by prospective tenants as the shopping center of choice in the respective community.

Given our property's location attributes together with a strong draw of our longtime supermarket anchors and other core service and destination tenants. Our centers continue to be sought out by prospective tenants as the shopping center of choice in their respective communities.

Speaker 3: Capitalizing on the demand, we continue to lease space at a record pace. Year to day, we have leased approximately 1.5 million square feet, which is a new record for us in terms of leasing volume for the first nine months.

Capitalizing on the demand we continue to lease space at a record pace year to date, we have leased approximately one 5 million square feet, which is a new record for us in terms of leasing volume for the first nine months.

Speaker 3: In step with our record leasing activity, we again achieved a portfolio lease rate above 98%, finishing the third quarter at 98.2% lease.

In step with our record leasing activity, we again achieved a portfolio lease rate above 98%, finishing the third quarter at 98, 2% leased.

Speaker 3: breaking that down between anchor and non-anchor space. Our anchor space continues to be 100% least, and our shop space is close behind at 96%.

Breaking that down between anchor and non anchor space, our anchor space continues to be 100% leased and our shop space is close behind at 96% leased.

Speaker 3: During the third quarter, we executed 95 leases, totaling 465,000 square feet.

During the third quarter, we executed 95 leases totaling 465000 square feet.

Speaker 3: The bulk of our leasing activity continues to center around renewing long standing value tenants with a number of them continuing to come to us early to renew particularly key anchor tenant.

The bulk of our leasing activity continues to center around renewing long standing value tenants with a number of them continuing to come to us early to renew particularly key anchor tenants.

Speaker 3: Specifically, during the third quarter, we renewed six anchor tenants. Five of which were not scheduled to mature until next year.

Specifically during the third quarter, we renewed six anchor tenants five of which were not scheduled to mature until next year.

Speaker 3: Additionally, as Stuart indicated, we continue to have good success in terms of releasing rent growth.

Additionally, as Stuart indicated we continue to have good success in terms of re leasing rent growth spin.

Speaker 3: Specifically, during the third quarter, we achieved a 36% increase in same space cash base rents on new leases and a 7% increase on renewal.

Specifically during the third quarter, we achieved a 36% increase in same space cash base rents on new leases and a 7% increase on renewals.

Speaker 3: Underscoring our strong leasing activity and consistent performance is a proactive approach of seeking out, identifying, and capitalizing on opportunities to recapture space well in advance of lease maturities and releasing the space quickly, enhancing tenancies, and driving rents higher in the process.

Underscoring our strong leasing activity and consistent performance is our proactive approach of seeking out identifying and capitalizing on opportunities to recapture space well in advance of lease maturities and releasing the space quickly enhancing tenancies and driving rents higher in the process.

Speaker 3: Just to cite an example, during the third quarter, at two of our centers, we recaptured prime freestanding pads, each with a drive-through.

Just decided an example during the third quarter of two of our centers, we recaptured crime freestanding pad each with the drive thru.

Speaker 3: It had to have been leased to a regional tenant whose business was recently acquired.

It hasnt been leased to a regional tenant whose business with recently acquired.

Speaker 3: anticipating the acquisition could bring about some consolidation, we reached out to the tenant and successfully recasted their spaces and now have several new national quick-serve restaurant operators lined up with base rents that represent a 44% increase on average over the previous tenant's rent.

Anticipating the acquisition could bring about some consolidation we reached out to the tenant and successfully recaptured their spaces and now have several new national quick serve restaurant operators lined up with base rents that represents a 44% increase on average over the previous tenants rent.

Speaker 3: In addition to the strong rent increase, the new restaurant operators will be a much stronger daily draw to our centers, which in turn will enhance future leasing demand at the property.

In addition to the strong rent increase the new restaurant operators will be a much stronger daily draw to our centers, which in turn will enhance future leasing demand at the properties.

Speaker 3: Along with our recapturing initiative, we also continue to have good success getting new tenants open and up.

Along with our recapturing initiative. We also continue to have good success getting new tenants open and operating year.

Speaker 3: Year-to-date, new tenants representing approximately $6 million of incremental base rent on a cash basis have opened and commenced paying rent, including $1.9 million opened in the 3rd quarter.

Year to date, new tenants, representing approximately $6 million of incremental base rent on a cash basis have opened and commence paying rent, including $1 9 million opened in the third quarter.

Speaker 3: In terms of new tenants that haven't yet opened, including those that we just signed during the third quarter, the incremental amount stood at $7.3 million as of September 30th, the bulk of which we expect to commence over the next several quarters.

In terms of new tenants that haven't yet opened including those that we just signed during the third quarter. The incremental amount stood at $7 3 million as of September 30, the bulk of which we expect to commence over the next several quarters.

Speaker 3: With respect to Rite Aid and their recent announcement, at September 30th, we had 15 leases with Rite Aid across our portfolio, which altogether accounted for 1.7% of our total base rent. Three of the leases are on Rite Aid.

With respect to Rite aid and their recent announcement at September 30, we had 15 leases with rite aid across our portfolio, which all together accounted for one 7% of our total base rent.

Three of the leases are on Rite Aid's closure list. The three together account for 0.3% of our total base rent the.

Speaker 3: The three together account for 0.3% of our total base rent.

Speaker 3: The average base rent for the three is 50 to as much as 80% below current market rent.

The average base rent for the three it's 50 to as much as 80% below current market rents.

Speaker 3: In terms of the remaining 12 leases with Rite Aid, they all continue to perform well and their rents are below market on average as well.

In terms of the remaining 12 leases with Rite aid they all continue to perform well and the rents are below market on average as well.

Speaker 3: Turning to lease maturities going forward, as of September 30th, we only had 141,000 square feet maturing during the 4th quarter, including 2 anchor leases totaling 44,000 square feet, both of which we expect to release before year end.

Turning to lease maturities going forward as of September 30, we only had 141000 square feet maturing during the fourth quarter, including two anchor leases totaling 44000 square feet, both of which we expect to release before year end.

Speaker 3: Looking out further to next year, we have seven anchor leases currently scheduled to mature in 2024, of which we currently expect that six of the seven will renew.

Looking out further to next year, we have seven anchor leases currently scheduled to mature in 2024 of which we currently expect that six of the seven will renew.

Speaker 3: In terms of non-anchor space, we have about a half a million square feet of inline space scheduled to mature next year, which we expect to renew and release consistent with our historical performance. Now, I'll turn the call back over to

In terms of non anchor space, we have about a half a million square feet of in line space scheduled to mature next year, which we expect to renew every lease consistent with our historical performance now I will turn the call back over to Stuart.

Thanks Rich.

Speaker 3: Based on our leasing performance year-to-date and our leasing activity here early in the fourth quarter, we were on track to finish the year strong in terms of property operations and post another successful year of maintaining our high portfolio lease rate and achieving record leasing volume while also achieving solid releasing rent growth and enhancing our tenant base.

Based on our leasing performance year to date and our leasing activity here early in the fourth quarter. We are on track to finish the year strong in terms of property operations and post another successful year of maintaining our high portfolio lease rate and achieving record leasing volume, while also achieving solid re leasing rent growth and any.

<unk> seen our tenant base and.

Speaker 3: In terms of growing our portfolio, it's safe to say that 2023 has been a frustrating year as the market has been largely idle and slow to adjust to the higher interest rate environment. As I mentioned,

In terms of growing our portfolio. It is safe to say that 2023 has been a frustrating year as the market has been largely idle and slow to adjust to the higher interest rate environment as I mentioned.

Speaker 3: along with the market also adjusting to the ongoing challenges that certain commercial property sectors and certain prominent markets across the country are currently faced with.

Along with the market also adjusting to the ongoing challenges that certain commercial property sectors and certain prominent markets across the country are currently faced with.

Speaker 3: Fortunately, the long-term fundamentals of the grocery acreage sector remain sound, especially as it relates to our specific portfolio and our highly protected market.

Fortunately the long term fundamentals of the grocery anchored sector remains sound, especially as it relates to our specific portfolio and are highly protected markets.

Speaker 3: As we look towards 2024, the current expectation in the market is that acquisition activity could potentially accelerate.

As we look towards 2024, the current expectation in the market as that acquisition activity could potentially accelerate as property level low interest rate debt begins to mature in earnest next year and private owners could have limited viable refinancing options and.

Speaker 3: Property level, low interest rate debt begins to mature in earnest next year and private owners could have limited viable refinancing.

Speaker 3: In anticipation, we have been strategically tracking a number of potential off-market opportunities across our core markets, working to establish and maintain an ongoing constructive dialogue with private owners.

In anticipation, we've been strategically tracking a number of potential off market opportunities across our core markets working to establish and maintain an ongoing constructive dialogue with private owners.

Speaker 3: Over our team's nearly 30-year history of specializing in the grocery-anchored sector on the West Coast, this strategy has proven instrumental time and again in our ability to gain access to acquire exceptional properties that rarely ever hit the market.

Over our teams nearly 30 year history of specializing in the grocery anchored sector on the West Coast. This strategy has proven instrumental time and again and our ability to gain access to acquire exceptional properties that rarely ever to hit the market.

Speaker 3: While it's early in terms of the acquisition market becoming fully active and favorable again, we are encouraged from what we are currently seeing and look forward to the opportunity to strategically grow our portfolio in 2024. Now we will open up the call for your.

Well, it's early in terms of the acquisition market, becoming fully active and favorable again, we are encouraged from what we're currently seeing and look forward to the opportunity to strategically grow our portfolio in 2024.

Now we will open up the call for your questions.

Operator.

Speaker 1: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster one moment.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.

Withdraw your question. Please press star one again, please standby, while we compile the Q&A roster one moment.

Speaker 3: And our first question comes from Juan Sanabria of BMO Capital Markets. Please proceed. Good morning, Juan. Good morning, Stuart. Just hoping you could talk a little bit more about Rite Aid and

And our first question comes from Juan Sanabria of BMO capital markets. Please proceed.

Good morning.

Martin.

Good morning Stuart.

Just hoping you could talk a little bit more about rite aid and the potential uses that youre looking at to backfill space.

Speaker 4: potential uses that you're looking at to backfill space and if you have any color on any incremental space they may look to give back. There's an article today that through the bankruptcy process they might hand back more than the initial list of rejections and divestitures that they were initially planning. So just curious what extra intel you may have.

And if you have any color on any incremental space. They may look to get back. There is an article today that through the bankruptcy process, they might hand back more than the than.

And the initial list of rejections.

Divestitures that they were initially planning so just curious what extra Intel you may have.

Speaker 3: Yeah, so in terms of uses, you know, right now we are speaking to a broad range of potential new tenants, including.

Rich yeah. So in terms of uses.

Right now we are speaking to a broad range of potential new tenants, including.

Speaker 3: fitness, grocery, automotive. There seems to be a lot of demand. I mean, what really has happened here is, you know, opportunities that we were unable to fulfill from tenants have now become possible. So I think, as you know, so far they've only rejected one lease of ours. There's significant interest in that space. Yeah, Juan, the demand has been a bit overwhelming.

Fitness grocery.

Automotive.

There seems to be a lot of demand I mean, what really has happened here is opportunities that we were unable to fulfill from tenants have now become possible.

So I think as you know so far they've only rejected one lease of ours. There is significant interest in that space.

One the demand has been a bit overwhelming.

Okay, and then a second question.

Speaker 4: you just talk a little bit about how build occupancy was flat but base rents were down quarter over quarter just seems a little in progress. I'm just hoping for some color there.

Could you just talk a little bit about how build occupancy.

What flat, but base rents were down quarter over quarter, just seems a little in progress.

I was hoping for some color there.

Hey, Juan it's Mike I think.

Speaker 5: Without digging into the details, my hunch is it's probably a, I mentioned my prepared remarks that the gap adjustment for the Bye Bye Baby lease, which had an above market lease, so when we had to, when that lease was terminated, we had to recognize that above market rental revenue, which is a hit to revenue, is probably the cause of the gap.

Well, let's dig into the details Mike My Hunch is it's probably a.

I mentioned in my prepared remarks that the GAAP adjustment for the buy buy baby lease, which had an above market lease.

When that lease was terminated.

Recognize that above market rental revenue, which is a hit to revenue probably the cause of the decrease.

Speaker 4: Great. And just one last one, if you don't mind, what's the expected cadence of the least commencements for the 7.2 million of time, but not occupied.

Great and just one last one if you don't mind, what's the expected cadence of.

The lease Commencements for the $7 2 million of signed but not occupied.

Speaker 5: I think it's about, I think 60% of it are so, it's supposed to come online by March 31st, another 15% by June . So that's, that's majority of it by June . Thank you guys, I appreciate it.

I think it's about 60.

60% of it or so is supposed to come online by March 31, another 15% by June so vast vast majority of it by June.

Thank you guys I appreciate it.

Excellent.

Thank you one moment for our next question.

Okay.

Speaker 1: And our next question comes from Craig Mailman of Citi. Please proceed.

And our next question comes from Craig Mailman of Citi. Please proceed.

Speaker 6: Hey, good morning. Good morning, Craig. How are you doing?

Hey, good morning, good morning, Craig.

How're you doing.

Speaker 4: So just wanted to follow up on your commentary, Stuart, about the acquisition environment and potentially that it could reflect here as some refinancing are coming due next year. I'm just kind of curious on the assets that you're tracking at least.

So just wanted to follow up on your commentary stood about the acquisition environment and potentially that could inflect here as some refinancings coming due next year I'm just kind of curious.

The assets to ear tracking at least.

Speaker 4: Is it just that they can't get financing or the debt service coverage don't make sense? I'm just trying to kind of square the circles.

Is it just that they can't get financing or the debt service coverage is don't make sense I'm just trying to kind of.

Square the circle.

Speaker 6: sellers looking to monetize here into a weak environment versus just kind of eating the higher interest expense given the NOI growth that you're starting to see here in the retail space. So I guess just commentary on that and then how, you know, what pricing you guys would need given what cost of capital is moving for you and just debt rates to make these work.

Sellers looking to monetize here into a weak environment.

Versus just kind of eating the higher interest expense given the NOI growth that youre starting to see here.

In the retail space.

I guess just commentary on that and then how what pricing you guys would need given where cost of capital is moving for you.

Debt rates to make these.

Working at accretive and interesting.

Speaker 5: Sure. Well, it's primarily a combination of the challenges in the financing market and the fact that they have to, in not all cases, but in a lot of cases, have to come out of pocket in terms of providing more equity in order to get new finance.

Sure.

It's primarily a combination of the challenges in the financing market and the fact that they have to and not all cases, but in a lot of cases have to come out of pocket in terms of providing more equity in order to get new financing.

Speaker 3: In terms of our cost of capital, the goal with what we're looking at buying right now as well as what's in the pipeline is to try to find that sweet spot in that six and a half to seven and a half cap range with the ability to drive rent.

In terms of our cost of capital.

The goal with what we're looking at buying right now as well as what's in the pipeline is to try to find that sweet spot in that six five to seven five cap range with the ability to drive rents.

Operator: Welcome to Retail Opportunity Investments Corp. Retail Opportunity Investments 3rd 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.

Speaker 3: through either vacancy or operating margin efficiencies.

Through either vacancy or operating margin efficiencies.

Lauren Silveira: Now I would like to introduce Lauren Silveira, the company's chief accounting officer. Thank you.

Speaker 3: about 150 basis points within an 18-month period. That's the goal. And what we believe in terms of what we're seeing right now that subjects doing due diligence on a couple of these deals, we will be able to close on these transactions accretively as it relates to our cost of capital.

About 150 basis points within an 18 month period.

That's the goal.

Lauren Silveira: Before we begin, please note that certain matters which we will discuss on today's call are forward-looking statements within the meeting as federal securities laws. These forward-looking statements involve risks and other factors which can cause actual results to differ significantly from future results that are expressed or implied by such forward-looking statements. Participants should refer to the company's filings with the SEC, including our most recent annual report on Form 10K to learn more about these risks and other factors.

And what we believe in terms of what we're seeing right now that are.

That subject doing due diligence on these couple of these deals we will be able to close on these transactions accretively as it relates to our cost of capital.

Speaker 6: Okay, so you might have a little bit of delusion or a push relative to where you can finance, he's going in, but ultimately, you're going to be an 8 to a 9 cap. If you could execute on that plan.

Okay. So you might have a little bit of dilution or a push relative to where you can finance is going in but ultimately.

Youre going to be an <unk> cap.

If you could execute on that plan.

Speaker 6: How do you finance that here debt equity, OPU units, asset sales? Kind of what's the optimal mix look like? And in particular for the asset that you're talking to, you know, you're not in contract yet, but some of your close kind of.

Lauren Silveira: In addition, we will be discussing certain non-dap financial results on today's call. Reconciliation of these non-dap financial results to gap results can be found in the company's quarterly supplemental, which is posted on our website.

How how do you finance that your debt equity LP units asset sales kind of what's the optimal mix look like and in particular for the asset that you're.

Talking to you I know youre not in contract yet, but it sounds like Youre close.

Stuart Tanz: Now I'll turn the call over to Stuart Tans, the company's chief executive officer. Stuart? Thank you, Lauren, and good morning, everyone.

Speaker 6: Is that in the realm of returns you just talked about and again, how do you think who actions have?

Is that in the realm of returns that you just talked about and again, how do you finance that.

Speaker 3: Well, the financing is done through a combination of OP units, and we do have an OP unit transaction that I believe will come to fruition now, if not in the first quarter, in the second quarter of next year, certainly at a stock price that will be.

Stuart Tanz: Here with Lauren and me today is Michael Haines, our chief financial officer and Rick Shovel, our chief operating officer. We are pleased to report that our grocery anchor portfolio continues to perform well. Notwithstanding our portfolio being essentially fully leased at over 98%, we continue to make the most of ongoing strong demand for space. In fact, to the first nine months of 2023, we have leased a record amount of space thus far.

While the financing is done through a combination of LP units and we do have an opening in a transaction that I believe will come to fruition now.

Stuart Tanz: Additionally, in step with capitalizing on the demand for space to achieve record leasing volume, we are also capitalizing on the demand to continue driving rents higher, posting our strongest quarter year to date in terms of releasing rent growth on both new leases and renewals. With respect to acquisitions, the West Coast has largely been idle this year with only a limited number of grocery anchor shop and centers trading. Interest rates continuing to rise throughout the year and the related uncertainty and difficulty in terms of obtaining reasonable debt financing has compelled many would-be buyers to stay on the sidelines.

If not in the first quarter in the second quarter of next year.

Certainly at a stock price that will be higher.

Speaker 3: higher than where our stock is currently trading. But it's a combination of that transaction, OP units.

Higher than where our stock is currently trading but it is a combination of that transaction LP units.

Speaker 3: a combination of selling some more assets and the RATM. That's how we're gonna help finance the upcoming opportunities as we look into the end of this year and into next year.

A combination of selling some more assets and our ATM.

That's how we're going to help finance.

The upcoming opportunities as we look into the end of this year and into next year.

Speaker 6: Okay, just lastly, you know, I know you guys haven't given guidance yet, but just the thought here, you know, you guys kind of lowered 23 guidance.

Okay, and just lastly, I know you guys haven't given guidance, yet, but just the thought here you guys kind of lowered.

'twenty three guidance.

Speaker 6: this quarter, partly as a result of, you know, the acquisitions coming out of it. As you guys think about presenting guidance next year, I mean, should we assume kind of no acquisitions baked in that aren't under contract? How are you going to approach that?

This quarter, partly as a result.

The acquisition is coming out of it as you guys think about presenting guidance next year I mean should we assume kind of no acquisitions baked in that are under contract kind of how you're going to approach that.

Speaker 6: just given the volatility in the macro and how that's kind of impacted the transaction.

Just given the volatility in the macro and how thats kind of impacted the transaction market.

Speaker 3: Sure. Well, I mean, obviously, we'll be giving guidance and on our year end call in terms of filling in some of the questions that you're asking right now. But I think you'll see again, as you've heard in our remarks, a bit more activity on external growth, a bit more activity on dispositions.

Sure well I mean, obviously, we will be giving guidance on our year end call in terms of filling in some of the questions that you're asking right now.

Stuart Tanz: Notwithstanding buyers being on the sidelines, certain private owners are starting to become more active and seeking to transact. We view this as an opportunity. In fact, we currently have an acquisition that we are close to having under contract. It's an excellent grocery anchor shopping center that we've had our eye on for some time. The property is located in the Los Angeles market in a densely populated, mature, diverse community. The Center is anchored by a well-established, natural food supermarket that is a long-time, national tenet of ours.

But I think youll see again as you've heard in our remarks, a bit more activity on the external growth a bit more activity on dispositions.

Speaker 5: along with potentially creating a bit more growth or more growth in terms of what we're seeing at the property level because operations continue to be very strong. As you've heard from our remarks today.

Along with that.

Potentially.

Creating a bit more growth or more growth in terms of what we're seeing at the property level because operations continue to be very strong as you've heard in.

From our remarks today.

Stuart Tanz: The seller is a private owner who is seeking an efficient closing, which given our knowledge of the market and the specific center and its tenet roster, we are in a position to facilitate their closing objective. Beyond that fact, we have several other opportunities that we currently have our sights on. Each with seller circumstances that we are well-positioned to capitalize on. Turning to our balance sheet, during the third quarter, we completed a public bond offering, raising 350 million in total. The offering grew considerable interest in the marketplace and was over-subscribe at tracking interest from 60 investors in total, which we think speaks to the long-term strength and stability of our grocery anchored portfolio and business.

Great. Thanks, guys.

Yes.

Thank you one moment for our next question.

Speaker 1: And our next question comes from the Jeffrey Specter of B&A Securities. Please proceed.

And our next question comes from Jeffrey Spector of BNA Securities. Please proceed.

Good morning, Jeff.

Speaker 7: Good morning. This is actually Lizzie on for Jeff. So, I, I was just wondering if you could provide more color on your, your confidence in the narrowed range for same store.

Good morning, this is actually will be on for Josh.

I was just wondering if you could.

Provide more color on your.

Your confidence and the narrowed range for same store NOI.

Speaker 7: Is that more so a function of greater visibility on the timing of store openings and commenced rent?

<unk>.

Is that more so a function.

Now greater visibility on the timing of store openings and commenced rent.

Michael Haines: Now I'll turn the call over to Michael Haines to take you through the details of the offering and our third quarter results. Mike? Thanks, Stuart. Starting with our financial results, for the third quarter, Gaffnut income attributable to common shareholders for the three-month sentence of September 30, 2023, was 8.4 million, equating to $0.7 per litre chair. And in terms of funds from operations for the third quarter, FFO totaled $0.36 million, equating to $0.27 per litre chair.

Speaker 7: Um, what would kind of swing that to the lower end versus the higher end there and, um, just to follow up on that to confirm. Is there any amount of, um.

What would kind of swing that to the low.

And burst at the higher end there and.

Just to follow up on that to confirm is there any amount <expletive>.

Speaker 7: rent fallout or lost occupancy that's assumed from ride aid or troubled retailers for the full year.

Rent fall out or lost occupancy.

From Rite aid or troubled retailers for the fall.

All year.

Speaker 3: You want to answer the question as it relates to fallout, though. Yeah, right now in terms of fallout, you know, only one lease has been rejected by right aid. The other two leases are in their sale process. And, you know, as you know, they are required to pay the rent while they're until they reject the any leases. So, we don't anticipate any financial fallout as it relates to right aid or any other before or after.

Do you want to answer the question as it relates to fallout correct, yes, right now in terms of fallout.

Michael Haines: With respect to our financial results for the first nine months of 2023, Gaffnut income attributable to common shareholders totaled $0.26.59 or $0.21 per litre chair. In terms of FFO, the company had $105.4 million in total FFO, or $0.79 per litre chair for the first nine months of 2020. In terms of net offering income, NLI on the same center cast basis increased by 8.2% during the third quarter and increased by 3.6% for the first nine months of 2023.

Only one lease has been rejected by Rite aid the other two leases are in their sale process.

As you know they are required to pay the rent.

While there until they reject any leases so we don't anticipate any.

Financial fallout as it relates to rite aid or any other major tenant.

Speaker 5: As far as same starting a life for the balance of the year, given that we're already at 3.6 for the nine months, I feel pretty comfortable between three and four are, you know, the other income items kind of contributed. That's in the third quarter. But fourth quarter should be back in line with kind of our normal historical. So, the 3 to 4% range, we feel pretty comfortable.

Yes.

As far as same store NOI for the balance of the year given that we're already at three six for the nine months here I feel pretty comfortable will be between three and four are.

Michael Haines: Our third quarter results were impacted by two items. First, other income increased notably, primarily as a result of recapturing true leases, which we have already lined up new tenants to take the bulk of the recaptured space at notably higher rents. Partially, offstanding the increased another income, Gaffnut amortization declined, primarily as a result of removing the buy-by-baby leases from our portfolio during the third quarter. The decline is a one-time non-cash gap adjustment.

The other income items kind of contributed in the third quarter, but fourth quarter should be back in line with kind of our normal historical so the 3% to 4% range, we feel pretty comfortable with.

Speaker 7: Okay, thank you. And second, I was just curious if you could give the latest temperature check on small shop tenant health, just given the 96% lease rate is so too, seems fairly consistent if you could just give the latest on the health of tenants.

Okay. Thank you.

And second.

Was just curious if you could get.

Michael Haines: And just like to recapture spaces, we already have several new tenants lined up for the buy-by-baby space, both at a higher rent and on the same space-cash basis, one of which is already open and operating. With respect to our balance sheet, as Stuart touched on, during the third quarter, we raised 350 million to republic bond offering of senior and skilled notes. It was the first time raising capital in public bond market in nearly a decade.

The latest Kemper.

Temperature check on small shop tenant health.

Just given.

The 96% lease rate dovetail on <unk> seen fairly consistent.

Michael Haines: As such, we made a conservative effort to fully engage with the market, having discussions with the broad and diverse mix of investors, a number of which were new to the company. We tend to utilize the proceeds to retire the 250 million of senior notes that mature in December. Additionally, we paid down 100 million over 300 million term loan. Looking out over the next five years, our debt maturity schedule was well-lattered, with approximately 300 million maturing each year on average.

If you could just get the latest on the health of tenants there.

Speaker 5: Sure, yeah, I mean, the shop tenants continue to be very active and, you know, our leasing team has been capitalizing on that. They are fielding multiple LOIs for the spaces that we do have available. And, you know, it is coming from a broad range of, you know, local, regional and national tenants.

Sure, Yes, I mean, the shop tenants continue to be very active.

Our leasing team has been capitalizing on that they are fielding multiple LOI for the spaces that we do have available.

And it is coming from a broad range of.

Local regional and national tenants.

Yes.

Okay, great. Thank you.

Michael Haines: Having now reestablished RIOC in the public bond market, our objective is to view more consistent annual issue going forward. Taking into account the bond offering, as of September 30th, over 96% of our debt is effectively fixed rate, over 96% of our debt is unsecured, and over 96% of our portfolio is unencumbered. Additionally, for the third quarter, that debt to annualize diva with 6.4 times, found from 6.6 times from a year ago.

Thank you one moment for our next question.

Speaker 1: And our next question comes from Wesley Gulliday of Baird. Please proceed.

And our next question comes from Wesley Golladay of Baird. Please proceed.

Speaker 3: Hey, Stuart. Follow up to the funding question for acquisitions. I mean, can you give us your appetite for selling stock at today's level? It looks like you're at mid to high sevens, depending on where we open today. And then where can you sell assets today?

Hey, good morning, everyone.

Okay.

Follow up to the funding question for acquisitions, I mean can you give us your appetite for selling stock at today's level. It looks like youre at mid to high <unk>, depending on where we open today and then where can you sell assets today.

Michael Haines: Lastly, with the year coming to a close, we elected and narrowed our FFO guidance range for 2023. On the positive side, we think activity this year has far too is our initial projections of the setback at the beginning of the year. However, the persistent rise and interest rates impacted our initial projected interest expense and our projected investment activity, both in which it then adjusted accordingly interrupted the guidance range for the year.

Speaker 5: Well, in terms of selling shares, we don't have to set price in mind. We consider a number of factors when contemplating raising equity to fund our investment activity, including our current stock price and the acquisition yields.

Well in terms of selling shares. So we don't have a set price in mind when we consider a number of factors when contemplating raising equity to fund our investment activity.

Including our current stock price and the acquisition yields.

Richard Schoebel: Now I'll turn the color over to Schoebel or CUO to discuss property operations rich. Thanks Mike. As Stuart highlighted, we achieved another successful active quarter of leasing. Demand across our portfolio continues to be consistently strong with a broad range of prospective new tenants actively seeking space. Given our properties, location attributes, together with the strong draw of our longtime supermarket anchors and other core service and destination tenants, our centers continue to be sought out by prospective tenants as the shopping center of choice in the respective communities.

In terms of cap rates.

Speaker 3: There's been, I think, as you heard in my remarks, very few transactions for high quality grocery anchored centers on the West Coast. What we have seen more recently has a couple of widely marketed deals in the fives, one in the low fives, one in the mid fives.

There's been I think as you heard in my remarks, very few transactions for high quality grocery anchored centers on the West coast, what we have seen more recently.

<unk> has a couple of widely marketed deals in the five one in the low fives one in the mid fives.

Speaker 3: And again, as we sit here today, a bit more activity over the last several weeks on the West Coast, primarily related to ICSC, which is occurring tomorrow and Friday in San Diego. You usually get a number of assets that come to market when you have this size of a gathering of retail experts.

And again as we sit here today.

A bit more activity over the last several weeks on the west coast primarily related to <unk>.

Richard Schoebel: Capitalizing on the demand, we continue to lease space at a record pace. Year-to-date, we have leased approximately 1.5 million square feet, which is a new record for us in terms of leasing volume for the first nine months. In step with our record leasing activity, we again achieved a portfolio lease rate above 98%, finishing the third quarter at 98.2% leased. Breaking that down between anchor and non-anchor space, our anchor space continues to be 100% leased and our shop space is close behind at 96% leased.

CSC, which is occurring.

Tomorrow and Friday in San Diego.

You usually get a number of assets come to market. When you have this size of a gathering of retail experts.

Speaker 3: But you know, cap rates today are still sitting in that. That's called 6% range to retake, you know, depending on the profile of the asset. Some are below the six, some are at the six are a bit above, but six on average still.

But cap rates today are still sitting in that let's call it 6% range give or take.

Depending on the profile of the asset.

Some are below this summer at a six or a bit above but six on average sale.

Richard Schoebel: During the third quarter, we executed 95 leases totaling 465,000 square feet. The bulk of our leasing activity continues to center around renewing long-standing value tenants with a number of them continuing to come to us early to renew, particularly key anchor tenants. Specifically, during the third quarter, we renewed six anchor tenants, five of which were not scheduled to mature until next year. Additionally, as Stuart indicated, we continued to have good success in terms of releasing rent growth.

Speaker 8: Got it. And then maybe on the right, I think you did a comprehensive review at ICSC with the management team over there. Overall, it sounds like you also feel pretty good about your portfolio. They're contemplating both, you know, asking for rent cuts and then also closing stores, would it be safe to say that you have no appetite for rent cuts with the concern where your market market is on these aspects?

Got it and then maybe on the Rite aid I think you did a comprehensive review at ICSC with the management team over there overall and it sounds like you also feel pretty good about your portfolio. They are contemplating both asking for rent cuts and then also closing stores would it be safe to say that you have no appetite for rent cuts.

Considering where your mark to market is on these assets.

Speaker 3: Absolutely. The demand has been a bit overwhelming to tell you the truth. We've only been in the market with these locations probably a couple of weeks, Rich.

Absolutely.

<unk>.

The demand has been a bit overwhelming to tell you. The truth, we've only been in the market with these locations probably a couple of weeks rich and we've got a number of LOI sort of hit our cable already even on the locations that haven't been rejected so we're pretty confident certainly sitting here today.

Richard Schoebel: Specifically, during the third quarter, we achieved a 36% increase in same space cash space rents on new leases and a 7% increase on renewals, underscoring our strong leasing activity and consistent performance is a proactive approach of seeking out, identifying, and capitalizing on opportunities to recapture space well in advance of lease maturities and releasing the space quickly, enhancing tendencies and driving rents higher in the process. Just a side an example, during the third quarter, of two of our centers, we recaptured prime, free standing pad, each with a drive through them.

Speaker 3: and we've got a number of L-O-I's that have hit our cable already, even on the locations that haven't been rejected. So...

Speaker 3: We're pretty confident, certainly sitting here today, that we'll be able to create some good value over time in terms of what we see on the ground with the right age situation. And the market, depending on the location, it's quite large, depending on, again, the location of the actual space. But.

That will be able to create some good value.

Over time in terms of what we see on the ground with with the Rite aid situation.

And the mark to market, depending on the location.

It's quite it's quite large depending on again.

The location of the actual space, but.

Speaker 3: Very encouraging in terms of what we're seeing right now on the ground. I don't know if you want to add anything to that Rick

Very encouraging in terms of what we're seeing right now on the ground I don't know if you want to add anything to that rich no I mean, I think as you see from.

Richard Schoebel: The pad had been leased to a regional tenant whose business was recently acquired. Anticipating the acquisition could bring about some consolidation, we reached out to the tenant and successfully recafted their spaces and now have several new, national, quick serve restaurant operators lined up with base rents that represent a 44% increase on average over the previous tenants rent. In addition to the strong rent increase, the new restaurant operators will be a much stronger daily draw to our centers, which in turn will enhance future leasing demand at the properties.

Speaker 3: No, I mean, I think is, you know, you see from, you know, other bankruptcy situations, you know, normally we've been coming out ahead on those, whether the lease is accepted and there's no down time or when we get the space back and we're able to bring that space up to market rent. So we would expect, you know, very similar situation here with riding.

Other bankruptcy situations.

<unk>, we've been coming out ahead on those whether the lease is accepted and there is no downtime or when we get the space back and we're able to bring that space up to market rents.

So we would expect very.

A very similar situation here with Rite aid.

Speaker 8: Got it. And then can I just get one more on this other income line item? It looks like it's a combination of, you know, maybe, correct me if I'm wrong, about $2 million of term income, a little $300,000 of interest income, just from the cash position you held. Does that seem correct? And it also looks like you got about maybe one year's worth of rent for free or interim income. Is that a good way to look at it?

Got it and then can I just get one more on this other income line item. It looks like it's a combination of maybe correct me if I'm wrong about $2 million of term income below 300000 of interest income.

Richard Schoebel: Along with our recapturing initiative, we also continue to have good success getting new tenants open it up. I'm celebrating. Year-to-date, new tenants representing approximately $6 million of incremental base rent on a cash basis have opened and commenced paying rent, including $1.9 million opened in the third quarter. In terms of new tenants that haven't yet opened, including those that we just signed during the third quarter, the incremental amounts that at $7.3 million as of September 30th, the bulk of which we expect to commence over the next several quarters.

The cash position you held does that seem correct and it also looks like you got about maybe one year's worth of rent for interim income is that a good way to look at it.

Speaker 5: The other we can be told so the three-nation of other income the third quarter two and a half of it two net Million of us to say with least term ratio and settled income and connection to those leases that we were captured that I mentioned Which we've already then also talked about already land on Lieutenant at higher rents the balance It was just a mix of other missleines and cumuladums and and a touch of interest income on the cash from the bond offering that's the money market Thanks everyone

The other income details of the three 5 million of other income in the third quarter, two and a half of that $7 million versus there was lease termination settlement income in connection with those leases that we recaptured that I mentioned.

Which we've already.

So it's not gonna have already landed new tenants at higher rents the balance of it was just a mix of other miscellaneous income items in and the types of interest income on the cash from the bond offering that sort of in the money market.

Richard Schoebel: With respect to right aid and their recent announcement, at September 30th we had 15 leases with right aid across our portfolio, which altogether accounted for 1.7% of our total base rent. Three of the leases are on right aid's closure list. The three together account for 0.3% of our total base rent. The average base rent for the three is 50 to as much as 80% below current market rent. In terms of remaining 12 leases with right aid, they all continue to perform well and the rents are below market on average as well.

Got it thanks, everyone.

Yes.

Thank you one moment our next question.

Speaker 1: And our next question comes from Dory Kestin of Wells Fargo Securities. Please proceed.

And our next question comes from Dori Kesten of Wells Fargo Securities. Please proceed.

Good morning, sorry.

Speaker 9: Morning, guys. Given the improvement you've noted of late in the transaction environment, is it fair to assume that your prior disposition guidance could be pushed into 24? Oh, my God.

Good morning, guys.

Given the improvement you've noted of latent in the transaction environment is it fair to assume that your prior disposition guidance.

Richard Schoebel: Turning to lease maturity is going forward. As of September 30th, we only had 141,000 square feet maturing during the fourth quarter, including two anchor leases totaling 44,000 square feet, both of which we expect to release before year end. Looking out further to next year, we have seven anchor leases currently scheduled to mature in 2024, of which we currently expect that six of the seven will renew. In terms of non anchor space, we have about a half a million square feet of inline space scheduled to mature next year, which we expect to renew and release consistent with our historical performance.

Could be pushed into 'twenty four.

Speaker 5: We will probably increase that guidance in 24 in terms of dispositions as we ramp up on the acquisition side.

We will probably increase that guidance in 'twenty four.

In terms of dispositions as we ramp up on the acquisition side.

Speaker 5: Although I can't give you any specifics this second, we believe that the market is so tight as it relates to

Although I can't give you any specifics the second.

We believe that there that the market is so tight as it relates to looking at high quality grocery anchored assets that.

Speaker 5: looking at high quality grocery anchor assets that we believe that there will be a nice window that will be opening up that will give us the ability to accelerate.

We believe that there will be a nice window that will be opening up that will give us the ability to accelerate.

Speaker 5: some of the disposition side of that equation, again, as we move into 24. But again, we'll give you firm guidance in our next call.

Some of the disposition side of that equation again, as we move into 'twenty four but again, we'll give you firm guidance in our next call.

Richard Schoebel: Now I'll turn the call back over to Stuart. And thanks, Rich. Based on our leasing performance year to date and our leasing activity here early in the fourth quarter, we were on track to finish the year strong in terms of property operations and post another successful year of maintaining our high portfolio lease rate and achieving record leasing volume while also achieving solid releasing rent growth and enhancing our tenant base. In terms of growing our portfolio, it's safe to say that 2023 has been a frustrating year as the market has been largely idle and slow to adjust to the higher interest rate environment, as I mentioned, along with the market also adjusting to the ongoing challenges that certain commercial property sectors and certain prominent markets across the country are currently faced with.

Speaker 9: Okay, and then on the, with the 23 maturities addressed, what are your initial thoughts on the timeline for addressing your 24th? I know you mentioned kind of annual offerings going forward. And I guess, just part of that, can you give us an update on your views regarding 6 versus floating exposure in this environment?

Okay, and then on the <unk>.

The 'twenty three maturities addressed.

What are your initial thoughts on the timeline for addressing your 24 as I know you mentioned.

Annual offerings going forward.

And I guess, just part of that can you give us an update on your views.

Turning fixed versus floating extended here in this environment.

Speaker 5: So in terms of expiration, I think that too. Oh, sorry. Okay. Okay. Sorry. Yeah, the 24s, I mean, obviously, you know, as we have in our filings, we swapped out a good portion of return one to become one hedge in August of next year, which is about the same timeline that we, you know, addressed the 23 materials this year. It really depends on where the markets can be with interest rates. So

So in terms of explorations.

I think that.

Okay.

Yes.

Yes, the 24 hours I mean, obviously.

As we have in our filings we swapped out.

Some of our term loan to become unhedged.

August of next year, which was about the same timeline.

Richard Schoebel: Fortunately, the long term fundamentals of the grocery anchor sector remains found, especially as it relates to our specific portfolio and our highly protected markets. As we look towards 2024, the current expectation in the market is that acquisition activity could potentially accelerate as property level low interest rate that begins to mature in earnest next year and private owners could have limited viable. So, in terms of growth, we finance and options. In anticipation, we've been strategically tracking a number of potential off market opportunities across our core markets, working to establish and maintain an ongoing, constructive dialogue with private owners.

Address the 'twenty three maturities this year.

Really depends on where the market is going to be with interest rates.

Speaker 8: Depending on whether it's continuing going up or if they start trending back down, if they start trending back down, you do wanna have some level of floating red or just to take advantage of that. So right now we're pretty highly fixed, but at the end of the year, we'll take out the 23s. We'll be a little bit more floating and we're comfortable with that level. So we'll just have to kind of watch and see where the market goes on the industry side of things. Okay, thank you.

Obviously.

Depending on whether it's continued growing up if they start turning back down if you if they start turning back then you do have some level of floating rate exposures to take advantage of that so right now we're pretty highly fixed but.

The end of the year, we will take out the 20 threes will be a little bit more floating and we're comfortable with that level. So we'll just have to kind of watch and see where the market goes in the interest rate side of things.

Okay. Thank you.

Thank you one moment for our next question.

Speaker 1: And our next question comes from Michael Muller of KP Morgan. Please proceed.

Richard Schoebel: Over our teams, nearly 30 year history of specializing in the grocery anchor sector on the west coast, this strategy has proven instrumental time and again in our ability to gain access to acquired exceptional properties that rarely ever hit the market. Well, it's early in terms of the acquisition market becoming fully active and favorable again. We are encouraged from what we are currently seeing and look forward to the opportunity to strategically grow our portfolio in 2024.

And our next question comes from Michael Mueller of Jpmorgan. Please proceed.

Speaker 5: Good morning Mike. Hi. Hey, good morning. Just a couple of quick ones here. They have missed it, but can you talk about just a rough dollar volume of the near term transaction that you think could happen? It sounds like it would happen in 2024, but the one that's lined up. And from a higher level perspective, we're thinking about 2024.

Good morning, Mike.

Hey, good morning, just a couple quick ones here.

I may have missed it but can you talk about just a rough dollar volume of the near term transaction that you think could happen it sounds like it would happen in 2024, but the one that's lined up.

And.

From a higher level perspective, when we're thinking about 2024.

Speaker 5: Should we be thinking of a base case of roughly equal levels of acquisitions and dispositions?

Should we be thinking of a base case of roughly equal levels of acquisitions and dispositions.

Stuart Tanz: Now we will open up the call for your questions.

Operator: Operator? Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster one moment.

You want to I mean.

Speaker 3: Again, we're going to give guidance in our next call, Mike. If you were to look out into 24 at this point and look at the pipeline of what we have in front of us.

Again, we're going to give guidance in our next call Mike.

If you were to look out into 'twenty four at this point and look at the pipeline of what we're what we have in front of us.

Speaker 5: including a potential OP transaction, you probably could be sitting in the 80 to $100 million range right now. That could change, of course. On the disposition side, we're probably ramping that up, probably in the 50 to 75 million initially, but that's where things sit as of this call.

Including a potential O P transaction.

Probably could be sitting in the 80% to $100 million range right now that could change of course.

Juan Sanabria: And our first question comes from Juan Sanabria of BMO Capital Markets. Please proceed. Good morning. Good morning, Stuart.

On the disposition side.

We're probably ramping that up.

Probably in the $50 to $75 million initially.

Stuart Tanz: Just hoping you could talk a little bit more about Right Aid and the potential uses that you're looking at to back fell space. And if you have any color on any incremental space and they look to give back, there's an article today that through the bankruptcy process, they might hand back more than the initial list of rejections and investors that they were initially planning to just curious what extra intel you may have.

But that's where things sit as of this call.

Speaker 3: I don't know, might that just, yeah, because they trim the portfolio around the edges of what we currently on and use those proceeds to buy some creative acquisition.

I don't know Mike.

As I turn the portfolio around the edges of what we currently on and use those proceeds by some accretive acquisitions.

Speaker 5: Got it. Okay. And then is there is there any update on the I guess the land sales tied to the redevelopment just maybe an update there?

Got it Okay. And then is there is there any update on the I guess the land sales tied to the redevelopment just maybe an update there.

Speaker 5: We continue to track the market in terms of the, you know, the entitled land that we've got. We continue to speak with buyers. We continue to speak. We've had a lot of interest in...

We continue to track the market in terms of the.

Stuart Tanz: Yeah, so in terms of uses, you know, right now we are speaking to a broad range of potential new tenants, including fitness, grocery, automotive. There seems to be a lot of demand. I mean, what really has happened here is, you know, opportunities that we were unable to fulfill from tenants have now become possible. So I think as you know, so far they've only rejected one lease of ours, there's significant interest in that space. Yeah, I want the demand has been a bit overwhelming.

The entitled Land that we've got we continue to speak with buyers. We continue to speak we've had a lot of interest in <unk>.

Speaker 3: strong the operators coming to us to join venture, these assets or these opportunities.

Trauma operators coming to us to joint venture these.

These assets are these opportunities.

Once we see the market begin to get better as you might say.

Speaker 3: We will push these assets to the market as well and we still expect them to get if we were to sell two of the three around $25 to $30 million. But the market again has been very difficult and but we continue to march very closely and we're in a very good position, you know, when things we see things begin to change to move these properties very quickly to the market. In?.

We will push these assets to the market as well and we still expecting to get if we were to sell two of the three.

Around $25 million to $30 million.

<unk>.

But the market again has been very difficult and.

Juan Sanabria: Okay, and then a second question. Could you just talk a little bit about how build occupancy was flat, but base rents were down quarter over quarter just seems a little in progress and just hoping for some color there.

But we continue to monitor it very closely and we're in a very good position when things we see things begin to change to move these properties very quickly to the market.

Got it thank you.

Yes.

Thank you one moment for our next question.

Michael Haines: Hey, one, it's Mike. I think the, what I'm digging in the detail, like my conscious, it's probably a, I mentioned my preparatory work is that the gap adjustment for the buy by baby lease which had an above market lease. So when we had to, when that lease was termed, we had to recognize that above market rental revenue, which is a hit to revenue, probably the cause of the decrease.

Speaker 1: And our next question comes from Linda Sye of Jeffries. Please proceed.

And our next question comes from Linda Tsai of Jefferies. Please proceed.

Turning Linda Linda.

Speaker 10: Blow. Just to clarify, given the discount where your stock is trading and, you know, what you said about acquisition and disposition volumes for next year, you'll be more focused on disposition near term rather than acquisitions.

Hello, Jim.

To clarify given the discount where your stock is trading and what you said about acquisition and disposition volumes for next year, you'll be more focused on dispositions near term rather than acquisitions.

Juan Sanabria: Great, and just one last one, if you don't mind, what's the expected cadence of the lease commencement for the 7.2 million of time, but not occupants. I think it's about, I think 60% of it or so, it's supposed to come online by March 31st, another 15% by June. So that's that's majority of it by June.

Combination of both.

Speaker 10: And then it sounds like Wright Aid has announced 150 rejections, but the Wright Aid article won, referred to says more coming. I just want to confirm that the three leases are on the list of identified, the 500 identified, or would you expect an announcement of more closures from Wright Aid from which the remaining 12 stores would also be considered?

Okay, and then it sounds like Rite aid has announced a 150 rejections, but the rite aid article one referred to more coming I just wanted to confirm that the three leases.

Alright dentists are on the list of identified.

Juan Sanabria: Thank you guys, I appreciate it. Thank you.

Operator: One moment for next question.

The 500 identified or would you expect an announcement of more closures from rite aid from which the remaining 12 stores would also be considered.

Speaker 5: Well, it's tough to look ahead in terms of that in process. I think right now it has had some time now to really evaluate their store count. I think that's one of the reasons why I took a bit longer to see the bankruptcy. We have one store I think that Rich mentioned that is closing the other two are up for sale. They're still operating.

Well, it's tough to look ahead in terms of that process I think rite aid has had some time now to really evaluate.

Craig Mailman: Then our next question comes from Craig Mailman of City, please proceed.

Their store count.

Stuart Tanz: Good morning. Good morning, Craig. How are you doing? So, just wanted to follow up on your commentary, Stuart, about the acquisition environment and potentially that it could reflect here as some refinancing or come and do next year. I'm just kind of curious on the assets that you're tracking at least. Is it just that they can't get financing or the debt service coverages don't make sense? I'm just trying to kind of score the circles, you know, sellers looking to monetize here into a week environment versus just kind of eating the higher interest expense, given the analog growth that you're starting to see here in the retail space.

I think thats one of the reasons why it took a bit longer to see the bankruptcy.

We have one store I think that rich mentioned that it's closing the other two are up for sale there is still operating.

Stuart Tanz: So, I guess just commentary on that and how, you know, what price of you guys would be given will cost the capital is moving for you and just debt rates to make these work in that creative and interesting. Sure. Well, it's primarily a combination of the challenges in the financing market and the fact that they have to in not all cases, but in a lot of cases have to come out of pocket in terms of providing more equity in order to get new financing.

Speaker 3: top to tell you anything beyond that. I mean, Rich, do you? No, I mean, I think they've also, you know, leading up to this have exited a certain number of stores as well. Some of them we've already redid significant increases in rent and so it's really hard to predict, you know, which ones may in the future come available, but as we touched on the demand has, you know, given the fact that there's really no supply available in our market.

Hospitality you anything beyond that I mean, rich do you know and I mean, I think they've also leave.

Leading up to this have exited a certain number of stores as well as just some of them. We've already relented significant increases in rent and so it's really hard to predict.

Which ones may in the future come available, but as we touched on the demand has.

Given the fact that Theres really no supply available in our markets.

Speaker 3: The demand has been exceptional.

Speaker 5: And I mean, a number of these locations have drives through and they're located in what I would call the premier part of our shopping centers, which would be at the intersection of where the two, you know, roadways or curials meet. So that's why we feel pretty confident that I don't, I'm not saying that we won't see more rejections, but...

Demand has been exceptional.

And I mean, a number of these locations have drive throughs and they are located in what I would call. The premier part of our shopping centers, which would be at the intersection of where the two.

Roadways are carryover meat. So that's why we feel pretty confident.

I'm, not saying that we won't see more rejections, but.

Speaker 5: I wouldn't be surprised if, you know, as we move, as right aid moves to get out of bankruptcy, that, you know, what we have fitting there remains pretty well in touch.

I wouldn't be surprised if <unk>.

As we move as Rite aid moves to get out of bankruptcy.

That what we have sitting there remains pretty well intact.

Speaker 10: Thanks. And then just one last one. How do you, for next year, how do you think about the puts and takes of interest expense against the pricing power you're seeing with, you know, new spreads and releasing spreads?

Thanks, and then just one last one for next year, how do you think about the puts and takes of interest expense against the pricing power you are seeing with new spreads and releasing spreads.

Stuart Tanz: In terms of our cost to capital, the goal with what we're looking at buying right now as well as what's in the pipeline is to try to find that sweet spot in that six and a half to seven and a half cap range with the ability to drive rents through either vacancy or operating margin efficiencies about 150 basis points within an 18 month period. That's the goal and what we believe in terms of what we're seeing right now that on that subject to doing due diligence on these a couple of these deals, we will be able to close on these transactions credibly as it relates to our cost of capital.

Speaker 3: Well, we'll put out the guidance for next year. The maternity is for $24 to come up until December . So unless we pull the trigger early, we can pretty much model where it's going to be for all of the year. You know, fourth quarter we're going to have the interest expense from both the 23s, which we've briefly financed already. We also have the benefit of the interest income, all the cash is sitting here. So 24.

So we'll put out guidance for next year, the maturities for 2000 and <unk> come up until December so unless we pull the trigger early we can pretty much model, where it's going to be for all of the year.

Fourth quarter, we're going to have the interest expense from both the 20 <unk>.

We refinanced already we also have the benefit of the interest income while the cash is sitting there so 24.

Speaker 3: We'll be able to give pretty solid guidance on that in February . We'll give guidance for the year. Thanks.

We will be able to give a pretty solid guidance on that in February when we give guidance for the year.

Thanks, Greg.

Thank you one moment for our next question.

Okay.

Speaker 1: And our next question comes from Paulina Rojas Schmidt of Green Street. Please proceed.

And our next question comes from Paulina Rojas Schmidt of Green Street. Please proceed.

Stuart Tanz: You're going to be an eight to a nine cap. If you could execute on that plan, you know, how how do you finance that here debt equity, op units, asset sales, kind of what's the optimal mix look like. And, you know, in particular for the asset that you're talking to you, I know you're not in contract yet, but sounds like you're close. Kind of is that in the realm of returns you just talked about again, how do you finance that?

Speaker 11: Early on the West Coast for you, how you doing? Here I am awake and ready with my question. I hope that's good enough. My question is, when you take a step back and look at the potential consequences of the current high interest rate environment on repellared balance.

So early on the West Coast for you how are you doing.

Okay.

Sure I am awake.

With my question.

Good enough.

Yeah.

My question is what does it take.

But when you look at the potential consequences of it.

<unk>.

High interest rate environment on retailer balance sheet.

Speaker 11: How do you describe your level of concern? The side of what we're seeing today, it's more and I'm thinking about the future. It definitely seems like your particularly worried, especially giving your attitude towards acquisition.

How would you describe your level of time inside of what we're seeing today more and.

Stuart Tanz: Well, the finance has done through a combination of op units and we do have an op unit transaction that I believe will come to fruition now. If not in the first core in the second quarter of next year, certainly at a stock price that will be higher than where our stock is currently trading. But it's a combination of what that transaction op units, a combination of selling some more assets and the RATM.

And about the future.

That does seem like Youre, particularly worried.

The question is given your attitude cohort acquisition.

Speaker 5: Well, look, the situation in terms of, you know, the interest rate environment is something that none of us can control.

We'll look at the situation in terms of.

The interest rate environment is something that none of us can control. So as we look into 'twenty four.

Speaker 5: So as we look into 24, I think most economists have been wrong in 23. I think interest rates are gonna stay elevated for longer than what most are anticipating. However, as we look into 24, we had a very successful bond offering. So we have the ability and certainly to go back and deal with the finance.

Stuart Tanz: That's how we're going to help finance the upcoming opportunities as we look into the end of this year and into next year. Okay, just lastly, you know, I know you guys haven't given guidance yet, but just the thought here, you know, you guys kind of lowered 23 guidance this quarter, partly as a result of, you know, the acquisitions coming out of it. As you guys think about, presenting guidance next year, I mean, should we assume kind of no acquisitions baked in the other under contract, kind of how you approach that.

Most economists have been wrong in 'twenty three.

I think it's just rates are going to stay elevated for longer than what most are anticipating however.

As we look into 'twenty four.

No.

We had a very successful bond offerings. So we have the ability and certainly to go back and deal with the financing.

Speaker 5: And more importantly, we do have some time now and some flexibility out there to really think about whether we want to accelerate some dispositions and use some of that to pay more debt down. And on top of that, potentially look at what might be out there to help alleviate

And more importantly, we do have some time now and some flexibility out there to really think about.

We want to accelerate some dispositions and use some of that to pay more debt down.

Stuart Tanz: Just given the volatility in the max. And how that's coming back to the transaction market? Sure, well, I mean, obviously, we'll be giving guidance on our year end call in terms of filling in some of the questions that you're asking right now, but I think you'll see, again, as you put in our remarks, a bit more activity on the external growth, a bit more activity on dispositions, along with potentially creating a bit more growth. Or more growth in terms of what we're seeing at the property level, because operations continue to be very strong, as you've heard in, you know, from our remarks today.

Craig Mailman: Great.

And on top of that potentially look at.

Operator: Express. Yep. Thank you one moment for next question.

What might be out of what might be out there to help alleviate that.

Speaker 5: the concern of high interest rates without giving you specific so

The concern of high interest rates.

That was giving you specifics so.

Speaker 5: Um, you know, everyone in 24 is really dealing with the same issue in terms of all our balance sheets.

Everyone in 'twenty four is really dealing with the same issue in terms of all our balance sheets.

Speaker 5: And we feel very, very comfortable given the strength of where our balance sheets are today, that will be able to get through this and hopefully lock in, you know, debt at a attractive rate.

And we feel very good very comfortable given the strength of.

Where our balance sheet sits today.

We'll be able to get through this.

And hopefully locked in.

Debt at a at a attractive rate.

Speaker 5: And Mike, I don't know if you want to add to that. I agree with what you're saying. I think there's no shortage of opinions out there in the marketplace of what's happening in the overall economy and where rates make up. So we just have to be patient waiting to see how it kind of evolves and just work with the market as we see it. The good news is, with the 23s already refinanced, the 24s, we've got full capacity in the credit line. So we've got some flexibility there and on the timing of that as well.

And Mike I don't know if you want to add to that I agree with what Youre, saying I think there is no shortage of opinions out there in the marketplace and what's happening in the overall economy and where rates might go. So we just have to be patient wait and see how that kind of evolves and just work with the market as we see it the good news is with the 'twenty threes already.

Jeff Respector: And our next question comes from Jeff Respector of B&A Securities, please proceed. Good morning, Jeff. Good morning.

We refinanced the 24 hours, we've got full capacity on the credit line. So we've got some flexibility there on the timing of that as well.

Michael Haines: This is actually with you on for just so I was just wondering if you could provide more color on your confidence in the, narrow grain for same store, NOI, is that more so a function of, you know, greater visibility on the timing of store openings and commence rent, what would kind of swing that to the lower end versus the higher end there, and just to follow up on that to confirm, is there any amount of rent fall out or lost occupancy. That's assumed from right aid or or troubled retailers for the full year.

Thank you.

Speaker 11: And then my other question is, when I look at your implied cap rate, it is seeming higher than some of your posterian court peers, which is unusual from at least a historical perspective.

And then my other question is.

When I look at your implied cap rate.

It is something higher than among your grocery anchored tiered switching unusual from a historical perspective.

Speaker 11: What do you think the market is getting wrong or is the market...

What do you think the market is getting wrong or.

Is the market putting in.

Speaker 11: too much weight into right aid. What is your interpretation of the current event?

Too much weight into rite aid.

Is your interpretation.

The current events.

Speaker 5: Yeah, I mean, look, I think the challenges for our OIC in 23 have been the debt maturity, which has now been resolved. And the noise is around Friday. And, you know, and right now it just looks like it's noise from our perspective. We feel very comfortable sitting here today that we will come out of this, you know, with some potentially some very strong rent growth. Remember, we have not had an anchor space available in this portfolio in five years.

Yes, I mean look I think the challenges for ROIC seeing 23 has been the debt maturity, which has now been resolved.

Michael Haines: You want to answer the question as it relates to fall out though. Yeah, right now in terms of fall out, you know, only one lease has been rejected by right aid. The other two leases are in their sale process and, you know, as you know, they are required to pay the rent while they're until they reject the any leases. So we don't anticipate any financial fall out as it relates to right aid or any other major tenant.

And the noise around Rite aid.

And right.

Right now it just looks like it's noise from our perspective.

We feel very comfortable sitting here today.

That we will come out of this.

With some potentially some very strong rent growth remember, we have not had an anchor space available in this portfolio in five years.

Speaker 5: And more importantly, when we look at the market today on the West Coast, there's nothing available. There's nothing to lease from an anchor perspective. So that demand has, again, has been a bit overwhelming since we've finally had enough. An anchor space come available. We've got a series of otherwise from incredible grocery anchor tenants, as well as others.

And more importantly, when we look at the market today on the West Coast. There is nothing available theres nothing to lease from an anchor perspective.

Michael Haines: And yeah, as far as same store and alive for, you know, for the bounce of the year, given that we're already at 3.6 for the, yeah, for the nine months, you know, pretty comfortable to be between three and four are, you know, the other income items kind of contribute to that in the third quarter, but fourth quarter should be back in line with kind of our normal historical. So the three to 4% range of fuel for the capital less. Okay, thank you.

So the demand is again has been a bit overwhelming since we finally had an extra space to come available.

We've got a series of LOI.

Incredible grocery anchored tenants as well as others.

Speaker 5: So, you know, again, we feel pretty comfortable today with where we sit and more importantly, you know, at some point the noise is going to go away. You know, we think we'll be able to show the market pretty quickly that there's a lot of marked-to-market value that's going to be created through this process.

So again, we feel pretty comfortable today with.

With where we set and more importantly at some point that noise is going to go away.

Richard Schoebel: And, and second, I was just curious if you could give, you know, the latest temperature check on on small shop tenant health. Just given like the 96% lease rate is so too seems fairly consistent. If you could just give the latest on the health of ten, there. Sure, yeah, I mean, the shot's going to continue to be very active and, you know, our leasing team has been capitalizing on that they are fielding multiple LLIs for the spaces that we do have available. And, you know, it is coming from a broad range of, you know, local regional and national tenants. Okay, great. Thank you.

We think we'll be able to show the market pretty quickly.

Operator: One moment for our next question.

There's a lot of.

Mark to market value, that's going to be created through this process.

Speaker 11: I think you mentioned you have seen the man from Grocers right for the state. Can you provide some order on what type of Grocers have approached you?

I think you mentioned you have seen demand from grocers.

Can you provide some color on what type of closer.

Have approached you.

Speaker 3: We've had the regional grocers, local grocers, and national grocers at the table all at one time, a protest, kind of, kind of like getting specific on names. It's a variety of all those types of, very strong kind of.

We've had the regional grocers local grocers and national Grocers.

Cable all at one time.

Approach us.

So without getting specific on names Thats, a variety of all of those types of very strong tenants.

Speaker 7: Okay, and the last one, are you thinking about single 10 users for the space or do you think it's likely that if you were to receive more space back, you would have to stop by the space into smaller and

Okay and the last one are you thinking about single tenant users or the space or do you think it's likely that if you.

Were to receive more space back you would have.

Subdivided.

Good morning.

Wesley Golladay: And our next question comes from Wesley Golladay of Baird. Please proceed.

Doors.

Speaker 3: Most of our righted spaces have already been right sized where we've taken back space and downsized them already. So our goal would be to re-tenit them with a single tenant, but we also would look at splitting them, which we've done in other circumstances. It really all depends on the user, the economics, and all the factors that we would consider when we lease a space.

Most of our ready spaces have already been <unk>.

Stuart Tanz: Good morning, everyone. Hey, Stuart, could you follow up to the funding question for acquisitions? I mean, can you give us your appetite for selling stock at today's levels, if you're mid to high sevens, depending on where we open today. And then, where can you sell assets today? Well, in terms of selling shares, we don't have to set price in mind. You know, we consider a number of factors when contemplating, raising equity to fund our investment activity.

Right sized where we've taken back space.

<unk> size them already so our goal would be to re tenant them with a single tenant, but we also would look at splitting them, which we've done.

In other circumstances, it really all depends on the users.

The economics.

And all of the factors that we would consider when we lease the space.

Thank you.

Thank you.

Stuart Tanz: Including our current stock rights in the acquisition yields. In terms of cap rates, there's been, I think he's heard in my remarks, very few transactions for high quality grocery anchor centers on the west coast. What we have seen more recently has a couple of widely marketed deals in the five, one in the low fives, one in the mid fives. And again, as we sit here today, a bit more activity over the last several weeks on the west coast, primarily related to ICSC, which is occurring tomorrow and Friday in San Diego.

Thank you one moment for our next question.

Okay.

Speaker 1: And our next question comes from Todd Thomas of Keybank Capital Markets. Please proceed.

And our next question comes from Todd Thomas of Keybanc Capital markets. Please proceed.

Hey, Todd.

Hi, good morning.

A couple of follow ups first I was wondering if you could tell us.

With regard to Rite aid how much term is left on average across the 2014 leases.

Leases in the portfolio, excluding the one that's been rejected and can you talk about your interest or appetite in buying leases at auction, whether whether that's an option that youre contemplating.

Speaker 3: The answer is yes in terms of buying the leases, especially if we see the pipeline of LOIs and grow as we're seen right now. The answer is yes, we are currently looking at buying these leases as we're having this discussion, rich in terms of term. Yeah, I don't have the average term here Todd, but you know we've been renewing right aids throughout the year and you know they range the next expiration is not until 2026.

The answer is yes in terms of behind the leases, especially if we see the pipeline of LOI and grow as we're seeing right now.

Stuart Tanz: You usually get a number of assets to come to market when you have this size of a gathering of retail experts. But, you know, cap rates today are still sitting in that. That's called six percent range to overtake, you know, depending on the profile of the asset. Some are below the six, some are at the six are a bit above, but six on average still.

Yes, we are currently looking at buying these leases as we're having this discussion rich in terms of term, yes, I don't have the average term here Todd but.

We've been renewing rite aid's.

Throughout the year end.

They range. The next exploration is not until 2026.

Speaker 3: um and then we go all the way out to 2029 and as far out as uh uh 20 um uh you know 30 so there's a bit of term on uh on many of these leases and then of course

Stuart Tanz: Got it. And then maybe on the right, I think you did a comprehensive review at ICSC with the management team over there. Overall, it sounds like you also feel pretty good about your portfolio. They are contemplating both, you know, asking for rent cuts and then also closing stores. Would it be safe to say that you have no appetite for rent cuts with the concern where your market market is on these assets?

And then we go all the way out to 2029 and as far out as.

<unk>.

30, so there's a bit of term on them.

Many of these leases and then of course options.

Speaker 12: Okay. And then just circling back to the dispositions. So I'm curious if you-

Okay.

And then just circling back to the dispositions.

So I'm curious if you can just talk a little bit more about.

Richard Schoebel: Absolutely. The demand has been a bit overwhelming to tell you the truth. We've only been in the market with these locations, probably a couple of weeks rich. And we've got a number of yellow eyes that have hit our table already, even on the locations that haven't been rejected. So, we're pretty confident, certainly sitting here today, that we'll be able to create some good value over time in terms of what we see on the ground with the right age situation.

Speaker 12: Talk a little bit more about the strategic rationale, I guess, behind those planned asset sales, what you're hoping to accomplish with the dispositions. And whether the cap rate spread on dispositions relative to some of the acquisition yield that you're starting to see or underwrite today would be a creative, or is it really more about the rate of NOI growth between the buys and sell?

The strategic rationale I guess behind those planned asset sales.

What youre, hoping to accomplish with the dispositions and and whether the cap rate spread on dispositions relative to some of the acquisition yields that you are.

Starting to see our underwrite today would be accretive.

Or is it really more about the rate of NOI growth between the buys and sells.

Speaker 5: Combination of the NOI growth, a combination of the arbitrage in terms of cap rates. We believe that on some of these aspects, we may get into the five.

It's a combination of the NOI growth.

Richard Schoebel: And the market, depending on the location, is quite large, depending on, again, the location of the actual space. But very encouraging in terms of what we're seeing right now on the ground, I don't know if you want to add anything to that rich. No, I mean, I think as you know, you see from, you know, other bankruptcy situations, you know, normally we've been coming out ahead on those. Whether the lease is accepted and there's no downtime, or when we get the space back and we're able to bring that space up to market rent. So, we would expect, you know, very similar situation here with Wright.

Combination of the arbitrage in terms of cap rates, we believe that on some of these assets we may get into the fives.

Speaker 5: and then obviously buying with, you know, on the other side of that equation in the mid-sixes or low seven.

And then obviously buying with on the other side of that equation in the mid sixes or low sevens.

Speaker 5: So it's a combination really of those two things.

So it's a combination really of those two things.

Speaker 5: And, you know, we have seen on the West Coast a couple of transactions with 1031 buyers where they have been paying up.

And we have seen on the West coast, a couple of transactions with 10, 31 buyers, where they have been paying up to buy these type of assets.

Speaker 5: by these type of assets quite aggressively. So hopefully with a bit of luck and a bit of focus in terms of timing here and more importantly, the fact that there's such little product on the market, I think will help drive this program of potentially accelerating selling some of these assets.

Quite aggressively so.

Michael Haines: Can I just get one more on this other income line item? It looks like a combination of maybe, correct me if I'm wrong, about two million of term income, we'll 300,000 of interest income, just from the cash position you held. Does that seem correct? And it also looks like you got about maybe one year's worth of rent for free or in term income. Is that a good way to look at it?

Hopefully with a bit of luck and a bit of focus in terms of timing here.

More importantly.

The fact that theres such little product on the market I think will help drive this program of potentially accelerating.

Selling some of these assets.

Speaker 12: Okay, and then, you know, I think I heard you mention joint ventures earlier, but, you know, I think that was...

Michael Haines: The other we can be told, so the three and a half million of other income in the third quarter, two and a half million of us. I wish to say with least term rates and settlement income, the connection to those leases that we were captured that I mentioned, which we've already also talked about have already landed on the tenants at higher rents. The balance of just a mix of other miscellaneous income items and a touch of interest income on the cash from the bond offering that's in the money market.

Okay and then.

I think I heard you mention joint ventures earlier, but I think that was with specifically.

Michael Haines: Got it.

Speaker 12: specifically around some of the land sales that you were maybe discussing. But in thinking about acquisitions, you own everything really on balance sheet today, no joint venture is nothing complicated. Is everything that you're considering moving forward in terms of acquisitions also on balance sheet or would you consider bringing in a partner or looking to do something a little bit more creative perhaps to make the deals pencil and be an opinion.

Around some of the land sales that you were maybe discussing.

And thinking about acquisitions, you own everything really on balance sheet today, no joint ventures nothing complicated.

Operator: Thanks everyone. Thank you. One moment for next question.

Everything that you are considering.

Sure.

Moving forward in terms of acquisitions also on balance sheet or would you consider bringing in a partner or looking to do something a little bit more creative perhaps to make the deals pencil and be in a position to take greater advantage of opportunities that might surface.

Dori Kesten: And our next question comes from Dory Kestin of Wells Fargo Securities. Please proceed.

Speaker 5: The focus of, as you know, Todd, of this management team for the last 30 years is to stay on balance sheet. We have been approached quite aggressively over the last six months by some of the biggest players in the business in terms of going off balance sheet.

The focus of as you know Todd of this management team for the last 30 years is to stay on balance sheet.

Dori Kesten: Good morning, Dory. Good morning, guys. Given the improvement you've noted of late in the transaction environment, is it fair to assume that your prior disposition guidance could be pushed into 24? We will probably increase that guidance in 24 in terms of dispositions as we ramp up on the acquisition side.

We have been approached quite aggressively over the last six months, but some of the biggest players in the business in terms of going off balance sheet.

Speaker 5: Nothing is in front of us today that would get us excited.

Nothing is in front of us today that would get us excited.

Speaker 5: However, I'll never say never if someone does walk in and gives us something that could be highly accreted to shareholders with the plan of what I would call getting these assets back on the balance sheet over time. But again, the focus continues to be on balance sheet in terms of growth as we look into the balance of this year and next year.

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I'll never say never if someone does lock in and gives us something that.

Could be highly accretive to shareholders with the plan of what I would call getting these assets back on the balance sheet over time.

Stuart Tanz: Although it's I can't give you any specifics. The second, we believe that there that the market is so tight as it relates to looking at high quality grocery anchor assets that we believe that there will be. There will be a nice window that will be opening up that will give us the ability to accelerate some of the disposition side of that equation again as we move into 24.

But again the focus continues to be on balance sheet in terms of growth as we look into the balance of this year and next year.

Speaker 12: That's helpful. And one last one maybe for Mike, if I could, on the model here, is the 4Q run rate, you made some adjustments around straight line run, but as we think about the implied fourth quarter for both straight line and FAS 141, just with the updated guidance, is that the right level to consider heading into 2024, as we think about, I guess, considerations around non-cash rent for...

Okay. That's helpful and one last one maybe for Mike if I could on the model here.

Is the <unk> run rate you made some adjustments around straight line rent, but as we think about the.

Michael Haines: But again, we'll give you firm guidance in our next call. Okay. And then on the with the 23 maturities addressed, what are your initial thoughts on the timeline for addressing your 24 as I know you mentioned, kind of annual offerings going forward. And I guess just part of that can you give us an update on your views regarding fixed versus floating exposure in this environment. So in terms of explorations, I think that too.

The implied.

Fourth quarter for both straight line and SaaS $1 41.

Michael Haines: Yeah, the 24s, I mean, obviously, you know, as we have in our filings, we swapped out a good portion of return one to become one has been August of next year, which is about the same timeline that we, you know, addressed the 23 maturities this year. It really depends on where the market is going to be with interest rates. Obviously, depending on whether it's continuing up if they start turning back down, if they start turning back down, you do want to have some level of floating red exposure to take advantage of that.

Just just with the updated guidance is that the right level to consider heading into 2024.

As we think about I guess considerations around noncash rent for the new year.

Michael Haines: So right now we're pretty highly fixed, but at the end of the year, we'll take out the 23s will be a little bit more floating and we're comfortable with that level. So we'll just have to kind of watch and see where the market goes on the interest rate side of things.

Speaker 5: I would say yes, the, I would say it a little bit of a pull down from the by-by baby least that we had permitted and cutery so that was a bit of a drag, but straight, you know, because we haven't really acquired anything recently, our, our phasal and foretold one rent amazement is pretty static, so when the guidance comes out in February , it should be pretty solid for the whole year, barring any unknown terminations, where acquisitions that we do end up buying something. I'm going to go on the straight line, rent side, you know.

I would say yes.

We say it a little bit of a push.

Then from the buy buy baby lease that we had terminated in Q3, so that was a bit of a drag but Australia.

Operator: Thank you. Thank you, one moment for our next question.

We haven't really acquired anything recently, our Fas one further one rent amortization is pretty static so when the guidance comes out in February it should be pretty solid for the whole year barring any unknown terminations.

Where acquisitions that Purdue and the buying something on this.

Trailing rent side.

Speaker 3: I would say the run rate was, until the nine months number would be a good, if you annualize that, that would be a good run rate given our leasing activities.

I would say that the run rate with the nine months number would be if you annualized that would be a good run rate given our leasing activity.

Speaker 12: Okay, got it. So the fourth quarter, the implied fourth quarter straight line ran should should be a pretty clean run race.

Okay got it so the fourth quarter the implied fourth quarter straight line ran should should be a pretty clean run rate.

To think about moving forward.

Speaker 5: It should be. It'll all depend on the leasing activity due in Q4. Yeah, right. Okay. Got it.

It should be at all it will all depend on the leasing activity during Q4.

Yes right.

Got it alright, thank you.

Okay. Thanks Pat.

Speaker 1: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Stuart Tants for closing remarks.

Thank you.

Im showing no further questions at this time I would now like to turn it back to Stuart <unk> for closing remarks.

Speaker 5: In closing, thanks to all of you for joining us today. As always, we appreciate your interest in our OIC.

In closing thanks to all of you for joining us today as always we appreciate your interest in ROIC.

Michael Mueller: And our next question comes from Michael Mueller of KP Morgan, please proceed. Good morning, Michael. Hey, good morning. Just a couple of questions here. I may have missed it, but can you talk about just a rough dollar volume of the near-term transaction that you think could happen? It sounds like it would happen in 2024, but the one that's lined up. And from a higher level perspective, and we're thinking about 2024, should we be thinking of a base case of roughly equal levels of acquisitions and dispositions?

Speaker 5: If you have any additional questions, please contact Lauren Mike Ritchham or me directly. Also, you can find additional information in the company's quarterly supplemental package, which is posted on our website as well as our 10Q.

If you have any additional questions. Please contact Laura and Mike Rich or me directly also you can find additional information in the company's quarterly supplemental package, which is posted on our website as well as our 10-Q.

Speaker 5: Lastly, for any of you that are attending the ICFC conference in San Diego, that starts today. We hope to see you there. And for those of you that are planning to attend a Nathaniel conference in a few weeks from now in Los Angeles, we look forward to seeing you there too. Thanks again and have a good day.

Lastly for any of you that are attending the ICSC conference in San Diego that starts today, we hope to see you there and for those of you that are planning to attend NAREIT <unk> annual conference in a few weeks from now in Los Angeles, We look forward to seeing you there too.

Thanks, again and have a great day everyone.

Speaker 1: This concludes today's conference call. Thank you for participating and you may now disconnect.

Yes.

Stuart Tanz: You want to, again, we're going to give guidance in our next call, Mike. If you were to look out into 24 at this point and look at the pipeline of what we have in front of us, including a potential OP transaction, you probably could be sitting in the $80 to $100 million range right now. That could change, of course. On the disposition side, we're probably ramping that up. Probably in this 50 to 75 million initially, but that's where things sit as of this call.

This concludes today's conference call. Thank you for participating and you may now disconnect.

Okay.

Speaker 13: The The

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Michael Haines: I don't know, Mike. Yeah, it's a trimlet portfolio around the edges of what we currently own and use those proceeds to buy some creative acquisitions. Got it. Okay.

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Stuart Tanz: Is there any update on the, I guess, the land sales tied to the redevelopment? Just maybe an update there. We continue to track the market in terms of the entitled land that we've got. We continue to speak with buyers. We continue to speak. We've had a lot of interest in strong operators coming to us to join venture. These assets or these opportunities. Once we see the market begin to get better, as you might say, we will push these assets to the market as well.

Stuart Tanz: And we still expect things to get if we were to sell two of the three around $25 to $30 million. But the market, again, has been very difficult. But we continue to mark through it very closely. And we're in a very good position when things, we see things begin to change to move these properties very quickly to the market. Got it.

Operator: Thank you. Yep. Thank you, one moment for our next question.

Linda Tsai: And our next question comes from Linda's side of Jeff Rees. Please proceed.

Stuart Tanz: Linda. Hey, Linda. Hello. Just to clarify, given the discount where your stock is trading and what you said about acquisition and disposition volumes for next year, you'll be more focused on disposition near-term rather than acquisition. Combination of both. Okay, and then it sounds like Wright Aid has announced 150 rejections, but the Wright Aid article, Juan referred to says more coming. I just want to confirm that the three leases are on the list of identified, the 500 identified, or would you expect an announcement of more closures from Wright Aid from which the remaining 12 stores would also be considered?

Stuart Tanz: Well, it's tough to look ahead in terms of that process. I think Wright Aid has had some time now to really evaluate their store count. I think that's one of the reasons why I took a bit longer to see the bankruptcy. We have one store I think that Rich mentioned that is closing the other two are up for sale. They're still operating. Talk to tell you anything beyond that. I mean, Rich, do you know, I mean, I think, you know, they've also, you know, leading up to this have exited a certain number of stores as well.

Stuart Tanz: Some of them, we've already related significant increases in rent. And so it's really hard to predict, you know, which ones may in the future come available, but as we touched on the demand has, you know, given the fact that there's really no supply available. In our markets, the demand has been exceptional. And I mean, a number of these locations have drives through and they're located in what I would call the the premier part of our shopping centers, which would be at the intersection of where the two, you know, roadways or curials meet.

Stuart Tanz: So that's why we feel pretty confident that I don't, I'm not saying that we want to see more rejections, but I wouldn't be surprised if, you know, as we move, as right a move to get out of bankruptcy. That, you know, what we have sitting there remains pretty well and tapped.

Stuart Tanz: Thanks, and then just one last one. How do you, for next year, how do you think about the puts and takes of interest expense against the pricing power you're seeing with, you know, new spreads and releasing spreads. Well, we'll put out the guidance for next year than the turties for 24 to come up until December. So unless we pull the trigger early, we can pretty much model where it's going to be for all of the year.

Stuart Tanz: You know, fourth quarter we're going to have the interest expense from both the 23s and which we've already announced already. We also have the benefit of the interest income, all the cash is sitting here. So 24 will be able to give pretty solid guidance on that in February and we give guidance for the year. Thanks.

Operator: Thank you one moment for our next question.

Paulina Rojas: And our next question comes from Paulina Rojasmith of Green Street, please proceed. Early on the west coast for you, how are you doing? Here I am awake and ready with my question. I hope that's good enough. My question is when you take a step back and look at the potential consequences of the current high interest rate environment on retailer balance. She. How do you describe your level of concern? Decide of what you're seeing today.

Paulina Rojas: It's more and I'm thinking about the future. It definitely seems like your particularly worried, especially given your attitude towards acquisition. Well, look, the situation in terms of, you know, the interest rate environment is something that none of us can control. So as we look into 24, I think most economists have been wrong in 23. I think it's straight. They're going to stay elevated for longer than what most are anticipating. However, as we look into 24, you know, we had a very successful bond offering.

Paulina Rojas: So we have the ability and certainly to go back and deal with the financing. And more importantly, we do have some time now and some flexibility out there to really think about whether we want to, you know, accelerate some dispositions and use some of that to pay more debt down. And on top of that, potentially look at what might be out of what might be out there to help alleviate the concern of high interest rates without giving you specifics.

Paulina Rojas: So, you know, everyone in 24 is really dealing with the same issue in terms of all our balance sheets. And we feel very good, very comfortable given the strength of where our balance sheets today that will be able to get through this and hopefully lock in, you know, debt at a attractive rate. And Mike, I don't know if you want to add to that. I agree with what you're saying. I think, you know, there's no shortage of opinions out there in the marketplace of what's happening in the overall economy and where rates make up.

Paulina Rojas: So we just have to be patient waiting to see how it kind of evolves and, and, and just work with the market as we see it. The good news is, you know, with the 23 is already refinanced the 24's, we've got full capacity in the credit line. So, you know, we've got some flexibility there on the timing of that as well.

Stuart Tanz: Thank you. And then my other question is, when I look at your implied cap rate, it is significantly higher than some of your closer and younger peers, which is unusual from at least a historical perspective. What do you think the market is getting wrong or is the market putting in too much weight into right aid? What is your interpretation of the current event? Yeah, I mean, look, I think the challenges for always seeing 23 have been the debt maturity, which has now been resolved.

Stuart Tanz: And the noise around writing, and, you know, and right now it just looks like it's noise from our perspective. We feel very comfortable sitting here today that we will come out of this, you know, with some potentially some very strong wrinkles. Remember, we have not had an anchor space available in this portfolio in five years, and more importantly, when we look at the market today on the West Coast, there's nothing available, there's nothing to lease from an anchor perspective, so that demand has again has been a bit overwhelming since we've finally had enough, an extra space come available.

Stuart Tanz: We've got a series of otherwise from incredible grocery anchor tenants, as well as others. So, you know, again, we feel pretty comfortable today with where we sit and more importantly, you know, at some point the noise is going to go away. You know, we think we'll be able to show the market pretty quickly that there's a lot of mark to market value that's going to be created through this process. I think you mentioned you have seen the momentum grocers right for the state.

Stuart Tanz: Can you provide some quarter on what type of grocers and have approached you? We've had the regional grocers, local grocers and national grocers at the table all at one time. A process rate kind of kind of like getting specific on names, it's a variety of all those types of very strong tenants. Okay, and the last one, are you thinking about single 10 users for the state or do you think it's likely that if you were to receive more space back, you would have to receive and subdivide the space into smaller and stores.

Stuart Tanz: Most of our righted spaces have already been right sized where we've taken back space and downsized them already. So our goal would be to retenit them with a single tenant, but we also would look at splitting them which we've done in other circumstances. It really all depends on the users, the economics and all the factors that we would consider when we lease the space.

Stuart Tanz: Thank you.

Operator: Thank you one moment for our next question.

Todd Thomas: And our next question comes from Todd Thomas of Keybank Capital Market. Please proceed. Hi, good morning. A couple of follow-ups.

Stuart Tanz: First, I was wondering if you could tell us, you know, with regard to right aid, how much term is left on average across the 14 leases in the portfolio, excluding the one that's been rejected? And can you talk about your interest or appetite and buying leases and auction, whether that's an option that you're contemplating? The answer is yes in terms of buying the leases, especially if we see the pipeline of LOIs and grow as we're seen right now.

Stuart Tanz: The answer is yes, we are currently looking at buying these leases as we're having this discussion, rich in terms of term. Yeah, I don't have the average term here, Todd, but, you know, we've been renewing right aids throughout the year and, you know, they range. The next expiration isn't not until 2026. And then we go all the way out to 2029 and as far out as 20, you know, 30. So, there's a bit of term on many of these leases. And then, of course, hop. Okay.

Stuart Tanz: And then just circling back to the dispositions. So I'm curious if you can just talk a little bit more about the strategic rationale, I guess, behind those planned assessails, what you're hoping to accomplish with the dispositions. And whether the cap rates spread on dispositions relative to some of the acquisition yield that you're starting to see. Or underwrite today would be a creative, or is it really more about the rate of NOI growth between the buys and sells?

Stuart Tanz: The combination of the NOI growth, a combination of the arbitrage in terms of cap rates, we believe that on some of these aspects we may get into the fives. And then obviously buying with, you know, on the other side of that equation in the mid-sixes or low sevens. So it's a combination really of those two things. And, you know, we have seen on the west coast a couple of transactions with 1031 buyers where they have been paying up to buy these type of assets quite aggressively.

Stuart Tanz: So hopefully with a bit of luck and a bit of focus in terms of timing here. And more importantly, the fact that there's such little product on the market, I think will help drive this program of potentially accelerating selling some of these assets. Okay.

Stuart Tanz: And then, you know, I think I heard you mentioned joint ventures earlier, but, you know, I think that was specifically, you know, around some of the land sales that you were maybe discussing. But, you know, in thinking about acquisitions, you know, you own everything really on balance sheet today. No joint ventures, nothing complicated. Is everything that you're considering, you know, moving forward in terms of acquisitions also on balance sheet or would you consider bringing in a partner or, you know, looking to do, you know, something a little bit more creative, perhaps to make the deals pencil in the end of position to take, you know, greater advantage of opportunities that might surface.

Stuart Tanz: The focus of, as you know, thought of this management team for the last 30 years is to stay on balance sheet. We have been approached quite aggressively over the last six months by some of the biggest players in the business in terms of going off balance sheet. Nothing is in front of us today that would get us excited. However, you know, I'll never say never if someone does walk in and gives us something that could be highly accreted to shareholders with the plan of, you know, what I would call getting these assets back on the balance sheet over time. But again, the focus continues to be on balance sheet in terms of growth as we look into the balance of this year and next year. Okay, that's helpful.

Michael Haines: And one last one, maybe for Mike, if I could, on the model here, you know, is the 4Q run rate, you know, you made some adjustments around straight line. But, you know, as we think about the implied, you know, fourth quarter for both straight line and FAS 141, just with the updated guidance is at the right level to consider heading into 2024, you know, as we think about, I guess, you know, considerations around non cash rent for for the New Year.

Michael Haines: I would say yes. The, obviously, I had a little bit of a pulldown from the by-by baby list, so we had tremendous and cutery, so that was a bit of a drag. But straight you know, we, because we haven't really acquired anything recently, our, our FAZ-141 rent amazement is pretty static, so when the guidance comes out in February, it should be pretty solid for the whole year, barring any unknown term nations, where acquisitions if we do end up accidentally.

Michael Haines: On the straight line rent side, you know, I would say that the run rate was, so the nine months number would be a good, if you annualize that, that would be a good run rate, given our leasing activity. Okay, got it. So the fourth quarter, the implied fourth quarter straight line rent should, should be a pretty clean run rate to think about moving forward. It should be, it will all depend on the leasing activity we do in February. Yeah, right. Okay, got it.

Michael Haines: All right, thank you. Okay, thank you. Thank you.

Operator: I'm showing no further questions at this time.

Stuart Tanz: I would now like to turn it back to Stuart Tantz 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 Lauren, Mike, Rick, or me directly. Also, you can find additional information in the company's quarterly supplemental package, which is posted on our website as well as our 10Q. Lastly, for any of you that are attending the ICFC conference in San Diego, that starts today.

Stuart Tanz: We hope to see you there. And for those of you that are planning to attend, may reach annual conference in a few weeks from now in Los Angeles, we look forward to seeing you there too. Thanks again, and have a great day, everyone.

Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.