Q4 2023 Phillips Edison & Co Inc Earnings Call

Good day, and welcome to Phillips Edison and companies of fourth quarter and full year 2023 earnings conference call. Please.

Operator: Good day, and welcome to Phillips Edison and Company's fourth quarter and full year 2023 earnings conference call. Please note that this call is being recorded. I will now turn the call over to Kimberly Green, head of investor relations. Kimberly, you may begin.

Please note that this call is being recorded.

I'll now turn the conference over to Kimberly Greene head of Investor Relations Kimberly you may begin.

Thank you operator I'm joined on this call by our Chairman and Chief Executive Officer, Jeff Anderson, Our President Bob Myers, Our Chief Financial Officer, John Caulfield.

Kimberly Green: Thank you, Operator. I'm joined on this call by our Chairman and Chief Executive Officer, Jeff Edison, our President, Bob Myers, our Chief Financial Officer, John Caulfield, and our Managing Director of Investment Management, Devin Murphy. Once we conclude our prepared remarks, we will open the call to Q&A. After today's call, an archived version will be published on our website.

Managing director of investment management, Devon Murphy once we conclude our prepared remarks, we will open the call to Q&A. After today's call. An archived version will be published on our website. As a reminder, today's discussion may contain forward looking statements about the company's view of future business and financial performance, including forward earnings guidance.

Kimberly Green: As a reminder, today's discussion may contain forward-looking statements about the company's view of future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings, specifically in our most recent Form 10-K and 10-Q. In our discussion today, we'll reference certain non-GAAP financial measures. Information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our Earnings Press Release and Supplemental Information Packet, which have been posted on our website. Please note that we have also posted a presentation with additional information. Our caution on forward-looking statements also applies to these materials. Now, I'd like to turn the call over to Jeff Edison, our Chief Executive Officer. Jeff?

And future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties.

Ascribed in our SEC filings specifically in our most recent Form 10-K, and 10-Q and our discussion today will reference certain non-GAAP financial measures information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our earnings press release, and supplemental information packet, which had been posed.

Two our website. Please note that we have also posted a presentation with additional information our caution on forward looking statements also applies to these materials.

Now I'd like to turn the call over to Jeff Anderson, Our Chief Executive Officer, Jeff.

Thank you Kim and thank you everyone for joining us today.

Jeff Edison: Thank you, Kim, and thank you, everyone, for joining us today. The PECO team in 2023 continued our track record of delivering strong growth. Same Center NOI increased 4.2%, Nareed FFO increased 6.7%, and Core FFO increased 5.2%. The continued strong performance of our portfolio is driven by our high occupancy, strong leasing spreads, high retention, and the many advantages of the suburban markets where we operate our neighborhood shopping centers. The operating environment remains strong with a resilient consumer. Retailers want to be located in our centers, where our grocers drive consistent and recurring foot traffic. PICO continues to benefit from several positive macroeconomic trends that create demand for space and tailwinds for NOI growth. The transaction market also improved for us in the latter part of 2023, allowing us to exceed the midpoint of our original guidance for acquisitions.

The <unk> team in 2023 continued our track record of delivering strong growth.

Same center NOI increased four 2% NAREIT <unk> increased six 7%.

<unk> increased five 2%.

The continued strong performance of our portfolio is driven by our high occupancy strong leasing spreads high retention and the many advantages of the suburban markets, where we operate our neighborhood shopping centers.

The operating environment remains strong with a resilient consumer retailers want to be located in our centers.

Where our grocers drive consistent and recurring foot traffic Pico.

<unk> continues to benefit from several positive macroeconomic trends that create demand for space and tailwind for NOI growth.

The transaction market also improved for us in the latter part of 2023, allowing us to exceed the midpoint of our original guidance for acquisitions.

The capital markets have improved interest rates have meaningfully changed from when we provided preliminary 2024 guidance during our Investor day in early December these.

Jeff Edison: The capital markets have improved, and interest rates have meaningfully changed from when we provided preliminary 2024 guidance during our investor day in early December. These factors allow us to increase our 2024 guidance. We accomplished a great deal in 2023, and I have a lot to be proud of. At the macroeconomic level, the year presented many challenges with high inflation, volatile and rising interest rates, and global conflicts.

These factors allow us to increase our 2020 for guidance.

We accomplished a great deal in 2023 and have a lot to be proud of at the macroeconomic level. The year presented many challenges with high inflation volatile and rising interest rates and global conflict.

However, the consistency of our growth is a testament to our differentiated and focused strategy of exclusively owning right sized grocery anchored neighborhood shopping centers anchored by the number one or two grocer by sales in our market.

Jeff Edison: However, the consistency of our growth is a testament to our differentiated and focused strategy of exclusively owning right-sized, grocer-anchored neighborhood shopping centers anchored by the number one or two grocer by sales in a market. Our results at the property level are driven by our integrated operating platform and our experienced and cycle-tested team. We could not have accomplished our 2023 results without the hard work of our PECO associates. I'd like to thank the entire PECO team for all of their efforts.

Our results at the property level are driven by our integrated operating platform and our experienced and cycle tested team.

We could not have accomplished our 2023 results without the hard work of our Pico associates I'd like to thank the entire Pico team for all their efforts.

Jeff Edison: Pico has always been a growth company, and we are well positioned to continue to grow. The fourth quarter was no exception, with $186 million in acquisitions. For the full year 2023, we acquired 11 shopping centers, two out parcels, and one land parcel for net acquisitions totaling $272 million at a weighted average cap rate of 6.6%. We are particularly excited to add two more Trader Joe's anchored centers and another HEB anchored center to our portfolio. The transaction market was tight in 2023 as the bid-ask spreads were very wide.

Pico has always been a growth company and we are well positioned to continue to grow.

The fourth quarter was no exception with a 186 million in acquisitions for.

For the full year 2023, we acquired 11 shopping centers to our parcels and one land parcel for net acquisitions totaling $272 million at a weighted average cap rate of six 6%.

We are particularly excited to add two more trader Joe's anchored centers and another HEB anchored center to our portfolio.

The transaction market was tight in 2023 as the bid ask spreads were very wide.

Jeff Edison: Our team has proven its ability to navigate and successfully execute through these tough markets. This result is due to our scale, our ability to buy in many markets across the country, our reputation as a sophisticated all-cash buyer, and our strong relationships. We're confident in our ability to continue to acquire high-quality centers as the transaction market opens up further. While it's early, we continue to successfully find attractive acquisition opportunities Activity in the first quarter remains strong.

Our team has proven its ability to navigate and successfully execute through these tough markets. This result is due to our scale our ability to buy in many markets across the country.

Reputation as a sophisticated all cash buyer.

And our strong relationships.

We're confident in our ability to continue to acquire high quality centers as the transaction market opens up further.

While it's early we continue to successfully find attractive acquisition opportunities.

Activity in the first quarter remained strong.

Jeff Edison: Our ability to predict acquisition volume for the rest of the year is less clear. As such, we are reaffirming our guidance for 200 to 300 million net acquisitions. We have the capabilities and leverage capacity to acquire much more if attractive opportunities materialize. We continue to target an unlevered IRR of 9% or greater for our acquisitions. The acquisitions that we completed in the second half of 2023 underwrote to over 9.5% on levered IRR.

Our ability to predict acquisition volume for the rest of the year is less clear.

As such we are reaffirming our guidance for $200 million to $300 million of net acquisitions.

We have the capabilities and leverage capacity to acquire much more if attractive opportunities materialize.

We continue to target, an unlevered IRR of 9% or greater for our acquisitions.

The acquisitions that we completed in the second half of 2023 underwrote to over nine 5% Unlevered IRR.

Jeff Edison: We will maintain our disciplined approach and focus on accretively growing our portfolio. We are hopeful that volumes will increase through the year. It is times like this in an evolving market that we have historically found some of our best opportunities. With a target market of 5,800 identified centers across the U.S., we have a long runway for external growth. Looking beyond 2024 and assuming a more stable interest rate environment and acquisition market, we believe our portfolio could deliver mid to high single-digit core FFO per share growth on a long-term basis, driven by both internal and external growth.

We will maintain our disciplined approach and focus on accretively growing our portfolio.

We are hopeful that volumes will increase through the year.

It is times like this in an evolving market that we have historically found some of our best opportunities with a target market of 5800 identified centers across the U S. We have a long runway for external growth.

Looking beyond 2024, and assuming a more stable interest rate environment and acquisition market. We believe our portfolio can deliver mid to high single digit core <unk> per share growth on a long term basis.

This will be driven by both internal and external growth.

Jeff Edison: We are confident in our ability to sustain growth in the near term, despite interest expense headwinds. We anticipate long-term AFFL growth will be higher than core FFO growth, as high occupancy and strong retention should require lower capital expenditures to support growth in the future. Our low leverage gives us the financial capacity to meet our long-term growth objectives. We expect to generate approximately $100 million in free cash flow after dividend distributions in 2024.

We are confident in our ability to sustain growth in the near term. Despite interest expense headwinds, we anticipate long term <unk> growth will be higher than core <unk> growth as high occupancy and strong retention should require lower capital expenditures to support growth in the future.

Our low leverage gives us the financial capacity to meet our long term growth objectives, we expect to generate approximately $100 million in free cash flow after dividend distributions in 2020 for this level of free cash flow combined with our low levered balance sheet allows us to acquire $250 million.

Jeff Edison: This level of free cash flow, combined with our low levered balance sheet, allows us to acquire $250 million a year while maintaining our targeted leverage ratio without raising any additional equity. PICO is well positioned to drive strong earnings growth and achieve our capital deployment goals in the years ahead. We remain committed to successfully executing our growth strategy, both internal and external. PICO generates more alpha with less beta, given our focused and differentiated strategy. As previously announced by Kroger and Albertsons, the estimated closing date for the proposed merger has recently been pushed back.

A year with while maintaining our targeted leverage ratio without raising any additional equity.

<unk> continues to be well positioned to drive strong earnings growth and achieve our capital deployment goals in the years ahead.

We remain committed to successfully executing our growth strategy, both internal and external.

Pico generates more alpha with less data, given our focused and differentiated strategy.

As previously announced by Kroger at Albertsons. The estimated closing date for the proposed merger was recently pushed back.

Jeff Edison: We do remain cautiously optimistic about the impact of this merger on PECO. We continue to believe it is ultimately a positive for PECO, for our centers, and for the communities that our centers serve. While the market still gives the merger a low probability of occurring, should it close and 413 stores are sold to CNS, we believe the impact on PICO is a net positive. Our Albertson stores will be operated by Kroger, which reinvests regularly in their stores and produces higher sales volumes. If the merger does not occur, our Albertsons Anchorage Centers will continue the strong performance that they have produced to date. With that, I'll now turn the call over to our new president, Bob Myers, to provide more color on the operating environment. Bob?

We do remain cautiously optimistic about the impact of this merger on Pico. We continue to believe it is ultimately a positive for veeco for our centers and for the communities that our centers serve well.

While the market is still gives the merger a low probability of occurring should it close and 413 stores are sold to CNS. We believe the impact on Pico is a net positive or.

Our albertsons stores will be operated by Kroger, which reinvest regularly in their stores and produces higher sales volumes.

If the merger does not occur or Albertsons anchored centers will continue the strong performance that they have produced to date.

With that I'll now turn the call over to our new President Bob Myers to provide more color on the operating environment Bob.

Thank you, Jeff and good afternoon, everyone and thank you for joining us.

Bob Myers: Thank you, Jeff. Good afternoon, everyone, and thank you for joining us. We continue to see strong retailer demand with no current signs of slowing. PECO's leasing team continues to convert this demand into higher rents at our centers. Portfolio occupancy remained strong and ended the year at 97.4% leased. Anchor occupancy remained high at 98.9%.

We continue to see strong retailer demand with no current signs of slowing chico's leasing team continues to convert this demand into higher rents at our centers.

Portfolio occupancy remained strong and ended the year at 97, 4% leased anchor occupancy remained high at 98, 9% in line occupancy ended the year at 94, 7% an increase of 90 basis points year over year, we believe that we can still push inline occupancy.

Bob Myers: Inline occupancy ended the year at 94.7%, an increase of 90 basis points year over year. We believe that we can still push inline occupancy another 100 to 150 basis points given continued strong retailer demand. Our acquisitions in the fourth quarter were 84% leased at closing and provide us with significant leasing opportunities. Buying centers with some vacancy will continue to allow us to drive growth. In terms of new lease activity, we continue to have success in driving meaningfully higher rents. Comparable new rent spreads for the fourth quarter were 21.9 percent.

Another 100 to 150 basis points, given continued strong retailer demand.

Our acquisitions in the fourth quarter were 84% leased at closing and provide us significant leasing opportunities buying centers with some vacancy will continue to allow us to drive growth.

In terms of new lease activity, we continue to have success in driving meaningfully higher rents comparable new rent spreads for the fourth quarter were 21, 9%.

We continue to capitalize on strong renewal demand and are making the most of the opportunity to strengthen key lease terms at renewal and drive rents higher in the fourth quarter. We achieved a 14, 2% increase in comparable renewal rent spreads. This increase in renewal spreads is consistent with the 14.

Bob Myers: We continue to capitalize on strong renewal demand and are making the most of the opportunity to strengthen key lease terms at renewal and drive rents higher. In the fourth quarter, we achieved a 14.2% increase in comparable renewal rent spreads. This increase in renewal spreads is consistent with the 14.6% increase we achieved in 2022 and reflects the continued strength of the leasing environment. Our inline renewal spreads remained high at 17.4% in the fourth quarter, which compares to our trailing 12-month average of 17.7%.

6% increase we achieved in 2022 and reflects the continued strength of the leasing environment.

Our in line renewal spreads remained high at 17, 4% in the fourth quarter, which compares to our trailing 12 month average of 17, 7%.

We expect leasing spreads will continue to be strong throughout the balance of this year and into the foreseeable future.

Bob Myers: We expect leasing spreads will continue to be strong throughout the balance of this year and into the foreseeable future. We continue to have great success retaining our neighbors while growing rents at attractive rates. PICO's retention rate remained strong this quarter at 93%.

We continue to have great success, retaining our neighbors, while growing rents at attractive rates <unk> retention rate remained strong this quarter at 93% an important benefit of high retention rates is that we have much lower ti spend on renewals and in the fourth quarter. We spent $1 17 per square foot on tenant improvements.

Bob Myers: An important benefit of high retention rates is that we have much lower TI spend on renewals. In the fourth quarter, we spent $1.17 per square foot on tenant improvements for renewals. We also remain successful at driving higher contractual rent increases. Our new and renewal inline leases executed in 2023 had average annual contractual rent bumps of two and three percent, respectively, another important contributor to our long-term growth. The leasing spreads that we are achieving, combined with our strong retention rates, create pricing power and are clear evidence of the continued high demand for space in our grocery-anchored neighborhood shopping centers. Pico's pricing power is a reflection of the strength of our focus strategy and the quality of our portfolio. PECO continues to benefit from a number of positive macroeconomic trends that create strong tailwinds and drive strong neighbor demand. These trends include a resilient consumer, hybrid work, migration to the Sunbelt, population shifts that favor suburban neighborhoods, and the importance of physical locations and last-mile delivery. The impact of these demand factors is further amplified due to the limited new supply over the last 10 years. Going forward, given the current economic returns, new construction does not justify it.

<unk> for renewals.

We also remained successful at driving higher contractual rent increases are new and renewal in line leases executed in 2023 had an average annual contractual rent bumps of 2% and 3% respectively. Another important contributor to our long term growth.

The leasing spreads that we're achieving combined with our strong retention rates create pricing power and are clear evidence of the continued high demand for space in our grocery anchored neighborhood shopping centers.

Pico is pricing power as a reflection of the strength of our focused strategy and the quality of our portfolio.

<unk> continues to benefit from a number of positive macroeconomic trends that create strong tailwind and drive strong neighbour demand. These trends include a resilient consumer hybrid work migration to the sunbelt population shifts that favor suburban neighborhoods and the importance of physical locations.

And the last mile delivery.

The impact of these demand factors are further amplified due to the limited new supply over the last 10 years and going forward given the current economic returns do not justify new construction.

We continue to see the many benefits of our grocery anchored portfolio with a healthy mix of national regional and local region.

Bob Myers: We continue to see the many benefits of our grocery-anchored portfolio with a healthy mix of national, regional, and local retailers. 70% of our rents come from neighbors offering necessity-based goods and services, and our top brochures continue to drive strong, reoccurring foot traffic to our centers. PECO's three-mile trade area demographics include an average population of 66,000 people and an average median household income of $80,000, which is higher than the U.

Yes.

70% of our rents come from neighbors offering necessity based goods and services and our top grocers continue to drive strong reoccurring foot traffic to our centers.

<unk> three mile trade area demographics include an average population of 66000 people and an average median household income of 80000, which is higher than the US Median these demographics are in line with store demographics of Kroger, and Publix, which are <unk> top two neighbors.

Bob Myers: These demographics are in line with the store demographics of Kroger and Publix, which are PECO's top two neighbors. Our centers are situated in trade areas where our top grocers are profitable, and our neighbors are successful. We also enjoy a well-diversified neighbor base. Our top neighbor list is comprised of the best grocers in the country. Our largest non-grocer neighbor makes up only 1.3% of our rents, and that neighbor is TJ Maxx. All other non-grocer neighbors are below 1% of ABR. To put a finer point on the neighbor mix, PECO has no exposure to luxury retail and very limited exposure to distressed retailers.

Our centers are situated in trade areas, where our top grocers are profitable and our neighbors are successful.

We also enjoy a well diversified neighbor base our top neighbor list is comprised of the best grocers in the country.

Our largest non grocery neighbor makes up only one 3% of our rents and that Nabors T J Maxx.

All other non grocery neighbors are below 1% of ABR.

Put a finer point on neighbor mix Pico has no exposure to luxury retail and very limited exposure to distressed retailers. The top 10 Nabors currently on our watch list represent just two 3% of ABR.

Bob Myers: The top 10 neighbors currently on our watch list represent just 2.3% of ABR. Twenty-seven percent of our ABR is derived from local neighbors. The majority of local neighbor rents come from retailers offering necessity-based goods and services. If you think about your favorite restaurant in your neighborhood, your physical therapist, chiropractor, or dentist, and your preferred hair salon or barber, there is a high likelihood that they are a local retailer.

27% of our ABR is derived from local neighbors. The majority of local neighbor rents come from retailers offering necessity based goods and services.

If you think about your favorite restaurant in your neighborhood.

Physical therapist tire fracture or dentist and your preferred hair salon or Barbara.

There is a high likelihood that they are a local retailer or local neighbors are successful businesses run by hard working entrepreneurs.

Bob Myers: Our local neighbors are successful businesses run by hardworking entrepreneurs, have healthy credit, and are less susceptible to corporate bankruptcy caused by weaker performing locations. Therefore, local neighbors offer favorable economic returns. A typical local retailer receives less capital at the beginning of their lease, accepts more PICO-friendly lease terms, has high retention rates, and achieves renewal spreads similar to nationals. PICO retained 85% of its local neighbors in the fourth quarter, and for in-line local neighbors, renewal rent spreads remained strong at 17% in the fourth quarter. Importantly, local retailers meaningfully differentiate the merchandise mix that our neighborhood centers offer our customers.

<unk> healthy credit and are less susceptible to corporate bankruptcy caused by weaker performing locations.

Local neighbors offer favorable economic returns are typical local retailer receives less capital at the beginning of their lease except it's more <unk> friendly lease terms has high retention rates and achieved renewal spreads similar to nationals.

<unk> retained 85% of local neighbors in the fourth quarter and for inline local neighbors renewal rent spreads remained strong at 17% in the fourth quarter.

Importantly, local retailers meaningfully differentiate the merchandize mix that are neighborhood centers offer our customers.

Bob Myers: Our local neighbors are resilient and have been in our shopping centers for 9.4 years on average. In addition to our strong rental growth trends, we continue to expand our pipeline of ground-up out-parcel development and repositioning projects. In 2023, we stabilized 13 projects and delivered over 230,000 square feet of space to our neighbors. These projects add incremental NOI of approximately $3.4 million annually.

Our local neighbors are resilient and have been in our shopping centers for $9 four years on average.

In addition to our strong rental growth trends, we continue to expand our pipeline of ground up out parcel development and repositioning projects in 2023, we stabilized 13 projects and delivered over 230000 square feet of space to our neighbors. These projects add incremental NOI.

<unk> of approximately $3 4 million annually. These projects provide superior risk adjusted returns and have a meaningful impact on our long term NOI growth.

Bob Myers: These projects provide superior risk-adjusted returns and have a meaningful impact on our long-term NOI growth. We continue to expect to invest $40 million to $50 million annually in ground-up development and repositioning opportunities, with a weighted average cash-on-cash yield between 9% and 12%. This activity remains a great use of free cash flow and produces attractive returns with less risk.

We continue to expect to invest $40 million to $50 million annually and ground up development and repositioning opportunities with a weighted average cash on cash yields between 9% and 12%.

This activity remains a great use of free cash flow and produces attractive returns with less risk. We continue to make great progress on these properties and our team is working hard on growing this pipeline.

John: We continue to make great progress on these properties, and our team is working hard to grow this pipeline. In summary, the PECO team remains optimistic about the current strong operating environment and the continued positive momentum we are experiencing across leasing, redevelopment, and development. In addition, our healthy neighbor mix and grocery-anchored strategy positions PECO well for continued steady growth. The overall demand environment, the strength of our centers, the strength of our grocers, and the capabilities of our team give us confidence in our ability to continue to deliver strong operating results. I will now turn the call over to John. John, thank you, Bob, and good morning and good afternoon, everyone.

In summary, the <unk> team remains optimistic about the current strong operating environment and the continued positive momentum we are experiencing across leasing redevelopment and development.

In addition, our healthy neighbor mix and grocery anchored strategy positions <unk> well for continued steady growth. The overall demand environment the strength of our centers the strength of our grocers and the capabilities of our team give us confidence in our ability to continue to deliver strong operating results.

I will now turn the call over to John.

John.

Thank you Bob and good morning, and good afternoon, everyone I will start by addressing our fourth quarter results then provide an update on the balance sheet and finally speak to our increased 2020 for guidance.

John: I'll start by addressing fourth quarter results, then provide an update on the balance sheet, and finally speak to our increased 2024 guidance. Fourth quarter 2023 NARED FFO increased 6% to $74.8 million, or $0.56 per diluted share, driven by an increase in rental income from our strong property operation. Results were partially impacted by higher year over year interest expense of $4.3 million.

Fourth quarter, 2023, NAREIT <unk> increased 6% to $74 8 million or <unk> 56 cents per diluted share driven by an increase in rental income from our strong property operations.

Also were partially impacted by higher year over year interest expense of $4 $3 million.

John: Fourth quarter core FFO increased 4.9% to $77.9 million, or 58 cents per diluted share, driven by increased revenue at our properties from higher occupancy levels and strong leasing spreads, partially offset by the aforementioned higher interest. Our same center NOI growth in the quarter was 3.6%, driven by minimum rent growth of 3.8% year over year. Our reserves for uncollectability were slightly elevated in the quarter at 97 basis points. However, they were below in the fourth quarter of 2022.

Fourth quarter core <unk> increased four 9% to $77 9 million.

Or <unk> 58 per diluted share driven by increased revenue at our properties from higher occupancy levels and strong leasing spreads partially offset by the aforementioned higher interest expense.

Our same center NOI growth in the quarter was three 6% driven by minimum rent growth of three 8% year over year.

Our reserves for uncollectible <unk> were slightly elevated in the quarter at 97 basis points. However, they were below the fourth quarter of 2022, we do see an upward trend in reserves in the fourth quarter. Each year, we monitor the health of our neighbors closely and are not concerned about bad debt in the near term, particularly given the strong retailer.

John: We do see an upward trend in reserves in the fourth quarter each year. We monitor the health of our neighbors closely and are not concerned about bad debt in the near term, particularly given the strong retailer demand that shows no signs of slowing. During the fourth quarter, we acquired six grocery-anchored shopping centers and two out parcels for a total of $186.4 million. We had no dispositions during the quarter.

And that shows no signs of slowing.

During the fourth quarter, we acquired six grocery anchored shopping centers and two out parcels for a total of $186 $4 million, we had no dispositions during the quarter.

In the fourth quarter Pico issued two 2 million shares under our ATM facility, which resulted in net proceeds of $77 5 million at a weighted average gross price of $35 92 per share.

For the full year Pico generated net proceeds of $147 6 million through the issuance of $4 2 million common shares at a weighted average gross price of $35 76 per share.

John: In the fourth quarter, PECO issued 2.2 million shares under our ATM facility, which resulted in net proceeds of $77.5 million at a weighted average gross price of $35.92 per share. For the full year, PECO generated net proceeds of $147.6 million through the issuance of 4.2 million common shares at a weighted average gross price of $35.76 per share. Assets acquired in 2023 and currently in our pipeline are accreted to earnings per share at these levels. We were intentional in matching funding our acquisitions with equity at a time when our access to the equity market was favorable while keeping our leverage low. We will continue to evaluate future equity issuance based on a combination of favorable market conditions, acquisition opportunities, and identifying uses of proceeds that are earnings-accretive.

Assets acquired in 2023 and currently in our pipeline are accretive to earnings per share at these levels, we were intentional and match funding our acquisitions with equity at a time when our access to the equity market was favorable while keeping our leverage low.

We will continue to evaluate future equity issuance based on a combination of favorable market conditions acquisition opportunities and identifying uses of proceeds that are earnings accretive.

Turning to the balance sheet, we have approximately $615 million of liquidity to support our acquisition plans with no meaningful maturities until late 2025.

Our net debt to adjusted EBITDAR was at five one times as of December 31, 2023.

Our debt had a weighted average interest rate of four 2% and a weighted average maturity of four one years, when including all extension options.

Subsequent to quarter end, we entered into an interest rate swap agreements totaling $150 million.

John: Turning to the balance sheet, we have approximately $615 million of liquidity to support our acquisition plan with no meaningful maturities until late 2025. Our net debt to adjusted EBITDAR was at 5.1 times as of December 31, 2023. Our debt had a weighted average interest rate of 4.2% and a weighted average maturity of 4.1 years when including all extension options. Subsequent to quarter end, we entered into an interest rate swap agreement totaling $150 million.

The new instrument swap sofa, so approximately 345% effective September 25th 2024, and matures December 31 2025.

This swap will help us manage our floating rate exposure as we have swaps that expired in September and October of 2024.

With the execution of this swap and a decrease in the forward rate curve for sofa, we are revising our 2020 for interest expense estimate lower and our <unk> estimates higher.

In January S&P revised its rating outlook for Pico to positive from stable while favorable we continue to believe we are in underwriting credit at Triple B minus and <unk> III and remain focused on achieving a ratings upgrade.

John: The new instrument swapped SOFR to approximately 3.45%, effective September 25, 2024, and matures December 31, 2025. This swap will help us manage our floating rate exposure as we have swaps that expire in September and October of 2024. With the execution of this swap and a decrease in the forward rate curve for SOFR, we are revising our 2024 interest expense estimate lower and our FFO estimates higher. In January, S&P revised its ratings outlook for Pico to positive from stable.

We continue to meet with the agencies as we believe our financial strategies are commensurate with at least a triple b flat or <unk> ratings.

Though we cannot specify when an upgrade will occur we continue to target leverage levels to achieve this goal, which we believe to be approximately five five times.

We ended the year at 78% fixed rate debt with 22% floating.

Several of our peers access the unsecured bond market in January we continue to monitor this market and we look to access it opportunistically, although we had no meaningful maturities until November 2025, we will consider opportunities to enhance our liquidity and extend our debt maturity profile.

John: While favorable, we continue to believe we are an underrated credit at triple V minus and BAAA3, and remain focused on achieving a ratings upgrade. We continue to meet with the agencies as we believe our financial strategies are commensurate with at least a triple B flat or B double A two rating. Although we cannot specify when an upgrade will occur, we continue to target leverage levels to achieve this goal, which we believe to be approximately five and a half times. We ended the year at 78% fixed rate debt, with 22% floating. Several of our peers accessed the unsecured bond market in January.

Between the significant free cash flow generated by our portfolio and the capacity available on our revolver, we can be strategic in our timing when accessing the debt market.

That leads me to our guidance for 2024, and our ability to increase it from the preliminary guidance shared at our investment community day in early December.

Our updated net income per share range for 2024, 53 to <unk> 58 per share.

Our increased range for NAREIT <unk> per share is $2 34 to $2 41.

John: We continue to monitor this market and look to access it opportunistically. Although we have no meaningful maturities until November 2025, we will consider opportunities to enhance our liquidity and extend our debt maturity profile, between the significant free cash flow generated by our portfolio and the capacity available on our revolver. We can be strategic in our timing when accessing the debt. That leads me to our guidance for 2024 and our ability to increase it from the preliminary guidance shared at our investment community day in early December. Our updated net income per share range for 2024 is $0.53 to $0.58 per share. Our increased range for NARIT FFO per share is $2.34 to $2.41, which is a 6% increase over 2023 at the midpoint of the range.

Which is a 6% increase over 2023 at the midpoint of the range.

Our increased range for core <unk> per share is $2 37 to $2 45.

Which is a 3% increase over 2023 at the midpoint.

We are reaffirming our range for same center NOI growth of three 5% to four 5% given the continued strong operating environment.

Included in our guidance is the negative impact of normalizing our anticipated uncollectible reserves to historical levels of 60 to 80 basis points of revenue.

We are reaffirming the range previously provided given the continued strong health of our neighbors.

As of February eight we made several acquisitions in our pipeline either under contract or in contract negotiation.

Activity provides a strong start for the year.

As Jeff mentioned it is still early so we are reaffirming our acquisition guidance and expect net volume to be in a range of $200 million to $300 million.

John: Our increased range for core FFO per share is $2.37 to $2.45, which is a 3% increase over 2023 at the midpoint. We are reaffirming our range for same center NOI growth of 3.25% to 4.25% given the continued strong operating environment. Also included in our guidance is the negative impact of normalizing our anticipated uncollectible reserves to historical levels of 60 to 80 basis points of revenue.

If the transaction and capital markets improve we are hopeful and have the capacity to meaningfully increase this number but we are comfortable with this guidance range in the current environment.

As we outlined at our investment community day, we believe the internal and external growth opportunities for Pico gave us a long term growth outlook in the mid to high single digits for core <unk> per share growth.

We expect our comparable our faster growth rate for <unk> per share because there should be less tenant improvement dollars required as occupancy stabilizes.

In the near term we are impacted by interest rate increases as all borrowers are which is limiting our earnings growth.

John: We are reaffirming the range previously provided, given the continued strong health of our neighbors. As of February 8th, we have several acquisitions in our pipeline, either under contract or in contract negotiations. This activity provides a strong start for the year.

However, we are pleased to guide to positive for share growth for 2024, we are updating the range of interest rate expense to $95 million to $105 million.

John: As Jeff mentioned, it is still early, so we are reaffirming our acquisition guidance and expecting net volume to be in a range of $200 million to $300 million. If the transaction and capital markets improve, we are hopeful and have the capacity to meaningfully increase this number, and we are comfortable with this guidance range in the current environment. As we outlined at our Investment Community Day, we believe the internal and external growth opportunities for Pico give us a long-term growth outlook in the mid-to-high single digits for core FFO per share growth. We expect a comparable or faster growth rate for AFFO per share because there should be fewer tenant improvement dollars required as occupancy stabilizes. In the near term, we are impacted by interest rate increases, as all borrowers are, which is limiting our earnings growth.

Our decreased guidance range is primarily due to <unk>, having a lower revolver balance at the end of the year, which was driven by our equity issuance in December combined with our lower projections for the sofa curves.

While not eliminated these revisions due to lessen the earnings headwind for interest expense.

We estimate that higher interest rates could be a headwind of <unk> 10 for the year.

If we added back the per share impact of interest rate periods. So our updated 2024 guidance. This.

This would be 6% core <unk> growth at the midpoint.

2023 presented many challenges with high inflation volatile and rising interest rates and global conflict. However, we were able to exceed our 2023 earnings guidance due to the focus and commitment of TECOS experienced team and the strength of our integrated operating platform.

We are excited for the growth opportunities ahead in 2020 for both internal and through acquisitions.

John: However, we are pleased to guide to positive per share growth. For 2024, we are updating the range of interest rate expense from $95 million to $105. Our decreased guidance range is primarily due to PICO having a lower revolver balance at the end of the year, which was driven by our equity issuance in December, combined with a lower projection for the SOFR curve. While not eliminated, these revisions do lessen the earnings headwind for interest expense.

That we will open the line for questions operator.

Thank you to ask any question simply press Star then the number one on your telephone keypad.

Our first question comes from the line of Caitlin Burrows with Goldman Sachs. Please go ahead.

Hi, I guess good.

Good afternoon, everyone.

The earnings release as it relates to guidance you guys pretty clearly showed that Pete and the assumptions driving guidance and like John you just mentioned the interest expense was brought down.

Which I think on a per share basis would be like <unk>, but the midpoint of guidance only increased by <unk>. So I was wondering if.

John: We estimate that higher interest rates could be a headwind of $0.04 to $0.10 for the year. If we added back the per share impact of interest rate variance to our updated 2024 guidance, this would be 6% core FFO growth at mid- 2023. 2023 presented many challenges with high inflation, volatile and rising interest rates, and global conflict. However, we were able to exceed our 2023 earnings guidance due to the focus and commitment of PECO's experienced team and the strength of our integrated operating platform. We are excited for the growth opportunities ahead in 2024, both internal and through acquisition. With that, we will open the line for questions. Operator, Thank you. To ask a question, simply press the star and then the number one on your telephone keypad.

If you could talk a little bit about what may have made you only increased the midpoint of the <unk> range by <unk> <unk> rather than <unk>.

Okay.

Okay. Thanks, Caylin, John do you want to take that.

Sure. Thanks Kaitlin.

So yes, if you look at the interest rate expense component of our guidance at the midpoint and decreased six four.

<unk> of that was because of the equity issuance that we did in the fourth quarter. So the net is actually the interest expense benefit to guidance with the <unk> and.

And we were happy to increase our guidance range by a penny.

At the midpoint and so I think you could also look at it and say it's early in the year, but there is opportunity for future growth and in our earnings then what's presented.

So are you, saying that part of it is related to <unk>.

Mike the underlying leverage in share count assumption then.

You bet.

That's correct so the.

The interest expense went down because we had a lower revolver balance at the end of the year.

The equities because there is more share count and so the net between interest is lower but the share count would be higher so it's about <unk>, it's about <unk>.

Caitlin Burrows: Our first question comes from the line of Caitlin Burrows with Goldman Sachs. Please go ahead. Hi. I guess good afternoon, everyone.

As the impact from the additional shares.

Caitlin Burrows: In the earnings release as it relates to guidance, you guys pretty clearly showed the assumptions driving guidance. And like, John, you just mentioned the interest expense was brought down, which I think on a per share basis would be like six cents, but the midpoint of guidance only increased by one cent. So I was wondering if you could talk a little bit about what may have made you only increase the midpoint of the core FFO range by one cent rather than... Thanks, Caitlin. John, do you want to take this?

So that leaves that <unk>.

Okay got it and then.

You guys laid.

<unk> out in the Investor day, how you could achieve 3% to 4% same store NOI growth, even without further occupancy growth I guess to take the other side of that with occupancy. So high what do you think the risk that occupancy declines I guess this year or in the future and I guess, how likely is it and what would the impact be.

Palin.

The one thing that I don't think we really mentioned at Investor day is that one of the things that we've been doing on the acquisition side is to look for opportunities where there is.

John: Sure. Thanks, Caitlin. So yes, if you look at the interest rate expense component of our guidance at the midpoint, it decreased, but $0.04 of that was because of the equity issuance that we did in the fourth quarter. So the net is actually the interest expense benefit to guidance would be $0.02. And we were happy to increase our guidance range by a penny at the midpoint. And so I think you could also look at it and say it's early in the year, but there's opportunity for future growth. So are you saying that part of it is related to, like, the underlying leverage and share count assumption? I think that's correct.

Where there is less occupancy.

What we have in our core portfolio into lease that space up to give additional growth and if you look at.

Sure.

From a quarter to quarter basis.

It gets complicated based about when we buy what.

What kind of occupancy because we're at such a high level of occupancy across the portfolio. So I do think that if you look at I mean.

I think it was 84% occupied the projects that we bought that is going to consistently be a drag separate from what the same store portfolio.

John: So the interest expense went down because we had a lower revolver balance at the end, so the interest is lower, but the share count would be higher. So it's about 6 cents, and it's about 4 cents is the impact from the additional shares. So, that leaves the...

Occupancy would be and Bob I don't know if you have anything to add to that.

Yeah, Jeff the only thing I would add to that is when you look at how we come up with 3% to 4% same center NOI growth we said.

Jeff Edison: Okay, got it. And then you guys laid out in the investor day how you could achieve 3 to 4% same-store NOI growth even without further occupancy growth. I guess to take the other side of that, with occupancy so high, what do you think is the risk that occupancy declines this year or in the future? And I guess, yeah, how likely is that, and what would the impact be?

The Investor day, we'd have 100 to 125 basis points coming from new and renewal spreads 75 to 100 basis points and contractual rent bumps 75 to 125 basis points coming from <unk> and our development projects.

But yeah, we acquired net $272 million and overall we are.

14 assets totaled 87% occupied and in the fourth quarter. It was 84% so that that's going to allow us to continue to drive future growth.

Jeff Edison: Kaylin, the one thing that I don't think we really mentioned at Investor Day is that, you know, one of the things that we've been doing on the acquisition side is to look for opportunities where there is less occupancy than what we have in our core portfolio and to lease that space up to give additional growth. And if you look at it, you know, on a quarter to quarter basis, it's, you know, it gets complicated based upon when we buy what and what kind of occupancy because we're at such a high level of occupancy across the portfolio. So, I do think that if you look at, I mean, I think it was 84% occupied, the projects that we bought, that's going to consistently be a drag separate from what the same store portfolio occupancy would be. And Bob, I don't know if you have anything to add to that.

So we're excited those projects.

Yes, no that definitely makes sense and being able to lease out the acquisition properties I guess as you think about those.

Pieces of the same store NOI growth I guess occupancy up or down is an assumed so I'm wondering what's the risk occupancy in our same store portfolio comes down.

Yes.

Yeah.

I I feel right now that we still have another 100 to 150 basis points of occupancy left in our in line spaces I believe right now we're at 94, 7%.

90, 794, 7%, so we still feel like there's another 150 basis points in our existing portfolio on a same center basis of occupancy movement and we continue to see.

Bob Myers: Yeah, Jeff, the only thing I would add to that is when you look at how we come up with three to 4% same-center NOI growth, we said at the investor day, we'd have 100 to 125 basis points coming from new and renewal spreads, 75 to 100 basis points and contractual rent bumps, and 75 to 125 basis points coming from redev and our development projects. But yeah, we acquired a net $272 million, and overall, Thank you. Thank you. 14 assets totaled 87% occupied, and in the fourth quarter, it was 84%.

Significant demand for the spaces that we have.

Okay. So it sounds like you would think theres more upside potential versus downside.

Sure sure absolutely.

Okay. Thank you.

Yeah.

Thanks Carolyn.

Your next question is from the line of Tayo Okusanya with Deutsche Bank. Please go ahead.

And tell your lines open. Please go ahead.

Hello.

Yes, we can hear you let's go ahead.

On the acquisition front on the acquisition guidance could you give us a sense if it's.

Going to be more front weighted back weighted evenly throughout the year.

And give us kind of a general sense of what kind of cap rates are expecting one transactions.

Sure.

Thanks for the question.

As you know.

Caitlin Burrows: So that's going to allow us to continue to drive future growth, and we're excited about those projects. Yeah, no, that definitely makes sense in being able to lease up the acquisition properties. I guess as you think about those pieces of the same-store NOI growth, occupancy up or down isn't assumed, so I'm wondering what the risk is if occupancy in the same-store portfolio comes down. I feel right now that we still have another 100 to 150 basis points of occupancy left in our inline spaces. I believe right now we're at 94.7 percent.

[laughter] acquisitions are bumpy.

Last year was probably as difficult a year on the acquisition side as we've had and probably bumpier than any any previous year that we had.

I would assume it will be bumpy this year too.

And.

I think we've got good good belief that we're going to get into our guidance.

In terms of win.

We do have decent activity for the first quarter.

But I would again.

Bob Myers: So we still feel like there's another 150 basis points in our existing portfolio on the same-center basis of occupancy movement. And we continue to see significant demand for the spaces that we, Okay, so it sounds like you would think there's more upside potential versus downside. For sure, absolutely. Okay, thank you. Thanks, Caitlin. Your next question is from the line of Tayo Okusanya with Deutsche Bank. Please go ahead. And Tayo, your line's open.

<unk>.

It's hard to say exactly when that will happen.

To be conservative I would say, it's going to be there'll be more in the backend.

But we're we've had a couple of good weeks of new acquisition opportunities coming in so that that could be a little less back ended certainly we hope it'll be less back ended than last year.

As we've said, we're we're we feel good about our guidance, we're cautious about timing and how that will fall out and in terms of cap rates as you know.

Tayo Okusanya: Please go ahead. Hello, yes, we can hear you.

Tayo Okusanya: Please go ahead. Perfect. On the acquisition front, and with the acquisition guidance, could you give us a sense if it's going to be more front-weighted, back-weighted, even throughout the year, and give us kind of a general sense of what kind of top rates you're expecting on transactions? Sure, Tayo. Thanks for the question.

IRR buyers.

We continue to underwrite to.

Nine plus Unlevered IRR.

In the last year that translated into like a six six cap.

Cap rate.

I would assume similar.

Jeff Edison: As you know, acquisitions are bumpy. Last year was probably as difficult a year on the acquisition side as we've had and probably bumpier than any previous year that we had. I would assume it will be bumpy this year, too.

Visibility into this year.

Again.

Trying to create additional growth opportunity through some of the properties, we buy in our ability to.

Spanned them.

And expand the gaslog from them.

Gotcha. Thank you.

Yes, Thanks, Jeff.

Jeff Edison: And, you know, I think we've got good belief that we're going to get into our guidance. In terms of when, you know, we do have, you know, decent activity for the first quarter. But I would, you know, again, it's hard to say exactly when that will happen.

Your next question is from the line, but Lizzie <unk> with Bank of America. Please go ahead.

Hi, Ann.

Maybe like not my question, but just on redevelopment.

Just curious that there is more clarity on the timing of spend there throughout 2024, and I know that tends to be lumpy.

Yeah.

Jeff Edison: To be conservative, I would say it's going to be, you know, there'll be more in the back end. But we've had a couple of good weeks of new acquisition opportunities coming in. So, you know, that could be a little less back-end. Certainly, we hope it'll be less back-end than last year.

Thanks for the question.

Bob do you want to take sort of that.

And maybe John as well.

Sure John I'll go ahead and start I think when I look at the pipeline this year.

We're still thinking that we'll do between 40 and $50 million and a lot of those projects.

Tayo Okusanya: But I, you know, as we've said, we feel good about our guidance. We're cautious about timing and how that will fall out. And in terms of cap rates, you know, as you know, we're IRR buyers, and, you know, we continue to underwrite to nine plus unlevered IRR in the last year, which translated into like a 6-6 cap rate. I would assume similar visibility into this year, again trying to create additional growth opportunities through some of the properties we buy and our ability to, you know, expand them and expand the cash flow from them. Gotcha. Thank you.

Just to remind everybody I mean these are these are smaller projects that are $2 million to $3 million in size. They are a four to 5000 6000 square feet in our parking lots.

And a lot of them and all of our all our existing shopping centers. So we'll end up doing somewhere between.

12, and 15 projects with targeted returns between nine and 12 timings tricky and as Jeff mentioned with the acquisition. The same is true.

Especially when Youre doing teardown rebuilds were currently doing to tear down rebuild with Publix and a lot of it has to do with their timing. So it's always going to be a bit in flux. So it's kind of hard to navigate quarter by quarter, but as I look at it on an annual basis I would feel comfortable that our guidance of 40 to 50 years in <unk>.

Lizzie Doykin: Yep, thanks, Al. Your next question is from the line of Lizzie Doykin with the Bank of America. Please go ahead.

Lizzie Doykin: Hi, thanks. Maybe like a similar question, but just on redevelopment, just curious if there's more clarity on the timing of the spend there throughout 2024, as I know that tends to be lumpy. Yeah, thanks for the question, Lizzie. Bob, do you want to take sort of that and maybe John as well? Sure. John, I'll go ahead and start.

That we can hit.

Okay.

I was going to say Lindsay to add to that our assumptions as we look at it it is fairly even with a slight weighting towards the second half of the year, but it is as Bob said, it's pretty even throughout but if I had an <unk> would be a little bit more on the back.

I understand bank and then maybe following up on Caitlin question.

Bob Myers: I think when I look at the pipeline this year, we are still thinking that we'll do between $40 and $50 million, and a lot of those projects. Just to remind everybody, these are smaller projects that are two, three million dollars in size. They are 4,000 to 5,000, 6,000 square feet in our parking lots and all our existing shopping centers. So we'll end up doing somewhere between 12 and 15 projects with targeted returns between nine and 12. Timing's tricky.

Before I just on occupancy as it relates to same store.

Why.

It really sounds like.

Theres now downside scenario to occupancy being accurate and.

I'm just curious if maybe you could help us understand.

The areas.

Uncertainty that there may be to same store NOI or is that in.

This past year and this year. It is a function of just a really strong environment.

Alright.

Yeah.

Bob Myers: As Jeff mentioned with the acquisitions, the same is true, especially when you're doing teardown rebuilds. We're currently doing two teardown rebuilds with Publix, and a lot of it has to do with their timing.

You could provide more color on maybe it be the nature of your portfolio.

Limited exposure to big box oriented each geography.

Kind of explaining that.

Characteristics there would be helpful.

Bob Myers: So it's always going to be a bit in flux, so it's kind of hard to navigate quarter by quarter. But as I look at it on an annual basis, I would feel comfortable that our guidance of 40 to 50 is in a range that we can hit. I was going to say, Lizzie, to add to that, our assumptions as we look at it are fairly even with a slight weighting towards the second half of the year. But it is, as Bob said, it's pretty even throughout.

Well, let me take a first step and Bob you can you can jump in as well.

Lindsay the.

As you know we have a very differentiated strategy in terms of what we do.

And.

The way I look at it is there continues to be really strong demand for our properties. If that were to change that that would be the biggest risk.

John: But if I had to nudge you a little bit more in the middle, understand, thanks. And then maybe following up on Kaitlyn's questions from before, just on occupancy as it relates to same-store NOI, it really sounds like, you know, there's no downside scenario to occupancy being factored in. And I'm just curious if maybe you could help us understand the areas of uncertainty that there may be in same-store NOI or if, you know, this past year and this year are a function of just a really strong environment. Yeah, if you could provide more color on maybe it's the nature of your portfolio, you know, limited exposure to big box, or if it's the geography, kind of explaining the characteristics there would be helpful Well, let me take the first step; then, Bob, you can jump in as well.

We don't think it's going to change in any kind of a shorter timeframe with regard to new development, where theres a lot of excess supply that just is not happening and we don't see that happening for some extended period of time.

And I think what the advantage of being necessity based and close to People's homes is the retailers are.

They see that as the place they want to be and if you know if you.

You come into a market that we're in and you want your national tenant or a regional local and you want to be.

Where the the activity of necessity retail is youre going to be one and youre going to want to be near the number one or two grocer and with that property.

We are the preferred location for a lot of the necessity based retailers and because of that.

Jeff Edison: You know, Lizzie, we have a very differentiated strategy in terms of what we do, and the way I look at it is that there continues to be really strong demand for our properties. If that were to change, that would be the biggest risk. We don't think it's going to change in any kind of shorter time frame with regard to new development, where there's a lot of excess supply that just is not happening. And we don't see that happening for some extended period of time. And, you know, I think the advantage of being necessity-based and close to people's homes is that retailers are. They see that as the place they want to be.

We this demand that is driving our results in our occupancy.

Seems to be.

To have legs, and we don't see it.

Slowing down and we do have pretty good visibility into the next.

Six months of leasing and it continues to be strong I, Bob any any other add ons there for Lilly.

I think the biggest part of our strategy is by having the number one or two grocer in the market average footprint of our shopping centers are around 115000 square feet are average in line space is 2500 square feet. We just don't have the box exposure occupancy is at all time highs and to.

Jeff Edison: And if you come into a market that we're in and you're a national tenant or a regional local and you want to be where the activity of necessity retail is, you're going to want to be near the number one or two grocer. And with that property, we are the preferred location for a lot of necessity-based retailers. And because of that, this demand that is driving our results and our occupancy seems to have legs, and we don't see it slowing down. And we do have pretty good visibility into the next six months of leasing, and it continues to be strong. Bob, are there any other add-ons for Lizzie?

<unk> point earlier, staying focused on a disciplined merchandising strategy, where 70% of your neighbors are necessity based is key.

As Jeff mentioned demand is there we still see a resilient consumer.

If we were going to see signs of something happened you would see it in your retention and your spreads and our retention is the highest it's been in the history of the company our spreads are still in the mid to upper teens.

Bob Myers: Now I think the biggest part of our strategy is by being the number one or two grocer in the market. The average footprint of our shopping centers is around 115,000 square feet. Our average inline space is 2,500 square feet. We just don't have the box exposure.

Just not seeing any slowdown in that and we're in a very very healthy operational environment today.

Okay. That's helpful. Thank you.

Sure. Thanks Luca.

Yeah.

Our next question is from the line of Todd Thomas with Keybanc. Please go ahead.

Hi, Thanks, Good morning, John just wanted to follow up on the guidance and the adjustments there.

Bob Myers: Octancy is at all-time highs, and to Jeff's point earlier, staying focused on a disciplined merchandising strategy where 70% of your neighbors are necessity-based is key. As Jeff mentioned, demand is there. We still see a resilient consumer.

<unk> offset to the interest expense savings that you mentioned.

Does that include future equity issuance throughout the year I guess I'm not sure I'm following on the <unk>.

Bob Myers: If we were going to see signs of something happening, you would see it in your retention and your spreads, and our retention is the highest it's been in the history of the company. Our spreads are still in the mid to upper teens. We're just not seeing any slowdown in that, and we're in a very, very healthy operational environment today. That's helpful.

Quickly just given where the company's cost of equity is relative to where.

Pricing was on the revolver and the balance that you paid down and also the cap rates that you're transacting at.

Sure. So the <unk> really when you look at the equity that we issued in the fourth quarter. It did tend to be weighted more toward the issuance was higher later in the quarter, but that does not have an assumption with regards to any additional equity issuance in 2024 and so it is.

Lizzie Doykin: Thank you. Thanks for the call. Our next question is from the line of Todd Thomas with KeyBank. Please go ahead. Hi, thanks. Good morning.

Todd Michael Thomas: John, just wanted to follow up on the guidance and the adjustments there. The $0.04 offset to the interest expense savings that you mentioned, does that include future equity issuance throughout the year? I guess I'm not sure I'm following on the $0.04, specifically, just given where the company's cost of equity is relative to where, you know, pricing was on the revolver and the balance that you paid down and also the cap rates that you're transacting at.

Not so much that it would dilution it was more of an offset so again.

We kept leverage low I should point out again that it were five one times levered, we have the opportunity to.

By a lot and we think the key part of our strategy that we're trying to do is match it with our acquisitions and the acquisitions that we closed on in there that were looking at is accretive at those levels of equity issuance.

John: So the 4 cents really, when you look at the equity that we issued in the fourth quarter, it did tend to be weighted more toward the issuance was higher later in the quarter. But that does not have an assumption with regard to any additional equity issuance in 2021. And so it's not so much that it was dilution; it was more of an offset.

But when you look at it so rather than thinking about it it's a headwind, but it's really was replacing the interest expense and so ultimately it's the <unk> that is so.

<unk> that's left we've increased guidance by a penny and then you kind of get into rounding on the last penny, but we wanted to open a year and a position that we've got opportunity for growth in the future.

John: So again, I should point out again that we're 5.1 times levered, and we have, you know, the opportunity to grow by a lot. And we think the key part of our strategy that we're trying to do is match it with our acquisitions. And the acquisitions that we closed on and that we're looking at are creative as those levels of equity issuance. But, you know, when you look at it, so rather than thinking about it, it's a headwind, but it's really replacing.

Okay.

Sure.

And then within the $2 million to $300 million of net investment guidance that you maintained and it sounds like you have some better visibility early in the year.

Relative to what the back half of the year might look like.

I'm just curious on the disposition side.

John: And so, ultimately, it's the two cents that is, you know. We've increased guidance by a penny, and then you kind of get into rounding on the last penny, but we wanted to open the year in a position that we've got opportunity for growth. And then within the 200 to 300 million of net investment guidance that you maintained, it sounds like you have better visibility early in the year, relative to what the back half of the year might look like. I'm just curious on the disposition side, what we should think about dispositions and how they sort of factor into the mix.

How we should think about dispositions and how they sort of factor into the mix.

That sort of 13 or 14% of the portfolio.

That's not currently anchored by a number one or number two grocer in the market.

Yes, Todd.

<unk>.

Okay.

We have our plan to do that and we will put product on the market.

The $200 million to $300 million is a net number.

So.

We will be balancing dispositions with acquisitions.

Yes.

To get to that number.

Todd Michael Thomas: You know, that sort of 13 or, I think 14% of the portfolio, that's not currently anchored by a number one or number two grocer in the market. Yeah, Todd, we have our plan to do that. And we will put product on the market. The 200, 300 million is a net number.

We continue to look at the market and if we have the opportunity.

To get pricing that we find favorable.

We're disciplined.

As we've said before we're disciplined on the dispose side as we are on the acquisition side and that.

It creates a balancing act between pricing returns and what what pace. We go with the disposition plan. So.

Jeff Edison: So we will be balancing dispositions with acquisitions, you know, to get to that number. And, you know, we continue to look at the market. And if we have the opportunity to get pricing that we, you know, we find favorable, I mean, we're disciplined, as we've said, we're as disciplined on the disposal side as we are on the acquisition side.

I think John I have we just.

What we anticipate being the disposal amount for this year that we are.

Uh huh.

We haven't because of the flexibility that you are looking for there I mean, ultimately we're looking to solve for a total and we're feeling very confident about the portfolio that we have.

Jeff Edison: And that, you know, it creates a balancing act between pricing returns and what, you know, what pace we go with the disposition plan. So we, I think, John, I have just disclosed what we anticipate being the dispo amount for this year. Did we or not?

And we look at things strategically and so that's where if we're looking at it it'll be opportunistic we look at risk management.

We only sold $6 million last year, and if we felt that there was a greater need we would've done more so we're just guiding to a kind of a net total number.

John: We haven't because of the flexibility that you're looking for there. I mean, ultimately, we're looking to solve for the whole, and we're feeling very confident about the portfolio that we have. And, you know, we look at things strategically. And so that's where if we're looking at it, it'll be opportunistic. We look at risk management, but, you know, we only sold $6 million last year. And if we felt that there was a greater need, we would have done more.

Okay alright, thank you.

Thanks, Tom.

Your next question comes from the line of Ronald Camden with Morgan Stanley. Please go ahead.

Thanks for the time here.

Yes. Please go ahead.

Kramer here on for Ron.

Just wanted to ask and I apologize one more about the guide so if I just what youre kind of a full year core <unk> number from 'twenty to 'twenty three I think it was $2.34.

<unk> increase to the midpoint to the new midpoint of the guide maybe just if you could walk us through how much of that seven.

John: So we were just guiding you to a kind of net total number. Okay. All right. Thank you. Thanks, Tom. Your next question comes from the lineup of Ronald Kammen with Morgan Stanley. Please go ahead.

From kind of the same store NOI and sort of the.

Same store portfolio versus how much of it is I guess from other stuff right and really want to kind of understand your EBITDA.

Ronald Kammen: Thank you all for your time here. Yeah, please go ahead. I'm Cramer here.

Kind of.

Good amount of acquisition very late in the year, presumably it's not in your kind of $2 34 run rate. So I'm just trying to think through if there's any upside from the kind of late in the year acquisition activity any upside to kind of 2024 numbers.

Ronald Kammen: On for On. I just want to ask, and apologizes, one more question about the guide. So if I just look at kind of the full year core FFO number for 2023, I think it was $2.34. That's like a seven cent increase to the midpoint, or to the new midpoint of the guide. Maybe just if you could walk us through how much of that seven cents is from kind of the same store NOI and sort of the same store portfolio versus how much of it is, I guess, from other stuff, right? And I really want to kind of understand why you did a kind of a good amount of acquisition very late in the year. Presumably, it's not in your kind of $2.34 run rate. So just trying to think through if there's any upside for maybe the kind of late-in-the-year acquisition activity, any upside to kind of 2024. John, do you want to take this?

John do you want to take that.

Sure.

Adam Thanks for the question so.

We are guiding to 3.25% to 4.25% on the same store, which is adding growth to the portfolio on an <unk> basis, and our acquisitions, while accretive again the market was in a position where the spread of where the cost of capital. It certainly improved in the latter half of the year and even.

Relative to the 22, but.

The private market cap rate didn't move to the same extent that the public market cost of capital whether that be on the debt side or the equity side moved so the spread between that cost and those acquisition is closer than it would historically be so we do have as benefit.

John: Sure. Adam, thanks for the question. So I, you know, we're guiding the three and a quarter to four and a quarter percent on the same store, which is, you know, adding growth to the portfolio on an FFO basis, and our acquisitions, while creative again, the market was in a position where the spread of, where the cost of capital, it certainly improved in the latter half of the year and even relative to 22. But, you know, the private market cap rate didn't move to the same extent that the public market cost of capital, whether that be on the debt side or the equity side, moved so that the spread between that cost and those acquisitions is closer than it would historically be.

Benefit in accretion, but it's going to we needed to deliver that growth.

In these assets and so there is some but it is not as much in again on those acquisitions. One we look at them and we're buying assets that are accretive out of the gate, but also to the point that Jeff has made we're focusing on a 9% Unlevered return and the continued growth in the portfolio. So that's another piece.

I will say that going against that in the other direction is that I spoke to the interest rate headwind that that persists, so ultimately even though.

John: So we do have a benefit in accretion, but it's going to, we need to deliver the growth in these assets. And so there is some, but it is, is not as much. And again, on those acquisitions, one, we look at them, and we're buying assets that are creative out of the gate, but also, to the point that Jeff has made, we're focusing on a 9% unlevered return and continued growth in the portfolio. So that's another.

Right around our investment community day, and kind of forward there has been an improvement in the debt cost of capital.

Still the rate piece is still at a 7% headwind at the midpoint of what we are estimating in that so.

It's a combination of those pieces I think the acquisitions will continue to deliver and position us very well to deliver growth and support our our growth progress in the future, but it's.

John: I will say that going against that in the other direction is that, you know, I spoke to the interest rate headwind that persists. So ultimately, even though, you know, right around our investment community day and kind of forward, there has been an improvement in the debt cost of capital. It's still the rate piece is still a 7 cent headwind at the midpoint of what we're estimating in that. So it's a combination of those pieces.

To add less early.

Just maybe switching gears I wanted to ask a little bit about kind of small shop local tenants.

But also the kind of demand for those types of.

Those those those types of formats kind of given some of the credit card data some of the other kind of economic data that we've seen of late.

Just kind of walk us through.

Bob Myers: I think the acquisitions will continue to deliver and position us very well to deliver growth and support our growth progress for the future. But they add less or... Just maybe switching gears. I want to ask you a little bit about kind of small shops, local tenants, health, but also about the kind of demand for those types of formats, kind of given some of the credit card data, some of the other kind of economic data that we've seen of late. So maybe just kind of walk us through just kind of the kind of demand for those types of businesses right now. Here, Bob, do you want to take that?

Kind of the kind of demand for those types of businesses right now.

Sure Bob do you want to take that.

Yes for sure.

I appreciate the question right now when we look at our portfolio and specific to our in line spaces, a 27% of our ABR comes from local tenants.

We think local tenants are great one.

They are strong they have good credit to their.

Likely friendly for for the landlord doesn't cost us as much money to put in they're sticky there honestly true entrepreneurs you think about your contractor your dentist office your local hair salon as examples.

Bob Myers: Yeah, for sure. So, appreciate the question. Right now, when we look at our portfolio, and specifically to our inline spaces, 27% of our ABR comes from local tenants. Thank you very much.

Their average tenure has been nine four years and our portfolio.

Again.

I want a direct correlation to our overall merchandising strategy about being around necessity based goods and services. So I'm very focused on not only the grocery store, but also quick service restaurants health and beauty med tail and service providers and I mean, our healthy neighbor VIX has never been stronger and there's a law.

John: Thank you. We think local tenants are great. One, they're strong; they have good credit. Two, they're economically good for the landlord.

Bob Myers: It doesn't cost us as much money to put in. They're sticky, they're honestly true entrepreneurs. You think about your chiropractor, your dentist office, your local hair salon as examples.

A lot of demand for our size shopping centers and having having the grocery there that drives the foot traffic, they're just getting the benefit of that and it's very very strong I think our local renewal spreads in the fourth quarter were 17, 2%. So again very very healthy very very strong so very important.

Bob Myers: Their average tenure has been 9.4 years in our portfolio again. I want a direct correlation to our overall merchandising strategy of being around necessity-based goods and services. So I'm very focused on not only the grocery store but also quick service restaurants, Health and Beauty, Medtail, and service providers. And I mean, our healthy neighbor, Bix, has never been stronger. And there's a lot of demand for our size shopping centers, and having the grocer there that drives the foot traffic, they're just getting the benefit of that. And it's very, very strong.

A piece of our overall merchandising.

Yes, Adam I would just add that.

When.

Yes.

There's always questions about the consumer and where theyre going.

The retailer when they're looking at.

Staying in one of our centers.

And how much rent increase in rent, they're going to give us that that's a real decision.

A decision that's really.

I think the leading indicator of what's going on and.

Jeff Edison: I think our local renewal spreads in the fourth quarter were 17.2%. So again, very, very healthy, very, very strong. So, Adam, I would just add that, you know, when, when, if, there's always questions about the consumer and where they're going. The retailer, when they're looking at staying in one of our centers and how much of an increase in rent they're going to give us, that's a real decision that's really, I think, the leading indicator of what's going on. And when you have sort of record retention and record spreads, it's a great indicator that the retailers are not seeing the consumer pulling back. There may be some credit card issues, but they are not, or they wouldn't be renewing at this rate.

And when you have sort of record retention and record spreads.

It is a great indicator that the.

The retailers are not seeing the consumer pulling back there may be some credit card issues abate, but they are not or they wouldn't be renewing at this rate you would start to see some reduction in those in both the spreads and in the amount of retention.

As we look very closely as we are not seeing that at this point in time.

Your next question is from the line of Juan Sanabria with BMO capital markets. Please go ahead.

Hi.

Thanks for the time, just a question on the.

Funds management initiatives noted or opportunity noted.

Jeff Edison: You would start to see some reduction in both the spreads and in the amount of retention. And as we look very closely at, we are not seeing that at this point in time. Your next question is from the line of Juan Sanabria with BMO Capital Markets. Please go ahead.

Investor Day, just curious.

On latest thoughts or comments there and.

Is any of the enthusiasm on recent acquisition opportunities is that related to funds opportunities are more on balance sheet.

Kevin do you want you want to take that.

Juan Sanabria: Hi, thanks for the time. Just a question on the Funds management initiative noted or opportunity noted at the investor. They're just curious about the latest thoughts or comments there, and any of the enthusiasm on recent acquisition opportunities, is that related to funds opportunities or more on balance? Devin, do you want to take that?

Sure Juan Thanks for the question.

As we mentioned at the Investor Day, the investment management business is a business that we've been in since the company's founding.

We have this platform because it allows us to access incremental capital it expands our acquisition opportunity set and it generates attractive rois for us.

The Rois in this business for us are in the high teens to high twenties, depending upon the strategy that we're executing we.

Devin Murphy: Sure. Juan. Thanks for the question. As we mentioned at Investor Day, you know, the investment management business is a business that we've been in since the company's founding. We have this platform because it allows us to access incremental capital, it expands our acquisition opportunity set, and it generates attractive ROIs for us. You know, the ROIs in this business for us are in the high teens to the high 20s, depending upon the strategy that we're executing. We did mention at Investor Day two new initiatives. One is a core partnership, and the other is a social impact fund targeting gross-ranked centers and majority-minority communities.

We did mention at the Investor day to new initiatives. One is the core partnership. The other is a social impact fund targeting growth strength centers and majority minority community the.

The capital in both of these ventures has been committed by our partners and our partners have requested that we do not disclose any additional information until we invest in a center in each venture. We are currently pursuing acquisition opportunities for each venture NR.

Hope and expectation is that we will be able to.

Devin Murphy: The capital in both of these ventures has been committed by our partners, and our partners have requested that we do not disclose any additional information until we invest in a center in each venture. We are currently pursuing acquisition opportunities for each venture. And our hope and expectation is that we will be able to give additional detail about these ventures in the first half of the year, as we mentioned in December. And so our enthusiasm for the acquisition is high. This translates into opportunities for both of these ventures, but they are also, on balance, acquisition opportunities because, as we've said, we expect to generate acquisition volume comparable to what we've done over the last number of years on balance. And then the acquisition volume that we do in these new ventures is incremental to what we do on balance. Thank you, and it's good to hear from you.

Give additional detail about these ventures in the first half of the year as we mentioned in December and so our enthusiasm for the acquisition volume translates into opportunities for both of these ventures, but for also our on balance sheet acquisition opportunities because.

As we said we expect to generate.

Acquisition volume comparable to what we've done over the last number of years on balance sheet and then the acquisition volume that we do in these new ventures is incremental to what we do on balance sheet.

Thank you.

Good to hear from you.

A follow up question on the acquisitions and how it relates to occupancy.

Juan Sanabria: Just a follow-up question on the acquisitions and how they relate to occupancy. So, what would the same store occupancy have been? The reported company-wide occupancy decreased quarter over quarter.

So.

What would have the same store occupancy Ben.

The reported company wide decreased quarter over quarter.

Jeff Edison: I'm assuming there was some modest impact from buying. Aspects that weren't fully occupied, so maybe if you could just give the same store occupancy delta sequentially. And just as a follow-up on that, the acquisition yields that are quoted, Are those going in, or are those assuming some sort of stabilization in the occupancy if, in fact, they're kind of below the stabilized level? I'll answer the first one, and then John can step in on the accuracy. It is the in-place income that we're talking about when we talk about cap rate on what we acquired. And on Occupancy Juan, it was our third quarter, it was consistent, it was 97.8 to 97.9. Thank you very much. Your next question is from the line of Haendel St. Juste with Mizuho. Please go ahead. Hey guys. Good afternoon, I think.

Assuming there was some modest impact from buying.

Assets that weren't fully occupied so maybe if you could just give the same store occupancy delta sequentially.

And just as a follow up on that are the acquisition yields that are quoted.

Those going in or are those assuming some sort of stabilization in the occupancy.

If in fact, they are kind of below stabilized levels.

Yes, I'll answer the first one it is.

And then John you can step in on the on the occupancy.

It is the in place income that we're talking about when we talked about cap rate on what we acquired.

Yes.

And John do you want to yes.

And on occupancy one it was our third quarter.

It was consistent was 97, 8% to 97 eight.

Thank you very much.

Your next question is from the line of Handel St Juice with Mizuho. Please go ahead.

Hey, guys. Good afternoon I think.

Bob Myers: So you mentioned the top 10 neighbors on your watch list represent, I think, 2.7% of the ABR. Can you talk a bit more about who or what categories on this list and what's embedded in your guide this year for credit loss and what you actually realized for full year 23? Great. John, I think maybe it's probably best if you can cover that. Thanks, Heather. Absolutely, and I'll say good afternoon to you, sir.

So you mentioned the top 10 neighbors in your watch list represent I think two 7% of ABR can you talk a bit more about who or what categories. On this list and what's embedded in your guide this year for credit loss and whats you actually realized for full year 'twenty three.

Great.

Yeah.

I think maybe that probably best if.

If you can cover that thanks.

Absolutely.

And I'll say good afternoon to you Sir.

Paulina Rojas: So the watch list that we have, I mean, we ultimately have watch lists at every, But the watch list that we're referring to here is really from a national standpoint, and I'll clarify with 2.3%. I think you said 2.7%. There's 2.3%. And it's not, they're not named.

Yes.

The watch list that we have I mean, we ultimately have watchlist that every center, but the watch list that we're referring to here are really from a national standpoint, and I'll clarify. It was two 3% I think you said two 7% versus two 3% and it's not they're not named so included in there would be someone like a joanne or.

John: So, you know, included in there would be someone like a Joanne or, you know, a Big Lots. It's things like that where we don't think there's anything imminent, but it is something that we are watching. And I would just, you know, this is where the diversification of our portfolio is really beneficial. So, I mean, even the names that I'm talking about, there are, you know, 20 and, you know, 50 bases, individually, assuming that they all go.

A big lots.

It's things like that where we don't think theres anything imminent, but it is something that we are watching and I would just this is where the diversification of our portfolio is really beneficial. So I mean, even the names that I'm talking about there are 20, and 50 basis points individually.

Assuming that they all wind and so we feel very good about our locations and everything so in terms of the guidance and what we're looking at in 2000 and for this.

John: And so we feel very good about our locations and everything. So in terms of the guidance and what we're looking at in 24, you know, this portfolio has been between 60 and 80 basis points over a long period of time. And that is what we have assumed.

This portfolio has been between 60 and 80 basis points over a long period of time and that is what we have assumed we feel good about our locations that we have and we our strategy specifically is that format drives results. So we are intentionally limiting our exposure to some of these larger non Greg.

John: We feel good about our locations that we have. And, you know, our strategy specifically is that format drives results. So we are intentionally, you know, limiting our exposure to some of these larger, non-gray markets.

John: That's very helpful. Did you actually mention what the actual credit loss was for last year? Oh, yeah, yeah, yeah. Okay, sure. So for the year, it was for total year 23. It was 62.

Anchors.

That's very helpful.

Did you could you ask me about sort of what the actual.

Quite loss was for last year was that.

Oh, Yeah, Yeah, Yeah, yeah, Okay sure. So for the year. It was for total year 'twenty three it was 62 basis points.

Bob Myers: Great, great, thanks. And just to follow up on, I think, your comments earlier on redevelopment, you talked about the $40 to $50 million of capital spend this year, and healthy 9% plus returns. I guess I'm curious, what is keeping that pipeline so small? I know you're working on smaller projects, but I'm curious if perhaps there's a greater opportunity to expand that, where that pipeline could grow to over time, and how we should think about that. Well, Bob, you want to walk through sort of what I mean, Handel. The answer is it's really hard to get the volume that we would like to.

Great great.

And just a follow up on your comments earlier on redevelopment you talked about the $40 million to $50 million of capital spend this year, a healthy 9% plus returns I guess I'm curious what is keeping that pipeline. So so small I know you're working on smaller quarter.

Projects, but I'm curious, if perhaps there's a great opportunity to expand that where that pipeline could grow to over time.

And how we should think about that thanks.

Yeah.

Well, Bob do you want you want to walk through sort of <unk>. The answer is it's really hard to get the volume that we would like to I mean, we'd love to do twice that amount.

This is sort of hand to hand combat of takings buying specific pieces of land getting the zoning and the other entitlements.

Jeff Edison: I mean, we'd love to do twice that amount. This is sort of a hand to hand combat of buying specific pieces of land, getting the zoning and the other entitlements, getting the store built and leased and doing that in, you know, 1 to $5 million chunks. It's a difficult process.

Getting that the store build.

And leased and doing that in.

$1 million to $5 million chunks.

It's a difficult process and Thats why were.

Jeff Edison: And that's why, you know, the stuff we're working on today is, you know, two, three years out and keeping the pipeline full and going. That's how we think about it. But the returns are really good.

The stuff we're working on today is two to three years out and keeping the pipeline full and going Thats, how we think about it but the returns are really good and therefore.

Bob Myers: And therefore, it's, you know, it's an important part of what we're trying to do with our centers in terms of being able to find additional growth opportunities for them. And, you know, if you can help us figure out how to get more volume, we're all for it. We're working really hard to get the volume that we are, and, you know, I think we feel good about being able to continue that. But it is not an easy process, getting those out of the ground and, you know, going through the full process.

It's an important part of what we're trying to do with our centers and in terms of being able to find additional growth opportunities for them.

And.

If you can help us figure out how to get more volume we were all for it.

We're working really hard to get the volume that we are and I think we feel good about being able to continue that but it is a.

It's not an easy process getting those out of the ground and going through the the the full processes.

Jeff Edison: It's, you know, it takes time. I mean, we're lucky in that, you know, all of them that we've done have been, are full basically at this point. So we've got, you know, we've gotten, we've done a really good job with them. It's just, you know, it's hard to do, you know, a lot more volume than what we've been able to put on the board. I'll just add a couple things to Jeff because not only you know do we think the portfolio can generate the 40 to 50 million per year and you touched on I mean we're doing a lot of Starbucks, Chipotle's, you know Chick-fil-A's, we're repositioning some of the boxes with EOS Fitness, Ross 5 Below as an example but one thing that we're very focused on is is finding development opportunities or redevelopment opportunities as part of our acquisition strategy and as we mentioned earlier we've closed on 14 assets in 2023, 8 of those 14 assets have some sort of development or redevelopment capability which is also why you see the 87% occupancy level is that we're very intentional about wanting to continue to drive this portion of our business and we are getting really good returns to Jeff's point between 9 and 12 so you'll see that we're going to run a parallel path between the existing portfolio and our acquisition strategy. Got it, got it.

It takes time.

We're lucky in that.

All of them that we've done have been our full basically at this point.

So we've got we've gotten we've done a really good job with them. It's just it's hard to do.

A lot more volume than what we've been able to put on the board.

Okay. That's helpful.

Yeah, I'll just add a couple of things to Jeff because not only do we think the portfolio.

And generate the $40 million to $50 million per year, and you touched on I mean, we're doing a lot of Starbucks Chipotle is.

Chick Fil A's.

Repositioning some of the boxes with Eos fitness Ross five below as an example, but one thing that we're very focused on is is finding development opportunities or redevelopment opportunities as part of our acquisition strategy and as we mentioned earlier, we've closed on 14 assets in 2023 eight of those 14.

Assets have some sort of development or redevelopment capability, which is also why you see the 87% occupancy level is that we're very intentional about wanting to continue to drive this portion of our business and we are getting really good returns.

<unk> point between nine and 12, so you'll see that we're going to run a parallel path between the existing portfolio and our acquisition strategy.

Got it got it that's helpful. It makes sense was also trying to ascertain really if there was anything.

Different about your portfolio that perhaps your peers. There are a lot of your peers have pipelines that are far larger but it sounds like.

Haendel Emmanuel St. Juste: That's helpful. It makes sense. I was also trying to ascertain, really, if there's anything different about your portfolio than perhaps your peers. A lot of your peers have pipelines that are far larger, but it sounds like as part of the opportunities on the acquisition side that you're sourcing today, that could lead to perhaps more redevelopment opportunities overall in the portfolio. Okay, guys. I think that was it for me.

Part of the opportunities on the acquisition side that you're sourcing today that could lead to perhaps more more redevelopment.

Overall in the portfolio.

Hey, guys I think that was that was it for me appreciate the time.

Thanks, Ed.

Your next question is from the line of Dori Kesten with Wells Fargo. Please go ahead.

Hi, Thank you.

Jeff Edison: Appreciate the time. Thanks. Thanks, Endel. Your next question is from the line of Dory Keston with Wells Fargo. Hi, thank you. I apologize if I missed this, John, but did you say what your intentions were regarding the swaps maturing later in 2024, and is that assumed in guidance now?

I apologize if I missed this Jonathan did you say what your intentions were regarding swaps maturing later in 'twenty four.

Is that is that assumed in guidance.

Hi, Doherty no actually it didn't speak to that so thank you for that so look we are focused on flexibility. We did after quarter end, we did execute a forward starting swaps of $150 million locking in the sofa curve at 345% I mean, we still are above.

Dory Keston: No, I actually didn't speak to that. So thank you for that. So look, we are focused on flexibility. We did, after quarter end, execute a forward starting swap for 150 million locking in the SOFR curve at 3.45%. However, we still are above or have more floating rate debt than we would like. We've mentioned that we want a target of 90% fixed, and as we look at those maturities, part of it is going to be whether it be fixing SOFR, or, ultimately, we want to be a long-term issuer in the unsecured bond market. And so if we're able to opportunistically issue in that market, that'll also improve that. So I will say this, with regard to our fixing activity, there is refinancing or financing around fixing, and other things in our guidance for 24 are already assumed.

Or have more floating rate debt than we would like we've mentioned that we want to target a 90% fixed.

And as we look at those maturities and part of it is going to be.

It would be fixing so for or ultimately we want to be a long term issuer in the unsecured bond market and so if we were able to opportunistically issue in that market that will also improve that so I will say this with regards to our fixing activity there are refinancing or financing around fixing and.

Other things in our guidance for 'twenty four already assumed the one clarifying piece going back to the question. I think is from Todd was we do not have incremental equity issuance in our in our guidance, but we do have activity related to our interest in our debt in our guidance.

Where do you think that you would price today in <unk>.

Dory Keston: The one clarifying piece going back to the question, I think it was from Todd, was that we do not have incremental equity issuance in our guidance, but we do have activity related to our interest and our debt. Where do you think that you would price your assets today in the unsecured market? So we do watch that debt market very closely. The most important thing we did was manage our maturity ladder last year.

The unsecured market.

Sure. So we do watch that that market very closely.

The most important thing we did was manage our maturity ladder last year, we don't have pressing maturities in 'twenty four and we do have meaningful liquidity to pursue the acquisition strategy. We've been talking about so one of our goals is to become a long term seasoned issuer in that unsecured bond market.

And so it is a little tough to specifically pinpoint because it's going to be dependent upon where the 10 year ends at the time, we believe that it would be in the five and three quarters to 6% range. We think are a reception will be similar to that of our peers. Because we believe we have a better business model lower leverage ultimately this just this.

John: We don't have pressing maturities in 24, and we do have meaningful liquidity to pursue the acquisition strategy we've been talking about. So one of our goals is to become a long-term seasonal issuer in that unsecured bond market. And so it is a little tough to specifically pinpoint because it's going to be dependent upon where the 10-year is at the time.

In the month of January we received a positive outlook from S&P, which is a step in the right direction, but we continue to believe were in underwriting credit. So we will look to access that market opportunistically.

John: We believe that it would be in the five and three-quarters to 6% range. We think our reception will be similar to that of our peers because we believe we have a better business model and lower leverage. Ultimately, just in the month of January, we received a positive outlook from S&P, which is a step in the right direction, but we continue to believe we're an underrated credit, so we will look to access that market opportunity. Okay, and congratulations on that outlook. One last question, if your net acquisitions did exceed $250 million this year, within your IRR expectations, would you feel comfortable issuing equity where you're trading today? Uh, today, you mean like today or today in terms of generally where we've been trading over the last, you know, several months today? No, I don't feel great about that.

Okay and congratulations on that.

One last question.

That acquisition.

Got here within your IRR excellent Colson would you feel comfortable issuing equity.

We're trading today.

Today, you mean like today or today in terms of generally where we've been trading over the last.

Several months.

Today no.

I don't feel great about that but.

But over.

Generally.

To me.

For us the where we would look to use the ATM is when we have an acquisition.

Volume that is that we know what the specific uses will be.

And we feel comfortable that we're it's very accretive at the stock price that we're at and at the debt costs that were at so that Youll were match funding those those two pieces as we grow and.

Jeff Edison: But generally, you know, it's to me, you know, we, for us, the time when we would look to use the ATM is when we have an acquisition volume that is that we know what the specific uses will be, and we feel comfortable that we're, it's very accretive at the stock price that we're at and at the debt cost that we're at. So, you know, we're matching funding those two pieces as we grow and, you know, trying to, take a longer-term growth perspective on the properties and matching them while at the same time, you know, keeping, you know, we certainly have a market-leading balance sheet today. We would like to continue to have a strong balance sheet and, and, and, and have the ability to grow faster if the opportunities arise. Does that answer your question, Dory? Yeah, it does.

Trying to take a longer term growth perspective to the properties and matching them while at the same time keeping.

I mean, we're certainly a market leading balance sheet today, and we would like to continue to have a strong balance sheet.

And find that have the ability to grow faster if the if the opportunities arise.

Does that answer your question Laura.

Yeah. It does.

Thanks.

Okay.

Your next question is from the line of Hong Zhang with Jpmorgan. Please go ahead.

Yeah, Hey, I had a quick question about your referral park and Apache shops acquisitions, I guess are those representative of the acquisition of a recent nature you were talking about.

Dory Keston: Your next question is from the line of Hong Zhang with JPMorgan. Please go ahead. Yeah, hey, I had a quick question about your River Park and Apache Shops acquisitions. I guess, are those representative of the acquisitions of the lease-up nature you were talking about? And what are your expectations on timing to lease them up to your average portfolio? That's a great question.

And what are your expectations on timing to reach them up to your average portfolio rate.

The great question.

They are examples of.

I think strong grocer centers with opportunity and.

Bob Myers: They are examples of, I think, strong grocer centers with opportunity. And I believe that we will see progress in both of those over the next 12 to 18 months, but it won't happen tomorrow. It's one of the beauties of our small store portfolio is that things can happen much more quickly. These two have some bigger box, two bigger box issues, along with a lot of small store opportunity.

We.

I believe that we will see progress in both of those over the next 12 months to 18 months, but they will take I mean, they're not it won't happen tomorrow.

One of the beauties about our small store portfolio is that things can happen much more quickly on these two have some bigger box to bigger box issues, along with a lot of small stir opportunity. So I would say, we will see the small store opportunity and in 12 months.

Bob Myers: So I would say we'll see the small store opportunity within 12 months and maybe slightly longer on the box opportunity. So that's the way we kind of look at those. But when we look at HEB and Trader Joe's, we perform very strongly in our centers that have them as anchors, and we anticipate doing the same with those two acquisitions. Bob, I don't know if you have anything else that you want to add.

Within 12 months and maybe slightly longer on the.

The box opportunities so.

That's the way, we kind of look at those but when we when we look at HEB.

And trader Joe's there too we performed very strongly in our centers that have them as anchors and we anticipate doing the same with these two those two acquisitions.

Bob I don't know if you have anything else that you want to add.

Bob Myers: No, I would already say that since we've acquired the assets, we're already working on letters of intent on River Park, as an example. And to your point, we usually will strike on our small shop spaces within the first six months. And then, to Jeff's point earlier, 12 to 18 months.

No I would already say that since we've acquired the assets were already working letters of intent on River Park as an example and to your point.

We usually will strike on our small shop spaces within the first six months and then.

The chunkier sized boxes that are a little bit larger could take to Jeff's point earlier 12 months to 18 months, but when you have to have the dominant number one number two grocers in these markets doing the type of sales volumes Theyre doing.

Bob Myers: But when you have two of the dominant number one and number two grocers in these markets doing the type of sales volumes they're doing, ATB's doing over $1,000 a foot, and Trader Joe's is doing over $2,200 a foot, they just are significant traffic drivers for the redevelopment opportunity. So I'm encouraged by the activity we've seen so far, and we just recently acquired these in the fourth quarter. Good. Got

<unk> is doing over $1000 a foot trader Joe's doing over 'twenty 200, a foot.

Just are significant traffic drivers to lease up the redevelopment opportunity so.

I'm encouraged by the activity we've seen so far and we just recently acquired these in the fourth quarter. So.

Good.

Got it if I can ask a follow up question I guess as you as you look at the potential pool of acquisitions today, how many of these how many of those potential acquisitions are our properties with.

Hong Zhang: If I could ask a follow-up question. I guess as you look at the potential pool of acquisitions today, how many of these potential acquisitions are properties with, you know, an 80% leased rate versus, I guess, more stable? Yeah, we wish we had more of the 80%. I would say that, I think I would say we're targeting probably 90% is probably where the market will end up in terms of total acquisitions, it will probably be closer to 90% than sort of the mid-80s. But we would love to match what we did in the fourth quarter.

Sub 80% leased rate versus I guess more stabilized.

Occupancies.

Yes, we wish we had more of the of the 80%.

Yes, I would say that.

I think I would say, we're targeting probably 90 is probably where the market will end up in terms of the total.

Acquisitions will probably be closer to 90% than sort of mid <unk>, but we would love to we'd love to match, what we did in the fourth quarter.

Jeff Edison: And it will be based, it'll be really based upon the opportunities that arise during the year. But we love those projects. And we think our team has been able to execute on them really well. So if those opportunities arise, we'll be there. But I would guess that, you know, it's more likely to be in the 90% occupied range. And that's total occupancy for the center.

And it will be based it will be really based upon the opportunities that arise during the year, but.

We love those projects and we think.

Our team has been able to execute on them really well so.

If those opportunities arise we will be there, but I would guess that it's more likely to be in the 90% occupied range and Thats total occupancy for the center.

Hong Zhang: Cool. Thank you. Yep, thanks. Our next question is from the line of Paulina Rojas with Green Street. Please go ahead.

Thank you.

Yes. Thanks.

Your next question is from the line of Paulino Rojas with Green Street. Please go ahead.

Paulina Rojas: Hello, everyone. I have two short questions. One is about one of the assets that you acquired, Glenbrook Marketplace. I see that it's not anchored by a coaster, and it's mostly a small shop with a shadow of Walgreens. So it's a little bit of a departure from the traditional center that you would acquire and then be intrigued by.

Hello, everyone.

Hey, Paul.

I have two short questions. One is one of the assets that you acquired glenbrook marketplace I see it's not anchored by a grocer and it's mostly small shop with a shadow and.

Walgreens I think so.

Our departure to the traditional center that you would acquire and then intrigued by it.

Jeff Edison: How much you, I don't know if you would do more of this, and if you have a limit for how much these types of assets could represent in the context of your entire portfolio. Yeah, probably a great question and one that, you know, we, I'm glad you asked. The, that particular project is directly across the street from one of the largest, one of the most productive jewels in Chicagoland, and we have a strong presence in Chicago, and with a good concentration. And this was an opportunity we saw where we could actually use the machine that we have built across the country, but particularly in this market, to get outside returns and, you know, very strong growth.

Much you.

I don't know if you would do more of this and if you had a limit for how much these type of assets could represent and.

You're in the context of your entire portfolio.

Yes, great.

Great question and one that we.

Uh huh.

Im glad you asked.

The.

That particular project is.

Is directly across the street from one of the largest one of the most productive jewels into Chicago.

Chicago land.

And.

We have a strong presence in Chicago.

And.

With the.

A good concentration.

And this was this was an opportunity we saw where we could actually use the machine that we have built in across the country, but particularly in this market to get outsized returns and.

Very strong growth so in those opportunities we are looking for those and will.

Jeff Edison: So, we are looking for those opportunities, and they'll continue to be a small part of our portfolio, but we are, you know, we believe that there are specific opportunities where we can take advantage of the team that we have and the booths we have on the ground, as well as having the traffic generators in the immediate vicinity that will allow these centers to be long-term successful. But we're, you know, as we underwrite them, we're, you know, we believe we need a bigger return on those projects than we do on our traditional gross record. So, if you think of those, those would be 10, 10 and a half on levered IRRs versus, you know, where we are at nine on our traditional gross record centers. So, you know, it's a small part of our portfolio, and it will continue to be a small part of our portfolio, but we do believe that there are select opportunities where this could be a good growth area for the company. Thank you.

It'll continue to be a small part of our portfolio, but we are we believe that there are specific opportunities, where we can take advantage of the team that we have and the boots, we have on the ground as well as having the the traffic generators in the immediate vicinity that will.

<unk> allows these centers to be long term successful.

But we're as we underwrite them.

We believe we need a bigger return on those projects than we do on our traditional grocery anchored. So if you would think of those those would be <unk> 10, and a half on levered IRR versus where we are at nine on our <unk>.

Traditional grocery anchored centers so.

It's a small part of our portfolio will continue to be a small part of our portfolio, but we do believe that there are.

Select opportunities, where this could be a <unk>.

Good.

Growth area for the company.

Paulina Rojas: And then the last one is I'm curious about where you think asset level financing is for the types of grocery-anchored centers that you are acquiring. And I'm asking from an industry perspective, not necessarily from you. I know you have issued equity, you have free cash flow, and other sources. Yeah, I Paulino, we're just not the best people to give you that. I mean, we have I can, you know, we can give you what the banks are teaching us about what our banks are talking with us about. But we have not, you know; we're not actively borrowing in the secured market right now.

Thank you and then the last one is I'm curious, where you think a certain level and financing is for the type of grocery anchored centers that you are acquiring.

And then.

I'm asking from an industry perspective, not necessarily to you I know you're you have issued equity you have free cash flow and other sources of capital.

Yes.

We're just not the best people to give you to tell you that we have I can we can give you what the banks are taught what our banks are talking with us about but we have not we're not actively borrowing in the secured market right now.

Jeff Edison: So I would be we would be inferring versus specific, but you know, maybe, Devin, you want to talk a little bit about what we're doing on the fun side, and we're, we're, we're seeing that capital. Sure, Paulina, the perspective we have on secured financing is from our venture activity because those assets will be financed in that market. And what we're hearing right now is 50 to 55% LPB at 1 AE over.

So.

I would be we would be incurring versus specific but maybe Devin you wanted to talk a little bit about what we're doing on the fund side and where we are seeing that that that capital.

Sure pulling at the perspective, we have on the secured financing.

From our venture activity because those assets will be financed.

In that market and what we're hearing right now is 50% to 55% LTV at one <unk> over so just inside of 6% today call me any given where the treasuries.

Devin Murphy: So, you know, just inside of 6% today, Paulina, given where the Treasury is. Thank you very much. This concludes our question and answer session. I will now turn the conference back to Jeff Edison for some closing remarks. Great, thank you, Operator.

Thank you very much.

Yes.

This concludes our question and answer session I will now turn the conference back to Jeff Edison for some closing remarks.

Great. Thank you operator.

Jeff Edison: In closing, you know, we're extremely proud of what the PECO team accomplished in 2023. Our differentiated and focused strategy and our talented team combined to create a market leader in the shopping center business. We're confident that the PECO team will continue to deliver market-leading results in 2024. We still have one of the lowest levered balance sheets in the shopping center space, and with the Fortress balance sheet and ample liquidity, we remain prepared for the challenges and opportunities that may arise this year. PICO's position to continue to successfully grow as we look forward. We believe we will provide our investors with more alpha and less beta. On behalf of the management team, I'd like to thank our shareholders, PECO associates, and our neighbors for their continued support. Thank you all for your time today, and have a great weekend. This concludes today's conference. You may now disconnect.

Closing, we're extremely proud of what the <unk> team accomplished in 2023 or.

Our differentiated and focused strategy and our talented team combined to create a market leader in the shopping center business. We're confident that the <unk> team will continue to deliver market leading results in 2024.

We still have one of the.

Lowest levered balance sheets in the shopping center space and with a fortress balance sheet and ample liquidity. We remain main prepared for the challenges and opportunities that may arise this year.

Because positioned to continue to successfully grow as we look forward. We believe we will provide our investors with more alpha and less beta.

The management team I'd like to thank our shareholders Pico associates and our neighbors for their continued support.

You all for your time today and have a great weekend.

This concludes today's conference you may now disconnect.

[music].

Yes.

Yeah.