Q4 2023 Acadia Realty Trust Earnings Call

Okay.

Operator: Thank you for standing by, and welcome to the Acadia Realty Trust fourth quarter 2023 earnings conference call. At this time, all participants are in a listen only mode.

Speaker Change: Thank you for standing by and welcome to Acadia Realty Trust fourth quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again.

After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one one again I would now like to hand, the call over to Jeff Winston. Please go ahead.

Operator: I would now like to hand the call over to Jeff Winston. Please go ahead. Good morning, and thank you for joining us for the fourth quarter 2023 Acadia Realty Trust Earnings Conference Call. My name is Jeff Winston, and I am a Senior Associate in our Asset Management Department. Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by such forward-looking statements. Due to a variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-K and other periodic filings with the SEC, forward-looking statements speak only as of the date of this call, February 14, 2024, and the company undertakes no duty to update them.

Jeff Winston: Good morning, and thank you for joining us for the fourth quarter 2023, Acadia Realty Trust earnings Conference call. My name is Geoff Winston and I am a senior associate and our asset management Department before we begin please be aware that statements made during the call that are not historical maybe deemed forward looking statements within the meaning of the securities and Exchange Act of 19%.

Jeff Winston: 34, and actual results may differ material from those indicated by such forward looking statements due to a variety of risks and uncertainty, including those disclosed in the company's most recent Form 10-K, and other periodic filings with the SEC forward looking statements speak only as of the date of this call February 14th 2024, and the <unk>.

Jeff Winston: Company undertakes no duty to update them. During this call management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia is earning press release posted on its website for reconciliations of these non-GAAP GAAP financial measures with the most directly comparable GAAP financial measures once the call becomes.

Operator: During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia's earnings press release posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. Once the call becomes open for questions, we ask that you limit your first round to two questions per caller to give everyone the opportunity to participate.

Jeff Winston: Open for questions. We ask that you limit your first round to two questions per caller to give everyone. The opportunity to participate you may ask further questions by Reinsert yourself into the queue and we will answer as time permits now it is my pleasure to turn the call over to Ken Bernstein, President and CEO, who will begin today's management remarks.

Jeff Winston: You may ask further questions by reinserting yourself into the queue, and we will answer as time permits. Now it is my pleasure to turn the call over to Ken Bernstein, President and CEO, who will begin today's management remarks. Great job, Jeff.

Kenneth F. Bernstein: Thank you. Welcome, everyone. Happy Valentine's Day.

Kenneth F. Bernstein: Thank you welcome.

Kenneth F. Bernstein: Welcome, everyone and happy Valentine's Day, I'm here with John Godfrey Stuart's Sealy and Jay Levine I'll give a few comments then hand the call over to AJ, then John will discuss our earnings our balance sheet metrics and our guidance and after that we're.

Kenneth F. Bernstein: I'm here with John Gottfried, Stuart Selig, and A.J. Levine. I'll give a few comments, then hand the call over to A.J., and then John will discuss our earnings, our balance sheet metrics, and our guidance. And after that, we're here to take questions. As you can see in our earnings release, our 2023 performance was very strong. Same property NOI growth was nearly 6%, and new lease spreads were over 40%, and this same property NOI growth is copping off prior year's growth of over 6% as well. Fourth quarter results also showed continued strength, driven by the street retail portion of our portfolio delivering 10%, same-store NOI growth, and a strong leasing spread. I'll let John discuss the moving pieces of our earnings in detail, but in a short time.

Kenneth F. Bernstein: Here to take questions.

Speaker Change: As you can see in our earnings release, our 2023 performance was very strong.

Speaker Change: Same property NOI growth was nearly 6% and.

Speaker Change: And new lease spreads were over 40%.

Speaker Change: And this same property NOI growth is comping off prior year's growth of <unk>.

Speaker Change: Over 6% as well.

Speaker Change: Fourth quarter results also showed continued strength driven by street the street retail portion of our portfolio delivering 10% same store NOI growth and strong leasing spreads.

Speaker Change: I'll, let John discuss the moving pieces of our earnings in detail, but in short.

Kenneth F. Bernstein: Our goal of creating... Superior Top-Line Growth at the Property and having that growth translate into bottom-line earnings growth remains on track. As we look to 2024 and beyond, the leasing momentum we saw last year is continuing. This is evidenced by both our significant signed-not-open activity and the leasing pipeline behind it. And while, in some respects, last quarter might be viewed as just another solid quarter from an internal growth perspective, I think there is a more meaningful shift going on. We are now past retail simply experiencing a COVID list or a COVID recovery.

Speaker Change: Our goal of creating.

Speaker Change: Superior top line growth at the property level.

Speaker Change: And having that growth translate into bottom line earnings growth remains on track on track.

Speaker Change: As we look to 2024 and beyond the leasing momentum we saw last year is continuing.

Speaker Change: This is evidenced by both our significant signed not open activity and our leasing pipeline behind it and while in some respects last quarter might be viewed as just another solid quarter from an internal growth perspective.

Speaker Change: I think there is a more meaningful shift going on.

Speaker Change: We are now past retail simply experiencing a COVID-19 lift or a COVID-19 recovery the shift in retailer sentiment and retailer activity.

Kenneth F. Bernstein: The shift in retailer sentiment and retailer activity feels more secular than cyclical and thus more long-lasting than just a rebound. While we first saw this as a lift in the suburban and necessity portions of our portfolio, and we're still seeing strong, solid performance. The longer-term growth is now having its most material impact within the street retail component of our portfolio, and it is looking more likely that at that growth rate, in-street retail has real staying power. A.J.

Speaker Change: Feels more secular.

Speaker Change: Then cyclical and thus more long lasting.

Speaker Change: And then just a rebound.

Speaker Change: While we first saw this as a lift in the suburban and necessity portions of our portfolio and we're still seeing strong solid performance there.

Speaker Change: The longer term growth is now having its most material impact within the street retail component of our portfolio.

Speaker Change: It is looking more likely that that growth rate.

Speaker Change: In Street retail has real staying power.

Kenneth F. Bernstein: Levine will discuss the drivers of this trend in further detail, but as it relates to internal growth, these secular tailwinds should add further support to the multi-year growth goals that we have been discussing and delivering on for the last couple of years. Then, along with continued momentum on internal growth after several relatively quiet years, actionable external growth opportunities are starting to emerge. We are seeing a narrowing of the bid-ask spread, an increased likelihood that accretive growth will start to pencil out, and since retail has not been an area of focus by institutional investors over the last several years, there are just fewer well-positioned, capable buyers. Now granted.

Speaker Change: A J Levine will discuss the drivers of this trend in further detail, but as it relates to internal growth. These secular tailwind should add further support to the multiyear growth goals that we have been discussing and delivering on for the last couple of years.

Speaker Change: Then along with continued.

Speaker Change: Momentum on internal growth after several relatively quiet years actionable external growth opportunities.

Speaker Change: Are starting to emerge.

Speaker Change: We are seeing a narrowing of the bid ask spread and increased likelihood that accretive growth will start to pencil out and since retail has not been an area of focus by institutional investors over the last several years. There are just fewer well positioned capable buyers now.

Speaker Change: Now granted.

Kenneth F. Bernstein: The inverted yield curve and elevated interest rates are still a headwind for improving deal flow, but this is beginning to shift; increased optimism about improving borrower costs, coupled with resilient tenant demand, is helping underwrite, and more. Whether due to more realistic appraised values or other factors, sellers seem to be more realistic and more willing to transact. A couple of quarters ago, I thought the majority of our activity would be distressed-focused, either discounted debt or forced sales. And it's still likely that there will be a fair amount of what we refer to as special situations, certainly for office, but other products like retail as well.

Speaker Change: The inverted yield curve and elevated interest rates are still a headwind for improving deal flow, but this is beginning to shift.

Speaker Change: Increased optimism about improving borrower cost.

Speaker Change: Coupled with resilient tenant demand is helping underwriting.

Speaker Change: And more significantly whether due to more realistic appraised values or other factors sellers seem to be more realistic.

Speaker Change: And more willing to transact.

Speaker Change: A couple of quarters ago, I thought the majority of our activity would be distressed focused either discounted debt or forced sale and it's still likely that there will be a fair amount of what we refer to as special situations certainly for office, but other products like retail as well.

Kenneth F. Bernstein: Given the non-performing nature of much of this type of investing, we'll likely participate in distressed special situations in conjunction with one of our strategic capital relationships. But more importantly... We are now seeing sellers begin to emerge that are not highly distressed. Just Motivate

Speaker Change: Given the nonperforming nature of much of this type of investing will likely participate in distressed special situations in conjunction with one of our strategic capital relationships.

Speaker Change: But more importantly.

Speaker Change: We are now seeing sellers begin to emerge that are not highly distressed.

Speaker Change: Just motivated they.

Kenneth F. Bernstein: They may have some staying power, but not unlimited patience. And this shift means our pipeline for a broader variety of opportunities is coming together nicely. You will hopefully see this reflected later this year and for years to come. So, here's how we're thinking about external... In terms of product types within open air, we consider ourselves to be highly confident in all areas of open retail and try to position ourselves to be open-minded as to which growth opportunities, which capital structure, and which risk-adjusted returns are most compelling at any given time. Here's how that landscape looks today.

Speaker Change: They may have some staying power, but not unlimited patients and this shift means our pipeline for a broad variety of opportunities is coming together nicely.

Speaker Change: You will hopefully see this reflected later this year and for years to come.

Speaker Change: So here's how we're thinking about external growth.

Speaker Change: In.

Speaker Change: Terms of product types within open air we consider ourselves to be highly confident in all areas of open retail and try to position ourselves to be open minded as to which growth opportunities, which capital structure, which risk adjusted returns are most compelling at any given time, here's how that landscape looks today.

Kenneth F. Bernstein: In terms of power or junior anchor-dominated regional centers, these will have the highest yields. But in order to have net effective growth, Special attention will have to be paid to tenant turnover and the cost of re-tenanting, which heavily impacts net effective growth. We still think this area can provide attractive risk-adjusted returns, but as was the case with our Fund 5 investing, we'll continue to focus on this investing in the fund or strategic venture format. Then, in terms of supermarket or neighborhood anchor centers, investor demand remains strong because of their resilience during COVID, the defensive profile, the ease of underwriting, and this segment is probably the most covered or the most crowded in terms of competition for bidding. So unless there's a value-add component, it will be hard for us to be constructive.

Speaker Change: In terms of power or junior anchor dominated regional centers. These will have the highest going in yields.

Speaker Change: But in order to have net effective growth special attention I will have to be paid to tenant turnover and the cost of re tenant ing, which heavily impact net effective growth.

Speaker Change: We still think this area can provide attractive risk adjusted returns, but as was the case with our fund five investing will continue to focus on disinvesting in the fund or strategic venture format.

Speaker Change: Then in terms of supermarket or neighborhood anchored centers investor demand remains strong because of their resilience during COVID-19.

Speaker Change: The defensive profile of the ease of underwriting and this segment is probably the most covered our most crowded in terms of competition for bidding. So unless there is a value add component it will be hard for us to be constructive we could add the right supermarket anchored assets.

Kenneth F. Bernstein: We could add the right supermarket-anchored assets, both on the balance sheet or in a joint venture structure, but in either case, growth opportunities will have to be compelling in terms of street retail after several bumpy years. We believe this segment... will have the highest long-term net effective growth. For a variety of reasons, notwithstanding the ongoing rebound in fundamental street retail, retail seems to be trading at an elevated floor on cap rates, with going in yield, that don't appear to take into account the growth potential. And this is creating an opportunity for asymmetrical.

Speaker Change: Both on balance sheet or in a joint venture structure, but in either case growth opportunities will have to be compelling.

Speaker Change: In terms of street retail App.

Speaker Change: After several bumpy years.

Speaker Change: We believe this segment.

Speaker Change: We will have the highest long term net effective growth for a variety of reasons notwithstanding the ongoing rebound in fundamental street retail seems to be trading at an elevated floor on cap rates with going going in yields.

Speaker Change: That don't appear to take into account the growth potential.

Speaker Change: And this is creating an opportunity for asymmetrical upside.

Kenneth F. Bernstein: Now, granted, street retail requires the highest level of expertise to underwrite, as it lacks some of the uniformity of other open-air assets, and while not all streets, not all markets are recovering equally. The initial fear... that street retail was too idiosyncratic or a zero-sum game, with the Sunbelt winning and other key markets losing, is turning out not to be the case. For most retailers, there is more synergy than cannibalization, meaning retailers can thrive in Soho and in Nashville. And since there are more markets that are thriving... From a scale and opportunity set perspective, we think there should be plenty of deals of size out there. We think we are entering a period where our shareholders will benefit from the expansion of our highly differentiated street retail portfolio in our core portfolio, provided we can do it on a leverage-neutral, earnings-accretive, and NAV-accretive basis.

Speaker Change: Now granted street retail requires the highest level of expertise to underwrite as it lacks some of the uniformity of other open air assets and while not all streets not all markets are recovering equally the initial fear.

Speaker Change: That street retail was two idiosyncratic or a zero sum game with the sunbelt winning in other key markets, losing its turning out not to be the case.

Speaker Change: For most retailers there is more synergy than.

Speaker Change: And then cannibalization, meaning retailers can thrive in Soho and in Nashville.

Speaker Change: And since there are more markets that are thriving.

Speaker Change: From a scale and opportunity set perspective, we think there should be plenty of deals of size out there.

Speaker Change: We think we are entering a period, where our shareholders will benefit from the expansion of our highly differentiated street retail portfolio in our core portfolio provided we can do it on a leverage neutral.

Speaker Change: Earnings and NAV accretive basis.

Kenneth F. Bernstein: Given our expertise and our extensive experience in this space, Acadia is well positioned to be a consolidator in street retail assets in this phase of the cycle, while a key focus will be, to the extent practical, to grow the street retail component on the balance sheet, adding to the 70% of our current portfolio that is street or urban. We suspect that there could also be several larger opportunities that will also include the leveraging of our strategic capital relationship. We are in a period where we are having access to multiple sources of equity, and Depp should inure to our shareholders' benefit.

Speaker Change: Given our expertise and our extensive experience in this space.

Speaker Change: <unk> is well positioned to be a consolidator in street retail assets in this phase of the cycle.

Speaker Change: While our key focus will be to the extent practical to grow Street. The street retail component on balance sheet, adding to this 70% of our current portfolio that is street urban we suspect that there could also be several larger opportunities that will also include the leveraging.

Speaker Change: Our strategic capital relationships.

Speaker Change: We are in a period, where having access to multiple sources of equity.

Speaker Change: And that.

Speaker Change: Should inure to our shareholders' benefit.

Kenneth F. Bernstein: Finally, from a capital allocation and deployment perspective, a few thoughts. Capital recycling will be part of our growth strategy. It can come from multiple areas.

Speaker Change: Finally from a capital allocation and deployment perspective, a few thoughts capital recycling will be part of our growth strategy.

Speaker Change: It can come from multiple areas first.

Kenneth F. Bernstein: First, from portions of our core portfolio that might not be as high-growth or not consistent with our long-term growth strategy. And then second, from portions of our over $2 billion of assets currently in our fund or investment management platform. Investor interest is growing, and we should be able to capitalize on this increase. This means we should be able to bring in new capital on a non-diluted basis and then redeploy it accrably, given our recent equity issuance. Our balance sheet metrics are getting to where we want them, so we can also afford to be strategic with our capital recycling initiative. Finally, since it doesn't take much volume to move the needle for us, even a few acquisitions can add meaningfully to our external growth. So to conclude,

Speaker Change: From portions of our core portfolio.

Speaker Change: That might not be as high growth, but were not consistent with our long term growth strategy and then second from portions of our over $2 billion of assets currently in our fund or investment management platform.

Speaker Change: Investor interest is growing and we should be able to capitalize on this increased interest. This means we should be able to bring in new capital on a non dilutive basis, and then redeploy it accretively.

Speaker Change: Given our recent equity issuance our balance sheet metrics are getting to where we want them. So we can also afford to be strategic with our capital recycling initiatives.

Speaker Change: Finally.

Speaker Change: Since it doesn't take much volume.

Speaker Change: To move the needle for us even a few acquisitions can add meaningfully to our external growth.

Speaker Change: So to conclude.

Kenneth F. Bernstein: The stars are beginning to align. This year, we will be keenly focused on the three key drivers of our growth. First, driving solid internal growth. Second, maintaining a solid and flexible balance sheet.

Speaker Change: The stars are beginning to align this year, we will be keenly focused on the three key drivers of our growth first driving solid internal growth second maintaining a solid and flexible balance sheet and third executing on our accretive external growth strategy the combination.

Kenneth F. Bernstein: And third, executing on our creative external growth strategy, a combination of improving fundamentals... Improving debt markets, improving bid-ask spreads, and investors inching their way back to retail are all positive trends. And we're in a great position, having access to both public and private capital, and using our platform to execute a highly accretive growth strategy. And with that, I'd like to thank the team for their hard work last year, and I will turn the call over to A.J. Thanks, Ken. Good morning, everyone.

Speaker Change: Of improving fundamentals improving debt markets, improving bid ask spreads and investors inching their way back to retail are all positive trends and we're in a great position, having access to both public and private capital to use our platform to execute a highly accretive growth strategy.

Speaker Change: And with that I'd like to thank the team for their hard work last year and I will turn the call over to AJ Levine.

AJ Levine: Great. Thanks, Ken Good morning, everyone.

A.J. Levine: So every two weeks, I get asked the same two questions. First, is there any sign of a slowdown? And for the last two plus years, my answer has consistently been a resounding no. Despite some of the choppiness in retailer sales that we saw in 2023, fundamentals remain strong, and it feels as if that trend will continue well into 2024 and beyond. Now that doesn't mean that we're naive to the impacts of inflation or the normalization in sales growth that we saw in 2023, of course, coming off of a record year of sales growth in 2022. But it does mean that when I speak with our tenants, they are yet to signal any anticipated slowdown in new store growth. There are always exceptions, but for the vast majority of our tenants... We continue to see remarkably strong... They are still comparing significantly positively against 2019 sales, and they are still operating under the reality that the physical store is the greatest driver of profitability for their business. And one of our luxury tenants on the Gold Coast tells me that despite a relative slowdown in 2023, they are still compping up 50% against 2019. It no longer surprises me.

AJ Levine: So every two every week I get asked the same two questions.

AJ Levine: Is there any sign of a slowdown.

AJ Levine: And for the last two plus years my answer has consistently been a resounding no.

AJ Levine: Despite some of the Choppiness in retailer sales that we saw in 2023 fundamentals remained strong and is feeling as if that trend will continue well into 2024 and beyond.

AJ Levine: Now that doesn't mean that were naive to the impacts of inflation, where the normalization in sales growth that we saw in 2023 of course coming off of a record year of sales growth in 2022.

AJ Levine: But it does mean that when I speak with our tenants they are yet to signal any anticipated slowdown in new store growth.

AJ Levine: There are always exceptions, but for the vast majority of our tenants.

AJ Levine: Continue to see a remarkably strong consumer.

AJ Levine: They are still comping significantly positive against 2019 sales and they are still operating under the reality that the physical store is the greatest driver of profitability for their businesses.

AJ Levine: When one of our luxury tenants on the gold Coast tells me that despite the relative slowdown in 2023, they are still comping up 50% against 2019, it no longer surprises me and that general message holds true across the board.

A.J. Levine: And that general message holds true across the board. So that leads me to the second question. Do you have any space?

AJ Levine: So that leads me to the second question do you have any space for me. This is true for both the suburbs and the streets, but particularly on our high growth streets, the demand for new stores, well exceeds the supply of desirable space.

A.J. Levine: This is true for both the suburbs and the streets, but particularly on our high growth, The demand for new stores well exceeds the supply of desirable space. The biggest challenge facing my retailer counterparts today is the lack of well-located, high-quality services. And as Ken mentioned, this is the result of the trends that we started seeing in late 2020, early 2021, that have persisted and appear to be more secular in nature. Robust yet thoughtful and disciplined retail expansion into both new and existing markets. That's certainly true for our luxury markets like Soho and the Gold Coast, but also applies to markets like M Street where luxury hasn't yet shown up but that hasn't deterred dynamic brands like Aloyoga, Skims, and Glossier from planting their flags on the show, the pivot away from department stores, toward freestanding, open-air storefronts on our streets and the inevitable clustering of other like-minded brands within these markets, in cities like New York, Los Angeles, Chicago.

AJ Levine: Biggest challenge facing by retailer counterparts today is the lack of well located high quality space.

AJ Levine: And as Ken mentioned this is the result of the trends that we started seeing in late 2020 early 2021 that have persisted and appear to be more secular in nature.

AJ Levine: Robust, yet thoughtful and disciplined retail expansion into both new and existing markets. That's certainly true for our luxury markets like Soho in the Gulf Coast, but also applies to markets like M Street, where luxury hasn't yet shown up but that hasnt deterred dynamic brands like Aloe yoga Skims and.

AJ Levine: Glossy from planting their flags on the street.

AJ Levine: The pivot away from department stores and towards freestanding open air storefront on our streets and the inevitable clustering of other like minded brands within these markets.

AJ Levine: In cities like New York, Los Angeles, Chicago increased customer demand and a diverse demographic profile has prompted many of these retailers, including luxury to have multiple locations within the greater market. They can capture the tourist in one neighborhood and the local shopper in another.

A.J. Levine: Increased customer demand and a diverse demographic profile have prompted many of these retailers, including luxury brands, to have multiple locations within the greater market that can capture the tourist in one neighborhood and the local shopper in another. They can do Madison and 5th Avenue and SoHo, and in the case of Hermes, they can even add Williams. They can do Melrose and Roday, in terms of ranks.

AJ Levine: They can do Madison, and fifth Avenue, and Soho and in the case of our Mezz they can even add Williamsburg.

AJ Levine: They can do Melrose and rodale.

AJ Levine: In terms of rates.

A.J. Levine: The sharper decline in rents that we saw on our streets coming into the pandemic and the remarkable recovery we've seen over the last few years will continue to provide stronger, net-effective rent growth relative to our suburbs. In our existing high-growth markets like Soho, Melrose, the Gold Coast, and M Street, the double-digit rent growth we've seen over the last few years should continue. Higher sales are fueling higher demand.

AJ Levine: The sharper decline in rents that we saw on our streets coming into the pandemic and the remarkable recovery we've seen over the last few years, we will continue to provide stronger net effective rent growth relative to our suburbs.

AJ Levine: In our existing high growth markets like Soho Melrose the gold Coast M Street, the double digit rent growth we've seen over the last few years should continue.

AJ Levine: Stronger sales are fueling higher demand now layer in low supply of natural barriers to entry and that is a recipe for sustained growth.

A.J. Levine: Now layer in low supply and natural barriers to entry, and that is a recipe for sustained growth. And to be clear, even with a moderation in rent growth moving forward, many of our markets can still experience low double-digit growth. And with the healthy occupancy costs that we've been seeing, these markets will remain affordable for our tenants.

AJ Levine: And to be clear, even with our moderation in rent growth moving forward many of our markets can still experienced low double digit growth.

AJ Levine: And with the healthy occupancy costs that we've been seeing these markets will remain affordable for our tenants.

A.J. Levine: On a related note, just like in past quarters, we continue to proactively pry space loose on our streets and accelerate a positive mark-to-market spread. In the third quarter, in SoHo, we accelerated a 45% mark-to-market spread. And in the fourth quarter, we did the same, this time with a 25% spread over a one-year period. And this was done at zero out-of-pocket cost to

AJ Levine: Unrelated note just like in past quarters, we continue to proactively price space loose on our streets and accelerate a positive mark to market in.

AJ Levine: In the third quarter in Soho, we accelerated a 45% mark to market spread and in the fourth quarter. We did the same this time with a 25% spread over a one year period and this was done at zero out of pocket cost to Acadia.

A.J. Levine: Now, that's very hard work, but the team has shown itself to be more than capable of identifying these opportunities and then getting to work on unlocking that value. And for those spaces that we can't recapture early, the street-centric nature of our portfolio will allow us to capture that growth through FMV resets. Of course, this is not unique to our portfolio. Space and Soho, which was being offered at $3.5 million in ADR just one year ago, recently leased for $4.5 million.

AJ Levine: Now thats very hard work, but the team has shown themselves to be more than capable of identifying these opportunities and then getting to work on unlocking that value and for those spaces that we cant recapture early the street centric nature of our portfolio will allow us to capture that growth through FMT resets.

AJ Levine: Of course, this is not unique to our portfolio space in Soho that was being offered at $3 $5 million in ABR, just one year ago recently leased at $4 5 million, that's 30% growth in one year.

A.J. Levine: That's 30% growth in one year, and that only happens in markets with a combination of low supply, high foot traffic, and the right brands, including luxury, that will cluster and create the right ecosystem to attract those shoppers. Additionally, that scarcity of space will also continue to accelerate the rebound of traditionally high-growth markets that have been slower to recover, like Madison Avenue in the 70s, North Michigan Avenue, and eventually San Francisco, as well as newer markets like Nashville and Tampa. As Ken mentioned, this is not a zero-sum game.

AJ Levine: That only happens in markets with a combination of low supply high foot traffic and the right brands, including luxury that will cluster and create the right ecosystem to attract those shoppers.

AJ Levine: Additionally that scarcity of space should also continue to accelerate the rebound of traditionally high growth markets that have been slower to recover like Madison Avenue in the seventies, North, Michigan Avenue, and eventually San Francisco as well as newer markets like Nashville, and Tampa as Ken mentioned this is <unk>.

AJ Levine: <unk> is zero sum game retail expansion and rent growth has and will continue to occur in both established and newer growth markets.

A.J. Levine: Retail expansion and rent growth have and will continue to occur in both established and newer growth markets. Overall, the net result of all this was another exceptional year for both street and suburban leadership. In 2023, we signed approximately $11 million of new core, representing 8% of in-place ABR, that eclipsed the $9 million in new leases we signed in 2020. We added a number of key retailers to our core portfolio, including Zimmerman, Madewell, Club Monaco, Alloyoga, Skims, and Ninh Binh, and the pipeline remains strong. Already this year, we have an excess of $4 million in new core leases in advanced stages of negotiation. Moving on for a minute to CityPoint. The park is complete.

AJ Levine: Overall, the net result of all this was another exceptional year of both street and suburban leasing in 2023, we signed approximately $11 million of new core leases, representing 8% of in place ABR.

AJ Levine: That eclipsed the $9 million in new leases, we signed in 2022.

AJ Levine: We added a number of key retailers, who are core to our core portfolio, including Zimmerman Madewell club, Monaco, Allo yoga skins, and the <unk> and the pipeline remains strong.

AJ Levine: Already this year, we have an excess of $4 million in new core leases in advanced stages of negotiation.

AJ Levine: Shifting for a minute to city point.

AJ Levine: The park is complete.

A.J. Levine: Our neighbor, which is the tallest residential tower in New York outside of Manhattan, is open, and residents are starting to move in. Scaffolding is coming down, and we are no longer leasing into a construction site. In more recent news, Live Nation will be opening a 2,000-seat theater directly across from City Point. And in terms of occupancy, the retail on our upper floors and concourse level is spoken for, with best-in-class anchors including Target, Primark, Alamo Drafthouse, and Trader Joe's. And this past year, we successfully anchored both ends of Prince Street, with Fogo de Chao on the north and Sephora to the south.

AJ Levine: Our neighbor, which is the tallest residential tower in New York outside of Manhattan is open and residents are starting to move in the scaffolding is coming down and we are no longer leasing into a construction zone.

AJ Levine: In more recent news live nation will be opening a 2000 seat theater directly across from city point and in terms of occupancy the retail on our upper floors and concourse level are spoken for with best in class anchors, including target Prime Mark Alamo Drafthouse in trader Joe's and this past year, we successfully anchor.

AJ Levine: Both ends of Prince Street with forward a chat on the north.

Sephora to the south.

A.J. Levine: But despite this momentum, in many respects, the leasing story at CityPoint is just beginning. Much of our most valuable street-level space is yet to be let, and with positive mark-to-market opportunities, there remains substantial embedded value at city points still ahead of us. So, wrapping it all up, an exceptional year for fundamentalism, and an exceptional year for leasing volume in both our high-growth streets and our suburbs, with no sign of a slowdown on the horizon. So with that, I will pass things off to John.

AJ Levine: But despite this momentum in many respects the leasing story at city point is just the beginning.

Much of our most valuable street level space is yet to lease and with positive mark to market opportunities that remains substantial embedded value at city point still ahead of us.

AJ Levine: So wrapping it all up an exceptional year for fundamentals.

AJ Levine: And an exceptional year for leasing volume in both our high growth streets, and our suburbs and no sign of a slowdown on the horizon.

AJ Levine: So with that I will pass things off to John.

John Gottfried: Thank you Jay and good morning.

John Gottfried: As outlined in our release, we had a strong finish to the year, with the same story on Hawaii and earnings coming in above our initial expectations. As a result, a recovery within our street retail portfolio not only continued but, as we had been anticipating, accelerated throughout the year with growth of 10% during the fourth quarter. And as we kick off the new year, that momentum is... Our multi-year core and total growth of 5% to 10% remains intact, along with a balance sheet that is now in a position to capitalize on an expanding pipeline of accretive opportunities, which sets us up for above-trend same-store NOI and FFO growth over the next several years. Now, I'll provide some more color on the quarter, along with an update on our multi-year outlook, starting with our fourth quarter results.

John: As outlined in our release, we had a strong finish to the year with our same store NOI and earnings coming in above our initial expectations as.

John: As the recovery within our street retail portfolio not only continued but as we had been anticipating accelerated throughout the year with growth of 10% during the fourth quarter.

John: And as we kick off the new year that momentum is continuing.

John: Our multi year core internal growth of 5% to 10% remains intact.

John: Along with a balance sheet that is now in a position to capitalize on an expanding pipeline of accretive opportunities.

John: Which sets us up for above trend same store NOI and <unk> growth over the next several years.

John: Now I'll provide some more color on the quarter, along with an update on our multi year outlook, starting with our fourth quarter results.

John: In line with our expectations, we reported <unk> of <unk> 28 per share for the quarter.

John: And in terms of same store NOI, we came in at the upper end of our guidance range with growth of five 8% for the year.

John: And Additionally, as highlighted in our release, we reported same store growth of four 2% for the fourth quarter. We wanted to point out a couple of things related to the quarter first the fourth quarter results were comping off of 2022 quarter, which included approximately $400000 of prior period cash recoveries, which have which if excluded would have inquiry.

John Gottfried: In line with our expectations, we reported an FFO of 28 cents per share for the year. And in terms of same-story NOI, we came in at the upper end of our guidance range with growth of 5.8% for the year. And additionally, as I highlighted in our release, we reported same-store growth of 4.2% for the fourth... We wanted to point out a couple of things related to the coroner first. The fourth quarter results were coming off a 2022 quarter that included approximately $400,000 of prior period cash recoveries, which if excluded would have increased the 4.2% we reported to 5.7%.

John: The four 2% reported to five 7%.

John: Secondly, and as outlined in our release our street portfolio grew in excess of 10% on a same store basis.

John: Not only have we been anticipate anticipating this acceleration, but we are feeling increasingly increasingly confident that this double digit growth will continue with.

John: With our model projecting about 10% annual growth from our street portfolio over the next several years.

John: And with roughly 45% of our pro rata NOI coming from the streets. This 10% annual growth is expected to generate incremental NOI of approximately $18 million to $20 million at our share.

John: And we are already well on our way of capturing us.

John: With more than half of the $18 million to $20 million already accounted for.

Approximately $6 million will come from the 3% escalator Escalations that are built into our street leases along with another $6 million from executed Street leases.

John Gottfried: Secondly, and as outlined in our release, our street portfolio grew in excess of 10% on the same storefront. Not only have we been anticipating this acceleration, but we are feeling increasingly confident that this double-digit growth, with our model projecting about 10% annual growth from our street portfolio over the next several years and with roughly 45% of our pro rata NOI coming from the streets. 10% annual growth is expected to generate incremental NOI of approximately $18-20 million, and we are already well on our way to capturing..., with more than half of the 18 to 20 million dollars already accounted for. Approximately $6 million will come from the 3% escalations that are built into our street leases, along with another $6 million from executed street leases that have not yet commenced and are included in the $7 million of signed but not yet open pipeline that we reported in December.

John: That are that have not yet commenced and are included in the $7 million of signed but not yet open pipeline that we reported at December 31.

John: Which leaves us with another $6 million to $8 million of street retail growth coming from two additional sources.

John: About half of our $3 million to $4 million is anticipated to come from projected cash rent spreads on expiring leases over the next few years.

John: With the balance coming from lease up of our current inventory of available space.

John: And to be clear. This is just the growth coming from our same store portfolio.

John: The $18 million to $20 million of NOI or 10% annual growth is before any potential upsides from our Redevelopments on North Michigan Avenue.

John: So we are so while we are starting to see some encouraging activity on north Michigan, Neither our 2020 for guidance or a base case multiyear projection assumes a recovery.

John: It's also worth pointing out that in addition to the extraordinary growth. We are projecting from the street. We are also seeing solid trends across our core and fund platforms.

John: In fact, as we look into 2024 in addition to the 5% to 6% of projected 2020 for same store NOI growth we.

John Gottfried: Which leaves us with another 68 million dollars of street retail growth coming from two additional... First, about half, or $3 to $4 million, is anticipated to come from projected cash rent spreads on expiring leases over the next few years, with the balance coming from lease-up of our current inventory of available... And to be clear, this is just the growth coming from our same store portfolio, meeting the $18 to $20 million of NOI, or 10% annual growth, before any Neither the 2024 guidance, or a base case multi-year projection assumes a rec...

John: We are projecting six 5% of total NOI growth from our core and fund businesses inclusive of Redevelopments.

And the good news is that our leasing team has already signed the vast majority of leases necessary to achieve our 2024 goals with $13 million of executed leases.

John: Representing seven 5% of in place ABR at our share in the signed but not yet open pipeline at December 31.

John: And this $13 million of signed but not yet opened pipeline is comprised of $7 million from our core operating portfolio that we highlighted in our release release, which represents the assets in our same store pool.

John Gottfried: It's also worth pointing out that, in addition to the extraordinary growth we are projecting from the streets... We are also seeing solid trends across our core and front platforms. In fact, as we look into 2024, in addition to the 5% to 6% of projected 2024 same-store and LIGRO growth, we are projecting 6.5% of total NOI growth from our core and front businesses, inclusive of redevelopment. And the good news is that our leasing team has already signed the vast majority of leases necessary to achieve our 2020... $13 million of executed leases, representing 7.5% of in-place ABR at our share in the signed but not yet open pipeline in December. And this $13 million of signed but not yet open pipeline is comprised of $7 million from our core operating portfolio that we highlighted in our release, which represents the assets in our..., with another $4 million of signed leases from assets in our core redevelopment and $2 million from our funding. All these amounts.

John: With another $4 million of signed leases from assets in our core redevelopment and $2 million from our fund business with all of these amounts being at our share.

Let's now transition from how this NOI growth.

John: Impacts our 2024.

John: Consistent with what I introduced on our last call. We are projecting $1 28 to <unk> at the midpoint.

John: This equates to earnings growth of about 5% over 2023 before the eight cents for the noncash gain on the bed Bath lease.

John: And over seven 5% when adjusting our <unk> for the promotes earned from our fund business.

John: As you may recall from our last quarter's call. Our 2020 for earnings growth is being driven by the underlying strength of our core business.

John: With $3 million of ABR that commenced fairly late in the fourth quarter that we highlighted in our release.

John: Along with another $7 million that is included in our signed but not yet opened pipeline.

John: Of which approximately 85% of those represent street leases and will commence throughout 2020.

John: Last point on earnings with strong year over year earnings growth of about 5% over seven 5% before promotes we see the potential for upside in our numbers from a few areas.

John Gottfried: Let's now transition from how NOI growth impacts our 2020, with what I introduced on our last call. We are projecting $1.28 of FFO at the end of 2020. This equates to earnings growth of about 5% over 2023, before the $0.08 for the non-cash gain on the bed-better and over 7.5% when adjusting our FFO for the promotions earned from our funds. As you may recall from our last quarterly call, our 2020 earnings growth projection is being driven by the underlying strength of our core business, with $3 million of ABR that commenced fairly late in the fourth quarter that we highlighted in our release, along with another $7 million that is included in our signed but not yet open pipeline, of which approximately 85% of those represent street leases and will commence throughout 2012. Last point on earnings, with strong year-over-year earnings growth of about 5% or over 7.5% before promotion.

John: First we are now past the painful and long discussed rollover on North, Michigan Avenue, and the bankruptcy of bed Bath <unk> beyond and.

John: In fact, as we look forward. These historical headwinds are now a source of upside as neither our 2020 for guidance or a base case multiyear projections have assumed a near term recovery covering <unk>.

John: Secondly, we have made significant leasing progress.

John: With $13 million of executed leases are signed but not opened pipeline, representing seven 5% of our core and fund NOI, coupled with a long and growing list of LOI is out for available space.

John: We are in great shape to not only hit our 2020 for leasing goals, but with a lot of calories are left in the year, a very realistic opportunity to beat them.

And not to mention that the rental rates. Our team is achieving on new leases is routinely beating the rents we had assumed in our model.

John: And finally, we have not factored in any earnings accretion from external growth, but as Ken discussed we are starting to see some exciting and accretive opportunities.

John: And as I will discuss now our balance sheet is now at a point, where we can and will aggressively pursue these.

Kenneth F. Bernstein: And as it relates to the balance sheet, let me first start off with talking about how we thought about the equity raise that we completed in early January.

John Gottfried: We see the potential for upside in our numbers from a few areas. First, we are now past the painful and long-discussed rollover on North Michigan Avenue and the bankruptcy of Bad Bet. In fact, as we look forward, these historical headwinds are now a source of, as neither 2020 for guidance nor a base case multi-year projections have assumed a near-term recovery.

Kenneth F. Bernstein: As you would expect we thought long and hard about the decision to issue our equity below NAV.

Kenneth F. Bernstein: But in this unique instance of being able to raise a moderate amount of equity on a non dilutive basis.

It enabled us to accelerate our balance sheet goals by at least a year, if not more and put our balance sheet in a much better position to go on offense.

And to be clear our goal is and will be to get our core debt to EBITDA back into the fives.

Kenneth F. Bernstein: We are now in the low sixes post equity raise and projected to be in the high fives on a non earnings dilutive basis by year end if not sooner.

John Gottfried: Secondly, we have made significant progress with $13 million in executed leases in our signed but not open pipeline, representing 7.5% of our core and fund NOI, coupled with a long and growing list of LOIs out for available space. We are in great shape to not only hit our 2024 leasing goals but, with a lot of calendar left in the air, a very realistic opportunity. And not to mention that the rental rates our team is achieving on new leases are routinely beating the rents we had assumed in our minds. And finally, we have not factored in any earnings accretion from external growth.

Kenneth F. Bernstein: Thus our acquisitions team now has both the balance sheet and liquidity it needs to aggressively pursue the external opportunities that we are seeing.

Kenneth F. Bernstein: And we will fund this accretive external growth on a leverage neutral basis, using all of the diverse and efficient sources of capital that are available to us.

Kenneth F. Bernstein: Whether it's recycled capital from non dilutive dispositions repayments from our loan book retained earnings for our business or the issuance of common equity or private capital.

Kenneth F. Bernstein: Lastly on the balance sheet I wanted to highlight our exposure and potential the opportunity related to interest rates.

Kenneth F. Bernstein: With a core balance sheet that is fully hedged and no meaningful maturities over the next few years, we are well positioned to have overall stability in our earnings related to interest cost.

And with the vast majority of our floating rate exposure and the funds already being the mark to market in terms of both spread and base rates, we have some upside in our earnings if and when the interest rates begin the downward trend that the market has predicted.

John Gottfried: But, as Ken discussed, we are starting to see some exciting and acquisitive opportunities. And as I will discuss now, our balance sheet is now at a point where we can and will aggressively grow. And as it relates to the balance sheet, let me first start off by talking about how we thought about the equity raise that we completed in our... As you would expect, we thought long and hard about the decision to issue our equity below any cost, but in this unique instance of being able to raise a moderate amount of equity on a non-d It enabled us to accelerate our balance sheet goals by at least a year, if not more, and put our balance sheet in a much better position to go on. And to be clear, our goal is and will be to get our core debt to EBITDA back into the fund.

Speaker Change: So in summary, we are starting the year with a strong balance sheet, along with a near term and not on non dilutive path to get it back to best in class and.

And we are excited about the internal growth that we are poised to generate in 2024 and for the next several years along with the potential to be in our expectations.

Speaker Change: Whether it's the continued acceleration in our street portfolio and or the accretion from external growth.

Speaker Change: And with that we will now open up the call for questions.

Speaker Change: As a reminder to ask a question you will need to press star one on your telephone if you've not already to remove yourself from the queue. You May press Star. One again, we ask that you limit yourself to one question and one follow up please standby, while we compile the Q&A roster.

Our first question.

Speaker Change: It comes from the line of.

John Gottfried: We are now in the low sixes, post-equity raise, projected to be in the high fives on a non-earnings diluted basis by year-end, if not sooner. Thus, our acquisitions team now has both the balance sheet and liquidity it needs to aggressively pursue the external opportunities that we..., and we will fund the secretive external growth on a leverage-neutral basis, using all of the diverse and efficient sources of capital that are available, whether it's recycled capital from non-dilutive dispositions. Payments from our loan book, retained earnings for our business, or the issuance of common equity or private... Lastly, on the balance sheet, I want to highlight our exposure and potentially the opportunity related to... With a core balance sheet that is fully hedged and no meaningful maturities over the next few years, we are well-positioned to have overall stability in our earnings-related... and with the vast majority of our floating rate exposure in the funds already being the mark to market We have some upside in our earnings. If and when interest rates begin the downward trend that the market expects...

Speaker Change: Linda Tsai of Jefferies. Your question. Please Linda.

Linda Tsai: Thank you.

Linda Tsai: Good morning.

Linda Tsai: The outside 10% same store growth in the street portfolio. This quarter, how sustainable is this run rate in Hawaii.

Linda Tsai: John why don't I, let you talk about the specific numbers as to our portfolio and then maybe I'll touch on these tailwind from a more macro perspective.

Linda Tsai: And Linda just back to what I spoke about in the <unk>.

John: In my prepared remarks, it's a little under half of our portfolio.

John: When we look at our model and you factor in the 3% contractual escalations that we're getting we have a good chunk gray.

Linda Tsai: Great space that Hey, Jay and his team are actively leasing up and then the mark to markets. So I think you can look at that.

Linda Tsai: As I outlined $18 million to $20 million and we think we capture over the next two and a half three years.

Linda Tsai: And when we model that out that portion of our business just a little under half is projected to grow annually 10%.

So then let me transition from that to why we see what I referred to in our prepared remarks is a secular shift.

Linda Tsai: And while I, neither expect nor hope.

Linda Tsai: That market rents continue to grow at that 10 to 20 and AJ, even mentioned, 30% in one of our markets year over year.

Linda Tsai: I do think that street retail is poised for high single digit market rent growth and thus our ability to capture it and others ability to capture it in street retail as follows that John touched on 3% contractual growth is industry standard.

John Gottfried: So in summary, we are starting the year with a strong balance sheet, along with a near-term and non-diluted path to get it back to best. And we are excited about the internal growth that we are poised to generate in 2024 and for the next several years, along with the potential to meet our expectations, whether it's the continued acceleration in our street portfolio or the accretion from outside. And with that, we will now open up the call. Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone if you have not already removed yourself from the queue. Then, you may press star one one again.

Linda Tsai: Fair market value resets also fairly common.

Linda Tsai: But what you need is really three different components as I think about it when you need supply and demand and a J talked about now having more tenants than space and Thats a good.

Linda Tsai: A good tailwind to have right now after several tough years.

Linda Tsai: Second you need to have strong tenant sales tenants can only continue to pay more rent.

Linda Tsai: If their sales are there and AJ mentioned that as well.

Operator: We ask that you limit yourself to one question and one follow-up. Please stand by while we compile the q&a roster. Our first question comes from the line of Linda Tsai of Jeffries. Your question, please, Linda. Thank you. Good morning.

Linda Tsai: And then finally you have to have the right deal structures you have to have the ability to capture that rent growth.

Linda Tsai: In a strong supply demand strong rent to sale you need to have the right contracts and we do.

Linda Tsai: Final point is why now well if you think about the last 10 years.

Kenneth F. Bernstein: In terms of the outside 10% same-store growth in the street portfolio this quarter, how sustainable is this run rate and why? John, why don't I let you talk about the specific numbers as to our portfolio and then maybe I'll touch on tailwinds from a more macro perspective. Absolutely.

Linda Tsai: 10 years ago, we entered into what was an oversimplified, so called retail Armageddon and that was the notion that retailers were going to be able to migrate their sales profitably online.

Linda Tsai: The migration online occurred, but the profitability didn't and by around 2019, it was becoming clear to a variety of our retailers.

John Gottfried: And Linda, before we just go back to, you know, what I spoke about in the, and my prepared statement, a little under half of our portfolio. And when we look at our model, you factor in the 3% contraction. We have a good chunk of...

Linda Tsai: That the ability to use online sales as the main driver of profit.

Was going to be too elusive.

Linda Tsai: But COVID-19 hit and thank goodness for online sales because it kept a variety of retailers alive.

Kenneth F. Bernstein: And then the mark to markets. So I think you look at that, that's, as I outlined, $18 to $20 million that we think we can capture over the next... We model that out, that portion, a little under half. Projected to grow annually.

Linda Tsai: What retailers saw in 2019, they are now executing on today and.

Linda Tsai: And that means they are recognizing the importance of the store.

Linda Tsai: Whether it's.

Linda Tsai: Discount department stores off price, certainly luxury and aspirational and everyone in between that tailwind is what's driving them. This long term growth.

Kenneth F. Bernstein: So then, let me transition from that to why we see what I referred to in our prepared remarks as a secular shift. And while I neither expect nor hope that market rents continue to grow at the 10% to 20% rate, and AJ even mentioned 30% in one of our markets year over year. I do think that street retail is poised for high single-digit market rent growth and, thus, our ability to capture it and others' ability to capture it in street retail as follows. As John touched on, 3% contractual growth is industry standard. Fair market value, resets, also fairly common. But what you need are really three different components, if I can.

Speaker Change: Thanks for that color.

Speaker Change: And then you sort of referred to this earlier, but what types of opportunities are most compelling for you as it relates to external growth.

Yeah.

Speaker Change: So partially because theres less competition.

Speaker Change: Partially because or significantly because we see outsized growth. We're probably most excited about street retail that's not to diminish the other areas that also I see tailwind for in terms of open air retail.

Speaker Change: But we think that there is an opportunity now.

Speaker Change: To capitalize on that we're seeing increased seller interest and willingness.

Kenneth F. Bernstein: One, you need supply and demand, and A.J. talked about now having more tenants, then space. That's a good tailwind to have right now after several tough years. Second, you need strong tenant sales. Tenants can only continue to pay more rent if their sales are there, and AJ mentioned that as well. And then, finally, you have to have the right deal structures.

We see what I referred to as an artificial floor on cap rates and I can get into that later, but we see what I think will be a good entry point at some point in 2024, and so we're looking forward to that really nice combination of strong internal growth and now the ability.

Speaker Change: To add a penny here, a penny there, which on a company of our size really adds up.

Kenneth F. Bernstein: You have to have the ability to capture that rent growth. In a strong supply-demand, and strong rent-to-sale market, you need to have the right contracts in place. The final point is, why now?

Speaker Change: Just one last one what kind of assumptions are baked into the high and low end of same store growth for your whole portfolio and what are the assumptions for bad debt at the high end low end.

Kenneth F. Bernstein: Well, if you think about the last 10 years... Almost 10 years ago, we entered into what was an oversimplified so-called retail Armageddon. And that was the notion that retailers were going to be able to migrate their sales profitably online. The migration online did occur, but the profitability didn't. And by around 2019, it was becoming clear to a variety of our retailers that the ability to use online sales as the main driver of profit was going to be too elusive. But COVID hit, and thank goodness for online sales because it kept a variety of retailers alive. What retailers saw in 2019, they are now executing on today, and that means they're recognizing the importance of the store, whether it's discount department stores, off-price, certainly luxury and aspirational, and everyone in between. That tailwind is what's driving them in the long term. Thanks for that, Collar.

I think Linda I think first just on the rent side. So I think as I alluded to in my remarks, where we have a chance to hit the upper end is it.

Speaker Change: Leasing team hits some of.

Speaker Change: They're able to pull forward some of our expectations of when we get space. Aside so I think that's.

Speaker Change: The key is that we do we beat our our base case expectations on not only getting leases signed but open. So I think we have a very deep team of professionals that try to accelerate that commencement.

Speaker Change: Leasing getting a lease signed.

Speaker Change: And our property management team that.

Speaker Change: Is making incredible strides on accelerating the time from signing to execution I'm sorry to commencement. Those are two areas one would be that and then on credit we have again in what I would say is I.

Speaker Change: Each month wake up thinking we're going to have some sort of deterioration in credit. We're just not seeing anything in terms of collections disputes.

Speaker Change: It's we're not seeing any downward trends, but within our guidance I've put in a conservative, particularly over where we saw last year.

Speaker Change: Expectation of one 5% to 150 basis points of rents.

Speaker Change: Credit reserve that I that I felt in which which.

Speaker Change: Which is more than we needed last year.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Standby for our next question.

Speaker Change: Our next question comes from the line of.

Kenneth F. Bernstein: And then you sort of referred to this earlier, but, you know, what types of opportunities are most compelling for you as it relates to external growth? Partially because there's less competition. Partially because, or significantly because, we see outsized growth. We are probably most excited about street... That's not to diminish the other areas that I also see tailwinds for in terms of open-air retail, but we think that there is an opportunity now to capitalize on that. We're seeing increased seller interest and willingness. We have what I refer to as an artificial floor on cap rates, and I can get into that later, but we have what I think will be a good entry point at some point in 2024. And so we're looking forward to that really nice combination of strong internal growth and now the ability to add a penny here, a penny there, which on a company of our size really adds up. Just one last one.

Speaker Change: Craig Mailman of Citi. Please go ahead Craig.

Craig Schmidt: Hey, good morning, guys.

Craig Schmidt: Just following back on the acquisition easier Ken can you just go through where you would see.

Craig Schmidt: Acadia kind of put out its own capital fully on balance sheet versus bringing in potential partners and maybe what those partnerships could look like relative to maybe the historical use of funds.

Craig Schmidt: Yes.

Kenneth F. Bernstein: So obviously it will be.

Kenneth F. Bernstein: Very dependent on what our on balance sheet cost of capital, both debt and equity versus utilizing outside sources.

Kenneth F. Bernstein: While every deal could look different in our investment management platform. Our historic economics are probably a good starting point.

Kenneth F. Bernstein: So the issue will be where and when will the right pricing showing show up.

Speaker Change: Here's what.

John Gottfried: What kind of assumptions are baked into the high and low ends of same store growth for your whole portfolio? And what are the assumptions for bad debt at the high and low ends? Great. I think, Linda, I think first it's on the rent side, so I think, as I alluded to in my remarks, we have a chance to hit the upper... is, to hit some of, able to pull forward some of our expectations. I think that's what it's called.

Speaker Change: Excites me in terms of on balance sheet and to be clear correct.

Speaker Change: I think our shareholders will benefit from earnings accretive acquisitions on balance sheet of assets that are consistent with the 50% of our portfolio that is street retail.

Speaker Change: I think that there is less competition.

Speaker Change: In terms of buyers there are sellers now who after a couple of years of not being able to transact are recognizing either.

John Gottfried: The key is that we, you know, do we meet our base case expectations on not only the leases signed but also the open ones. So I think we have a very deep team of professionals that try to accelerate that. So between leasing and getting a lease signed and our property management team, incredible strides and acceleration. I'm sorry, too.

Speaker Change: That time's up.

Speaker Change: Or as often as not it's probably as good a time as it might be for them to exit these kind of assets the going in yields have an artificial floor on them.

Speaker Change: And let me explain what I mean by that.

John Gottfried: Those are the two areas, and then on, credit, we have again, and what I would say is. Each month I wake up thinking we're going to have some sort of deterioration and in credit. We're just not seeing it in terms of collection. We're not seeing any downward trends, but within our guidance, I've put in an expectation of one and a half percent of the credit reserve that I built in, which is more than we... Thank you.

Speaker Change: For retail in general.

Speaker Change: There is a hesitancy by institutional investors and then other similar investors there is a hesitancy for retail in general to enter and at yields lower than borrowing costs and I'm talking about private market borrowing costs.

Speaker Change: Now that is true for supermarket anchor and Thats, probably the most crowded of the trades and so it's true for a variety of other components as well.

Operator: Standby for our next question. Our next question comes from the line of Craig Melman of Citi. Please go ahead, Craig.

Speaker Change: And what that means for street retail, which should have about twice the growth rate as what we're seeing in our supermarket portfolio that creates an interesting opportunity.

Kenneth F. Bernstein: Hey, good morning, guys. Just following back on the acquisition team here, Ken, can you just go through where you would see Acadia kind of put out its own capital fully on the balance sheet versus bringing in potential partners and maybe what those partnerships could look like, relative to maybe the historical use of funds? Yeah, so obviously, it will be very dependent on what our on-balance sheet cost of capital, both debt and equity, versus utilizing outside sources. And while every deal could look different in our investment management platform, our historic economics are probably a good start. So the issue will be... Where and when will the right pricing show up? Here's what excites me in terms of on the balance sheet and to be a clear crack. I think our shareholders will benefit from earnings-accretive acquisitions on the balance sheet of assets that are consistent with the 50% of our portfolio that is on the street. I think that there will be less competition.

Speaker Change: The stars have to align.

Speaker Change: They're not there yet, but it's feeling real close for on balance sheet acquisitions that pencil out.

Speaker Change: Then in terms of utilizing other funds. If we were talking a year ago I would tell you that institutions, where at best what I referred to as retail curious they were real.

Speaker Change: To take meetings and hearing about retail after not having invested in it in many years.

Speaker Change: What we've seen in the last three to six months is a shift a recognition that they want best in class partners and we're now in a position to partner with a variety of different institutions.

Speaker Change: So if we are unable to acquire Accretively on balance sheet for street retail, we absolutely will utilize some of those relationships and then irrespective of whether or not we grow street retail on balance sheet. If you look what we did.

Kenneth F. Bernstein: In terms of buyers, there are sellers now who, after a couple of years of not being able to transact, are recognizing either that time's up, or, as often as not, it's probably as good a time as it might be for them to exit these kinds of assets. The going in yields have an artificial floor on them.

Speaker Change: With our fund five power center acquisitions been highly successful.

Speaker Change: I have every reason to expect us to continue to do that.

Speaker Change: And then to the extent that special situations distressed debt other kind of workouts and restructurings.

Speaker Change: Become viable we are being asked by a variety of capital sources to partner with them to.

Kenneth F. Bernstein: And let me explain what I mean by that. For retail in general, there is hesitancy by institutional investors and then other similar investors. Now, that is true for supermarket anchors, and that's probably the most crowded of the trades, and so it's true for a variety of other components as well. And what that means for street retail, which should have about twice the growth rate as what we're seeing in our supermarket portfolio, that creates an interesting opportunity. The stars have to align.

Speaker Change: To be their retail solution in what might be pools of debt or complicated transactions. So you put it all together and I am not going to predict which hits because it's so dependent on a bunch of moving pieces, but I am willing to tell you that.

Speaker Change: Whereas in 2023, I was cautious about even thinking about external growth.

Speaker Change: Now I am much more excited based on what we see in our pipeline the deal activity and the outreach from both investors and sellers.

Kenneth F. Bernstein: They're not there yet, but it's feeling real close for on-balance sheet acquisitions that pencil out. And then in terms of utilizing other funds. If we were talking a year ago, I would tell you that institutions were, at best, what I refer to as retail curious. They were thrilled to take meetings and hear about retail after not having invested in it in many years.

Speaker Change: No. That's helpful. I don't want to get too over your skis in terms of guiding on potential acquisitions, but from what youre seeing in the pipeline.

Speaker Change: What would be a base level that you'd be disappointed maybe if you don't get to over the next 12 to 18 months given what's in the pipeline and are there any new markets, especially on street that you guys are.

Kenneth F. Bernstein: What we've seen in the last three to six months is a shift, a recognition that they want best-in-class partners, and we're now in a position to partner with a variety of different institutions. So if we are unable to acquire a creatively on balance sheet for street retail,

Kenneth F. Bernstein: We absolutely will utilize some of those, and then, irrespective of whether or not we grow street retail on balance sheet, if you look at what we did with our Fund 5 Power Center acquisitions, we were highly successful. I have every reason to expect us to continue to do that. And then to the extent that special situations, distress, debt, other kinds of workouts and restructurings become viable, we are being asked by a variety of capital sources to partner with them, to be their retail solution in what might be pools of debt or complicated transactions. So you put it all together, and I'm not going to predict which hits because it's so dependent on a bunch of moving pieces, but I am willing to tell you that, Whereas in Now I am much more excited based on what we see in our pipeline, the deal activity, and the outreach from both investors and sellers. That's helpful.

Speaker Change: Closer to today than you were previously yes.

Speaker Change: Yes, so I want to be very very respectful of your request for us not to get too far over our skis.

Speaker Change: John I think.

Speaker Change: There is zero in.

Speaker Change: Our earnings growth associated with that and I would be very disappointed.

Speaker Change: If that is the case, but.

Don't forget what a Jay Levine was just talking about we have really good internal growth. So I don't feel a need to do something prematurely just to do it.

Speaker Change: We will remain opportunistic but disciplined.

Speaker Change: And keep in mind every hundred $200 million of acquisitions, whether done on balance sheet.

Speaker Change: Or through our investment management platform.

Speaker Change: Can add a half a penny to a penny per $100 million, historically, and I think that could be the case going forward.

Speaker Change: So it could really move the needle if the deals make sense in terms of new markets.

Kenneth F. Bernstein: You know, I don't want to get too over your skis in terms of, you know, guiding on potential acquisitions, but from what you're seeing in the pipeline, kind of what would be a base level that you'd be disappointed maybe if you didn't get to over the next 12 to 18 months, given what's in the pipeline? And are there any new markets, especially on the street that you guys are closer to today than you were previously? Yeah, so I want to be very, very respectful of your request for us not to get too far over our skis. John, I think, said there is zero in our earnings growth associated with that.

Speaker Change: Here's what we saw kind of heading.

Speaker Change: Into Covid and now out there was what I referred to fears of a zero sum game.

Speaker Change: That Soho loses in let's say Nashville wins.

Speaker Change: It turns out not to be the case turns out our retailers for a variety of reasons are recognizing there are just more key markets that they need to control their own store and formatted.

Youre seeing this for a variety of reasons and in a variety of geographies.

Speaker Change: One of the reasons is wholesale.

Speaker Change: Is generally shrinking a lot of retailers, whether they are luxury or otherwise are recognizing while the department store can still be.

Kenneth F. Bernstein: And I would be very disappointed if that is the case, but don't forget what A.J. Levine was just talking about. We have really good internal growth, so I don't feel a need to do something prematurely just to do it.

Speaker Change: And important.

Speaker Change: Component of at an important channel for them. There are just fewer doors and there is more desire to have their own locations.

Kenneth F. Bernstein: We will remain opportunistic but disciplined. And keep in mind every hundred or two hundred million of acquisitions, whether done on balance or through our investment management platform can add a half a penny to a penny per hundred million historically, and I think that could be the case going forward. So it could really move the needle if the deals make sense and terms of new markets make sense. Here's what we saw kind of heading, into COVID and now out. There was what I referred to as the fear of a zero-sum game, that Soho loses and, let's say, Nashville wins. But it turns out not to be the case.

Speaker Change: So with that added distinction plus some of the migration we've seen over the last few years markets that were experimental.

Speaker Change: Just a few years ago.

Speaker Change: Nashville like Tampa.

Speaker Change: I could go on with a variety of them I pick those two because they J mentioned them.

Speaker Change: These are now.

Speaker Change: Locations that our retailers are saying.

Speaker Change: If you build it we will come.

Need a location there we want to be around our other retailers for a variety of reasons. There are strong demographic demand. So you add those at the same time I'm more than happy to double down in Williamsburg, Brooklyn, because the tenant sales and the demand there is strong as is Soho and AJ.

Kenneth F. Bernstein: Turns out, our retailers, for a variety of reasons, are recognizing there are just more key markets that they need to control their own store and format. You're seeing this for a variety of reasons and in a variety of geographies. One of the reasons is that wholesale is generally shrinking. A lot of retailers, whether they're luxury or otherwise, are recognizing that while the department store can still be and is important. There are just fewer doors, and there is more desire to have their own location. So, with that added distinction, plus some of the migration we've seen over the last few years, markets that were experimental just a few years ago, like Nashville, like Tampa. I could go on with a variety of them, but I picked those two because A.J.

Speaker Change: Mentioned Madison Avenue coming back.

Speaker Change: Make new friends, but keep the old ones seems to be a logical way for us to continue to expand street retail.

Speaker Change: Alright, thanks for the color.

Speaker Change: Sure.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Todd Thomas of Keybanc capital markets. Your question. Please Todd.

Todd M. Thomas: Hi, Thanks. Good morning first question I, just wanted to go back to the comments around capital recycling.

Todd M. Thomas: Thank you commented that some of that activity might be from both the core and from the funds.

Kenneth F. Bernstein: mentioned them. These are now the locations that our retailers are saying. If you build it, we will come. We need a location there.

Kenneth F. Bernstein: We want to be around our other retailers for a variety of reasons. There's strong demographic demand. So you add those at the same time; I'm more than happy to double down in Williamsburg, Brooklyn because the tenant sales and the demand there are strong, as is SoHo, and AJ mentioned Madison Avenue coming back. So make new friends, but keep the old ones; seems to be a logical way for us to continue to expand. Great, thanks for the call.

Todd M. Thomas: Haven't really sold much in the core over time and I'm. Just curious how you think about the core portfolio and how much property you consider to be.

Todd M. Thomas: Noncore.

Todd M. Thomas: And also whether your marketing assets for sale or is the thought process that investments and capital needs will drive the decision to sell over time.

Todd M. Thomas: Yeah.

Operator: Thank you. Our next question comes from the line of Todd Thomas of KeyBank Capital Markets. Your question, please, Todd. Hi, thanks. Good morning.

Todd M. Thomas: So multiple components that let's stick with the core portfolio first Todd.

Todd M. Thomas: The 50% that is street.

Todd M. Thomas: 20% that we call urban the vast majority of those are core markets and there are one or two that we have mentioned over time that we're probably overweighted and would look to trim. Some.

Kenneth F. Bernstein: First question, I just wanted to go back to the comments around capital recycling. I think you commented that some of that activity might be from both the core and from the funds. You haven't really sold much in the core over time, and I'm just curious how you think about the core portfolio and how much property you consider to be non-core, and also whether you're marketing assets for sale, or is the thought process that investments and capital needs will drive the decision to sell over time? Yeah, so multiple components. Let's stick with the core portfolio first, Todd. The 50% that is street, and the 20% that we call urban And there are one or two that we have mentioned over time that were probably overweighted and would look to trim some.

Todd M. Thomas: But in general we see those as growth markets and are less likely to recycle there other than due to overexposure.

Todd M. Thomas: And then for the 30% of our core portfolio that is traditional solid suburban what we have found is there Ben.

Inbound inquiries or we've reached out in general to investors, who want to participate in those kind of assets and want a operating partner and that would be best execution for us because as I've said, we think we are best when we are agnostic.

Todd M. Thomas: As to the different components within open air retail and so bringing in capital on that side may be more advantageous both economically.

Kenneth F. Bernstein: But in general, we see those as growth markets and are less likely to recycle there other than due to overexposure. And then for the 30% of our core portfolio, that is traditional, solid, suburban. What we have found is there have been inbound inquiries, or we've reached out in general to investors who want to participate in those kinds of assets and want a operating partner.

Todd M. Thomas: But also just in terms of making sure our team can stay on top of the game.

Todd M. Thomas: So could be recap of some assets, but it could be sale as well if they are lower growth and less consistent with our long term growth strategy. There is no reason not to sell at the right time. So you pointed out we haven't shared it in the last few years I would say, it's been a tough time to be.

Kenneth F. Bernstein: And that would be best execution for us because, as I've said, we think we are best when we are agnostic as to the different components within open-air retail. And so bringing in capital on that side may be more advantageous, both economically and also just in terms of making sure our team can stay on top of it. So, it could be a recapitalization of some assets, but could be a sale as well. If they are lower in growth and less consistent with our long-term growth strategy, there's no reason not to sell at the right time. As you pointed out, we haven't shed any in the last few years.

Todd M. Thomas: A seller of assets.

Todd M. Thomas: Thus you saw the lack of volume if a friend called and said Hey.

Todd M. Thomas: Want to sell an asset in 2023, I'd say brace yourself.

Todd M. Thomas: Now 2024 increased investor interest is starting to feel like the bid ask spread declines and maybe we can have transactions there more importantly, though.

Todd M. Thomas: A couple of billion dollars of assets that we have in our fund platform.

Todd M. Thomas: There is increased investor interest.

Kenneth F. Bernstein: I would say it's been a tough time to be a seller of assets. Thus, you saw the lack of volume if a friend called and said, "hey." If I want to sell an asset in 2023, I'd say brace yourself, now 2024 increased investor interest. It is starting to feel like the bid-ask spread declines, and maybe we can have transactions. More importantly, though... a couple billion dollars of assets that we have on our fund platform, there is increased investor interest. And that might also translate, it might translate through to the... That's a fair amount of information, Todd, for what may or may not be a key driver of our capital. We're not necessarily looking to shrink the company. We don't have to do it.

Todd M. Thomas: And that might also translate it might translate through to the.

Todd M. Thomas: Old way, we have in the traditional way of buy fix and sell nothing wrong with that it would be great to see some more promote income come in.

Todd M. Thomas: But there are also investors, saying how about we just recapitalize some portion of fund five some portion of fund four and so we're certainly having.

Todd M. Thomas: Those conversations in terms of <unk>.

Todd M. Thomas: Potential transactions there.

Todd M. Thomas: That's a fair amount of information Todd for what May or may not be a key driver.

Todd M. Thomas: Of our capital, we're not looking to necessarily shrink the company. We don't have to we are just saying here are different ways, we can create shareholder value and to the extent that those numbers make sense, we will do it.

Kenneth F. Bernstein: We are just saying that there are different ways we can create shareholder value, and to the extent that those numbers make sense, we will do it. Okay, understood. And then, John, you mentioned that you're past the painful vacates and, I think, expirations on North Michigan Ave and that there's no recovery there, really assumed in guidance, but can you provide an update on the status of H&M and some other movement at those assets that was anticipated, whether there's any NOI in the 4Q run rate, and if there's any vacate activity that I guess could impact results Yeah, absolutely. So why don't I walk you through the numbers, and then I'll have A.J. talk about what... early, exciting things on the street that I'll turn it over to him, you know, within our 2024 guidance highlighted that, you know, the pain is, and H&M is on their very, They found a new space. They will.

Speaker Change: Okay understood.

Speaker Change: And then John you mentioned that you're past the painful vacates and I think explorations on North Michigan Avenue.

Speaker Change: And that there is no recovery there really assumed in guidance, but can you provide an update on the status of.

Speaker Change: <unk> and some other movement that those assets that was anticipated whether theres any NOI in the <unk> run rate and if there is any vacate activity that I guess could could impact results in the near term just as we think about the quarterly cadence of earnings throughout the year.

Speaker Change: Yeah, absolutely so why don't I I'll walk through the numbers and then I'll have Jay talked about what.

Jay Levine: Early I've mentioned, some some early signs of exciting things on the streets I will turn it over to him. So I think.

Speaker Change: Within our 2024 guidance highlighted that the pain is behind us on ancient Amazon a very short term lease. So they are they found a new space. They will be moving later this year, but they're effectively on.

John Gottfried: But they're effectively on a month, arrived very early this year, so I think they have a little bit left in The Bulletproof Executive 2013, Yeah, yeah. I mean, what I would add to that is, you know, North Michigan Avenue still has a little ways to go, and we're very encouraged by what we're seeing happening here, Yoga opening up, Aritzia not far behind opening up for $50,000, the number of tours that we've had at our facilities. The LOIs that we are aware of on the street have increased significantly over the last three to six months. And then, of course, there's the success that we saw on the Gold Coast, which is just a block away. The high level of demand, the incredibly low level of supply, and the inevitable spillover back onto the avenue that's going to occur as a result of that. So... So...

Speaker Change: On a month to month lease Todd Thats, that's baked into our numbers horizon is out very early.

Speaker Change: This year so.

Speaker Change: They have a little bit left in the in the quarter and then there'll be there'll be fully out, but thats baked into our numbers.

Speaker Change: Yeah.

Speaker Change: Yes, yes, I mean, what I would add to that is north Michigan Avenue still a little ways to go we are very encouraged by what we're seeing happening on the street Allo yoga opening up Ritchie and not far behind opening up and 50000 feet. The number of tours that we've had at our assets.

Speaker Change: LOI that we are aware of.

Speaker Change: The Street has increased significantly over the last three to six months and then of course there is the success that we saw on the gold coast, which is just a block over the high level of demand incredibly low level of supply and the inevitable spillover back onto the Avenue, that's going to occur as a result of that so.

Speaker Change: And then of course, Chicago on yet to meet a retailer that in some form or fashion doesn't view Chicago as a market that they.

A.J. Levine: So... And then, of course, Chicago. I'm yet to meet a retailer that, you know, in some form or fashion, doesn't view Chicago as a market that they need. So, not at a full level of recovery quite yet, but we're certainly on our way, and we're very encouraged by what we're seeing. Todd, just to re-clarify what I said in my remarks, all of that optimism, while I'm rooting for AJA, is not in our multi-million dollar plan whenever we talk about North Michigan from this point on. Okay. Yeah, understood. But, John, is there any way to just quantify, I guess, how much ABR or really NOI is still being generated by those assets and how much might come offline during the course of the year? At the top of my head, I don't have the exact number, but it's de minimis, and I'll tell you H&M isn't.

Speaker Change: They need to be in.

Speaker Change: So not at a so a whole level of recovery quite yet, but we're certainly on our way and we're very encouraged by what we're seeing.

Speaker Change: Todd just to re clarify what I said in my remarks, all of that optimism I'm already per agent is not in our multiyear model. So whenever we talk about north Michigan from this point on is going to be outside.

Todd M. Thomas: Okay, Yeah understood, but John is there any way to just quantify I guess how much.

Todd M. Thomas: ABR or really NOI is still.

Todd M. Thomas: Being.

Todd M. Thomas: Those assets are still generating and how much might come offline during the course of the year.

John: Yes, it's off the top of my head I don't have the exact number but its de Minimis and I will tell you <unk> not covering their taxes right. So this is one it's a insignificant amount of ramp throughout the year.

John: Okay. Okay. So so.

John: It's already a drag on earnings that's in the run rate today that's.

John Gottfried: Right, so this is one that's a... Okay. Okay, so it's already a drag on earnings that's in the run rate today. Got it.

Speaker Change: Alright got it.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line.

John Gottfried: All right. Thank you. Thank you.

Operator: Our next question comes from the line of Floris Van Dijkum of Compass Point, LOC. Your question, please, Floris. Great. Hey, thanks, guys. Thanks for the color on everything.

Floris van Dijkum: Floris van <unk> of Compass point LLC.

Floris van Dijkum: Your question please.

Floris van Dijkum: Great. Thanks, guys.

Floris van Dijkum: Thanks for the color on on everything.

Kenneth F. Bernstein: Can you remind us, I think your street portfolio currently is only, I think, 91.5% leased or 91.4% leased, what is the actual percentage of... pain or physical occupancy, and can you also remind us where peak occupancy was, you know, obviously, you know, in a different time and, you know, give us an indication of what kind of upside potential we could look at. So let me start while John looks at those numbers. When we say peak occupancy at a different time, we're getting pretty close to that different time, Floris. There is more demand for quality space than there is space. And AJ, I won't criticize you on a live earnings call, but why aren't we 100%? Obviously, it takes time to get the spaces open.

Floris van Dijkum: Can you remind us I think your street portfolio currently is only.

Floris van Dijkum: I think 91, 5% leased or 91, 4% leased.

Floris van Dijkum: What is the actual percentage of <unk>.

Floris van Dijkum: Pain, where physical occupancy.

Floris van Dijkum: And can you also remind us where peak occupancy was.

Floris van Dijkum: Obviously.

Floris van Dijkum: Different time and.

Give us an indication of what kind of upside potential we could look at so let me start off John looks at those numbers.

Floris van Dijkum: When we say peak occupancy at a different time.

John: We're getting pretty close to that different time for us.

There is more demand for quality space than there is space.

And a J I won't criticize you on our live earnings call, but why are we 100% obviously it takes time to get the spaces open.

Kenneth F. Bernstein: But right now, for quality space, Floris, I think we can, in the key markets, get to fall. That probably translates through into the mid-90s because there's always different spaces. But John, now, why don't you?

John: But right now for quality space, Florida, I think we can in the key markets get to fall that probably translates through into the mid nineties, because there is always different spaces, but John why don't you give the numbers yeah. So so for US we are right now we're about 89% physically physically occupied into where.

John Gottfried: Yeah, so Floris, we are right now about 89% I... Spot on, we were in the mid-90s up to... from what I recall. We have a ways to go, and in my prepared remarks, that 18 to 20 million dollars does not, you know, there's no room to run after that. So those are pretty, pretty well.

John: Brickley can spot on we were in the <unk>.

Mid <unk> up to 96, four from what I recall, so we were.

John: We have a ways to go in my prepared remarks that $18 million to $20 million does not theres still room to run after that so those are pretty pretty well base case assumptions.

Speaker Change: Yes, I mean, if you do the math I mean.

Kenneth F. Bernstein: Yeah, I mean, if you do the math, your average street and urban rent is 71 bucks and depends a little bit on where that vacancy is located. I mean, there's some significant upsides, it appears. Maybe Two things I was curious about as well.

Speaker Change: Your average street and urban range is 71 box.

Speaker Change: It depends a little bit on where that vacancy is located.

Speaker Change: Some some significant upside it appears maybe.

Speaker Change: Two things I was curious on as well.

Kenneth F. Bernstein: You mentioned something about M Street, Ken, and maybe A.J. did as well in his remarks about there's no luxury there yet, but you expect that that could potentially happen. What do you see in terms of the signs for that, and what kind of impact, in your view, would that have on your holdings in that particular corridor? So there is no confusion. We are not currently predicting luxury shows on M Street. I think A.J.

Speaker Change: You mentioned something about.

Speaker Change: M Street, Ken I think and maybe AJ did as well in his remarks about theres no luxury there yet.

Speaker Change: But you expect that that could potentially happen what do you see in terms of the signs for that and what kind of impact in your view would that have on your.

Speaker Change: On your holdings in that in that particular quarter.

Speaker Change: So there is no confusion, we are not <unk>.

Speaker Change: Currently predicting luxury shows up on M Street, I think AJ point was simply even with out luxury you can have thriving Carter's think of Armitage Avenue in Chicago think of M Street.

Kenneth F. Bernstein: 's point was simply that even without luxury, you can have thriving corridors. Think of Armitage Avenue in Chicago. Think of M Street.

Kenneth F. Bernstein: Certainly, if and when luxury shows up, as it did on Melrose Place, there is that additional lift. But our point would be, let's not limit our thoughts to just where luxury is. There is a broader universe than just pure luxury. And then if luxury shows up, as we are now seeing, let's say, in Williamsburg, great. But if it didn't, Williamsburg would still be just as great.

Speaker Change: Certainly, though if and when luxury shows up as it did on Melrose place. There is that additional lift but our point would be let's not limit our thoughts to just where luxury is.

Speaker Change: There is a broader universe than just pure luxury.

Speaker Change: And then if luxury shows up as we are now seeing let's say in Williamsburg, great.

Speaker Change: But if it didn't Williamsburg would still be Greg.

Speaker Change: Great and then.

Kenneth F. Bernstein: And then my last question was, so where do you think SoHo market rents are today? Obviously, we've seen some massive growth, and I think in prior peaks, they were close to $700 or even actually above $700 a square foot.

Speaker Change: My last question.

Speaker Change: Question was so where do you think so whole market rents are today, obviously, we've seen some massive growth then I think in prior peaks. It was close to 700 or you've been actually above $700 a square foot clearly rents bottomed I think somewhere around three.

Kenneth F. Bernstein: Clearly, rents bottomed, I think, somewhere around 300 square feet off the top of my head. Could you tell us a little bit, or maybe AJ, could you give a little more color on where and at what levels per square foot rents are being signed in that particular market? Yes, I'll let A.J.

Speaker Change: <unk> hundred square foot off the top of my head could you could you tell us a little bit or maybe a J could you give a little more color where.

Speaker Change: What levels per square foot rents are being signed at in that particular market.

J: Yes, I'll, let <unk> answer it other than to really emphasize it space by space. Some spaces are 700. Some are 200. It has to do with frontage. That's why it can be idiosyncratic, but the movement in general.

A.J. Levine: answer it other than... really emphasize it space by space. Some spaces are 700, some are 200. It has to do with frontage. That's why it can be idiosyncratic.

Kenneth F. Bernstein: But the movement, in general, is a trend that is happening more or less across the board, AJ, so, answer Floris' question, markets are, so to pinpoint a number, whether it's 700 or 1,000 or 300, is a little bit of a loaded question. There are certainly corridors that are quickly approaching the prior, and there are certainly corridors, perhaps further south or further west, that still have a significant amount of room to run It's hard to pinpoint an answer there, but the growth has been tremendous, and we think that there's enough growth ahead of us there where there's still a lot of value to capture. And let me take one more stab at it, Floris.

Speaker Change: He is a trend that is happening more or less across the board. So.

Speaker Change: Answered <unk> question, yes, those caviar, yeah, we'll do the best we can.

Speaker Change: It's a very nuanced market is a lot of these street markets are so to pinpoint a number whether it's 700 or 1000 or 300 is a little bit of a loaded loaded question. There are there are certainly corridors that are quickly approaching the prior peak there are certainly core doors, perhaps.

Speaker Change: Further south or further west that still have a significant amount of room to run so.

Speaker Change: Hard to pinpoint and answer there but.

Speaker Change: The growth has been tremendous and we think that there is enough growth ahead of us there where they are still still a lot of value to capture and let me take one more stab at Florida. So again, not all spaces are equal, but if the space at prior peak was 700 and dropped to 300 during the dark days of Covid.

Kenneth F. Bernstein: So again, not all spaces are equal, but if a space at a prior peak was 700 and dropped to 300 during the dark days of COVID, it is certainly more than halfway back, with room to run, and we're starting to see some leases getting done at prior peaks. So it has been a significant acceleration. But if you want to write that we're halfway there, fine.

Speaker Change: It is certainly more than halfway back with room to run and we're starting to see.

Speaker Change: Some leases getting done at prior peaks.

Speaker Change: So it has been a significant acceleration.

Speaker Change: But if you want to write that were halfway there fine if youre, saying, we're less than halfway there I would disagree and if you say we're back to prior peaks across the board I would disagree as well.

Kenneth F. Bernstein: If you're saying we're less than halfway there, I would disagree. And if you say we are back to prior peaks across the board, I would disagree. So just to summarize, Ken, just make sure that I understand that correctly. I think their average rent in a place in SoHo is around $370 a square foot.

Speaker Change: So just to summarize Ken just to make sure that I understand that correctly.

Speaker Change: I think your average rent in place in Soho is around $370 a square foot.

Kenneth F. Bernstein: So, if you're back halfway to the prior peak, would it be fair to assume that market rents are somewhere in that $500 a foot range now? With all the caveats I already said, if you look at some of the recent spreads that A.J. and his team have executed on, that would be consistent with your theory.

Speaker Change: Youre back halfway to prior peak Youre it would it be fair to assume that market rents are somewhere in that $500.

Foot range now.

Speaker Change: With all the caveats I already said.

Speaker Change: If you look at some of the recent spreads that Jay and his team have executed on.

Speaker Change: That would be consistent with your thinking.

Kenneth F. Bernstein: Great, thanks. Thank you. Our next question comes from the line of Key, Ben Kim of Truist. Your question, please? First question, just on the GNA guidance. It's a little bit lower than I thought. Any kind of commentary you can provide?

Speaker Change: Great. Thanks.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of key bin Kim of choice.

Speaker Change: Your question please.

Speaker Change: First question just on the G&A guidance.

Speaker Change: Lower than I thought.

Speaker Change: Any kind of commentary you can provide.

John Gottfried: Sorry, can you say that again? You said the GNA guidance? Yeah, basically, you know, you're not projecting it to grow, which is typically unusual. So just curious if you can provide any commentary around that. Yeah, no, we're basically, you know, give it a penny or two flat down to last year. So nothing, nothing dramatic, but constantly, constantly looking at ways to operate more. Okay, and on the institutional capital front, you know, your five funds are currently not in the promote period. So, a couple of questions: are we getting any closer to realizing promotes? And secondly, when you're talking about new possible joint venture partners or funds, are you thinking about restructuring some of how you actually earn and promote, maybe tied to, you know, individual properties versus a fund format, which, you know, might have some pitfalls?

Speaker Change: It's actually been taken you said the G&A guidance.

Speaker Change: Yes, basically you are not projecting it to grow which is typically unusual. So just curious if you can provide any commentary around that yes, no. We're basically give it a penny or two flat down to last year. So nothing nothing dramatic but constantly constantly looking at ways to operate more efficiently.

Speaker Change: Okay and on the <unk>.

Speaker Change: Additional capital front.

Speaker Change: There are five funds are currently not in the promote period. So a couple of questions.

Speaker Change: Getting any closer to you.

Speaker Change: Realizing promote and secondly.

Speaker Change: When you're talking about new possible joint venture partners or funds are you thinking about restructuring some how you actually earn a promote maybe tied to.

Speaker Change: Individual properties versus that fund format, which might have some pitfalls.

Yes, and yes.

Speaker Change: Now to add a little more color to that we are both for fund three where we are in the process of liquidating assets getting.

John Gottfried: Yes and yes. Now to add a little more color to that, we are both for Fund 3 where we are in the process of liquidating assets, getting, close, very close to that promotion as those assets ripen for disposition. We would be in the money there. Okay, great. And if I could squeeze a third one here, the bad debt in your guidance of 150 basis points, how much of that accounts for known move out versus unknown general reserve? I would say the vast, vast, vast majority of the time.

Speaker Change: Close very close to that promote as those assets.

Speaker Change: <unk> for disposition, we would be in the money there.

Speaker Change: Fund five very likely could be the next one because of the significant cash flow remember we've been clipping mid teens cash flow returns and so a sale a recap of that could also provide accretion and then to structuring going forward very very light.

Speaker Change: <unk> that going forward, we would come up with structures that would enable more consistent promotes then the multiyear lumpiness in our traditional funds. So you are spot on on both.

Speaker Change: Okay, great and if I can squeeze a third one year to bad debt and your guidance of 150 basis points. How much of that is accounts for known move outs versus unknown General reserve.

John Gottfried: Okay, thank you guys. Thank you. Our next question comes from the line of Paulina Roja of Green Street. Your question, please, Paulina. Good morning.

Speaker Change: I would say the vast vast vast majority is unknown.

Speaker Change: Okay. Thank you guys.

Speaker Change: Thank you.

Speaker Change: Our next question.

Paulina: It comes from the line of Paulina ROA of Green Street. Your question. Please paulina.

Good morning.

You have talked about attractive going in yields for street retail and given the growth you expect from those assets.

Kenneth F. Bernstein: You have talked about attractive yields on yields for street retail given the growth you expect on those assets. Can you help us by providing some numbers around this comment? Where do you see the yields going for street retail assets without materially below or above market rent? Yeah, and this goes back to the whole issue that investors, in general, seem hesitant to enter into below-private marketplace lending cards. Well, what does that mean?

Paulina ROA: Can you help us providing some numbers around this comment where where do you see that going in yields for street retail assets and.

Paulina ROA: We felt material below or above market rates.

Speaker Change: Yes, and this goes back to the whole issue that.

Speaker Change: Investors in general seem hesitant.

Speaker Change: To enter in below private marketplace borrowing costs.

Speaker Change: Well, what does that mean that probably means if you're really good at executing on your mortgage debt year at about 6%.

Kenneth F. Bernstein: That probably means if you're really good at executing on your mortgage debt, you're at about 6%. And so that's kind of the going rate in yield. What's crazy about that is historically, again, different interest rate environment, but historically, cap rates tended to align with growth rates. But when you add that artificial floor, and if everything starts at a 6, and I'm grossly oversimplifying, but if everything does, and that's kind of what we're seeing, it grows from there. And so a highly motivated seller may be selling at a seven, while a more patient seller may be closer to six.

Speaker Change: And so that's kind of the going in yield what's crazy about that is historically again different interest rate environment, but historically cap rates tended.

Speaker Change: To align with growth rates, but when you add that artificial floor and if everything starts at a six and I'm grossly oversimplifying, but if everything does and thats kind of what we're seeing.

Speaker Change: It grows from there and so a highly motivated seller.

Speaker Change: May be selling at a seven a more patient seller may be closer to six there will be examples where people breakthrough and are in the fives.

Kenneth F. Bernstein: There will be examples where people break through and are in the fives, but that floor is real, and we think that that's gonna create asymmetrical upside for buyers like us who can avail themselves of both the public markets and the private. And you have mentioned that you see more rent growth in street retail than in other open-air formats. So first, I wanted to make sure that with this comment, you're referring truly to market rents and you're not really capturing the different lease structures of the two segments. And if you were really referring to market rents, a side of the fact that in street retail, you have more upside to historical values. Can you elaborate on why you think there will be more rent growth in this asset class? Yeah, so let's break it down because it is a combination of both market rent growth and contractual nature. So,

Speaker Change: But that floor is real and we think that that's going to create asymmetrical upside.

Speaker Change: For buyers like us who can avail themselves of both the public markets and the private one.

Speaker Change: And you have mentioned that you seem more rent growth and retail street retail than another open air formats.

Speaker Change: So firstly I wanted to make sure that you are.

This comment.

Speaker Change: Throwing truly to market rents and you are not really capturing the different truck.

Speaker Change: Structures of the two.

Speaker Change: Segments.

Speaker Change: And if you were really referring to market rents.

Speaker Change: The fact that in street retail you have more appetite to historical values.

Speaker Change: Can you elaborate on why you think there would be more rent growth in this asset class.

Speaker Change: Yes, so let's separate because it is a combination of both market rent growth.

Speaker Change: And the contractual nature so.

Kenneth F. Bernstein: Part of our bullishness is that we get 3% contractual growth and fair market value resets in our street retail, whereas in our suburban, the contractual growth rate is less, and there are no fair market value resets. Some of this is structural, but what we have experienced over the last decade is it doesn't really matter how good your structure is if the supply and demand and rent-to-sales are not there. Going forward now, what our retailers are saying is for a variety of reasons, that AJ touched on otherwise, supply and demand for these markets, they want to be there. Secondly, they can afford to be there because of their sales. Now, some of the sales left were good old-fashioned inflation, which we've got to get past our inflationary period, but it sure is better than deflation for rent-to-sales.

Speaker Change: Part of our Bullishness is that we get 3% contractual growth and fair market value resets in our street retail, whereas in our <unk>.

Speaker Change: Suburban growth the contractual growth rate is less and there are no fair market value reset. So some of this is structural but what we experienced over the last decade is it doesn't really matter. How good your structure is if the supply and demand and rent to sales are not there.

Speaker Change: And so certainly during COVID-19 it didn't matter.

Speaker Change: That you had that structure you had to deal with the realities of a very difficult time period.

Speaker Change: Going forward now what our retailers are saying is for a variety of reasons.

Speaker Change: That AJ touched on it otherwise supply demand for these markets they want to be there.

Speaker Change: Secondly, they can afford to be there because of their sales now some of the sales lift was good old fashion inflation, which we've got to get past, our inflationary period, but it sure as heck better than deflation.

Speaker Change: For rent to sales and then the second is the migration towards these type of stores. So what our retailers are saying is they always would like to pay less rent, but they are more than happy to open profitably in these locations.

Kenneth F. Bernstein: And then the second is the migration towards these types of stores. So what our retailers are saying is they always would like to pay less rent, but they're more than happy to open profitably in these locations. And that combination, strong rent-to-sales, strong supply-demand, and strong contractual growth means we think we will be able to, over the next 1, 3, 5, 10 years, recognize more growth in that component of our portfolio than in the other open area that we, Can you put the...

Speaker Change: And that combination strong rent to sales strong supply demand.

Speaker Change: And strong contractual growth means we think we will be able to over the next 135 10 years recognize more growth in that component of our portfolio than in the other open air that we mentioned.

Speaker Change: Can you put that.