Q4 2023 Federal Realty Investment Trust Earnings Call

Okay.

Speaker Change: Good day and welcome to the Federal Realty Investment Trust fourth quarter three earnings conference call.

Operator: Good day, and welcome to the Federal Realty Investment Trust's fourth quarter 2023 earnings conference call. All participants will be in listen-only mode.

All participants will be in listen only mode.

Speaker Change: Should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad.

Speaker Change: After todays presentation, there will be an opportunity to ask questions.

Speaker Change: Ask your question there were press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

Operator: To withdraw your question, please press star then two. We do ask that you limit yourself to one question per trip to the queue. Please also note today's event is being recorded. I would now like to turn the conference over to Leah Brady, Vice President, Investment Relations. Please go ahead. Good afternoon.

Speaker Change: We do ask you limit yourselves to one question per trip to this year.

Speaker Change: Please also note today's event is being recorded.

Speaker Change: I would now like to turn the conference over to Leah Brady Vice President Investor Relations. Please go ahead.

Leah Andress Brady: And I'm sure you and thank you for joining us today.

Leah Andress Brady: Thank you for joining us today for Federal Realty's fourth quarter 2023 Earnings Conference call. Joining me on the call are Don Wood, Federal's Chief Executive Officer, Jeff Berkes, President and Chief Operating Officer, Dan Gee, Executive Vice President, Chief Financial Officer and Treasurer, Jan Sweden, Executive Vice President, Chief Investment Officer, and Wendy Seher, Executive Vice President, Eastern Region President. As well as other members of our executive team who are available to take your questions at the conclusion of our prepared remarks. A reminder that certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results, including guidance.

Leah Andress Brady: Fourth quarter 2020.

Leah Andress Brady: Three earnings Conference call joining me on the call are Don was Chief Executive Officer, and Jeff Berkowitz, President and Chief operating Officer, and Chief Executive Vice President and Chief Financial Officer, and Treasurer, Yeah honestly doesn't.

Leah Andress Brady: I'm, the executive Vice President and Chief Investment Officer, and when you see our executive Vice President Eastern region.

Leah Andress Brady: Other members of our executive team, they're available to take your questions at the conclusion of our prepared remarks.

Leah Andress Brady: A reminder, that certain matters discussed on this.

Leah Andress Brady: This call may be deemed to be forward looking statements within the meaning of the private Securities Litigation Reform Act.

Leah Andress Brady: Forward looking statements include any annualized or protected information as well as statements referring to expected or anticipated events.

Our results, including guidance, although federal Realty believes expectations reflected in such forward looking statements are based on reasonable assumptions around your operations and its actual performance may differ materially from the information in our forward looking statements and we can give no assurance.

Leah Andress Brady: Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements, and we cannot give any assurance that these expectations can be attained. The earnings release and supplemental reporting package that we issued tonight, our annual report filed on Form 10-K, and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and results of operations. Given the number of participants on the call, we kindly ask that you limit yourself to one question during the Q&A portion of our call. If you have additional questions, please repeat them. And with that, I will turn the call over to Don Wood to begin our discussion of our fourth quarter results. Don? Thanks, Leah, and good afternoon, everybody.

Leah Andress Brady: Yeah.

Leah Andress Brady: The earnings release, and supplemental reporting package that we anticipate our annual report filed on Form 10-K, and our other financial disclosure documents provide them more in depth discussion of risk factors that may affect our financial condition and results of operation given the number of participants on the call. We only have to limit yourself to one question during the Q&A portion of our call.

Leah Andress Brady: If you have additional questions. Please re queue and with that I will turn the call over to John went to begin our discussion of our fourth quarter results Don.

John: Thanks, Leah and good afternoon everybody.

Donald C. Wood: Well, 2023 is in the books with a strong $1.64 recorded in the fourth quarter, finishing off what is an all-time record earnings year at $6.55 of FFO per share. That's happening despite over $600 million in construction progress not yet contributing and higher interest expense that cost the trust an additional $0.27 per share when compared with the average rate in 2022. Jeff, with comparable money costs between 22 and 23, FFO growth per share would have been 8%, right up there with our best pre-COVID. It says a lot in terms of the power of the portfolio that has grown bottom-line FFO per share at a compound annual growth rate of 4.5% over the last 20 years in addition to an average uninterrupted dividend yield of roughly 3% or better that includes the great financial crisis that includes the global pandemic and includes every, A Better Portfolio to Own for the Long-Term. You know?

John: Well 2023 into the book with a strong dollar 64 recorded in the fourth quarter finish off what is an all time record earnings year.

John: $6 55.

Sure.

John: It's happening despite over $600 million of construction in progress not yet contributing.

John: The higher interest expense the cost of trust, an additional 27 cents per share when compared with the average rate in 2022.

With comparable money cost between 'twenty, two and 'twenty three.

John: <unk> growth per share would have been 8% right up there with their best picked up in years.

John: It says a lot in terms of the power of the portfolio that is growing bottom line <unk> per share at a compound annual growth rate or 5% over the last 20 years. In addition to an average uninterrupted dividend yield of roughly 3% or better.

John: Close to the great financial crisis caused the global pandemic.

John: A better portfolio to own for long term investors.

Donald C. Wood: It also feels like we're getting closer to a time where accelerated acquisition activity, coupled with our redevelopment and re-merchandising expertise on new acquisitions, could boost that growth rate over the next few years. As far as today's environment is concerned, demand continues to exceed supply for the highest quality assets in the close-in suburbs. And with the impacts of the pandemic in the rearview mirror and lack of new supply coming on, I don't see this positive supply-demand dynamic changing anytime soon. Our average in-place rents portfolio-wide are $31.60 per foot, and the comparable retail deals we did in the fourth quarter were at $44.57 per foot and were at $36.75 for the entire year. I've been hearing that our rents are high and can't be pushed further for the better part of the last 20 years. And I guess, on a relative basis, they are.

John: It also feels like we're getting closer to a time, where it's celebrated acquisition activity coupled with our redevelopment and re merchandising expertise on new acquisitions could boost that growth rate over the next few years.

John: As far as today's environment demand continues to exceed supply for the highest quality assets in the close in suburbs and what the impacts of the pandemic in the rearview mirror and lack of new supply coming on I don't see this positive supply demand dynamic changing anytime soon.

John: Our average in place rents portfolio wide or $31 61.

And the comparable retail deals we did in the fourth quarter were at $44 57.

John: We're at 36 75 for the entire year.

John: I've been hearing that our rents are high and can't be pushed further for the better part of the last 20 years and I guess on a relative basis. They are.

Donald C. Wood: Federal properties have higher occupancy rates, and better properties have higher tenant sales and profitability. Frankly, it's obvious. The Fan Addrents are an interesting barometer of the While we push for a strong fixed rent in nearly every lease, tenant sales above a threshold level equates to additional rent. Percentage rent and overage rent totaled $6 million in the fourth quarter and $19.3 million for the year, an all-time record, which broke the $18.8 million record from a year earlier. Fourth quarter retail leasing continued to pick up with another 100 comparable retail deals done at 12% rollover on a cash basis, and 23% on a straight line basis. These comparable retail deals account for virtually all, 98% of the total retail deals done in the quarter, making them representative of the entire portfolio, not just a fraction.

John: Better properties have higher rents better properties have higher tenant sales and profitability.

John: It's obvious percentage rents arent interesting barometer on this topic.

John: While we push for a strong fixed rent and nearly every lease tenant sales are above a threshold level equates to additional rent.

John: Percentage rent and overage rent totaled $6 million in the fourth quarter.

John: And $19 $3 million for the year.

John: An all time record.

John: Which broke the $18 $8 million record from a year earlier.

John: Fourth quarter retail leasing continue to crank, but another hundred comparable retail deals done at 12% rollover on a cash basis, 23% on a straight line basis.

John: These comparable retail deals to account for virtually all 98%.

John: Of the total retail deals done in the quarter, making them representative of the entire portfolio not just the frac.

Donald C. Wood: It was a great leasing year, the third in a row where we exceeded 2 million square feet, roughly 25% more than the five-year average between 2015 and 2019. And just to pound the point home, those cash basis rollover inquiries that we've had come on top of leases that have had what I believe to be the highest contractual rent bumps throughout their term in the sector, making that rollover all the more impressive. Contractual rent bumps for the deals done in the fourth quarter were roughly 2.5% for anchor and small, with New and Renewal Small Shops at approximately three. The Weighted Average Contractual Rent Bumps for the Entire Retail Portfolio, Anchor and Small Shop, not just one quarter's worth, but the whole thing. Approximates two and a quarter percent.

John: It was a great leasing here the third in a row, where we exceeded 2 million square feet, roughly 25% more than the five year average between 2015 and 2019.

Just the pound the point home those cash basis rollover increases come on top of pieces that have had what I believe to be our highest contractual rent bumps throughout their term in this sector.

John: That rollover all the more impressive.

John: Contractual rent bumps for the deal in the fourth quarter or roughly 2.5% blended anchor and small shop with new and renewal small shop at approximately 3%.

John: The weighted average contractual rent bumps for the entire retail portfolio anchor and small shop, not just one quarter's worth but the whole thing approximates approximates, 2.25% best in the business as far as we can do.

Donald C. Wood: Best in the business as far as we can see... Sustained leasing volume and related economics bode well for the future, especially the contractual. We ended the year with overall portfolio leads at 94.2, pretty strong, but with room to grow. That breaks down between anchors at 96% lease and shop space at 90.7%. When you look at occupancy possibilities going forward, by looking at our past, it's reasonable to expect another 100 basis points of small-shelf occupancy and another 200 basis points of anchor occupancy improvement in the coming 12 to 18 months, depending, of course, on the extent of future bankruptcies that we are not seeing today. They're not at all obvious.

John: The sustained leasing volume and related economics, bode well for the future, especially the contractual rent bumps.

John: We ended the year with overall portfolio leased at 94 point to pretty strong, but with room to grow.

John: That breaks down between anchors at 96% leased and shop space at 91 seven.

John: When you look at occupancy possibilities going forward by looking at our past, it's reasonable to expect another 100 basis points of small shop occupancy and another 200 basis points of anchor rock anchor occupancy improvement in the coming 12 to 18 months depending of course on the extent of future bankruptcies that we're not seeing today, they're not at all obvious.

Donald C. Wood: The residential and office product at our mixed-use properties continues to outperform competing supply in non-mixed-use environments and stood at 96% least for both our comparable resi and comparable mixed-use office product at year-end while commanding premium rent. Progress leasing up our mixed-use office under development, 915 Meeting Street of Plank and Rose and Santana West, has been measurably stronger, with 215,000 square feet newly leased or in the final stages of the LOI to sign the lease process. That includes the first signed deal with Santana West and Acroshore, the global fintech leader in insurance. With those deals complete, 915 Meeting Street and Blanken Rose will be 80% leased, and Santana West will be nearly half leased.

John: The residential and office product at our mixed use properties continues to outperform competing supply non mixed use environments and stood at 96% leased for both our comparable and comparable mixed use office product at year end, while commanding premium rents.

John: Progress leasing up our mixed use office Underdevelopment 915 meeting Street at Pike, <unk> Rose and Santana West have been measurably stronger with 215000 square feet newly leased or in the final stages of the LOI to find these process.

John: That includes the first sign deal at Santana West with that for sure a global Fintech leader to the insurance sector.

John: With those deals complete 915, beating street at Pike, <unk> Rose will be 80% leased at Santana West will be nearly half leased up.

John: I go through all this to really try to hammer home the obvious health of a business centered around leasing high quality retail centric properties in the close in suburbs of America's greatest cities. While Bottomline results are and will continue to be muted by the higher but certainly historically reasonable cost of capital that is stabilizing.

Donald C. Wood: I go through all this to really try to hammer home the obvious health of a business centered around leasing high-quality, retail-centric properties in the close-in suburbs of America's greatest cities. While bottom-line results are, and will continue to be, muted by the higher, but certainly historically reasonable, cost of capital that is stabilizing, rents will likely continue to adjust upward over time to reflect that reality. This is especially true for tenants in locations in affluent areas where customers can absorb higher costs.

John: Rents will likely continue to adjust upward overtime to that reality.

John: This is especially true for tenants and locations in affluent areas, where customers can absorb higher costs.

John: The higher interest rates don't quite investors' appreciation of strong underlying business fundamentals that exist today likely tomorrow.

John: With that backdrop. We're also really excited to add a substantial expansion of the 87 unit first phase of residential product that we built at Bala Cynwyd shopping center in suburban Philadelphia, a few years back.

Donald C. Wood: I hope that higher interest rates don't cloud investors' appreciation of the strong underlying business fundamentals that exist today and likely tomorrow. With that backdrop, we're also really excited to add a substantial expansion to the 87-unit first phase of residential product that we built at Ballot Kenwood Shopping Center in suburban Philadelphia. The first phase is open strong and remains fully leased with growing rents. Strong supply and demand dynamics in this close-in part of Philadelphia's main line, along with construction costs moderating, means that we're able to build an additional 217 residential units, 16,000 feet of additional retail, and the covered parking spaces to service it all, on the former Lord and Taylor site at Ballatinwood. The shopping center features an expansive tenant roster, including an LA fitness gym, a full-service grocer, restaurants, and necessary services Projects should get underway later this year, beginning with the demolition of the Old Lord and Taylor Building.

John: The first phase phase opened strong and remains fully leased with growing rents.

John: Supply and demand dynamics in the in this close in part of Philadelphia's mainline along with construction cost moderating means that we're able to build an additional 217 residential units 16000 feet of additional retail and the covered parking spaces service at all on the former Lord and Taylor site at balance sheet.

John: The shopping center features and features an expansive tenant roster, including an la fitness been a full service grocery restaurants and necessary services, which are often cited as a reason residents are choosing it.

Project should get underway later this year beginning with demo of the old Lord <unk> Taylor building and should yield a 7% cash on cost return when stabilized.

John: Double digit Unlevered IRR based on the rent growth, we've seen and expect and be funded from free cash flow.

John: Yeah.

John: Okay on the 'twenty 'twenty four we certainly expect another record earnings year with an energized team and a strong sense of optimism.

Speaker Change: And I'll go into a bunch more detail and I'll turn it over to him and then open it up to your questions.

Donald C. Wood: It should yield a 7% cash-on-cost return when stabilized, drive a double-digit unlevered IRR based on the rent growth we've seen and expect, and be funded from free cash flow. Okay, on to 2024, where we certainly expect another record earnings year with an energized team and a strong sense of opportunity. Dan will go into a bunch more detail, and I'll turn it over to him and then open it up to your questions. Dan?

Speaker Change: Thank you dawn.

Speaker Change: Everyone.

Speaker Change: Our reported <unk> per share the dollars 60 for the fourth quarter.

Speaker Change: 55 for the year were up three eight and $3 six respectively versus 2022.

Speaker Change: <unk> was up six 5% fourth quarter.

Speaker Change: More impressive seven 2% for the year.

Speaker Change: Primary drivers for the strong performance in 2023.

Speaker Change: First Toi group and our comparable portfolio up almost 5% on cash basis, excluding prior period rents in Turkey driven.

Daniel Guglielmone: Thank you, Don. Hello, everyone. Our reported FFO per share of $1.64 for the fourth quarter and $6.55 for the year were up 3.8 and 3.6, respectively versus 2022. POI was up 6.5% in the fourth quarter and a more impressive 7.2% for the year. Primary drivers for the strong performance in 2023. First, POI growth in our comparable portfolio, up almost 5% on a cash basis, excluding prior period rents and term fees, driven by both higher rents and higher average occupancy over the course of the year. Through my continued strength in consumer traffic and tenant sales, particularly at our mixed-use assets, driving parking revenues and over the percentage rent hires, effectively controlling property level expenses, and having a lower credit reserve than we originally forecast. Second, contributions from our redevelopment and expansion pipeline, which came in at the upper end of our portfolio. And lastly, continued focus on overall expense controls. The GNA came in below expectations.

Speaker Change: Driven by both higher rents and higher average occupancy over the course of the year.

Driven by continued strength in consumer traffic and tenant sales, particularly at <unk>.

Speaker Change: Next use assets driving parking revenues and overall percentage rents higher.

Speaker Change: Actively controlling property level expenses.

Speaker Change: And having a lower credit reserves, we originally forecast.

Second contributions from our redevelopment and expansion pipeline, which came in at the upper end of our forecast.

Speaker Change: And lastly continued focus on overall expense controls G&A came in below expectations.

Speaker Change: This was offset primarily by higher interest rate headwinds.

Speaker Change: Totaling 27 cents.

Speaker Change: To reiterate <unk> point earlier with a consistent cost of debt versus 2022.

Speaker Change: <unk> per share growth year over year would've been 8% in 2023.

Speaker Change: Reflecting an exceptionally strong year growth at the property level.

Speaker Change: Yeah.

Speaker Change: GAAP based comparable POI growth came in at 4% for the fourth quarter and three 2% for you.

On a comparable cash basis, excluding the impact of prior period rent and term fees.

Speaker Change: <unk> was five 2% in the fourth quarter and four 7% for the year.

Speaker Change: As a reminder, this information, including its appropriate rent term fees and GAAP to cash adjustments can be found on page 12.

Daniel Guglielmone: This was all set primarily by higher interest rate hedges, totaling $0.27. To reiterate Dom's point earlier, with a consistent cost of debt. 2022 FFO per share growth year-over-year would have been 8% in 2022, reflecting an exceptionally strong year of growth at the property. Gap-based comparable POI growth came in at 4% for the fourth quarter and 3.2% for the year, and comparable cash, excluding the impact of prior period rent and term, was 5.2% in the fourth quarter and 4.7% for the year.

Speaker Change: Quarterly NK cells.

Our residential portfolio continues to be a source of strength despite headwinds in the broader residential sector.

Speaker Change: Same store residential py growth was five 8% for Q1 with revenue growth for the quarter at 6% and we expect this strength to continue into 2024.

Speaker Change: The value proposition, providing a premium residential offerings on top of an attractive retail amenity base.

Speaker Change: Driving outperformance across our targeted residential portfolio.

Speaker Change: Also a big driver of our growth in 2023 was the continued stabilization of a large portion or redevelopment and expansion pipeline, it's $18 million of the incremental P. O L. I came online from our $750 million.

Daniel Guglielmone: As a reminder, this information, including the components of prior period rent, term fees, and gap-to-cash adjustments, can be found on page 12 of our quarterly 8K Supplement. The residential portfolio continues to be a source of strength. Despite headwinds in the broader residential... Same store residential P.O.I.

Speaker Change: Paul.

Speaker Change: And we expect that to be the case moving forward as well as we add new projects to the lineup and maintain that part of our business.

Speaker Change: A new driver of growth.

Speaker Change: The scale and skill set of our redevelopment program is a key.

Daniel Guglielmone: growth was 5.8% in 4Q, along with revenue growth for the quarter at 6%. We expect this strength to continue into 2020. The value proposition of providing a premium residential offering on top of an attractive retail amenity base. Driving Out Performance Across Our Targeted Residential Communities Another big driver of our growth in 2023 was continued stabilization of a large portion of our redevelopment and expansion pipeline as $18 million of incremental POI came online from our $750 million in process pipeline. And we expect that to be the case moving forward as well, as we add new projects to the lineup and maintain that part of our business as a continued driver of growth. The scale and skill set of our redevelopment program. Key Differentiator for Federal, Notable updates to our in-process pipeline will contribute an additional $9 to $12 million of POI in 2024, including $115 million Darien Common Projects in Connecticut, where the residential is fully stabilized, 98.4% occupancy with rents above $4.00. Tenant retention rates remain above 90%, and the retail component approaches 90%.

Speaker Change: Regina.

Speaker Change: No.

Speaker Change: Notable updates to our in process pipeline.

Speaker Change: Each will contribute an additional $9 million to $12 million.

Speaker Change: In 2024 include $115 million Darien common projects in Connecticut.

Speaker Change: The residential is fully stabilized 98, 4%.

Speaker Change: Occupancy with rents above $4.

Speaker Change: Foot per month, well above underwriting.

Speaker Change: Tenant retention rates remain above 90% and a retail component approaches 90% leased.

Speaker Change: A testament to what a strong retail amenity base and bring to a residential project.

Speaker Change: At $190 million 915 meeting Street Pike <unk> rose.

Choice hotels fully moved in as they open and for Q plus they have taken additional space.

Speaker Change: <unk> U S headquarters is next.

Speaker Change: But.

Speaker Change: All other tenants actively negotiating leases.

Speaker Change: Huntington shopping center on long Island, it's $85 million.

Speaker Change: Anchored redevelopment.

Speaker Change: Over 90% leased with new anchor Rei opening during the fourth quarter. In addition to a number of small shops.

Speaker Change: We feel very good about the yield on this project.

Speaker Change: <unk> the top end of our 7% to 8% return range.

Speaker Change: For those of you in the New York area, It's worth a trip out to Central Long Island. Later this year after a whole foods opened to check it out as well as the melody Melville asset.

Daniel Guglielmone: A testament to what a strong retail amenity base can bring to a residential project, at the $190 million 915 Meeting Street at Pike and Rose. Choice Hotels has fully moved in as they opened in 4Q, plus they've taken additional space. Sodexo's U.S. headquarters is next on deck, with multiple other tenants actively negotiating these, at Huntington Shopping Center on Long Island.

Speaker Change: While further south.

Speaker Change: Our exceptional retail redevelopment truly highlight skill set.

Speaker Change: It's only in 2023, we incrementally invested over $140 million and properties will be only partially owned previously had an effect of eight 1% cap rate.

No better risk adjusted investments and deploying capital reasonably into assets, we know extremely well.

Speaker Change: Unlevered IRR on these investments in the double digits.

Now to the balance sheet and an update on our liquidity position.

Daniel Guglielmone: This $85 million Whole Foods anchored redevelopment is over 90% leased, with new anchor REI opening during the fourth quarter in addition to a number of... We feel very good about the yield on this project, approaching the top end of our 7-8% return range. For those of you in the New York area, it's worth a trip out to Central Long Island later this year after Whole Foods opens to check it out, as well as the Melville Asset Management Center, a mile further south.

Speaker Change: As you all saw we refinanced our $600 million bond maturity, which came due on January 15 through a combination of a $200 million secured loan or Bethesda row property and an effective 5% fixed rate for the first two years alone plus two one year extensions at our option effectively a four year loan.

Speaker Change: And a $485 million, 3.25% exchangeable notes offering due 2029 raised in early January.

Daniel Guglielmone: Both are exceptional retail redevelopments that truly highlight the federal skillset. Additionally, in 2023, we incrementally invested over $120 million in properties we only partially owned previously, at an effective 8.1% cap. There is no better risk-adjusted investment than deploying capital credibly into assets we know extremely well, own leverage of IRRs on these investors, and the Double D. Now to the balance sheet and an update on our liquidity position. As you all saw, we refinanced our $600 million bond maturity, which came due on January 15th, through a combination of a $200 million secured loan on our Bethesda Row property and an effective Offering due 2029. Raised in early January, at an effective 3.9% interest rate all in. Order that transaction today.

Speaker Change: And an effective three 9% interest rate all in.

Speaker Change: Part of that transaction, we purchased all spread to increase the effective strike price on the convert.

Speaker Change: Up 40%.

Speaker Change: Up above $143 per share.

Speaker Change: So no incremental economic solution, unless the common stock trades above that level.

Speaker Change: Pro forma the most recent financing dividends paid our liquidity stands above $1 3 billion with an undrawn $1 5 billion credit facility and available cash on hand.

Plus we have no maturities remaining in 2024 and no material maturities until 2026.

Speaker Change: Our leverage metrics continue to be strong.

Fourth quarter annualized net debt to EBITDA stands at five nine times.

Speaker Change: And that metric should improve over the course of 2024 and hit our target of five and a half times in 2025.

Speaker Change: Fixed charge coverage was three six times at year end in that metric.

Daniel Guglielmone: The call spread to increase the effective strike price on the convert by 40%, up above $143. So no incremental economic solution unless the common stock trades above that level of Pro forma, with the most recent financing and dividends paid, our liquidity stands above $1.3 billion with an undrawn $1.25 billion credit facility and available cash on hand. Plus, we have no maturities remaining in 2024 and no material maturities until 2026. Our leverage metrics continue to be strong, as our fourth quarter annualized net debt to EBITDA stands at 5.9 times. And that metric should improve over the course of 2024 and hit our target of five and a half times in 2025. Fixed charge coverage was 3.6 times at year end, and that metric should continue to improve as incremental EBITDA comes online.

Speaker Change: Continue to improve as incremental EBITDA comes online.

Speaker Change: And interest rates fall over the second half.

Speaker Change: Now onto guidance.

Speaker Change: For 2024, we're introducing an ethical per share forecast.

Speaker Change: <unk> 65 to 687 per share.

Speaker Change: This represents over 3% growth at the midpoint of $6 76.

Speaker Change: <unk>, 5% at the high end of the range.

Speaker Change: This is driven by comparable growth.

Speaker Change: Half the 4% when excluding prior period rents in term fees right in a quarter percent at the midpoint.

Speaker Change: This assumes occupancy levels will increase from 92, 2%.

Speaker Change: At 12 31.

Speaker Change: Up to roughly 93% by year end 2020.

Speaker Change: Although expect to step back in the first quarter due to expected seasonality.

Speaker Change: And then add in additional contributions from our redevelopment and expansion pipeline of $9 million to $12 million for those modeling let me direct you to our 8-K on page 16.

Speaker Change: We provide our forecast of stabilized P O y timing by project.

Speaker Change: This will be offset.

Speaker Change: By modestly lower prior period collections.

Speaker Change: Got it to be roughly $3 million.

Speaker Change: Four versus $5 million 23.

Daniel Guglielmone: And interest rates fall over the second half of the year. Now on to guide, 2024, we are introducing an FFO per share forecast. 665-687-PROCEED.

Speaker Change: Modestly lower net term fees forecasted $4 million to $7 million range in 'twenty four versus $7 million 23.

And continued drag from higher money calls.

Speaker Change: The recent $600 million of notes that we repaid last month.

Daniel Guglielmone: This represents over 3% growth at the midpoint of $6.76 and roughly 5% at the high end of the range. This is driven by comparable growth of 2.5% to 4% when excluding prior period rents and terms, trading a quarter percent at the mid, and assumes occupancy levels will increase from 92.2 percent at 1231 to roughly 93% by year-end 2020. Although we expect to step back in the first quarter due to expected seasonality post-season, and then add in additional contributions from our redevelopment and expansion pipeline of $9 to $12 million. For those modeling, let me direct you to our 8K on page 16, where we provide our forecast of stabilized POI and timing by project. This will be offset by modestly lower prior period collection, expected to be roughly $3 million in 2024 versus $5 million in 2023.

Speaker Change: Effective rate of three 7%.

Speaker Change: The new blended cost on our two most recent refinancing of four 3%.

Speaker Change: Other assumptions include a $100 million to $150 million of spend this year on redevelopment and expansions at our existing properties G&A as forecast 48 $52 million range for the year and capitalized interest for 2024 is estimated at $18 million to $21 million.

Speaker Change: We've assumed a total credit reserve consisting of bad debt expense unexpected vacancy incentive or at least a 70 to 90 basis points for 2024.

Speaker Change: More in line with pre pandemic.

Speaker Change: Yes.

And as is our custom this guidance does not reflect any acquisitions or dispositions in 2024.

Speaker Change: We will adjust upwards as we go given our opportunistic opportunistic approach to both.

Speaker Change: Quarterly F O cadence for 2024 its forecast the first.

Speaker Change: First quarter being roughly in line with the fourth quarter of 2023, and a range of $1.60 to $1.65 with.

Speaker Change: <unk> growth each quarter thereafter.

Speaker Change: Please see the detailed summary of this guidance and our 8-K on page 28.

Speaker Change: And in our press release.

Speaker Change: And with that operator, please open the line for questions.

Speaker Change: Thank you we will now begin the question and answer session.

Daniel Guglielmone: Modestly lowered net term fees forecasted in the $4-$7 million range in 2024 versus $7 million in 2023, and continued drag from higher money, recent 600 million dollars of notes that we repaid last at an effective rate of 3.7%, versus the new blended costs on our two most recent refinancing of 4.3%. Other assumptions include $100 to $150 million of spend this year on redevelopment and expansions on our existing property. G&A is forecast in the $48-$52 million range for the year. Capitalized interest for 2024 is estimated at $18-$21 million. We've assumed a total credit reserve, consisting of bad debt expense, unexpected vacancy, and debt of unrelief, of 70 to 90 basis points for 2024, more in line with the pre-pandemic historical average.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

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Speaker Change: We ask that you limit yourself to one question.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: And today's first question comes from Juan San Bruno with BMO capital markets. Please go ahead.

Speaker Change: I was just hoping you guys could talk a little bit more about the office leasing it sounded like it was the outcome.

Speaker Change: Please.

Speaker Change: China was there anything else I'm curious as to the the momentum or our prospects for some other tenants there.

Speaker Change: And how do you think that evolves.

Speaker Change: In 'twenty four.

Speaker Change: Yeah, no well, one I I tried to with or.

Speaker Change: Without mentioning the name or are getting myself in trouble.

Speaker Change: To.

Indicate that there is a large tenant there that we are very close to lease signing an LOI is done more in the last stages of lease signing I'm not going to name the tenant today.

Daniel Guglielmone: And, as is our custom, this guidance does not reflect any acquisitions or dispositions in 2024. We will adjust, likely upwards, as we go, given our opportunistic approach. Quarterly FFO cadence for 2024 is forecast to have the first quarter being roughly in line with the fourth quarter of 2023 at a range of $1.60 to $1.65, with sequential growth each quarter thereafter.

Speaker Change: Certainly, we'll know them and we would expect that lease.

Speaker Change: That's something dramatic goes wrong done very very shortly from here on that along.

Speaker Change: Along with that for sure.

Speaker Change: A couple of other smaller things is what gets us to about half done on on that on that building in Santana west and similarly.

Speaker Change: Very close to signing on a couple of blood.

Speaker Change: Here at Pike, <unk> Rose four 915 meeting, which would get that building to 80% leased so been a very different last few months in terms of.

Operator: Please see the detailed summary of this guidance in our 8K, on page 28, and in our press. And with that, operator, please open the line. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad.

Speaker Change: Not just tourists but productivity.

Speaker Change: The attorney L.

Speaker Change: Otherwise into leases.

Speaker Change: Thank you and the next question today comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Operator: If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. We ask that you limit yourselves to one question. At this time, we will pause momentarily to assemble our roster. And today's first question comes from Juan San Bruno with BMO Capital Markets. Please go ahead. I was just hoping you guys could talk a little bit more about the office leasing. It sounded like it was the FinTech leasing at Santana. Was there anything else?

Speaker Change: Hey.

Alexander Goldfarb: Thank you for taking the question.

Alexander Goldfarb: Don just going through the your tenancy.

You know overall its pretty good list you know when the top tenants, but obviously, there's some not rated some not investment grade, but holistically as you push the portfolio occupancy and really upgrade tenancy are there types of tenants that youre, saying no to like for example, the classic private.

Donald C. Wood: Curious as to the momentum or prospects for finding other tenants there, and how you think that evolves in 24. Yeah, no, Juan. I tried to, without mentioning a name or getting myself in trouble, I tried to indicate that there is a large tenant there that we are very close to lease signing on. The LOI is done.

Alexander Goldfarb: <unk> highly levered tenants, even if they're a great performer, you're saying look historically these type of Lebron tenants are the ones that cause issues in.

Alexander Goldfarb: In the next downturn and therefore, even though they may be promising let's try to limit exposure just trying to think what ways that you know as the portfolio becomes increasingly in demand that you may be gaining leverage to sort of push back on the types of tenants, even if they're a great performer, but just going you know what great performer, but not great Bal.

Donald C. Wood: We're in the last stages of lease signing. I'm not going to name the tenant today, but you certainly will know them.

Donald C. Wood: And we would expect that lease, unless something dramatic goes wrong, to be done very, very shortly from here on. And that, along with that, for sure. And a couple of other smaller things are what gets us to that half done on that building in Santana West. And similarly, very close to signing on a couple of deals here at Pike and Rose work 915 meeting, which would get that building to 80% leased. So it's been a very different last few months in terms of not just tours but productivity, in terms of turning LOIs into leases. Thank you. And our next question today comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander Goldfarb: On sheet, we're going to pass.

Speaker Change: Yeah, Alex it's a it's really a good question I mean, the bottom line is when you're trying to do to improve that your portfolio, what you're effectively doing is taking all of that into consideration.

Speaker Change: Yeah.

Alex: For not just next year or the year.

Alex: After that but the terminals.

Alex: So it includes the capital decisions that have to be made in terms of what's going in I will tell you that that to the extent a tenants and it's just I think makes sense to you a tenant that we liked a lot but that does that.

Operator: Hey, thank you for taking the time to answer the question. Don, just, you know, going through your tenancy, overall, it's a pretty good list of top tenants, but obviously, there's some not rated, some not investment grade. But holistically, as you push the portfolio occupancy and really upgrade tenancy, are there types of tenants that you're saying no to, like, you know, for example, the classic private equity, highly levered tenants, even if they're a great performer? You're saying, look, you know, historically, these types of levered tenants are the ones that cause issues in the next downturn. And therefore, even though they may be promising, let's try to limit exposure, just trying to think of ways that, you know, as the portfolio becomes increasingly in demand, you may be gaining leverage to sort of push back on the types of tenants, even if they're a great performer, but just going, you know, what great performer, but not a great balance sheet, we're going to pass. Yeah, Alex, it's a really good question.

Alex: Has the riskier profile to the extent, we're limiting significantly the capital will get Jim wasn't Michelle to the extent, we're investing in that piece of real estate in that particular space and Theyre and theyre better be credit there better be comfort. If you will that that we're going to get paid we're very likely to get paid for the entire term our beliefs.

Alex: So you know I think as I started out I mean, this is a very good time for supply and demand dynamics and what that means in the better properties is choice and to the extent you had but that choice you absolutely consider things like leverage level like what the owners are planning to do with the asset or with their <unk>.

Retailers et cetera, so it's a good time to be able to continue to upgrade the portfolio.

Alex: Yeah.

Speaker Change: Thank you and our next question is how should we see the software with Evercore. Please go ahead.

Speaker Change: Thanks, Good afternoon.

Evercore: Don I guess, just maybe following up on Alex line of questioning just one.

Evercore: To talk a little bit about pricing power and given where the portfolio is in the potential uptick in occupancy I guess, how are you and Wendy and the team thinking about being able to push rents and do you expect that to materially change in 'twenty four or you know is that a little bit longer term kind of runway you just given.

Donald C. Wood: I mean, the bottom line is, when you're trying to improve your portfolio, what you're effectively doing is taking all of that into consideration for not just next year or the year after that, but the entire period determined, so it includes the capital decisions that have to be made in terms of what's going in. I will tell you that to the extent we're limiting significantly the capital we'll get to them, we'll give them a shot. To the extent we're investing in that piece of real estate, that particular space, then there better be credit, there better be comfort, if you will, that we're going to get paid. We're very likely to get paid through the entire term of the lease. So as I started out, I mean, this is a very good time for supply and demand dynamics. And what that means in the better properties is choice. And to the extent you have that choice, you absolutely consider things like leverage, like what the owners are planning to do with the asset or with their retailer, et cetera.

Evercore: You know that there's been no supply in the space and demand seems to be very tight at the good centers.

Evercore: It does it does Steve and look at.

At the end of the day, it's still a very local business and you are having this conversation based on what the potential choices are for that particular piece of real estate, where I love, where I think the and I just.

Evercore: This is the most important thing is in the contract itself.

Evercore: And so the the leverage generally whether it comes out in better bumps I mean.

Evercore: You know how I feel about the the bumps that's a contractual increase in cash flow for a long period of time nothing deep stuff.

Evercore: To me that's that's that's the first thing and the second thing is making sure that we have control of the space because the tenant wants control of our of the rest of that shopping center not just the space, but the shopping center and so I do think we're making and I've always kind of focus on this is a big thing for us to make sure that contra.

Donald C. Wood: So it's a good time to be able to continue to upgrade. Thank you. And our next question comes from Steve Sakwa with Evercore. Please go ahead. Thanks, good afternoon. Don, I guess, maybe following up on Alex's line of questioning, I just wanted to talk a little bit about pricing power and given where the portfolio is and the potential uptick in occupancy, I guess, how are you and Wendy and the team thinking about being able to push rents and do you expect that to materially change in 24 or, you know, is that a little bit longer-term kind of runway just given, It does indeed.

Evercore: <unk> as a landlord friendly as it as it could be but those are places where we have made strong strides in the last 18 months in particular before for you know strong leases with big bump. So that's where I'd look for it that's where I'd look for at most and that's in insurance.

Donald C. Wood: It does, Steve. And look, at the end of the day, it's still a very local business. And you're having this conversation based on what the potential choices are for that particular piece of real estate, where I love it, where I think the, and I just believe this is the most important thing it is in the contract. And so the leverage, generally, whether it comes out in better bumps, I mean, you know how I feel about the bumps. That's a contractual increase in cash flow for a long period of time. Nothing.

Policy to know that the foundation of this company the basic.

Evercore: Shopping centers throughout this company.

Evercore: Our our really strong with rents that whether you believe it or not are under market.

Evercore: As proven by each by each quarter that we go through now you take that and you supplement that with things like the Redevelopments that we're doing at places like Huntington with a new.

Donald C. Wood: To me, that's the first thing. And the second thing is making sure that we have control of the space, because the tenant wants control of the rest of that shopping center, not just the space but the whole shopping center. And so I do think we're making, and I've always kind of focused on this as a big thing for us, to make sure that the lease is as landlord-friendly as it could be. But those are places where we have made pretty strong strides in the last 18 months, in particular, for, you know, strong leases with big bumps. So that's where I'd look for it.

Evercore: Residential project that we're doing at Bell Kingwood with potential stronger acquisition market as we move forward, that's where I get very excited and very positive.

Evercore: About the future growth of the company.

Evercore: Thank you and our next question today comes from Jeff Spector with Bank of America. Please go ahead.

Jeff J. Donnelly: Great. Thank you well.

Jeff J. Donnelly: Don can you elaborate on your opening remark comment on accretive acquisitions and opportunities. It seems like you're a bit more optimistic or maybe excited at some of the.

Donald C. Wood: That's where I'd look for it most. And that's an insurance policy to know that the foundation of this company, the basic, you know, shopping centers throughout this company are really strong with rents that, whether you believe it or not, are under market, as proven by each quarter that we go through. Now, you take that and you supplement that with things like the redevelopments that we're doing in places like Huntington, with a new residential project that we're doing at Ballot-Kinwood, with a potential stronger acquisition market as we move forward. That's where I get very excited and very positive about future growth. Thank you. And our next question today comes from Jeff Spector with Bank of America. Please go ahead. Great, thank you.

Jeff J. Donnelly: Opportunities Youre seeing is that correct and if yes.

Jeff J. Donnelly: Is it certain regions again type of centers I know, we talk about this all the time, but I think it seemed like you specifically highlighted that in your opening remarks.

Don: Hey, Jeff first of all thanks for listening to the opening remarks I. Appreciate the time and yes, you are dead right in terms of the way I see it but let's let me, let me turn it over to Jeff.

Speaker Change: Burkas or yawn give us guys give us your thoughts on on that question.

Speaker Change: Yeah, sure Don Hey, Geoff it's Jeff Bird, because I'm here with your Angel jumping in in a minute on what are you seeing kind of day to day in the market.

Operator: Don, can you elaborate on your opening remark comment on accretive acquisitions and opportunities? Seems like you're a bit more optimistic or maybe excited at some of the opportunities you're seeing. Is that correct? And if so, you know, are they certain regions again, type of centers?

Jeff: But yeah, you're right. We are a we are looking forward to a good year and 'twenty four for acquisitions.

We didn't really see anything in 'twenty three that excited us that much other than the opportunities we had to invest within our own portfolio at very accretive rates, but we think.

Donald C. Wood: I know we talk about this all the time, but I think it seemed like you specifically highlighted that in your opening remarks. Hey, Jeff, first of all, thanks for listening to the opening remarks. I appreciate that a ton.

Jeff: The market is starting to heal.

Jeff: We expect.

Jeff: 24 to be.

Better year, or certainly a good year for us for acquisitions.

Donald C. Wood: And yes, you are dead right in terms of where I see it. But let me turn it over to Jeff Berkes or Jan. Guys, give us your thoughts on that question. Yeah, sure, Don. Hey, Jeff, it's Jeff Berkes.

Jeff: You know I know you know us well and you probably know what I'm going to say, but you.

Jeff: Keep in mind that look at we've got a very compelling cost of capital.

Jeff: We are not constrained by any one.

Jeffrey S. Berkes: I'm here with Jan. He'll jump in in a minute on what he's seeing kind of day to day in the market. But yeah, you're right. We are looking forward to a good year in 24 for acquisitions. We didn't really see anything in 23 that excited us that much other than the opportunities we had to invest within our own portfolio at very accretive rates.

Jeff: Hub product type within retail you know, we'll we'll we're format agnostic, we're more focused on location and opportunity with the piece of dirt in exactly the improvements and sit on it today.

Jeff: We have a really well developed a team here that looks.

Jeffrey S. Berkes: But we think the market's starting to heal. And, you know, we expect 24 to be a better year, certainly a good year for us in terms of acquisitions. And, you know, I know, you know, as well, and you probably know what I'm going to say, but, you know, keep in mind that we've got a very compelling cost of capital. We are not constrained by any one sub-product type within retail. We'll, we'll, we're format agnostic.

Jeff: It looks at highest and best use and ways to add value through our re leasing re merchandising and improving the existing improvements.

Jeff: Well as you know knocking parts of the property down in going vertical and doing things like we're doing a bowler and other shopping centers that are in our portfolio, where we add residential.

Speaker Change: We've got great relationships in the market were known as a closer.

Speaker Change: Both with the sellers and the brokers.

Speaker Change: So I think we've got a lot of advantages.

Jeffrey S. Berkes: We're more focused on location and opportunity with a piece of dirt than the exact improvements that sit on it today. We have a really well-developed team here that looks at the highest and best use and ways to add value through releasing re-merchandising and improving the existing improvements, as well as, you know, knocking parts of the property down and going vertical and doing things like we're doing at Bala and other shopping centers in our portfolio where we add residential. We've got great relationships in the market. We're known as a closer, both with the sellers and the brokers.

Speaker Change: And it really sort of clear eye towards.

Speaker Change: Growing the company through accretive acquisitions that are going to deliver long term growth.

Speaker Change: To the company and we hope the markets are.

Speaker Change: Respond and I think they will but let me let me turn it over to you on and kind of let him give you his thoughts on where we're sitting in the market today IGF yawn.

Speaker Change: So a lot of sellers have really been sitting on the sidelines waiting for the cost of capital and cost of debt in their situation to kind of settle itself out and I think 23 was a record year for sellers asking brokers for their broker opinion of value them. It's just a massive b O V year, yeah. The Super majority of those sellers chose not to put there.

Jeffrey S. Berkes: So I think we've got a lot of advantages and a really sort of clear eye towards growing the company through accretive acquisitions that are going to deliver long-term growth to the company. And, you know, we hope the markets will respond, and I think they will. But let me turn it over to Jan and kind of let him give you his thoughts on what we're seeing in the market today. Hi Jeff. Jan.

Speaker Change: Are there properties on the marketplace and so now the cost of capital and cost of debt has started to settle went a lot. We're hearing a lot of rumbling about sellers now putting their properties on the market.

Speaker Change: In areas and sometimes in some new markets that are of interest to us.

Jan Sweden: So, a lot of sellers have really been sitting on the sidelines waiting for, you know, the cost of capital and cost of debt and their situation to kind of settle itself out. And I think 23 was a record year for sellers asking brokers for their broker opinion of values. I mean, it's just a massive BOV year.

That we think we're going to see in so far as we're looking through here in early February it seems like there's going be a lot more interesting product for us to look at and try to acquire so to me I think 24 is gonna be a big year for US Yeah, Jeff you've heard US talk about this in the past we are very creative in how we structure deals we have been.

Speaker Change: For a very long time and are good at figuring out ways to solve sellers issues, particularly a private sellers in older sellers that have owned the properties for a long time, so lot of a lot of tools in the toolbox here at federal and we expect to be putting them to good use of share.

Jan Sweden: And a super majority of those sellers chose not to put their properties on the marketplace. And so now that the cost of capital and the cost of debt have started to settle in a lot, we're hearing a lot of rumbling about sellers now putting their, their, you know, properties on the market. And in areas and sometimes in some new markets that are of interest to us that we think we're going to see. And so far, as we're looking through here in early February, it seems like there's going to be a lot more interesting products for us to look at and try to acquire. So, to me, I think 24 is going to be a big year.

Speaker Change: Thank you and our next question today comes from Greg Mcginniss Scotiabank. Please go ahead.

Greg Mcginniss: Hey, good evening.

Greg Mcginniss: So it was a great year overall from retail leasing, but Q4 leasing volumes fell about 25% compared to the first three quarters in 2023, and Z occupancy fell 190 basis points quarter over quarter could you just provide some details on the trends you're seeing in retail tenant demand as well as as well.

Jan Sweden: Yeah, Jeff, you know, you've heard us talk about this in the past; we are very creative in how we structure deals. We have been for a very long time and good at figuring out ways to solve sellers' issues, particularly private sellers and older sellers that have owned the properties for a long time. So there are a lot of tools in the toolbox here at Federal, and we expect to be putting them to good use this year.

Greg Mcginniss: It happened on the resi side and expectations built into 2024 guidance for rest of the occupancy and rent growth.

Speaker Change: I have to ask you to go Jeff Yeah.

Jeff: He was somebody who does the occupancy for a second before you do that.

Jeff: On the retail.

Jeff: Occupancy in the fourth quarter, Greg that's just timing.

Jeffrey S. Berkes: Thank you. And our next question today comes from Greg McGinniss with Social Bank. Please go ahead. Hey Gideon,

Speaker Change: Theres nothing in there from a trend perspective that we feel any different about when I I know we had a couple of particular anchors that are released that went out in.

Operator: So it was a great year overall for retail leasing, but Q4 leasing volumes fell about 25% compared to the first three quarters in 2023, and resi occupancy fell $199. What Happened on the Resi Side and Expectations Built into 2024 Guidance, Resi occupancy and rent growth. I'm going to have to ask you to go, Danny, or somebody on the Resi occupancy side for a second. Before you do, though, on retail occupancy in the fourth quarter, Greg, that's just timing. There's nothing in there from a trend perspective that we feel any different about. I know we had a couple of particular anchors that were released that went out in the fourth quarter and, you know, again, released at good spreads going forward, but just timing in the quarter there. I don't know, Wendy, if there's more to say about that for Greg. No.

Speaker Change: The fourth quarter and you know again released at good spreads going going forward, but just timing in the quarter. There I don't know Wendy if theres more to say about bad for Greg.

Greg Mcginniss: Yeah, Let me just.

Greg Mcginniss: I mean, he is number one make sure.

Greg Mcginniss: Our pipeline still remains strong and when I look at where we are in.

Small shop leasing I do feel like we have a runway there.

Greg Mcginniss: Probably another 100 basis points well on time and also some of the timing.

Uh huh.

Greg Mcginniss: You mean our islands.

Greg Mcginniss: So there's some overlap.

Speaker Change: Yeah, Let me Yeah, let me.

Speaker Change: Dan go ahead on the resi if you want but my my comment Greg would be you know we have we have a couple of markets that are a very seasonal primarily out here in California, and new England. So we do try and ramp up of occupancy going into the slower winter season.

Wendy Seher: I think if you look at, you know, timing is number one and number two is our pipeline still remains strong, and when I look at where we are specifically in small shop leasing, I do feel like we have a runway there of probably another 100 basis points to grow off of. And some of the timing is also attributed to several of the deals that we're doing on spaces that are already occupied. So there's some overlap between them.

Speaker Change: So we can we can ride through.

Speaker Change: First quarter of a little bit slower leasing in those seasonal markets and be in a position.

You know, we're we're not giving up a lot when the leasing season heats up again, so some of that strategic.

Speaker Change: And the way, we build occupancy up in the prior quarter, but Dan if you got more to add please do so now.

Dan: That's exactly right on the residential portfolio seasonality is really whats driving that move.

Wendy Seher: Yeah, Dan, go ahead with Resi if you want. But my comment, Greg, would be, you know, we have a couple of markets that are very seasonal, primarily out here in California and New England. So we do try and ramp up occupancy going into the slower winter season so we can ride through, you know, the first quarter of a little bit slower leasing in those seasonal markets and be in a position where we're not giving up a lot when the leasing season heats up again. So some of that is strategic in the way we build occupancy in the prior quarter. But Dan, if you got more to add, please do so.

Dan: We're up year over year.

Dan: From an occupancy perspective, and we fully expect occupancy to pull back in the fourth quarter.

Dan: Relative to do that exact reason.

Speaker Change: Have a small portfolio I think that you know.

Speaker Change: It only takes a.

Speaker Change: So a handful of units to kind of move things a little bit so I would not read anything into that at all.

Speaker Change: Thank you and the next question comes from Craig Mailman with Citi. Please go ahead.

They actually want to go back to the question about acquisitions and it sounded like maybe there could be some multi unit deals in there, but could you just give us a sense of you know.

Jeffrey S. Berkes: That's exactly right about the residential portfolio. Seasonality is really what's driving that move. I mean, we're up year over year from an occupancy perspective, and we fully expect, you know, occupancy to pull back in the fourth quarter relative due to that exact reason. And we have a small portfolio. I think that, you know, it only takes a handful of units to kind of move things a little bit.

Craig Richard Schmidt: The magnitude at this point is it at the level, where you would need to tap some of the equity in some of the trophy mixed use projects or can you guys funding this with kind of current liquidity.

Speaker Change: Oh, that's a good question Craig.

Speaker Change: Funding with the funding with the trophy assets at some point its something for the future it's not something for today.

Jeffrey S. Berkes: So I would not read anything into that or thank you. And our next question today comes from Craig Merriman with Citi. Please go ahead. Thank you. Maybe I just want to go back to the question about acquisitions, and it sounded like maybe there could be some OP unit deals in there, but could you just give us a sense of, you know, magnitude at this point, is it at the level where you need to cap some of the equity and some of your trophy mixed-use projects, or can you guys fund this with kind of current liquidity? Oh, I think that's a good question, Craig The funding with the funding with the trophy assets at some point is something for the future. It's not something for today.

Speaker Change: Given where the market stands and the appetite.

Speaker Change: Got it it's still the uncertainty on that.

Speaker Change: Stuff overseas in particular.

Speaker Change: With respect to two.

Speaker Change: Boosting the acquisition portfolio now that's what that line for so there's you know there's there's short term financing and then it'll be long term financing.

Speaker Change: But there is a there's a reason that powder dry and we'd like to use it.

Speaker Change: Thank you and our next question comes from Kevin Chiang with Truest. Please go ahead.

Kevin Chiang: Thank you.

Operator: Given where the market stands and the appetite, and there's still uncertainty about that, that stuff overseas, in particular. With respect to boosting the acquisition portfolio, now that's what So there's, you know, there's short-term financing, and that'll be long. But there's a reason that powder is dry, and we'd like to use it.

Kevin Chiang: Don can you just go back to some of the comments you made about the occupancy from demand you're seeing at Santana West and 19 meeting just.

Kevin Chiang: Just curious if.

Kevin Chiang: Theres been any kind of commonality for why somebody's times I'm guessing it's relocations moving to these centers and four 950 meeting the NOI contribution is it reasonable to expect that 50% contribution to be backend weighted or more portable.

Donald C. Wood: Thank you. And our next question comes from Ki-Bin Kim with Truist. Please go ahead. Thank you. Don, can you just go back to some of the comments you made about the office decent demand you're seeing at the 10.0 West and 9.15 meetings? Just curious if there's been any kind of commonalities for why some of these tenants, I'm guessing it's relocations, are moving to these centers. And for 9.15 meetings, the NOI contribution, is it reasonable to expect that 50% contribution to be back-end weighted or more Go ahead on that. Yeah, pro-rata, I would say, effectively, in terms of contribution over the course of the year.

Don: Go ahead on that yeah, but pro rata I would say yes.

Don: Effectively in terms of contribution over the course of the year.

Don: And I got to tell you can tell Ya man the.

Don: The common thread through through all of this is is either it's funny either relocations from downtowns to these mixed use properties in both of them basically in the in the.

Don: First ring suburb or or out further and coming in looking for a full amenities.

Don: That that these trends these properties provides and that's been so darn consistent over the past three three and a half four years with respect to what's happening there I don't see that stopping it at that.

Donald C. Wood: And I got to tell you, man, the common thread through all of this is either, it's funny, either relocations from downtowns to these mixed-use properties, both of them, basically in the first-ranked suburb, or out further and coming in looking for the full amount of the United States, um, you know wherever they were, West Coast, some kind of campus, the East Coast, the East Coast, same type of thing potentially. But they are taking less space, but they demand more in terms of the amenity base, that is so consistent in basically the three places, the three big projects, whether it's the same in Boston, with respect to assembly. So that's that's the common thread.

Don: The demands of these tenants who are generally taking less space than they have wherever they were worse.

Don: West Coast, some kind of campus are the east coast or East coast same type of thing potentially but they are taking less space, but they demand more in terms of the amenity base and and.

Don: That is so consistent in basically the three places the three big projects, whether it's the same in Boston.

Don: With respect to assembly. So that's that's the common threat.

Donald C. Wood: Thank you. And our next question today comes from Mike Mohler with J.P. Morgan. Please go ahead.

Don: Thank you and our next question today comes from Mike Mueller with Jpmorgan. Please go ahead.

Michael W. Mueller: Yeah, Hi, I just have two quick development questions I guess first for Valley Kingwood.

Operator: Yeah, hi, I just have two quick development questions. I guess first for Bala Kinwood, is there any meaningful NOI that's coming out of the run rate that you know, your 4Q NOI run rate? And then do you have a ballpark estimate of timing for the Santana office rent commencement? Let me let you. Can you do that? Yeah, on BALA, um, you know, I don't think there's any

Michael W. Mueller: Is there any meaningful NOI, that's coming out of the run rate.

Michael W. Mueller: Your <unk> NOI run rate and then do you have a ballpark.

Michael W. Mueller: That's the kind of timing for the Santana office rent Commencements.

Oh, they let you can you do that on balance.

Speaker Change: I don't think there's any material, it's an empty Lord and Taylor.

Daniel Guglielmone: It's an empty Lord & Taylor, uh, which is not my payment. And then the timing, we'll let you know about the timing. You know, we'll start Accra Shore recognizing some revenue this year, 2024. And we'll let you know when we sign the leases, the timing of the leases that we have in the pipeline, kind of when those will look to come on. Thank you. And our next question comes from Floris Van Dijkum with Compass Point. Please go ahead. Hey, good evening, guys.

Speaker Change: So no impact.

Speaker Change: And then the timing well, let you know on the timing.

Yes.

Speaker Change: I'll start on <unk>, recognizing some revenue this year 2024.

Speaker Change: And we'll let you know when we sign the leases the timing of the leases that we have in the pipeline are kind of when those will come on line.

Thank you and our next question comes from Floris Van <unk> with Compass point. Please go ahead.

Floris van Dijkum: Hey, good evening guys. Thanks, Thanks for taking my question.

Operator: Thanks. Thanks for taking my question. Following up a little bit on the office activity, obviously, congrats on, you know, obviously haven't gotten it over the line yet, but certainly got the first leases going there, both Santana West as well as..., and Pike and Rose. Are those leases in your guidance? And maybe you can talk about what is happening to the negotiations in terms of the rents there. And, and Jeff, maybe I'd look to you because you're on the ground at Santana West.

Floris van Dijkum: Following up a little bit on the the office activity obviously.

Floris van Dijkum: Congrats on on.

Floris van Dijkum: Obviously, you haven't gotten it over the line yet, but certainly you got the first leases going there.

Floris van Dijkum: Both Santana west as well as.

Floris van Dijkum: And Pike <unk> rose.

Floris van Dijkum: Are those leases in your guidance and maybe you can talk about what is happening to the negotiations in terms of the rents there and Jeff maybe I looked at you because you're on the on the ground.

At.

Floris van Dijkum: Santana West.

Floris van Dijkum: Are you getting pushback from office tenants on on rents or other things or is it just.

Jeffrey S. Berkes: Are you getting pushback from office tenants on rents or other things, or is it just, you know, talk a little bit about the competitive situation and the balance between landlord and tenant, because clearly it's different in the office than it is in retail. Go ahead, Jeff. Yeah, I'm actually going to pass it to Jan. Floris, Jan handles all of our large office leasing, so let me turn it over to him. Hey, Floris, I think just in terms of the rents. I would say two things. One of which is, you know, both at Pike and Rose and at Santa Ana West here and also at Assembly. Really, the tenants are looking for something, as Don said, they're looking for the amenities, they're looking for a better building, they're looking to upgrade their location. So they have tended to be less price sensitive on rent. So rents feel like they're holding pretty well, but tenant improvement packages have, in fact, gone up. So that's really the change that we've seen. And that's where the competitive piece comes in.

Floris van Dijkum: Talk a little bit about the competitive situation of in.

Floris van Dijkum: The balance.

Floris van Dijkum: Between landlord and tenant because clearly different in office than it is in <unk>.

Floris van Dijkum: Retail.

Jeff: Go ahead, Jeff.

Jeff: Yeah.

Jeff: I'm actually going to pass a T on Florida, you on handles all of our large office leasing so let me turn it over to him.

Jeff: For Us I think just in terms of the rents I would say two things one of which is you know both at the site.

Pike, <unk> rose and Santana West here. He also at Assembly really the tenants are looking for something as Don said Theyre looking for the humanities, they're looking for better building, they're looking to upgrade their their location and so they have tended to be less price sensitive on rent. So rents feel like they are holding pretty well, but the tenant improvement path.

Jeff: You just have in fact gone up so that's really the change that we've seen and that's where the competitive piece comes in but the rents have been really rock solid.

Jan Sweden: But the rents have been really rock solid. And just for us to remind you, and I think we've talked about this before, and Don alluded to it in his earlier comments, you know, most of the tenants that are moving into our state-of-the-art buildings in those three locations are coming from inferior buildings where they take up more space, and they're downsizing. So while they may be paying a higher rent per foot in our buildings than they were paying, because they're taking less square footage, their overall occupancy costs are less, which again goes to them not being as sensitive about rent. I think that's important to understand. Thank you. And our next question today comes from Doreen Keston with Wells Fargo. Please go ahead. Thanks. Good evening.

Jeff: Floris to remind you and I think we've talked about this before and Don alluded to it in his earlier comments you know most of the tenants that are moving into the R. State of the our buildings and those three locations are coming from inferior buildings, where they take more space and they're downsizing so well.

It may be paying a higher rent per foot in our buildings than they were paying.

Jeff: Because they're taking less square footage there overall occupancy costs are allowed us, which again goes to them not being as sensitive about about rent I think that's important to understand.

Okay.

Jeff: Thank you and our next question today comes from Duane <unk> with Wells Fargo. Please go ahead.

Duane: Hi, Thanks, Good evening Hi.

Operator: Can you walk through your thought process behind the mortgage on Bethesda Roe and just address the size, maybe loan-to-value, why Bethesda specifically? Look, I think the debt markets have been extremely volatile. And you know, interest rates have lacked direction, to say the least. I think back in October, when we committed to doing that transaction, the 10-year was at 5%, and our stock was at $85.

Duane: Can you walk through your thought process behind the mortgage on Bethesda row, I'm, just getting the size maybe wanted to value why why the peso specifically.

Speaker Change: Look I think the debt markets have been extremely volatile.

Speaker Change: And interest rates a lack.

Speaker Change: Direction.

Speaker Change: East I think back in October when we just minutes doing that transaction.

Speaker Change: The 10 year was at 5%.

Speaker Change: The our stock was at $85 and we saw this as a unique opportunity for us to lock in a spread.

Daniel Guglielmone: And we saw this as a unique opportunity for us to lock in a spread on a secured loan on one of our best properties and Get Attractive Financing. The leverage is lower than we typically would. It's a little bit structured.

Speaker Change: On a on a secured loan on one of our best properties and get attractive financing.

Speaker Change: You know the leverage is lower than we typically would it's a little bit structured.

Daniel Guglielmone: But today, mortgage rates on retail product today at normalized leverage levels are probably 200 basis points over the Treasury, probably 175 to 200 basis points on a floating rate basis above SOFR. We're able to get 95 basis points through the structuring that we did with our lender. We felt like that was a really, really attractive... Credit Spread, it was certainly more attractive than the 150 to 160 basis points we were looking at back in October to do a five-year loan, and so it was just a unique, opportunistic financing that really demonstrates the Fed's historic ability to access different parts of the capital markets at more difficult times in the cycle. And, you know, I think that in, you know, our access Don, did you want to add anything?

Speaker Change: But today mortgage rates on retail product today at a normalized leverage levels.

Speaker Change: A 200 basis points over the Treasury, probably 175 to 200 basis points on a floating rate basis above our sulfur we were able to get 95 basis points through the structuring that we did with their lender. We felt like that was a really really attractive.

Speaker Change: Credit spreads and it was certainly more attractive than the 150 to 160 basis points. We're looking that back in October to do a five year alone and so it was just a Oh boy I think a unique opportunistic.

Speaker Change: Financing that really demonstrates federal historic ability to access different parts of the capital markets.

Speaker Change: More difficult times.

Speaker Change: And the cycle and you know.

Speaker Change: I think that in our access the convertible market is another example of that.

Daniel Guglielmone: No, I wanted to ask you, Dan, too, from a tax perspective, a tax basis perspective, putting $200 million on Bethesda Rowe frees up some flexibility with respect to... tax planning. And so, you know, I think having the leverage on there and having debt on Bethesda, where we've created significant value over our ownership, created a ton of value above where, you know, if we do want to bring in a joint venture partner, this brings and gives us that optionality and that flexibility to do a tax efficient business. Thank you. And our next question today comes from Linda Sy with Jeffries. Please go ahead.

Speaker Change: Don did you want to add anything no I wanted to ask you Dan.

Speaker Change: From a tax perspective, and tax basis perspective, putting $200 million on on Bethesda row frees up some flexibility with respect to the tax planning and so I think having the leverage on there and having that on Bethesda.

Speaker Change: We've created significant value over our ownership created.

Speaker Change: Hunter value above.

Speaker Change: Where.

Speaker Change: If we do want to bring in a joint venture partner.

Speaker Change: This brings and gives us that optionality and flexibility.

Speaker Change: Do a tax efficient.

Speaker Change: Thank you.

Question today comes from Linda Tsai with Jefferies. Please go ahead.

Operator: Hi, thank you. I think you said earnings growth in 23 was an 8% absent higher money costs. What level of earnings growth does this mean for 24 if you look at it the same way? Well, you know, 8%. We had significant headwinds in 27, but we have less headwinds heading into 2024. Although they're still there.

Linda Tsai: Hi, Thank you.

Linda Tsai: Thank you said earnings growth in 'twenty, three with an 8% absent higher money cost what level of earnings credit discipline for 24, if you look at it the same way.

Linda Tsai: Well you know 8% Yeah, we had significant headwinds 27, we have less headwinds heading into 2024, although they're still there I haven't done the calculation, but it's probably a couple of hundred basis points of incremental.

Daniel Guglielmone: I haven't done the calculation, but it's probably a couple hundred basis points of incremental. You know, if you back out the cost of that, so the 3% probably goes up to something north of 5% less money costs, at least from my perspective. I haven't done the exact calculation, Linda, but that's roughly where I would. Thank you.

Linda Tsai: If you back out the cost of that so but yes.

Linda Tsai: Uh huh.

Linda Tsai: 3%, probably goes up to something north of 5%.

Linda Tsai: Less money cost at least for.

Linda Tsai: From my perspective.

Linda Tsai: I haven't done the exact calculation Linda but.

That's roughly where I would see it.

Linda Tsai: Yeah.

Linda Tsai: Thank you and our next question comes from Anthony Powell with Barclays. Please go ahead.

Operator: And our next question today comes from Anthony Powell with Barclays. Please go ahead. Hi, thank you.

Anthony Franklin Powell: Hi, Thank you I think in the prepared remarks, you talked about how construction costs, we're going lower in which helps with your decision to do the Philadelphia residential can you maybe expand more on what's going on in construction costs and do more of your products and your future redevelopment pipeline look attractive given more fixed costs.

Operator: I think in your prepared remarks, you talked about how construction costs were going lower, which helped with your decision to do the Philadelphia residential. Could you maybe expand more on what's going on with construction costs and make more of your projects in your future redevelopment pipeline look attractive, given lower construction costs? That's a good question. You know, when It's not dramatic in terms of a reduction in construction costs. I mean, when you think about the components of it, particularly the labor component of it, when business slows down, as it obviously has in the past couple years, you've got better leverage to get labor rates that make some more sense. And when you compare that to, really, the last five or six years, in particular, before that, it's a dramatic difference in terms of being able to forecast.

That's a good question.

Anthony Franklin Powell: When that.

Anthony Franklin Powell: It's not dramatic in terms of a reduction in our income from construction cost I mean, when you think about the components of it are particularly the labor component of it when business slows down as it obviously has in the past couple of years, you've got better leverage to get labor rates that does that make some more sense.

Anthony Franklin Powell: And when you compare that to really gosh, the last five or six years in particular before that.

Anthony Franklin Powell: It's a dramatic difference in terms of being able to forecast and that's really the most important thing here is anytime you want to do.

Donald C. Wood: And that's really the most important thing here: anytime you want to do a redevelopment or development itself, it's about predictability of costs, in addition to growth in the rent. So what's happening now is we're finding much better predictability in construction costs, primarily on the labor side. We're going to tie these things down to GMPs, maximum price contracts. And so when you're able to do that, then you can focus more on what the rent growth is, the timing, and whether it makes sense to do it. In the case of Bala, it was really a case where supply and demand finally made some sense without new products being added to that particular section of the main line, which is very attractive. So we really liked that. Now, we couldn't make sense.

Anthony Franklin Powell: A redevelopment or development itself, it's about predictability of costs are in addition to the growth in.

And the rent so what's happening now is is we're finding much better predictability are in.

Anthony Franklin Powell: In in construction costs, primarily on the labor side, we're going to tie these things down to <unk>.

Anthony Franklin Powell: Maximum price contracts and so when you're able to do that then you can can focus more on you know what the rent growth is the timing does it make sense to do in the case of ballot. It was really a case, where where supply and demand finally.

Anthony Franklin Powell: Made some sense without new products being added in that particular section of the main line, which is very attractive. So we really liked is that now we couldn't make sense of it.

Donald C. Wood: A year ago, or two years ago, or three years ago, but we can make sense of it now. I would hope to see more of those possibilities going forward. And remember, this is land that the federal government zoned for a very low price, and that gives you a huge advantage because the land costs are on incremental land associated with it. So that's why that makes sense. So when you look at construction, I wouldn't look at it as, as you know, costs are going to be dramatically lower than they were, but they've certainly stabilized and are coming down a few percentage points because of the labor side. It's an important consideration when you're deciding whether to go or not.

Anthony Franklin Powell: A year ago, or two years ago or three years ago, but we can make sense of it now I would hope to see more of those possibilities going forward and remember this is land that federal zoned for a very long time and that gives you a huge advantage.

Anthony Franklin Powell: Because the land costs, there arent incremental ingalls.

Anthony Franklin Powell: Associated with it so that's why that's why that makes sense. So when you look at construction I wouldn't look at it as as you know costs are going to be dramatically lower than they were but they certainly stabilized and coming down a few percentage.

Points because of the labor side is it it's an important consideration when you're deciding whether to go or not.

Donald C. Wood: Thank you. And our next question today comes from Paulina Rojas Schmidt with Cleve Street. Please go ahead. Hello, everyone.

Anthony Franklin Powell: Thank you and our next question today comes from Paulina Rojas with Green Street. Please go ahead.

Anthony Franklin Powell: Yes.

Anthony Franklin Powell: Yeah.

Hello, everyone and my question is related to the prior one and we reported for the boiler project.

Operator: And my question is related to the prior one. And we reported an ROIC of seven for the BALA project, and I think you mentioned in your prepared remarks that unleveraged IRR as well. But more broadly speaking, what kind of profit margin do you need to see when thinking about this project to compensate you for the risk, whether it's cost or risk? I'm not quite following your question, Paulina.

Anthony Franklin Powell: Seven.

And I think you mentioned in your prepared remarks.

Anthony Franklin Powell: With that I'll never tell you well, but.

Anthony Franklin Powell: More broadly speaking and what kind of profit margins.

Anthony Franklin Powell: And when thinking about this project circumstance that is well underway.

Anthony Franklin Powell: Were there any costs or anything.

Speaker Change: Not quite following your question Lena you asking kind of what kind of.

Daniel Guglielmone: Are you asking kind of what kind of... You know, I'm premium we need to get to kind of have those those to have the IRR get up into the double digits. Yeah, when you think about comparing your coverage, Okay, I think that developing this to a seven... Clearly higher than it would be in today's market, and as interest rates come down and stabilize. Obviously, you know, what we think the spread is is, is, well north of 100 base points, 150, 200 bases.

Speaker Change:

Lena: Yeah premium we need to get to kind of have those those are to.

Lena: To have the IRR is get up into the double digits.

Lena: Yeah, when you think about comparing your your pathways and.

And I think that's developing this to.

Lena: Develop developing this to a seven.

Lena: Clearly higher than it would be in today's market and as interest rates come down.

Lena: And stabilized obviously, what we are what the spread is.

As you know well north of 100 basis points 150, 200 basis points.

Jeffrey S. Berkes: And look, we are going to expect to be able to grow rents residentially in line with kind of what we've done. And our residential portfolio, you know, is amenitized; it's adjacent to great retail. And we've been able to grow rents very attractively over time. So as we grow rents, obviously, the POI is going to be a big driver of those unlevered returns as well. So those are the inputs that go in there that get us very comfortable with double-digit IRR unlevered, something that's achievable. You know, developing this to a seven initially and having it grow. Hey, Dan, if I can just add on Paulina, it's it's Jeff.

Lena: Look we are going to expect to be able to grow rents residential.

Lena: In line with kind of what we've done in our residential portfolio.

Lena: <unk> is a monetized its adjacent to great retail and we've been able to grow rents are very attractively overtime. So as we grow rents obviously the Eli this is gil.

Lena: To be a big driver there was unlevered returns as well so those are the.

Lena: As of the inputs that go in there and again, it's very comfortable double digit IRR unlevered something that's achievable.

Lena: Developing this with seven initially and having it grow from there.

Hey, Dan if I can just add on Paulina, it's Jeff <unk>.

Jeffrey S. Berkes: One thing to think about, too, as it relates to federal and the residential that we develop, and we've got about a $900 million pipeline of projects in the design and entitlement phase right now, is that almost all of those are in places where we already operate residential property. That's the case at Vala, and it will be the case if we do anything at Bethesda Row, Santana Row, Pike and Rose, Assembly Row, other places in Montgomery County, Maryland, where we own real estate. So the risk-adjusted return for us is really, really strong. We understand the rental market very well.

Jeff: One thing to think about too as it relates to federal when the residential that we develop and we've got about.

Jeff: $900 million pipeline of projects in the design and entitlement phase right now is almost all of those.

Jeff:

Jeff: Our our at places, where we already operate a residential property that's the case at Bala.

Jeff: The case, if we do anything at Bethesda row, Santana row, Pike, <unk> Rose Assembly row.

Jeff: Other places in Montgomery County, Maryland, where we own real estate. So the risk adjusted return for US is really really strong we understand the rental market very well.

Jeffrey S. Berkes: We operate units where we're adding units, so we understand the operating costs very well. And as Don mentioned in the prior question, when we contract for construction, we do that with full construction drawings, great bid coverage, and a guaranteed maximum price contract. So the risk-adjusted returns for us are exceptionally strong when we add residential to our portfolio. Thank you. And our next question today is a follow-up from Alexander Goldfarb of Piper Sandler. Please go ahead. Hey, evening.

Jeff: We operate units.

Jeff: We're adding units so we understand the operating cost very well and as Don mentioned.

Jeff: In the prior question when we we contract for the construction, we're doing that with.

Jeff: Full construction drawings are great bid coverage in a guaranteed maximum price contract. So the risk adjusted returns for us are exceptionally strong when we add residential to our portfolio.

Jeff: Thank you and our next question today is a follow from Alexander Goldfarb from Piper Sandler. Please go ahead.

Alexander Goldfarb: Hey evening, just going back to the Bethesda row, I think you guys had spoken previously about possibly joint venturing their own that asset or maybe it was institutional interest, but I guess bigger picture you know historically federal Hasnt been a JV you know platform, but you know you talked about it with the potential.

Operator: Just going back to the Bethesda row, I think you guys had spoken previously about possibly joint venturing that asset, or maybe there was institutional interest. But I guess, bigger picture, you know, historically, Federal hasn't been a JV, you know, platform, but, you know, you talked about it with the potential for Bethesda. So in your view, Don, as you guys talk to joint venture capital, what's their appetite for shopping centers? And do they believe that this, you know, burgeoning growth that we all talk about will actually come to fruition?

Alexander Goldfarb: On Bethesda, so in your view Don as you guys talk to joint venture capital, what's their appetite for shopping centers and do they believe that truly this you know burgeoning growth that we all talk about will actually come to fruition or is there a view that the leases or so locked in in favor of the tender.

Donald C. Wood: Or is there a view that the leases are so locked and in favor of the tenant that, yes, at some point, you know, they can get good economics, but, you know, it may be a longer timeline than they are actually willing to underwrite and invest in? Just sort of curious about what's going on in the private sector as you talk to possible partners. And well, a couple of things, Alex.

Alexander Goldfarb: And that yes at some point you know they can get good economics, but you know it may be a longer timeline than they actually are willing to.

Alexander Goldfarb: Alright, and invest just sort of curious you know what's going on in the private side as you talk to possible partners.

Speaker Change: Well, a couple of things Alex and <unk>.

Jeffrey S. Berkes: And Jeff, I'd love you to add to this if you need to. But first of all, don't use me as a proxy for what's happening among the private side, in terms of their appetite, because we have not seriously gone down the road with any of them in terms of serious negotiations, because we don't believe this is the right time to effectively do a deal like that on the mixed-use assets. When we look at our stuff and where we see the growth in the portfolio, I think I've said this before, I think we're going to have to. For the last four or five quarters, our mixed-use stuff is outperforming the rest. And it's growing, and it's growing fast. So we'd like to get these things.

Speaker Change: Jeff I'd Love you to add after this if you need to.

Speaker Change: But first of all I don't use me as a proxy for what's happening among the others.

Speaker Change: The private side in terms of their appetite because we have not seriously gone down the road with.

Speaker Change: With any of them in terms of the serious negotiations because we don't believe this is.

Speaker Change: The right time.

Speaker Change: To effectively do a deal.

Speaker Change: Like that on an E.

Speaker Change: The mixed use assets when we looked at ourselves and where we see the growth in the portfolio I think I've said this.

Speaker Change: For the last four or five five quarters, our mixed used stuff is outperforming the other stuff.

Speaker Change: And it's growing and it's growing fast so we'd like to get this stuff.

Jeffrey S. Berkes: You know, to have that trajectory continue, like to see over the next year or two or three. The capital markets will solidify themselves. Obviously, we're just in the very early stages of figuring out what that means in terms of capital markets in the country. And so, you know, I don't have much more to add with respect to any specific group of private joint venture investors because we really haven't had in-depth conversations. I don't know, Jeff, anything?

Speaker Change: To have that trajectory continue like to see over the next year or two or three but the.

The capital markets.

Speaker Change: Solidify themselves obviously, we're just in the very early stages of figuring out what the what what.

What that means in terms of the capital markets in the country and so you know I don't have much more to add with respect to any specific.

Speaker Change: You know a group of private joint venture investors, because we really haven't had in depth conversations with them at this point I don't know Jeff anything yeah.

Donald C. Wood: Yeah, Don, I don't really have anything meaningful to add to that. Sorry. Oh, all good.

Jeff: Yeah, John I don't really have anything meaningful add to that sorry.

Jeff: Okay.

Operator: Thank you. And our next question today comes from Steve Sakwa at Evercore. Please go ahead.

Jeff: Mhm.

Jeff: Thank you and our next question today comes from student Sochua at Evercore. Please go ahead.

Operator: Yeah, thanks. Just wanted a quick follow up, maybe with Dan G on the guidance. You know, when you kind of look through the building blocks, you know, just maybe help us think through which ones have kind of the most leverage, maybe to the upside, maybe to the downside, and maybe just a little bit more color on the POI growth, you know, X prior-period rents and term fees are about 100 basis points slower, around three and a quarter versus the four and three. So maybe just kind of walk us through there Is that really all kind of bad debt driven? Or is there something else kind of pulling that growth rate down?

Sochua: Yeah. Thanks, just wanted to quick follow up maybe with Dan G on the guidance.

Sochua: When you kind of look through the building blocks.

Sochua: Just maybe help us think through which ones have kind of the most leverage maybe to the upside and the downside and maybe just a little bit more color on the P. O Y gross you know ex prior period rents in term fees.

Sochua: It was about 100 basis points slower around three and a quarter versus the four three so maybe just kind of walk us through there is that really all kind of bad debts were then or is there something else kind of pulling that growth rate down. Thanks.

Daniel Guglielmone: Thanks. Yeah, it is just guidance. And I think there are a lot of things that go into, you know, in particular the FFO guidance. I mean, as it relates to specifically the comparable POI growth, which is between two and a half and four percent, occupancy levels, and how aggressively and how quickly we can push levels up towards 93%. I think how much percentage rent can we continue? Collect parking revenues. Can we control property expenses the way we have?

Sochua: They looked at it it is guidance and I think there are a lot of things that go into in particular that go into the <unk> guidance I mean as it relates to.

Sochua: Specifically the comparable yoy growth.

Sochua: 4%.

Occupancy levels, and how aggressively and how quickly we can push levels up towards 93%.

Sochua: I think how much percentage rent and we continue to collect parking revenues can we control property level expenses. The way, we have which has been a.

Daniel Guglielmone: Which has been a big help. Term fees, you know, I guess don't apply to that metric, but that's going to drive FFO. And, you know, we're looking at how we can do that. User Interface. And I think one of the things that's going to be a big driver is, you know, look, we purposely have $600 million of floating rate debt. How quickly SOFR comes down?

Sochua: A big help.

Sochua: <unk> fees, I guess don't apply to that.

Sochua: That metric, but that's going to drive that typo.

Sochua: Although it won't necessarily drive the disease.

Sochua: Py metric.

Sochua: Excluding that how.

Sochua: How quickly and how are we can we can get development <unk>.

Sochua: And I think one of the things that we're gonna be a big driver as well.

Sochua: Purposely have $600 million of floating rate debt how quickly chauffeur comes down I think we've been pretty conservative in terms of our assumptions for where interest rates will go and so that's that won't have an impact and then I think what we've done an exceptional job at probably drive some of the growth is just getting tenants opened sooner keeping tenant.

Daniel Guglielmone: I think we've been pretty conservative in terms of our assumptions for where interest rates will go. And so that will have an impact. And then I think what we've done an exceptional job at, which probably drives some of the POI growth, is just getting tenants open sooner, keeping tenants in possession, you know longer keeping tenants that we expected to leave. I think that's another driver. I think they all contribute uh... throughout the range. Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to Leah Brady for her closing remarks. I look forward to seeing many of you in the next few weeks. Thanks for joining us today. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day at www. FederalRealtyInvestmentTrust.com

Sochua: In possession.

Sochua: Longer keeping tenants in that.

Sochua: We expect it to leave I think that's a that's a.

Sochua: Another driver I think they all contribute.

Sochua: It's rather range.

Speaker Change: Thank you.

A question and answer session I would like to turn the conference back over to Leah Brady for closing remarks.

Leah Andress Brady: We look forward to seeing many of you over the next few weeks thanks for joining us today.

Speaker Change: Yeah.

Thank you. This concludes today's conference call.

Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Speaker Change: Okay.

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