Q4 2023 Retail Opportunity Investments Corp Earnings Call

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Operator: Welcome to Retail Opportunity Investments' 2023 fourth quarter and year-end conference call. Please note that participants are currently in a listen-only mode.

Welcome to retail opportunity investments 2023 fourth quarter and year end conference call participants are currently in a listen only mode. Following the company's prepared remarks, the call will be opened up for questions now I'd like to introduce Lawrence severe <unk> the company's chief.

Operator: Following the company's prepared remarks, the call will be opened up for questions. Now, I'd like to introduce Lawrence Savera, the company's Chief Accounting Officer. Please begin.

Counting officer please begin.

Lawrence Savera: 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 that can cause actual results to differ significantly from future results that are expressed or implied by such forward-looking statements.

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.

Lawrence Savera: 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. 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 Tanz, the company's Chief Executive Officer. Stuart

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.

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 we just posted on our website now I'll turn the call over to Stuart hands, the company's Chief Executive Officer Stuart.

Stuart A. Tanz: Thank you, Lauren, and good day, everyone. Here with Lauren and me today are Michael Haines, our Chief Financial Officer, and Rich Schoebel, our Chief Operating Officer. Notwithstanding, 2023 hasn't been a year of extraordinary challenges for certain commercial real estate asset classes and certain CBD markets across the country. In contrast, the long-term core drivers of the gross re-anchorage sector remain fundamentally sound, especially as it relates to our portfolio in a highly protected, sought-after West Coast market. Capitalizing on these strong fundamentals, we achieved a number of new leasing records and milestones for the company. For the 14th consecutive year, we leased essentially double the amount of space that was originally scheduled to mature.

Sure.

Thank you Lorne and good day everyone.

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

Notwithstanding 2023 haven't been a year of extraordinary challenges certain commercial real estate asset classes and certain CBD markets across the country.

In distinct contrast, the long term core drivers of the grocery anchored sector remains fundamentally sound.

Especially as it relates to our portfolio in a highly protected sought after west coast markets.

Capitalizing on the strong fundamentals, we achieved a number of new leasing records and milestones for the company.

For the 14th consecutive year, we leased essentially double the amount of space that was originally scheduled to mature spitz.

Stuart A. Tanz: Specifically, in 2023, we leased over 1.7 million square feet, achieving a new record for the company in terms of overall leasing activity. Additionally, we again achieved rental rent growth for a record 11th consecutive year, including 11 years in a row of achieving double-digit growth on same-space new leases. Importantly, we worked at strategically renewing early a number of key valued anchor tenants, including longstanding grocer tenants.

Specifically in 2023, we leased over one 7 million square feet, achieving achieving a new record for the company in terms of overall leasing activity.

Additionally, we again achieved re leasing rent growth for a record 11th consecutive year, including 11 years in a row of achieving double digit growth on same space new leases.

Importantly, we worked strategically renewing early a number of key valued anchor tenants, including longstanding grocery cats.

Stuart A. Tanz: By doing so, we enhance the long-term strength and stability of ROIC's core anchor income stream well into the future. We also continue to implement our longstanding strategy of proactively enhancing the tenant mix across our portfolio by seeking out opportunities to recapture early and really select space. Going forward, this will not only serve to enhance the strength of our tenant base and appeal of our properties, but it will also serve to grow our income stream, having achieved higher release rent. In terms of acquisitions, in light of the considerable uncertainty in commercial real estate during 2023, the West Coast acquisition market sat essentially idle through much of the year. While it was sitting idle, we continued to maintain an active dialogue with our long-standing off-market sources in order to be in a strong position to capitalize on unique opportunities when the market began to pick up again.

By doing so we enhance the long term strength and stability of ROIC is core anchor income stream well into the future.

We also continued to implement our long standing strategy of proactively enhancing the tenant mix across our portfolio.

Through seeking out opportunities to recapture early and really select spaces.

Forward.

Only serve to enhance the strength of our tenant base and appeal of our properties will also serve to grow our income stream, having achieved higher re leasing rates.

In terms of acquisitions in light of the considerable uncertainty in commercial real estate during 2023, the west coast acquisition market status essentially idled through much of the year.

Well it was sitting idle we continue to maintain an active dialogue with our long standing off market sources in order to be in a strong position to capitalize on unique opportunities when the market began to pick up again.

Stuart A. Tanz: To that end, during the closing months of 2023, certain private owners started to become more active in seeking to transact. Capitalizing on this, in December, we acquired an excellent neighborhood grocery-anchored shopping center that we had our eye on for some time. The property is located in the Los Angeles market in a densely populated, mature, diverse community. The Centre is anchored by a well-established supermarket that is a long-time national tenet of ours.

To that end during the closing months of 2023 certain private on were starting to become more active in seeking to transact.

Capitalizing on this in December we acquired an excellent neighborhood grocery anchored shopping center that we had our eye on for some time.

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

The center is anchored by a well established supermarket Theres a law.

Long time national tenant of ours.

Stuart A. Tanz: The seller was a private owner that was in need of a closing before year end. Given our knowledge of the market, together with our knowledge of the property and tenant roster, we were in a strong position to facilitate an efficient closing and, in return, achieve attractive prices, including a cap rate in the high sixties for what is irreplaceable, sought-after real estate. Looking ahead, based on what we're currently seeing, market activity for acquisitions could resume on the West Coast in 2024, potentially in earnest. Turning to our balance sheet, during 2023, we worked diligently to enhance our long-term financial strength and Profile through implementing a number of strategic capital market initiatives, including re-entering the public bond market, balancing our debt maturity schedule, while also reducing our floating rate debt and extending Now, I'll turn the call over to Michael Haines, our CFO, to take you through the details of our balance sheet initiatives, as well as our financial results for 2023 and initial guidance for 2024. Thanks, Stuart.

The seller was a private owner that was in need of a closing before year end.

Given our knowledge of the market together with our knowledge of the property and tenant roster. We were in a strong position to facilitate an efficient closing and in return achieved attractive pricing, including a cap rate in the high sixes for what its irreplaceable sought after real estate.

Looking ahead based on what we're currently seeing market activity for acquisitions could resume on the west coast in 2020 for potentially in earnest.

Turning to our balance sheet. During 2023, we worked diligently to enhance our long term financial strength and profile through implementing a number of strategic capital market initiatives, including reentering, the public bond market balancing our debt maturity schedule boss or reducing our flow.

<unk> rate debt and extending our credit line maturity as well as raising a bit of equity in connection with the acquisition.

Now I'll turn the call over to Michael Haines, our CFO to take you through the details of our balance sheet initiatives as well as our financial results for 2023 and initial guidance for 2020 for Mike.

Michael B. Haines: Starting with our financial results, for the year ended 2023, total revenues reached a new record high of $328 million. Offsetting record revenues, interest expense during 2023 increased notably as a result of higher interest rates. In terms of net income, for the year 2023, gap net income attributable to common shareholders totaled $35 million, or $0.27 per diluted share.

Thanks, Stuart starting with our financial results for the year ended 2023 total revenues reached a new record high of $328 million.

Offsetting record revenues interest expense during 2020 through increased notably as a result of higher interest rates.

In terms of net income for the year 2023, GAAP net income attributable to common shareholders totaled $35 million or 27 cents per diluted share with.

Michael B. Haines: With respect to funds from operations, FFO for the year 2023 was $141 million, equating to $1.06 per share. Net operating income for 2023 on a same-center comparative cash basis increased by 3.7% over 2022. According to our financing activities, during 2023, we raised in total approximately $363 million of capital, $350 million of which were raised in September through a public offering of unsecured senior notes. As Stuart noted, it was the first time raising capital in the public bond market in nearly a decade.

With respect to funds from operations <unk> for the year, 2023, or $141 million equating to a $1 six per share.

Net operating income for 2023 on a same center comparative cash basis increased by three 7% over 2022.

Turning to our financing activities. During 2023, we raised in total approximately $363 million of capital.

$250 million in which we raised in September through a public offering of unsecured senior notes.

No that was the first time raising capital in the public bond market in nearly a decade.

Michael B. Haines: Accordingly, we made a concerted effort to fully engage with the market, having discussions with a broad and diverse mix of investors, a number of which were new to the company. We will utilize the proceeds from the offering to retire the $250 million of unsecured senior notes that matured in December. Additionally, we retired early $100 million in floating rate debt. Also, in the midst of the Fed's rate tightening, we swapped $150 million in floating rate debt for fixed rate. As such, at year-end, just 9% of our total debt outstanding was effectively floating rate, down significantly from a year ago when our floating rate debt was 28% of our total debt outstanding. Along with proactively lowering our floating rate debt earlier in the year in light of the regional banking turmoil, we proactively extended the maturity of our credit line.

Accordingly, we made a concerted effort to fully engage with the market, having discussions with a broad and diverse mix of investors a number of which were new to the company.

We utilized the proceeds from the offering to retire the $250 million of unsecured senior notes that matured in December. Additionally.

Additionally, we retired early $100 million floating rate debt.

Also in the midst of the fed's rate tightening, we swapped $150 million floating rate debt to fixed rate.

As such at year end, just 9% of our total debt outstanding was effectively floating rate down significantly from a year ago, when our floating rate debt was 28% of our total debt outstanding.

Along with proactively lowering our floating rate debt earlier in the year in light of original banking turmoil, we proactively extended the maturity of our credit line.

Michael B. Haines: Sending a maturity date out to 2027 with the ability to extend it for an additional year to 2028. We also have the ability to double the capacity of the credit line from its current capacity of $600 million to $1.2 billion. Additionally, in the context of what happened in the regional banking sector this past year, it's important to note that we just have two mortgages that together only total about $60 million. Looking ahead, come April, when one of the two loans matures, we will be down to only one mortgage remaining. In addition to lowering our floating rate and secured debt, during 2023, we will continue to work on enhancing the company's financial ratios, including the company's net debt ratio. We ended the year with a net debt ratio of 6.2 times for the fourth quarter, which is the lowest that our net debt ratio has been since 2014.

Lending and maturity date out to 2027, but the ability to extend it for an additional year to 2028.

Also have the ability to double the capacity of the credit lines from its current capacity of $600 million up to $1 2 billion.

Additionally, in the context of what happened in the regional banking sector. This past year. It's important to note that we just have two mortgages that together only totaled about $60 million.

<unk> had come April one one of the two loans mature we were down to only one mortgage remaining.

In addition to lowering our floating rate secured debt. During 2023, we continue to work on enhancing the company's financial ratios, including the Companys net debt ratio.

Ended the year with a net debt ratio of six two times for the fourth quarter, which is the lowest of our net debt ratio has been dating back to 2014.

Michael B. Haines: Looking ahead, our debt maturity schedule is well laddered over the next five years, with approximately $300 million maturing each year on average. Having now re-established ROEC in the public bond market, our objective is to be a consistent annual issuer going forward. Looking at 2024, in addition to refinancing the senior notes that mature at the end of the year, we may also look to refinance our term loan and credit line borrowings with long-term, fixed-rate bonds, depending upon market conditions as the year progresses. With respect to equity capital and the led acquisition that Stuart discussed, in December, we issued common stock through our ATM, raising approximately $13 million.

Looking ahead, our debt maturity schedule is well ladder. It over the next five years with approximately $300 million maturing each year on average.

Having now reestablished our always see in the public bond market. Our objective is to be a consistent annual issuer going forward looking.

Looking at 2024 in addition to refinancing our senior notes that mature at the end of the year. We may also look to refinance our term loan and credit line borrowings with long term fixed rate bonds, depending upon market conditions as the year progresses.

With respect to equity capital in light of the acquisition that Stuart discussed in December we issued common stock through our ATM raising approximately $13 million.

In terms of guidance for 2024, we currently expect our core portfolio NOI will continue to grow driven by a combination of contractual rent increases together with expected re leasing rent growth additions.

Michael B. Haines: In terms of guidance for 2024, we currently expect our core portfolio NOI to continue to grow, driven by a combination of contractual rent increases, together with expected release rent growth. Additionally, as Stuart touched on, we are anticipating that the acquisition market will become active and favorable again. Accordingly, we currently expect to acquire between 100 and as much as 300 million in shopping centers net of disposition. To fund acquisitions, our guidance assumes that we will issue equity in-step with the acquisition activity as we move through the year, with the goal of keeping our financial ratios intact as we grow our portfolio. Moderating our expected external and internal growth will be interest-caused.

Additionally, as Stuart touched on we are anticipating that the acquisition market will become active and favorable again.

Accordingly, we currently expect to acquire between 100 to as much as $300 million of shopping centers net of dispositions to.

The fund acquisitions, our guidance assumes that we will issue equity in step with the acquisition activity as we move through the year with the goal of keeping our financial ratios intact as we grow our portfolio.

Monitoring our expected external internal growth will be interest costs based on the bonds that we issued in 2023 together with our projected acquisition and refinancing activity. We currently expect that the company's interest expense will be in the $78 million to $80 million range for 2024.

Additionally, in terms of bad debt, our guidance assumes a range of $3 million to $5 million. Although our current expectation is that would be more towards the lower end based on the overall strength of our tenant base today.

Into account all of these factors and other various assumptions we have set our initial <unk> guidance range for 2024 and $1 three to $1 90 per diluted share now I will turn the call over to rich shovel, our COO rich.

Richard K. Schoebel: Based on the bonds that we issued in 2023, together with our projected acquisition and refinancing activity, we currently expect that the company's interest expense will be in the $78 to $80 million range for 2024. Additionally, in terms of bad debt, our guidance assumes a range of $3 to $5 million, although our current expectation is that it would be more towards the lower end, based on the overall strength of our tenant base today. Taking into account all of these factors and other various assumptions, we have set our initial FFO guidance range for 2024 at $1.03 to $1.09 per diluted share. Now, I'll turn the call over to Rich Schoebel, our COO. Rich?

Thanks, Mike as Stuart highlighted 2023 proved to be one of our best years in terms of leasing demand for space across our portfolio continues to be consistently strong as a diverse mix of longstanding tenants together with new concepts and businesses seeking to expand to the west coast continue to Viper space.

These diverse businesses are predominantly destination type tenants and the wellness self care restaurant service and entertainment segments.

Important from our perspective is there a keen interest in leasing space at select shopping centers that are well located in diverse communities and have an established grocer as the core daily draw, which is exactly what our portfolio offers.

Richard K. Schoebel: Thanks, Mike. As Stuart highlighted, 2023 proved to be one of our best years in terms of leasing. Demand for space across our portfolio continues to be consistently strong as a diverse mix of longstanding tenants, together with new concepts and businesses seeking to expand to the West Coast, continue to vie for space. These diverse businesses are predominantly destination-type tenants in the wellness, self-care, restaurant, service, and entertainment segments.

Capitalizing on the demand as Stuart highlighted during 2023, we achieved a new record for the company leasing over one 7 million square feet in total.

The bulk of our activity centered around renewing longstanding tenants.

Specifically, we renewed approximately one 3 million square feet during 2023 and over half of that involve renewing valued anchor tenants, including longstanding grocers with a number of tenants coming to us early to renew.

Some by as much as over a year in advance of their lease maturities.

In terms of new leasing activity, given the lack of available space across our portfolio and the modest amount of space that was scheduled to mature during 2023, we made a concerted effort to proactively recapture select spaces, focusing on sought after anchor and pad spaces spaces that are well suited for the.

Richard K. Schoebel: Most important from our perspective is their keen interest in leasing space at select shopping centers that are well located in diverse communities and have an established grocer as the core daily draw, which is exactly what our portfolio offers. Capitalizing on the demand, as Stuart highlighted, during 2023, we achieved a new record for the company, leasing over 1.7 million square feet in total. The bulk of our activity centered around renewing long-standing technology.

Of businesses that are leading the demand.

In total we successfully executed upwards of 400000 square feet of new leases, a good portion of which were with tenants new to our portfolio.

In step with our renewal and new leasing activity, we again posted another solid year in terms of re leasing rent growth, including a 7% increase on renewals and a 22% increase in same space new leases.

Richard K. Schoebel: Specifically, we renewed approximately 1.3 million square feet during 2023, and over half of that involved renewing valued anchor tenants, including longstanding grocers, with a number of tenants coming to us early to renew some by as much as over a year in advance of their lease maturity. In terms of new leasing activity, given the lack of available space across our portfolio and the modest amount of space that was scheduled to mature during 2020, we made a concerted effort to proactively recapture select spaces, focusing on sought-after anchor and pad spaces. Space that is well suited for the type of businesses that are driving the demand.

With respect to Rite aid as we discussed on our last call back in October.

The 15 leases, we have with rite aid across our portfolio three of the stores closed in the fourth quarter, which is reflected in our portfolio lease rate, which was 97, 7% at year end.

We already have much of the space spoken for with new synergistic tenants that we're excited about.

And we expect to achieve a notable increase in the average base rent.

In terms of the remaining 12 leases with Rite aid all of the stores continued to perform well and Rite aid has indicated that they intend to keep operating the stores and plan to implement new merchandising and operational strategies aimed at enhancing their performance going forward.

Richard K. Schoebel: In total, we successfully executed upwards of 400,000 square feet of new leases, a good portion of which were with tenants new to our portfolio. In step with our renewal and new leasing activity, we again posted another solid year in terms of lease growth, including a 7% increase on renewals and a 22% increase on same space new leasing. With respect to Rite Aid, as we discussed on our last call back in October, out of the 15 leases we had with Rite Aid across our portfolio, three of the stores closed in the fourth quarter, which is reflected in our portfolio lease rate, which was 97.7% at year end. We already have much of the space spoken for with new synergistic canons that we are excited about, and we expect to achieve a notable increase in the average In terms of the remaining 12 leases with Rite Aid, all the stores continue to perform well, and Rite Aid has indicated that it intends to keep operating the stores and plans to implement new merchandising and operational strategies aimed at enhancing its performance going forward.

As 2024 is getting underway demand for space continues to be strong across our portfolio such that we expect to have another solid year.

In terms of occupancy, we expect to maintain our overall portfolio lease rate and the 97% to 98% range as we move through the year.

In terms of lease rollover, specifically anchor lease maturities at the start of 2024, we had seven anchor leases scheduled to mature during the year totaling 281000 square feet.

So you have the seven have already renewed their lease and we currently expect another tour of new as well.

As to the remaining two anchor leases scheduled to mature on is with Rite aid, which is one of the 12 stores that they intend to keep operating we're currently in the process of amending their lease to extended for another five years with.

With respect to the other anchor lease we are in the process of re leasing the space and are currently in discussion with several national destination Entertainment businesses that will be a terrific added draws to our property.

Additionally, we expect to achieve a substantial increase in base rent over the prior tenants rent.

Looking out further in 2025, we currently have 22 anchor leases scheduled to mature based on our early proactive discussions with these tenants. We currently expect that 'twenty one of the 22 anchors will renew.

Richard K. Schoebel: As 2024 gets underway, demand for space continues to be strong across our portfolio, such that we expect to have another solid year. In terms of occupancy, we expect to maintain our overall portfolio lease rate in the 97 to 98 percent range as we move through the year. In terms of lease rollover, specifically anchor lease maturities, at the start of 2024, we had seven anchor leases scheduled to mature during the year, totaling 281,000 square feet. Three of the seven have already renewed their lease, and we currently expect another two will renew as well.

The bulk of which we expect will renew early as we move through 2024.

The remaining anchor lease is one of the 12 leases with Rite aid that we are currently in the process of extending the lease term.

Lastly in terms of non anchor space maturing in 2024.

At the start of the year, we had 484000 square feet of shop space scheduled to mature.

Similar to our anchor releasing activity.

Already hard at work and having good success renewing and re leasing the space.

Richard K. Schoebel: As to the remaining two anchor leases scheduled to mature, one is with Rite Aid, which is one of the 12 stores that they intend to keep operating. They are currently in the process of amending their lease to extend it for another five years. With respect to the other anchor... We are in the process of releasing the space and are currently in discussions with several national destination entertainment businesses that will be a terrific added draw to our property. Additionally, we expect to achieve a substantial increase in base rent over the prior tenants. Looking out further to 2025, we currently have 22 anchor leases scheduled to mature. Based on our early proactive discussions with these tenants, we currently expect that 21 of the 22 anchors will renew, the bulk of which we expect will renew early as we move through 2024. The remaining anchor lease is one of the 12 leases with Rite Aid that we are currently in the process of extending the lease term. Lastly, in terms of non-anchor space maturing in 2024, at the start of the year, we had 484,000 square feet of shop space scheduled to mature.

Additionally, we are also proactively pursuing recapture opportunities and expect to have another productive year as we did in 2023.

Now I'll turn the call back over to Stuart.

Thanks Rich.

Our ability to post another strong year of leasing underscores the resiliency and competitive strength of our grocery anchored portfolio and the intrinsic value of our operating platform singular West coast focus.

Echo Rich looking ahead, we expect to have another strong and productive year in 2024.

In terms of same center net operating income.

We fully expect to continue growing our NOI in 2024, however on a cash basis the growth rate for this year will be moderated as a result of rite aid stores that closed in the fourth quarter and the anchor lease that rich mentioned.

While we are already close to having new tenants lined up for this space is at significantly higher rents on average there will be downtime as we get the new tenants in place, which is reflected in our same center NOI guidance growth rate for 2024.

Once the new tenants are in place together with what we expect to be another strong year of leasing in 2020 for looking out further at 2025. We currently expect that same center NOI growth will be in line with our historical growth rate in the 3% to 4% range if not better.

Stuart A. Tanz: Similar to our anchor releasing activity, we are already hard at work and having good success renewing and releasing space. Additionally, we are also proactively pursuing recapture opportunities and expect to have another productive year as we did in 2023. Now, I'll turn the call back over to Stuart.

In terms of acquisitions as 2024 is getting underway. We currently have close to $100 million of off market transactions in our pipeline.

Stuart A. Tanz: Thanks, Rich. Our ability to post another strong year of leasing underscores the resiliency and competitive strength of our grocery anchor portfolio and the intrinsic value of our operating platform's singular West Coast focus. To echo Rich, looking ahead, we expect to have another strong and productive year in 2024 in terms of same-center net operating income. We fully expect to continue growing our NOI in 2024. However, on a cash basis, the growth rate for this year will be moderated as a result of Rite Aid stores that close in the fourth quarter and the anchor lease that Rich mentioned.

All of which is truly irreplaceable real estate in the heart of densely populated sought after communities.

While the transactions are not yet finalized we currently expect that the potential pricing on a blended basis will be comparable to our fourth quarter acquisition.

Safe to say, we are excited about these opportunities and look forward to growing our portfolio in 2024, and continuing to build long term value.

Now we will open up the call for your questions.

Operator, thank you.

Ask a question you will need to press star one on your telephone to withdraw your question. Please press star one again, please wait for your name to be announced please standby, while we compile the Q&A roster.

Stuart A. Tanz: While we are already close to having new tenants lined up for the spaces, that's significantly higher rent on average. There will be downtime as we get the new tenants in place, which is reflected in our same center NOI guidance growth rate for 2024. Once the new tenants are in place, together with what we expect to be another strong year of leasing in 2024, looking out further into 2025, we currently expect that same-center NOI growth will be in line with our historical growth rate in the 3-4% range, if not better. In terms of acquisitions, as 2024 gets underway, we currently have close to 100 million in off-market transactions in our pipeline, all of which is truly irreplaceable real estate in While the transactions are not yet finalized, we currently expect... The potential pricing on a blended basis will be comparable to our fourth quarter acquisition.

One moment for our first question.

Our first question comes from the line of Jeffrey Spector with Bank of America Securities. Your line is now open.

Good morning, Jeff.

Good morning. This is levine on for Jeff actually live with Deutsche Bank.

Hi, there.

So I guess, just starting with <unk>.

Back to the rationale around.

<unk> issuing equity in the quarter and then putting out.

Guidance for the year.

Could we just maybe get some more color around expectations.

Cost and kind of why.

Why that range is a bit wider.

Presumably you're.

It looks like that that would be.

Dilutive.

Kind of depending on your view of NAV.

Operator: Safe to say, we are excited about these opportunities and look forward to growing our portfolio in 2024 and continuing to build long-term value. Now we will open up the call to your questions. Operator. Thank you. To ask a question, you'll need to press star 11 on your telephone.

Just wanted to get some more color around.

The plans to issue equity.

Sure well look in terms of the fourth quarter, we issued the stock specifically to finance the acquisition acquisition on our balance sheet neutral basis.

And to maintain our financial ratios based on the cash cap rate and the <unk> yield on the acquisition the transaction is accretive with good growth opportunities going forward.

Operator: To withdraw your question, please press star 11 again. Please wait for your name to be announced. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question comes from the line of Jeffrey Spector with Bank of America Securities. Your line is now open. Good morning, Jeff. Good morning, this is Lizzie on for Jeff, actually, Lizzie Dwight-Dewey.

Looking forward, obviously, it's going to be a function of cap rates in terms of where we're acquiring any future assets and the price of our stock.

Okay, Great and I guess, just a follow up.

Michael B. Haines: Hi there. So I guess I'll start by going back to the rationale around issuing equity in the quarter and then putting out guidance for the year. Could we just maybe get some more color around expectations of... and kind of why that range is a bit wider, you know? Presumably, you're.. Looks like that that would be dilutive, kind of depending on your view of NAV, but just wanted to get some more color around plans to issue. Sure. Well, look, in terms of the fourth quarter, we issued the stock specifically to finance the acquisition on a balance sheet-neutral basis and to maintain our financial ratios. Based on the cash cap rate and the FFO yield on the acquisition, the transaction is accretive with good growth opportunities going forward. Looking forward, obviously, it's going to be a function of cap rates in terms of where we're acquiring any future assets and the price of our stocks. Okay, great. And I guess just to follow up, where are you seeing cap rates for the centers you're interested in trending today? Have we seen more of a compression there?

Are you seeing cap rate for the centers youre interested in trend today have we seen.

More of a compression Nelson.

Maybe we lost touched on this in October November.

Sure look there's very little activity in the market. So it's very tough to pin.

Our cap rates in this market.

Depending on the asset and depending on the growth profile cap rates continued to sort of move around.

But going forward, we're expecting with what we see in our pipeline in terms of the off market opportunities that cap rate again in the mid sixes or even a bit higher.

Okay great.

And then separately.

Just wanted to touch on your.

Same store NOI outlook.

And can we clarify what the exact step ups are to that 1% to 2% range is.

Is most of the drag really from.

Stuart A. Tanz: You know, maybe we last touched on this in October or November. Sure. Look, there's very little activity in the market, so it's very tough to pin a cap race in this market because, depending on the asset and depending on the growth profile, cap rates continue to sort of move around. But going forward, we're expecting, with what we see in our pipeline in terms of the off-market opportunities, that cap rate again in the mid-sixes or even a bit higher. Right. And then separately, I wanted to touch on your Same Store NOI Outlook. Can we clarify what? The exact step-ups are to that 1-2% range, with most of the drag really from... Downtime Associated with Vaxilla, Spaces that were lost. If there's any more color you can add on,

The downtime associated with back filling.

Spaces that were lost.

If there's any more color you can add on.

The building blocks to that.

That range.

Which implies.

A deceleration from this year last year's growth that would be great.

Sure it's purely a function of the three rite AIDS that we mentioned back on our last call and what rich was good enough to articulate today.

Along with one other anchor tenants.

That is vacating or has vacated at the end of January those or is it really that the building blocks to our same store NOI. The good news is that were making some very good momentum in re leasing those spaces and as I said in the closing part of my presentation.

Stuart A. Tanz: Building Blocks to that, which implies, you know, a deceleration from last year's growth. Sure. It's purely a function of the three Rite Aids that we mentioned back on our last call and what Rich was good enough to articulate today, along with one other anchor tenant that is vacating or has vacated at the end of January. Those are really the building blocks to our same store NOI.

We're expecting most of that to be leased in the next let's call. It <unk>.

First quarter early second quarter, and we will see it.

Positive impact of that as we move through the balance of the year and into 'twenty five.

Michael B. Haines: The good news is that we're making some very good progress in releasing those spaces. As I said in the closing part of my presentation, we're expecting most of that to be leased in the next, let's call it the first quarter, early second quarter. We'll see the positive impact of that as we move through the balance of the year and into 2025. Thank you.

Okay. Thank you.

Thank you.

For our next question.

Our next question comes from the line of Dori Kesten with Wells Fargo Securities. Your line is now open.

Good morning. Thanks.

Okay.

Back to the net acquisition guide I guess I understand that you have $100 million in the pipeline today, what gives you confidence in the 100 to 300 are you are you rather close to having an LOI on the country.

Operator: One moment for our next question. Our next question comes from the line of Dori Keston with Wells Fargo Securities. Your line is now open. Good morning.

Michael B. Haines: Hi. Hey, back to the net acquisition guide. I guess I understand that you have 100 million in the pipeline today. What gives you confidence in the 100 to 300? Are you rather close to having an LOI on the 100?

Just.

I think we've been hard at work over the last several quarters in terms of reconnecting with our what I would call our pipeline.

Sellers.

Stuart A. Tanz: I think we've been hard at work over the last several quarters in terms of reconnecting with what I would call our pipeline of sellers, and we are seeing some of these sellers come under pressure as it relates to debt coming due. So we're feeling pretty good about really going out and finding very high-quality assets at compelling prices. So as we sit here today, you know, look, we do have some exciting opportunities ahead of us. Obviously, we're still in the due diligence stage in terms of buying these assets, but we feel very comfortable sitting here today that we'll be able to achieve, certainly, that lower end of our guidance. Okay. And I believe on the Q3 call, you were talking about potential acquisitions funded with OP units or VSEs that you're referring to or with those other ones. No, those opportunities are at our doorstep as well, right now.

And we are seeing some of these sellers come under pressure as it relates to debt coming due.

So we're feeling pretty good about really going out and finding.

High quality assets at compelling prices.

So as we sit here today.

Look we.

We do have some exciting opportunities.

Opportunities ahead of US obviously, we're still in the due diligence stage in terms of buying these assets, but we still we are feeling very comfortable sitting here today that we'll be able to achieve certainly that lower end of our guidance.

Okay and I believe on the Q3 call you were talking about.

Potential acquisitions funded with op units.

That you're referring to with those other ones.

No. These there are those opportunities are at our doorstep as well right now and obviously that equity. If we ended up doing these transactions will be at a much higher price than where our stock is currently trading.

Stuart A. Tanz: And obviously, that equity, if we end up doing these transactions, will be at a higher price than where our stock is currently trading. Okay, and last question. In your interest expense guide for the year, what assumptions are embedded for refinancing, swaps, and paying down with cash?

Okay and last question.

And your interest expense guidance for the year, what assumptions are embedded or <unk>.

Bob.

Cool down.

Michael B. Haines: Well, the guidance is going to take into account refinancing the 24 bonds later in the year. It's really kind of tied to the forward yield curve. That's the best thing we can use to model that interest cost out. And in terms of cash flow, Mike? Well, free cash flow, you know, through the year, whether we use it to pay down debt or fund acquisitions, is about $20 to $30 million, depending on actual CapEx costs and interest costs through the year.

The pass.

Well the guidance is going to take into account refinancing the 'twenty four bonds later in the year.

It really kind of tied to the forward yield curve. That's the best thing, we can use to model that interest cost out.

Okay and in terms of cash flow, Mike, but free cash flow or whether we use it to pay down debt or fund acquisitions of about 20 to 30 million, depending on actual capex cost and interest costs through the year.

Michael B. Haines: Thank you. Thank you. Thank you. Our next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is now open. Hi, good morning.

Okay.

Thank you.

Our next question comes from the line of Juan Sanabria with BMO capital markets. Your line is now open.

Hi, good morning.

Richard K. Schoebel: Good morning. Just hoping you could talk a little bit about the build or commenced occupancy and how we should expect that to trend over 24. I'm not sure if all the right stuff is in the base as a starting point for the year or if you expect a seasonal dip in the first quarter, but if you could just give us a sense of the trend for the year and how we should expect the year to end, that would be great from a build occupancy perspective. Well, we're still making very good progress on, you know, getting the rent commenced and, but as you know, as we're commencing rents, we're adding new uncommenced rents to the bucket and with the Rite-Aids and the other anchor space we spoke of, it will take some time to refit those spaces, but we expect that we will continue to bring on the rent consistent with our historic average, Okay, but the it sounds like the one anchor the right aid that the couple closures are in the face to start the year.

Good morning, just hoping you could talk a little bit about the builder commenced occupancy and how we should expect that to trend over 24 Im not sure. Although rated stuff is in the basin.

As a starting point for the year or if you expect.

Seasonal dip in the first quarter, but if you could just give us a sense of the trend through the year and how we should expect the year to end that would be great from a build occupancy perspective.

Sure, we're still making very good progress on.

Getting the rent commenced and but as you know as we're commencing rents were adding new.

And commenced rents to the bucket.

With the Rite aid the other anchor space, we spoke of.

It will take some time to reset those spaces, but we expect that we will continue to bring on.

The rent consistent with our historic averages.

Okay.

Okay, but it sounds like the one anchor the rite aid couple of closure in the place to start the year.

Richard K. Schoebel: Thinking about where you ended last year, and then you have one more anchor closure, and is that kind of all the meaningful declines or negative impacts we should be factoring in for the year? I've seen some kind of random puts and takes here and there. Yeah. Okay, great. And then just curious, any update on the assets where you guys are pursuing entitlements and the kind of processes there? And what, if anything, is assumed in guidance, which starts or?

Thinking about where you ended last year and then you have one more anchor closure.

Is that kind of all the.

The meaningful.

Declines are negative impacts we should be factoring in.

For the year.

Some kind of random puts and takes here and there.

Yes.

Okay, Great and then just curious.

Any update on the assets, where you guys are pursuing entitlements.

Kind of the processes, there and what if anything is assumed in guidance with starts are for.

Stuart A. Tanz: for monetizations of that value creation. Well, in terms of the crossroads, you know, we are getting to the end in terms of the permitting process, but given the current market environment, we plan to sort of sit tight for the time being in terms of breaking ground. We did, during the fourth quarter, finally get full entitlements in Nevada.

Our monetization of that value creation.

Well in terms of the crossroads.

We are getting to the end in terms of the permitting process, but given the current market environment, we plan to sort of sit tight for the time being in terms of breaking ground.

Did during the fourth quarter gets finally get full entitlements in Nevada.

Stuart A. Tanz: So both the other two projects are, at this point, fully entitled, and we are engaged with a series of builders and or buyers in the market right now to potentially sell these assets. However, you know, the multifamily market right now is still in what I would call a sort of a stalled stage in terms of transacting. And my personal opinion is that as we move through the year, if we can get some cap rate compression in the multifamily business, then there's a good chance that we'll be able to transact on these properties. Thank you.

So both the other two projects are at this point are fully entitled and we are engaged with a series of builders and or buyers in the market right now to potentially sell these assets. However.

The multifamily market right now is still in what I would call in a sort of stalled stage in terms of transacting.

And my personal opinion is that as we move through the year. If we can get some cap rate compression in the multifamily business. Then there is a good chance that we'll be able to transact on these properties.

Thank you.

Operator: One moment for our next question. Our next question comes from the line of Todd Thomas with KeyBank Capital Markets. Your line is now open. Good morning, Todd. How are you?

Thank you.

One moment for our next question.

Our next question comes from the line of Todd Thomas with Keybanc Capital markets. Your line is now open.

Good morning, Todd.

Good morning, how are you.

Operator: A couple of questions. First, the additional anchor vacancy that you mentioned, I'm just curious how much occupancy that might represent. If you can share that, I'm just curious how much lower occupancy may go before bottoming out here so we can just think about the trajectory of occupancy and maybe help us understand the trajectory. Same story, growth a little bit throughout the year.

A couple of questions.

First the.

The additional anchor vacancy that you mentioned I'm just curious how much occupancy.

That that might represent if.

If you can share that I'm, just curious how much lower occupancy may go before bottoming out here. So we can just think about the trajectory of occupancy and maybe help us understand the trajectory of same store NOI growth a little bit throughout the year and then rich can you talk about the potential mark to market.

Richard K. Schoebel: And then, Rich, can you talk about the potential mark to market on that space and the right aids that you discussed? Here, in terms of the occupancy hit, it really won't have a significant impact, and we're still comfortable with, you know, maintaining the ninety seven to ninety eight percent range throughout the year. The mark to market on that one anchor space could be very significant. It's a very low.

That space in the Rite AIDS that.

As discussed recapturing and re leasing.

Okay.

Sure in terms of the occupancy hit it really won't have a significant impact and we're still comfortable with maintaining the 97% 98% range throughout the year.

The mark to market on.

On that one anchor spaces, it could be very significant.

It's a very low single digit rent.

Stuart A. Tanz: So, we're expecting a big spread there, and then on the Rite-Aids, on a blended basis, it's going to be a very nice spread. Okay, is there any additional impact from Rite-Aids at all assumed in the guidance? It didn't sound like it, but just curious, you know, as things are still ongoing over there, if you have any additional assumptions at all embedded in guidance either around... uh... space being recaptured or or potential uh... lease negotiations. Well, we're really finished when I say finished. We have gone through and spent a lot of time with Rite Aid over the last several months, and at this point, we're just waiting to have these leases confirmed through the bankruptcy process.

So we're expecting a big spread there and that on the Rite AIDS.

Blended basis, it's going to be a very nice increase as well.

Okay.

It does.

Alright.

Is there any additional impact from from Rite Aid's at all assumed in the guidance it didn't sound like it but just curious.

As you know things are still.

Ongoing over there just curious if you have any additional assumptions at all embedded in guidance either around.

Space being recaptured or potential lease negotiations.

Well, we're really finished when I say finished we are.

We have gone through and spent a lot of time with rite aid over the last several months and at this point were just waiting.

To have these leases confirmed through the bankruptcy process.

Stuart A. Tanz: Anything can happen, as we know, as we get through the process, but we feel very comfortable. We sit today knowing that if things continue to go well and Rite Aid comes out of bankruptcy, the extent of what we've articulated today in terms of what we've seen in vacancy will remain where it is. Okay, and then just shifting over to the acquisitions and the guidance there, you know, I guess as it pertains to the funding and the equity issuance that's assumed alongside the investments, that the range that you've provided, you know, how price sensitive are you to the stock price? You know, as you kind of look ahead here, the growing pipeline of deals that you're seeing. Sure. Well, look, we are very sensitive to price.

Thing can happen as we know as we get through the process, but we feel very comfortable where we sit today that if things continue to go well and the Rite aid comes out of bankruptcy the extent of what we've articulated today in terms of what we've seen in vacancy will remain where it is.

Okay, and then just shifting over to the acquisitions and the guidance there.

I guess as it pertains to the.

Funding and the equity issuance that's assumed.

Alongside the investments.

The range that you've provided how price sensitive.

Are you to the stock price.

As you kind of look ahead here.

With the growing pipeline of deals that you are saying.

Sure well look we are very sensitive to price.

Stuart A. Tanz: But again, we feel pretty good looking at the pipeline in terms of possible accretion, and if we decide to issue equity, we'll be, you know, I think we'll again be a function of the pricing of where we're buying these assets and the price of our stock. But certainly, you know, we'll monitor things as we move along, both in terms of timing and in terms of issuing equity if we decide to build that route as it relates to issuing that equity. Okay. At the midpoint of the guidance, I guess, for acquisitions, for equity issuance, I mean, how much accretion is built into the guidance that you're, you know, anticipating from, you know, this investment activity? I guess it is.

But again.

We feel pretty good looking at the pipeline in terms of possible accretion.

In terms of if we decide to issue equity.

We will be.

I think will again will be a function of the pricing of where were buying these assets in the price of our stock but.

Certainly.

We'll monitor things as we move along both in terms of timing and in terms of.

In terms of issuing equity if we decide to go that route as it relates to the issuing that equity.

Okay at the midpoint of the guidance I guess for acquisitions for equity issuance I mean, how much accretion.

It was built into the guidance that you're anticipating from.

This investment activity and I guess.

Michael B. Haines: You know, the capital-raising activity alongside that on a leverage-neutral basis. Just with where the company's blended cost of capital is today, you know, equity debt also in the, you know, sort of mid to high 6% range, you know, I'm just wondering how much accretion that you're anticipating or what's embedded in the guidance. Hey, Todd. It's Mike.

The capital raising activity alongside that.

A leverage neutral basis, just with where the company's blended cost of capital is today.

Equity debt also in the sort of mid to high 6% range I'm just I'm just wondering how much.

Accretion that youre anticipating or what's embedded in the guidance.

Michael B. Haines: So, you know, looking at the low and the high end, on the low end, if we acquire about $100 million, we're expecting that to add about a penny, one cent, and on the high end, it will be about three. So at the midpoint, if you do $200 million, it's going to be two cents. That's just kind of ballparking, you know, the use of equity in debt to buy those acquisitions. Okay. All right. That's helpful.

Hey, Scott, it's Mike So looking at the low and the high end.

Hello, and acquired about $100 million, we're expecting that's added about a penny.

And on the high end would be about three so at the midpoint of your $200 million, it's going to be <unk>. That's just kind of a ballpark in the use of equity and debt to buy those acquisitions.

Okay.

Michael B. Haines: You know, one last one, Mike, on the interest expense question from earlier, though, that is tied to the acquisitions, right? And you're assuming about, I guess, 40% debt financing, you know, or really, maybe 30 or 35%, assuming you reinvest your free cash flow into acquisitions. So if you do not acquire assets, the interest expense would be below the guidance range, right?

Alright Thats helpful.

Last one Mike on the interest expense question from earlier, though that is tied to the acquisitions right and you're assuming about I.

I guess, 40%.

Debt financing or really maybe 30 or 35%, assuming you reinvested your free cash flow and to acquisition. So if.

If you do not acquire assets the interest expense would be would be below the guidance range right.

Michael B. Haines: Presumably, yes, that's correct. And then we also have the refinancing activities we have to do, and that's going to be dependent on where the yield curve is as we move through the year. Obviously, we had the hiccup earlier this week with the CPI, but we'll see where the 10-year Treasury goes as we move through the year.

Presumably yes, that's correct and then we also have the refinancing activities, we have to do and that's going to be depending on where the yield curve as we move through the year. Obviously, we had the hiccup. This year earlier this week with the CPI, but we'll see where the 10 year Treasury goes as we move through the year.

Michael B. Haines: Okay, but the debt portion of the acquisition activity that you'll be funding that you're assuming is being funded on the line. All right. Okay, got it. Thank you.

Okay, but the debt portion of the acquisition.

Activity that youll be funding that you're assuming as is being funded on the line.

Correct.

Okay got it thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Paulina Rojas with Green Street. Your line is now open. Good morning. Good morning.

Thank you.

One moment for our next question please.

Our next question comes from the line of Paul in a Rojas with Green Street. Your line is now open.

Good morning.

Richard K. Schoebel: Last time we spoke, I think we talked about one of the Rite Aid leases being rejected and the other two being in a sale process. So I'm curious why weren't those leases acquired if they had a meaningful market, and I wonder if it's because of the term, if they have little term left. Those two locations, you're right, were offered for sale by Rite Aid, but the feedback we received from Rite Aid was that they were not willing to pay the debt rent, the administrative rent that's required to be paid on those locations. So, if Rite Aid didn't step up immediately and agree to pay that debt rent, even while they were doing due diligence, they were just moving forward with rejecting those locations. So that was sort of their strategy out of the gate. And those two locations; no one jumped fast.

Good morning, and last time, we spoke I think we talked about one of the rite aid and.

This is being rejected and the other two being in.

Sale process. Some I'm curious why werent those leases acquired they had a mean pool and.

Mark to market.

And I wonder if its because of the of the term if they have nearer term left.

Yes.

Sure those two locations Youre right were offered for.

For sale by Rite aid, but the feedback we received from Rite aid was that they were not willing to pay the dead rent.

<unk>.

Administrative rent that's required to be paid on those locations. So if people didn't step up immediately and agree to pay that debt rent even while they were doing due diligence. They were just moving forward with with rejecting those leases. So that was sort of their strategy out of the gate in those two locations.

No one jumped fast enough.

Richard K. Schoebel: However, as we touched on, there is a good mark to market on those leases, and we have had very strong interest in the space. Thank you. My other question is, and the Kroger Albertsons merger is, is it's a risk, right?

However.

As we touched on there is a good.

Mark to market on those leases and and we have had very strong interest in the spaces.

Thank you and my other question is and the Kroger Albertsons merger is it's the risk.

Stuart A. Tanz: And it's potentially weighing on your stock as well. So is there anything you can do today, proactively to prepare for the consequences of this merger? And that it could have, not immediately, but in the medium term, or you're really. There is not much you can do today.

Right and it's potentially weighing on your stock as well. So is there anything you can do today proactively to prepare for the consequences of this merger and.

But it could have not immediately but Indonesia medium term.

Or are you really.

Stuart A. Tanz: You're putting the topic to rest until there are more. Yeah, look, I mean, we've been analyzing this transaction internally for almost two years, but, you know, look, we continue to communicate a lot with both Kroger and Albertsons and conduct business as usual, including renewing leases. And, you know, their discussions, they have ongoing discussions, as we all know, with the government. So they're not yet in a position to disclose what specific stores will be sold as part of the merger. And we haven't spoken to CNS as well, so there's not much more I can sort of tell you as it relates to your question. I mean, we're all waiting at this point.

There is not much you can do today youre, putting the topic to risks until there are mortgages.

Yes look I mean, we've been analyzing this transaction internally now for almost two years, but.

Look we continue to communicate.

A lot with both Kroger and Albertsons and conduct business as usual, including renewing leases.

And there are discussions.

We have ongoing discussions as we all know with the government. So they are not yet in there.

Positioned to disclose what specific stores will be sold as part of the merger and we havent spoken a CNS as well.

So theres not much more I can sort of tell you as it relates to your question I mean, we're all waiting at this point and.

Stuart A. Tanz: And, you know, we do think the outcome of this will not have much impact in terms of ROI safety. How would you assess the appetite of other grocers for this space? Very strong, extremely strong.

We do think the outcome of this will not have much impact in terms of ROIC.

How did what are your says the appetite for other grocers spreads for this space.

Very strong extremely strong we've had a series of LOI has already come in for a number not a number but some locations.

Stuart A. Tanz: We've already had a series of LOIs come in for a number of sites, you know, not a number but some locations, on the assumption that CNS may take one or two of these locations. But again, there's nothing we can do at this point until there's more clarity. Thank you. Thank you. One moment for our next question, please. Our next question comes from the line of Michael Mueller with J.P. Morgan. Your line is now open. Good morning, Mike. Hi. Hey, hello there.

On the assumption that CNS may take one or two of these locations, but again theres nothing we can do at this point until there's more clarity.

Thank you.

Thank you one moment for our next question. Please.

Our next question comes from the line of Michael Mueller with Jpmorgan. Your line is now open.

Good morning, Mike.

Hello there.

Michael B. Haines: A lot of stuff's been answered, but maybe one thing, and I apologize if this was addressed, I missed the first part of the call. But what's the biggest thing that you would say that has changed as it relates to acquisitions where you know, you're coming off of 2023, but now you have pretty good expectations for 2024. When you're talking to sellers, I mean, what do they point to? It gives you better confidence.

Why does have been answered, but maybe one thing and I apologize. If this was addressed I missed the.

First part of the call, but what's the what's the biggest thing that you would say that has changed as it relates to acquisitions, where youre coming off of 2023, but now.

You have pretty good expectations for 2024, when youre talking to sellers.

What are they point to.

Stuart A. Tanz: I think what's changed out there, Mike, is that a lot of sellers were on the sidelines in 23. But as mortgages are coming due, as redemptions are coming in from the institutional community, we seem to be making very good headway in terms of these conversations. And more importantly, sort of finding, you know, what I would call very high-quality assets at compelling prices. So the market is really beginning to change in terms of some of these sellers coming to the realization that they've got to do something now rather than wait, you know, three months, six months, nine months as it relates to either debt coming due or to potentially, you know, move equity or to redeem some of the what's in queue in terms of cash But that's what we're sort of seeing out there.

It gives you better confidence I think what's changed out there Mike is that a lot of sellers were on the sidelines in 'twenty three but as mortgages are coming due.

As redemptions are coming in from the institutional community, we seem to be making very good headway in terms of these conversations and more importantly sort of finding.

What I would call very high quality assets at compelling prices. So it's really the market is beginning to change in terms of some of these sellers coming to the realization that they've got to do something now rather than wait.

For three months six months nine months as it relates to either debt coming due or to potentially move equity or to redeem some of the what's in queue in terms of cash as you might say, but that's what we're sort of seeing out there there is a bit of.

Michael B. Haines: There's a bit of a change occurring, and for us, you know, we are certainly in some very productive conversations in terms of meeting the goals that we've set out for shareholders. Got it. And then maybe we can take a shot at Juan's question a different way here.

A change occurring in for us.

We are certainly.

In some very productive conversations in terms of meeting the goals that we've set out to shareholders.

Got it and then.

Maybe take a shot at one's question a different way here. If we're looking at the year end build occupancy it sounds like youre going to have a move out on the anchor side that will pull it down a little bit.

Michael B. Haines: If we're looking at the year-end build occupancy, it sounds like you're going to have a move out on the anchor side that'll pull it down a little bit. Where in 2024 or when in 2024 do you get to the point where build occupancy and flex start to kind of move back up? I think it's going to be closer to the end of the year, you know, as we work through these leases and then also get started on all these, the leases that are currently. Okay. Okay. Thank you. Yeah,

In 2024 or when in 2024 do you get to the point where.

Build occupancy and flex and starts to kind of move back up.

I think it's going to be closer to the end of the year.

As we work through these leases and then also get commenced on all of these leases that are currently in the pipeline.

Okay. Okay. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Wesley Galladay with Baird. Your line is now open. Good morning, Wes.

Yes.

Thank you one moment for our next question.

Our next question comes from the line of Wesley Golladay with Baird. Your line is now open.

Richard K. Schoebel: Hey, good morning, Stuart. Just another follow-up on that anchor lease that you mentioned. I mean, it looks like you have clear runway outside of that one lease all the way to 2026. But for that anchor, you know, what percentage of the ABR do they represent?

Good morning, everyone, Hey, good morning, Stuart just another follow up on that one anchor lease that you mentioned I mean, it looks like you have clear runway outside of that one lease all the way to 2026 before that anchor what percentage of the ABR do they represent and how soon do you think you'll re signed leases for that space and when do you think.

Richard K. Schoebel: And how soon do you think you'll resign leases for that space? And when do you think the tenants will open for that? Richard, it's a very small part of our ABR. I don't have the exact percentage here in front of me.

We'll open for that.

Rich, it's a very little bit of our AVR I don't have the exact percentage here in front of me.

And really where we're at now is we're trying to pick the best tenant for the space.

Richard K. Schoebel: And, you know, really where we're at now is we're trying to pick the best tenant for the space. We have a lot of demand from a lot of different tenants, and, you know, one of the factors we're taking into account is obviously the cost of getting them in and the time of getting the rent started. So we, you know, we want to make sure we pick the right tenant.

We have a lot of demand from a lot of different tenants and.

One of the factors were taken into account is obviously the cost of getting them in at the time, we are getting the rent commenced.

So we.

We want to make sure we pick the right tenant and.

Richard K. Schoebel: And, you know, look, we see a lot of demand for the space and expect to have a very nice spread in the rents. Yeah, the mark to market on that particular space is going to be quite good, depending on what we end up doing. But the tenants are currently paying a modified triple net lease at about $6 a square foot. Fantastic. You did mention entertainment.

Booked.

We see a lot of demand for the space and expect to have a very nice spread and the reps, yes, the mark to market on that particular space is going to be quite good depending on what we end up doing but.

The tenant is currently paying a modified triple net leased at about $6 a square foot.

Okay Fantastic or you heard mentioned entertainment you mentioned there will be an entertainment concept should we expect that uptick in tenant improvements there.

Richard K. Schoebel: You mentioned it would be an entertainment concept. Should we expect an uptick in tenant improvements there? Yeah, and that's what we're taking into account as we speak is, yes, some of these entertainment uses will cost a little bit more to refit the space, converting it from retail, but they're also the highest rent payers. So we're balancing all of those factors. Yeah, fair point.

Yes, and that's what we're taking into account as we speak is yes. Some of these entertainment uses will cost a little bit more to refit the space converting it from retail.

But they're also the highest rent payers. So we're balancing all of those factors.

Stuart A. Tanz: And then lastly, just on the acquisitions, you know, the stock's sitting at 13 bucks a share today, seven, a little north of a seven cap, depending on whose numbers you're using. How sensitive are you at these levels to pursue this external growth? Um, we are. We're sensitive.

Fair point.

Just on the acquisitions the stock sitting at 13 Bucks a share today seven a little north of a seven cap depending on whose numbers you use.

Incentive argue at these levels to pursue this external growth.

We are we're sensitive I mean, when I say that obviously, we realize where our cost of capital is and we want to be smart in terms of.

Stuart A. Tanz: I mean, obviously, we realize where our cost of capital is, and we want to be smart in terms of buying and combining with buying assets, raising equity in terms of our balance sheets. So we're watching, obviously, the price, you know, and like everyone else, but we feel pretty good in terms of where these assets are going to end up in terms of cap rates and our FFO yield on these assets. So we'll see how things progress as we move through the year. And then, on an equality perspective, where would you rank these assets if you were to acquire them within the right portfolio?

Buying and concurrently with buying assets raising the equity in terms of our balance sheet. So we're watching obviously the price.

And like everyone else, but we feel pretty good in terms of where these assets are going to end up in terms of cap rates and our <unk> yield on these assets. So we'll see how things progress as we move through the year.

Okay.

Alrighty perspective, where would you rank these assets if we were to acquire them within the portfolio.

Stuart A. Tanz: These will be some of the highest quality assets that we have acquired in the last 10 to 13 years. Got it. Thank you. Yes. Thank you. One moment for our next question. And our next question comes from the line of Craig Mailman with Citi. Your line is now open. Hey, guys. Good morning. Good morning.

These will be some of the highest quality assets that we have acquired in the last 10 to 13 years.

Got it thank you.

Yes. Thank you one moment for our next question.

And our next question comes from the line of Craig Mailman with Citi. Your line is now open.

Hey, guys good morning.

Operator: A couple quick ones and then we'll have a big picture one. But just notice that your amortization below the bulk market leases kind of kicked up here relative to last year. What's driving that?

Morning.

Couple quick ones and then more of a big picture one but just.

I noticed the your amortization of below market leases kind of kicked up here relative to last year, what's driving that.

Michael B. Haines: Are you talking about the actual for 23 or for 24's guidance? The 24's guidance, the $14 million. I'm just trying to see if there is anything sort of one-time in there for- Yes, there is. That's going to occur in the first quarter.

Are you talking about the actual for 'twenty through 'twenty <unk> guidance the 'twenty one.

Scott.

$14 million I'm, just trying to see how do you think.

Sort of one time and therefore.

Michael B. Haines: It's related to the lease that Rich was referring to. When you do the original FAS 141 purchase rights allocation, they assume that option periods are going to be exercised, and in this case, they weren't. So that below-market lease liability is going to be one-time added as an event in Q1. Okay, but how much of the $14 million is going to be in one queue? I think, I don't have the exact number in front of me, but I want to say it's around $4 million.

Yes, Sir.

To occur in the first quarter, it's related to the lease that that rich was referring to.

When you do the original Fas 141 purchase price allocation I assume that option periods are going to be exercised in this case they werent. So.

That below market lease liability is going to be one time additive event in Q1.

Okay, how much of that $14 million is <unk>.

I don't have the exact number in front of me I want to say its around $4 million.

Michael B. Haines: So there's really nothing to write about that; that's solely the anchor vignette. No, that's just that. Yeah, the rest of it is all the other leases just regularly amortizing down over time. Perfect. And then on bad debt, is there anything specific related to Rite Aid, or is that, you know, just your general kind of placeholder for this point in the year on the initial outlook? It's just a general placeholder. Yeah, the bad debt in 2024, the $3 to $5 million range is our standard. And if there's anything relative to Rite Aid, it would be well within our budget.

So theres nothing related to rite aid and that Thats solely the anchor bank. That's just that the rest of it is all of the other leases that are regularly amortizing down over time.

And then on bad debt.

Is there anything specific related to rite aid or is that.

Just your general kind of placeholder for at this point in the year on the initial outlook.

Just a general placeholder.

Yes, the bad debt and 24, the $3 million to $5 million range a certain standard.

And if theres anything relative rate review well within our budget.

Michael B. Haines: Okay. And then circling back to acquisitions, more big picture here, Stuart, I think you just said, you know, if you can acquire some of these assets, it'd be the highest quality you've bought in the last 10 to 13 years. And you guys are kind of targeting high sixes.

Okay and then.

Circling back to acquisitions more big picture here Stuart I think you just said you know if you can acquire some of these assets would be the highest quality you've bought in the last 10 to 13 years.

You guys are kind of targeting high fixed.

Stuart A. Tanz: I'm just trying to get a sense, you know, I have you guys trading in the low sevens, depending on where you guys think NAV is today. I mean, are these private market trades just really indicative of where the market should be? And, you know, I know you guys have talked a lot about your stock being a little bit undervalued here, but is your ability to kind of break some of these loose and sellers getting more willing to transact at these levels going to change your view at all of your discount to NAV? And again, I know it's been brought up a lot on this call, your sensitivity to kind of issuing equity here to buy these. I'm just trying to get a sense of, you know, what the real accretion here to NAV is, even though maybe you're getting a little bit of accretion here to earnings out of the gate. Well, undervalued is an understatement, in my humble opinion, in terms of where the stock is trading.

Trying to get a sense.

Have you guys trading in the low sevens, depending on where you guys think NAV is today I mean.

Are these private market trades, just really indicative of where the.

The market should be and I know you guys have talked a lot about your stock being.

I'm, a little bit undervalued here, but.

Does your ability to kind of break some of these loose sellers getting more willing to transact at these levels.

Change your view at all of kind of your discount to NAV.

Again, I know, it's been brought up a lot on this call your sensitivity to kind of issuing equity here to buy these I'm just trying to get a sense.

What's the real accretion here.

<unk>.

Even though maybe youre getting a little bit of accretion here to earnings out of the gate.

Well.

Undervalued is an understatement in my humble opinion in terms of where the stock is trading.

Stuart A. Tanz: But yeah, I mean, look, this is not a market indication in terms of where the market is or where the market's going. These are transactions that are done principle to principle. And you know, again, there's typically a reason why we're getting better pricing, whether it's timing or other moving pieces. That's really what's driving the transactions from our perspective. So again, this is not sort of a mark; you know, this isn't a mark on the market.

Yes, I mean look we will.

This is not this is not in our market indication in terms of where the market is or the market's going these are transactions that are done.

Principal to principal.

And there is again there is typically a reason why we're getting better pricing.

Whether its timing or other moving pieces.

That's really what's driving.

The transactions from our perspective. So again this is not sort of a market. This isn't a mark in the market. It's just.

Stuart A. Tanz: It's just, you know, the ability to do this is what we do best as a management team. I mean, we've been doing this for 30 years, we have acquired a number of assets on the West Coast, and we have a pretty good idea what we're buying and the accretions we can get from these assets. I mean, not only do we think we will be buying them, hopefully, accretively as we close these transactions, but it's what comes afterwards that's more important in terms of growth. So, you know, we are excited, and we'll see how things go as we move through the year. What do you think the growth profile of some of these assets is relative to your legacy portfolio?

The ability. This is what we do best as a management team I mean, we've been doing this for 30 years, we have acquired.

A number of them.

Assets on the West Coast, and we have a pretty good idea, what we're buying and the accretion we can get from these assets I mean, not only do we think we will be buying them hopefully.

Creatively as we.

Closed these transactions, but it's what comes afterwards, that's more important in terms of growth. So.

We are we're excited and we'll see how things go as we move through the year.

What do you think the growth profile of some of these assets is relative to your legacy portfolio.

Stuart A. Tanz: What we're looking at is probably going to deliver, you know, probably 3% internal growth, maybe a bit better. It just depends on, you know, how we manage and how we lease. So I mean, the one thing that we do well is we stay ahead of this tenant base. And we, as you have seen and heard for many years, are very proactive in terms of capturing what I would call the mark to market on the assets we own and we buy. And not to belabor the point, because I know it's been addressed, but just as you guys think about the appropriate investment spread relative to your cost of capital, or at least what the minimum accretion you need is, kind of where are you thinking these days? Is it 50 basis points? Is it 100?

These.

We're looking at is probably going to deliver.

A 3% internal growth.

Maybe a bit better was it just depends on.

How we manage and how we leased I mean, the one thing that we do well as we stay ahead of this tenant base and we as you have seen and heard many years, we were very proactive in terms of capturing what I would call the mark to market on the assets, we own and we buy.

Alright, and then not to belabor the point because everyone's been addressed but just as you guys think about the appropriate investment spread relative to your cost of capital or at least what.

The minimum accretion you need is kind of where are you thinking.

These days is it 50 basis points is 100 kind of where is the minimum.

Stuart A. Tanz: Kind of where's the minimum also taking into account sort of that maybe longer-term growth or other opportunities within the asset that you can unlock going forward? Yeah, look, it's just a function of looking at the underlying, you know, leases and what we're getting from those leases as it relates to rollover or what we can potentially terminate and get a much higher mark to market on. So internal growth is very important from our perspective.

Also taking into account sort of that maybe longer term growth.

Other opportunities within the asset that you can unlock going forward.

Yes, if you look at this just a function of looking at the underlying.

Leases and what we're getting from those leases as it relates to rollover or what we can.

<unk> terminated and get a much higher mark to market on so that internal growth is very important from our perspective and.

Michael B. Haines: And, you know, every situation is different. I don't know if you want to add anything to that, Rick. All right, great. Thank you. Thank you. Thank you. And our final question comes from the line of Linda Seib with Jeffries. Your line is now open. Hi, thank you. Good morning. In 2023, bad debt was $3.4 million, and you have a $3 to $5 million bad debt expectation for 2024. Can you just remind us how this compares to history? I think I would take COVID out of that in terms of history, but...

Every situation's different.

I don't know if you want to add anything to that rich.

Alright, great. Thank you.

Thank you. Thank you.

And our final question comes from the line of Linda Tsai with Jefferies. Your line is now open.

Hi, Linda.

Good morning.

In 2023, bad debt was $3 4 million and you have $3 million to $5 million.

That expectation for 2004 can you just remind us how this compares to history.

I think I would take COVID-19 out of that in terms of history.

Michael B. Haines: I think we got it probably initially a little bit too conservatively. Our normal bad debt budget is one and a half percent of total revenue. So we put some goalposts around that for guidance. 2023 might have been a little bit higher than our normal, but you know three to five million is just kind of a general range to see what happens with the tenant base over the year. And then your occupancy is weighed down a little bit by Rite Aid, but presumably still pretty high on an absolute basis. Just generally, how are you feeling about the overall retail environment as it relates to retailer demand versus store closures? Yeah. Yeah, retail demand continues to be very strong. As we've touched on a few times during the call, you know, when we do get a space back, there are typically multiple LOIs, multiple offer times.

Okay.

I think we got probably initially a little bit considerably our normal bad debt budget is one 5% of total revenue. So we put some goalposts around that for guidance.

2023, might've been a little bit higher than normal but.

Three to 5 million, just kind of a general range to see what happens with the tenant base over the year.

Got it and then your occupancy is way down a little bit by Rite aid, but presumably still pretty high on an absolute basis.

Just generally like how are you feeling about the overall retailer environment as it relates to retailer demand versus the store closures.

Yes.

Yes retail demand continues to be very strong.

We've touched on a few times during the call when we do get a space factors typically multiple otherwise awful offer common spaces.

Michael B. Haines: And, you know, we see the tenant base on the West Coast buying for the product that we have, the grocery-anchored product, still in very high demand. I mean, the numbers this morning were very strong as it relates to the resiliency of our tenant base, Linda. Pharmacy was up almost seven, grocery was up three, and restaurants were up six. I mean, these are very, very strong numbers in terms of what we're seeing so far in 24.

And.

We see.

The tenant base on the West coast buying for the product that we have with grocery anchored product.

Still a very high demand.

I mean the numbers. This morning were very strong as it relates to the resiliency of our tenant base Linda pharmacy was up almost seven grocery was up three restaurants were up six I mean these are very very strong numbers in terms of what we're seeing so far in 2004. So we think certainly the grocery anchored.

Stuart A. Tanz: So we think certainly the grocery-anchored segment of retail is going to hold up quite well. Great, thank you. Thank you. I'm currently showing no further questions at this time. I'd like to turn the call back over to Mr. Stuart Tanz for a closing remark.

<unk> segment of retail is going to hold up quite well.

Great. Thank you.

Thank you I am currently showing no further questions at this time I'd like to turn the call back over to Mr. Stuart <unk> for closing remarks.

Stuart A. Tanz: In closing, thank you all for joining us today. As always, we appreciate your interest in ROIC. If you have any additional questions, please contact Lauren, 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 in our 10K.

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

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-K.

Operator: Thanks again, and have a great day, everyone. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day. Do you like to watch videos?

Thanks, again and have a great day everyone.

This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.

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