Q1 2024 Brixmor Property Group Inc Earnings Call
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Operator: Greetings and welcome to the Brixmor Property Group Incorporated First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the bricks more property group incorporated first quarter 'twenty 'twenty four earnings conference call.
At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Operator: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stacy Slater, Senior Vice President, Investor Relations. Thank you. You may begin.
As a reminder, this conference is being recorded.
Now my pleasure to introduce your host Stacy Slater Senior Vice President Investor Relations. Thank you you may begin. Thank you operator, and thank you all for joining Brooks' Morris first quarter conference call with me on the call today are Brian Finnegan interim CEO, and President and Steve Gallagher interim Chief Financial Officer, Mark Horgan.
Stacy Slater: Thank you, Operator, and thank you all for joining Brixmor's First Quarter Conference Call. With me on the call today are Brian Finnegan, Interim CEO and President, and Steve Gallagher, Interim Chief Financial Officer. Mark Horgan, Executive Vice President and Chief Investment Officer, will also be available for Q&A. Before we begin, let me remind everyone that some of our comments today may contain forward-looking statements that are based on certain assumptions and are subject to inherent risks and uncertainties, as described in our SEC filings, and actual future results may differ materially. We assume no obligation to update any forward-looking statements.
<unk> Executive Vice President and Chief Investment Officer will also be available for Q&A before we begin let me remind everyone that some of our comments today may contain forward looking statements that are based on certain assumptions and are subject to inherent risks and uncertainties as described in our SEC filings and actual future results may differ materially we used.
Jim No obligation to update any forward looking statements also we will refer today to certain non-GAAP financial measures further information regarding our use of these measures and reconciliation of these measures to our GAAP results are available in the earnings release and supplemental disclosure on the Investor relations portion of our website.
Stacy Slater: Also, we will refer today to certain non-GAAP financial measures. Further information regarding our use of these measures and reconciliation of these measures to our GAAP results is available in the Earnings Release and Supplemental Disclosure under the Investor Relations portion of our website. Before turning the call to Brian, please note that out of respect for Jim's privacy, we will not be addressing any questions regarding his temporary medical leave and look forward to his return in the near future.
Speaker Change: Before turning the call to Brian. Please note that out of respect for Jim as privacy really not be addressing any questions regarding the temporary medical leave and look forward to his return in the near future. We do ask that you join our Brookfield family and wishing Jim Good health as always please limit your questions to one or two enemy.
Stacy Slater: We do ask that you join our Brixmor family in wishing Jim good health. As always, please limit your questions to one or two and queue for any follow-up. At this time, it's my pleasure to introduce Brian Finnegan.
Speaker Change: Here for any follow up at this time, it's my pleasure to introduce Brian Finnegan.
Brian T. Finnegan: Thanks, Stacy. And good morning, everyone. I'm pleased to report another quarter of outstanding execution by the Brixmor team, as we continue to capitalize not only on the positive trends in open-air retail but on the work our team has done in transforming this portfolio. That transformation is evident in every observable metric, including same-property NOI growth during the first quarter of 5.9% and our improved same-property NOI and NAREIT FFO outlook for 2024, as Steve will provide additional detail on shortly.
Brian T. Finnegan: Stacy and good morning, everyone I'm pleased to report another quarter of outstanding execution by the bricks more team as we continue to capitalize not only on the positive trends in open air retail, but on the work our team has done in transforming this portfolio that transformation is evident in every observable metrics, including same property NOI growth during the first quarter of <unk>.
Speaker Change: Five 9% and our improved same property NOI and NAREIT <unk> outlook for 2024, and Steve will provide additional detail on shortly.
Brian T. Finnegan: And, in conjunction with the tailwinds from the record $68 million of annual base rent and our sign-but-not-commence pool, and our highly accretive, low-risk reinvestment pipeline, we continue to position this portfolio for long-term, sustainable growth. That growth starts with leasing, and we delivered another quarter of excellent results, executing 294 new and renewal leases, totaling 1.3 million square feet, including 700,000 square feet of new leases with tenants across a wide range of categories in the open air space.
Speaker Change: And in conjunction with the tailwind from the record 68 million of annual base rent and are signed but not commenced pool and are highly accretive low risk reinvestment pipeline. We continue to position this portfolio for long term sustainable growth.
That growth starts with leasing and we delivered another quarter of excellent results executing 294, new and renewal leases totaling one 3 million square feet, including 700000 square feet of new leases with tenants across a wide range of categories in the open air space.
Brian T. Finnegan: We added another 3 grocers during the quarter and now derive 80% of our base rent from grocery-anchored centers, while again adding thriving retailers to the portfolio, such as Ulta Beauty, Ross Dress for Less, Chipotle, Chick-fil-A, and J.D.
Speaker Change: We added another three grocers during the quarter and now derived 80% of our base rent from grocery anchored centers, while again, adding thriving retailers to the portfolio such as Ulta beauty Ross dress for less Chipotle, Chick Fil, a and JD sports.
Brian T. Finnegan: We achieved several noteworthy records this quarter, including for overall anchor and small shop occupancy of 95.1%, 97.3%, and 90.5%, respectively, with a sequential small shop gain for the 13th consecutive quarter. We also hit a high watermark for new small shop rents at over $30 per square foot. The improvements we have made at our centers, along with a high demand, low supply, retail leasing environment, are allowing our team to drive rates across the portfolio.
Speaker Change: We achieved several noteworthy records this quarter, including for overall anchor and small shop occupancy of 95, 1% 97, 3% and 95% respectively with a sequential small shop gain for the 13th consecutive quarter.
Speaker Change: We also hit a high watermark in new small shop rents at over $30 per square foot as the improvements we have made at our centers along with the high demand low supply retail leasing environment is allowing our team to drive rate across the portfolio.
Brian T. Finnegan: That ability to drive rates and capture the upside embedded in our below-market rents was also apparent in our new and renewal spreads of 20% and our new leasing spreads of 40%. We're also encouraged by our move-out trends, which were the lowest first-quarter result this portfolio has had and led to record retention in over 89% of GLA. In addition, tenant disruption has so far this year remained muted, which is a significant factor in our improved outlook for the year, as Steve will highlight further.
Speaker Change: That ability to drive rate and capture the upside embedded in our below market rents was also apparent in our new and renewal spreads of 20% and our new leasing spreads of 40%.
Speaker Change: We're also encouraged by our move out trends, which were the lowest first quarter result, this portfolio has had and led to record retention at over 89% of GLA.
Speaker Change: In addition, tenant disruption has so far this year remained muted which is a significant factor in our improved outlook for the year as Steve will highlight further but to be clear the positive trends. We continue to see them move outs and retention are not simply a result of the environment. We are witnessing an open air retail, but indicative of the transformation of this portfolio.
Brian T. Finnegan: But to be clear, the positive trends we continue to see in move-outs and retention are not simply a result of the environment we are witnessing in open-air retail but indicative of the transformation of this portfolio and the durability of our underlying tenant base. The cumulative effect of robust leasing, record portfolio retention, low move-out activity, and a stable tenant base is also reflected in our improved Same Property NOI Outlook for the year of 3.5% to 4.25%.
Speaker Change: Oh, and the durability of our underlying tenant base.
Speaker Change: The cumulative effect of robust leasing record portfolio retention low move out activity and a stable tenant base are also reflected in our improved same property NOI outlook for the year of three 5% to $4 two 5% as the team remains laser focused on accelerating rent commencements across the portfolio <unk>.
Brian T. Finnegan: As the team remains laser focused on accelerating rent commencements across the portfolio, including from space, we recaptured last. Moving to reinvestments, our team stabilized 11.6 million projects at an incremental 12% return and now has an active pipeline of over 400 million projects at an incremental 9% return, of which we expect to stabilize approximately 200 million this year. This includes some of the company's most high-profile projects, like Roosevelt Mall and Plymouth Square in the Philadelphia market and the first phase of Port Orlando, across from one of the busiest convention centers in the country in Orlando, Florida.
Speaker Change: <unk> from space, we recaptured last year.
Speaker Change: Moving to Reinvestments, our team stabilized $11 6 million of projects at an incremental 12% return and now has an active pipeline of over $400 million of projects and an incremental 9% return of which we expect to stabilize approximately $200 million this year.
Speaker Change: This includes some of the company's most high profile projects like Roosevelt Mall, and Plymouth square in the Philadelphia market and the first phase of <expletive> Orlando across from one of the busiest convention centers in the country in Orlando, Florida.
Brian T. Finnegan: On the external growth front, as Mark can touch on in Q&A, we're beginning to see transaction activity increase and more opportunities to put our platform to work, particularly following the $69 million of attractive capital that Mark and his team raised in the first quarter through disposition. We took advantage of one of those opportunities last week in Long Island, New York, where we purchased a grocery-anchored asset adjacent to a center we already own, consistent with the clustering strategy we have deployed with great success over the last few years in places like Southwest Florida, Southern California, Houston, Atlanta, Philadelphia, and Chicago.
Speaker Change: On the external growth front as Mark can touch on in Q&A, we're beginning to see transaction activity increase and more opportunities to put our platform to work, particularly following the $69 million of attractive capital that Marc and team raised in the first quarter through dispositions.
Speaker Change: We took advantage of one of those opportunities last week in long Island, New York, where we purchase a grocery anchored asset adjacent to a center, we already own consistent with the clustering strategy. We have deployed with great success over the last few years in places like southwest, Florida, Southern California, Houston, Atlanta, Philadelphia and Chicago.
Brian T. Finnegan: And while we expect to see more opportunities in the transaction market in the balance of the year, we will remain disciplined as a higher interest rate environment persists and our self-funded internal growth strategy allows us to be patient on external growth. Before handing it over to Steve for a more detailed review of our financial results. I would like to thank all of you that have reached out with your thoughts and well-wishes for James Taylor.
Speaker Change: And while we expect to see more opportunities in the transaction market and the balance of the year, we will remain disciplined as our higher interest rate environment persists and our self funded internal growth strategy allows us to be patient on the external growth front.
Speaker Change: Before handing it over to Steve for a more detailed review of our financial results I would like to thank all of you that have reached out with your thoughts and well wishes for Jim.
Brian T. Finnegan: The outpouring of support has been overwhelming, but not surprising, given both the person that he is and the impact that he has had on this industry. As Stacy noted, out of respect for Jim and his family, we won't be answering any questions outside of what was in the release, but we do look forward to his return in the near future. With that, I'll hand the call over to Steve for a more detailed review of our financial results.
Speaker Change: The outpouring of support has been overwhelming but not surprising given both the person that he has and the impact that he has had on this industry.
Speaker Change: Stacy noted out of respect for Jim and his family, we won't be answering any questions outside of what was in the release, but do look forward to his return in near future without I'll hand, the call over to Steve for a more detailed review of our financial results Steve.
Brian T. Finnegan: Thanks, Brian. I'm pleased to report on a very robust start to 2024 as we continue to capitalize on the strength of the current leasing environment and the momentum generated by our portfolio transformation initiative. Navy FFO with 54 cents per share in the first quarter driven by same property and a wide growth of 5.9%. Base rent growth contributed 380 basis points to same property on a wide growth this quarter, reflecting continued strong leasing spreads, growth, and build occupancy, and a historically low level of first quarter move out.
Steven T. Gallagher: Thanks, Brian I'm pleased to report on a very robust start to 2024 as we continue to capitalize on the strength of the current leasing environment and the momentum generated by our portfolio transformation initiatives.
Steven T. Gallagher: S S, though with 54 cents per share in the first quarter driven by same property NOI growth of 5.9% base.
Speaker Change: Base rent growth contributed 380 basis points to same property NOI growth this quarter, reflecting continued strong leasing spreads growth in billed occupancy and a historically low level of first quarter move outs and.
Brian T. Finnegan: In addition, net expense reimbursements contributed 90 basis points driven by the growth in build occupancy. Revenues deemed uncollectible were slightly positive in the quarter and contributed 60 basis points to same property OI growth due to lower tenant disruption and the timing of annual real estate tax reconciliations collected from cash basis tenants.
Speaker Change: In addition, net expense reimbursements contributed 90 basis points driven by the growth in billed occupancy revenues deemed uncollectible was slightly positive in the quarter and contributed 60 basis points of same property NOI growth due to the lower tenant disruption in the timing of annual real estate tax reconciliations collected from cash basis tenants.
Steven T. Gallagher: Also of note, as indicated in our initial guidance for 2024, first quarter FFO benefited from a penny of savings associated with the CFO transition, including the reversal of stock compensation expense. As Brian noted, we are very pleased to have achieved portfolio records for our total anchor and small shop lease rates, reflecting the demand from retailers to locate in our centers and the substantial progress we have made in leasing space recaptured in bankruptcy last year. As such, we ended the first quarter with a 450 basis point spread between lease and build options. And our signed-but-not-yet-commenced pool totaled a record $68 million, which included $60 million of net new rent.
Speaker Change: Also of note as indicated in our initial guidance for 2024 first quarter <unk> benefited from a penny of savings associated with the CFO transition, including the reversal of stock compensation expense.
Speaker Change: As Brian noted we are very pleased to have achieved portfolio records for our total anchor and small shop lease rate, reflecting the demand from retailers to locate in our centers and the substantial progress we have made in leasing space recaptured in bankruptcy last year.
Speaker Change: As such we ended the first quarter with a 450 basis point spread between leased and build occupancy and.
Speaker Change: <unk> signed but not yet commenced pool totaled a record $68 million.
Steven T. Gallagher: The size of the pool continues to grow despite commencing approximately $12 million of annualized base rent since the end of the year. In addition, the blended annualized base rent per square foot on the signed but not yet commenced pool is $21.11, approximately 23% above our portfolio average, reflecting the below market rent basis in our centers that our team continues to capture the upside on. We expect approximately 41 million or 61% of ABR in the sign but not commence pool to start in the remainder of 2024.
Speaker Change: Which includes $60 million of net new rent the size of the pool continues to grow despite commencing approximately $12 million of annualized base rents since the end of the year.
Speaker Change: In addition, the blended annualized base rent per square foot on the signed but not yet commenced pool is $21 an 11 <unk>.
Speaker Change: Approximately 23% above our portfolio average, reflecting the below market rent basis in our centers that our team continues to capture the upside on we expect.
Speaker Change: Approximately $41 million or 61% of ABR in the signed but not commenced pool to commence in the remainder of 2024.
Steven T. Gallagher: From a balance sheet perspective, we continue to hold the proceeds from our $400 million January bond offering in stable, high-yield accounts in advance of repaying $300 million of our 3.65% bonds when they mature in June. As of March 31st, we had a total liquidity of $1.7 billion, and our debt to EBITDA on a trailing 12-month basis was 5.9 times.
Speaker Change: From a balance sheet perspective, we continue to hold the proceeds from our 400 million January bond offering and a stable high yield accounts in advance of repaying $300 million of our $3 six 5% bonds when they mature in June.
Speaker Change: March 31, we had a total liquidity of $1 7 billion and our debt to EBITDA on a trailing 12 month basis was five nine times, leaving us well positioned to execute on our business plan and with the flexibility to Opportunistically access the capital markets.
Steven T. Gallagher: Leaves us well positioned to execute on our business plan and with the flexibility to opportunistically access the capital market. And since last quarter's call, our credit rating has been placed on a positive outlook by Moody's, recognizing the improvements that have been made to the balance sheet over the past several years. In terms of our forward outlook, given the continued strength in the leasing environment, we have increased our same property NOI growth to a range of 3.5% to 4.25%, comprised of a 425 to 475 basis point contribution from base rent, which includes approximately 40 basis points of top line drag at the midpoint from national tenant disruption.
Speaker Change: Since last quarter's call our credit rating has been placed on a positive outlook by Moody's recognizing the improvements that I think made to the balance sheet over the past several years.
Speaker Change: In terms of our forward outlook given the continued strength in the leasing environment. We have increased our same property NOI growth to a range of three 5% to four 5% comprised of a 425 to 475 basis point contribution from base rent, which includes approximately 40 basis points of top line drag at the midpoint from national tenant disruption.
Steven T. Gallagher: As we have better visibility at this point in the year, with respect to revenues deemed uncollectible, a significant portion of the outperformance in the first quarter, as I indicated earlier, was timing-related. As such, we still expect revenues deemed uncollectible to end the year within our historical run rate of 75 to 110 basis points of total revenue.
Speaker Change: As we had better visibility at this point in the year with respect to revenues deemed uncollectible a significant portion of the outperformance in first quarter as I indicated earlier was timing related.
Speaker Change: We still expect revenues deemed uncollectible to end the year within our historical run rate of 75 to 110 basis points of total revenues, but the signs we're seeing in our tenant base are encouraging with strong payment trends illustrating the improvements in the credit quality of our tenants.
Speaker Change: In conjunction with the increase in our same property NOI expectation, we have raised our guidance for 2020 for NAREIT <unk> to a range of $2 eight to $2 11 per share in summary, we are grateful for the continued execution by their bricks and mortar team as we continue to create value for our stakeholders and with that I'll turn the call over to the operator for Q&A.
Operator: But the signs we are seeing in our tenant base are encouraging, with strong payment trends illustrating the improvements in the credit quality of our tenants. In conjunction with the increase in our same property NOI expectation, we have raised our guidance for 2024 NAID FFO to a range of $2.08 to $2.11 per share. In summary, we are grateful for continued execution by the Brixmor team as we continue to create value for our stakeholders.
Speaker Change: Okay.
Speaker Change: Thank you at this time, we will now conduct a question answer session. If he would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: The confirmation tone will indicate your line is in the question queue. You May press star two people like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for our first question.
Operator: And with that, I turn the call over to the operator for Q&A. Thank you. At this time, we will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: My first question is from Samir came out with Evercore. Please proceed.
Samir: Hey, Yeah. Good morning, everyone I guess, maybe help us unpack the same store NOI guidance the revised one.
Samir Upadhyay Khanal: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for our first question. Our first question is from Samir Khanal with Evercore. Please proceed. Hey, good morning, everyone.
Samir: What you're assuming sort of this time around for bad debt assumptions. Thanks.
Samir: Yeah, why don't I take that first severe and then I'll hand, it to Steve. So when we spoke on the last call our guidance provided for a fairly wide range of tenant disruption, we saw it as though and talked about it we had the ability to outperform and as you look at the start of the year tenant disruption has effectively been nonexistent right with Joanne.
Brian T. Finnegan: I guess maybe help us unpack the same strand of white guidance, the revised one, you know, what you're assuming sort of this time around for bad debt assumptions. Thanks. Why don't I take that first, Samir, and then I'll hand it to Steve.
Steven T. Gallagher: Filling quickly going through the process, no downtime and rent and no store closures and then if you look at all we've done across the portfolio to improve the tenant base you see record low move outs you see record retention. There. So we feel like the start of the year has been pretty strong from that regard now we're still watching.
Brian T. Finnegan: So, when we spoke on the last call, our guidance provided for a fairly wide range of tenant disruption, and we felt as though, and talked about it, we had the ability to outperform. And as you look at the start of the year, tenant disruption has effectively been nonexistent, right? With the Joanne filing, quickly going through the process, no downtime in rent, and no store closures. Record low move out.
Samir: Certain categories and certain tenants, but we feel pretty encouraged in terms of what we're seeing on the bad debt front and then maybe I'll hand, it to Steve in terms of how that flows through the guidance, yes, I mean from a guidance perspective, if you remember going back to our initial guidance. We had about 100 basis points of drag in same property NOI for this tenant disruption.
Steven T. Gallagher: You see record retention there. So we feel like the start of the year has been pretty strong in that regard. Now, we're still watching certain categories and certain tenants, but we feel pretty encouraged in terms of what we're seeing on the bad debt front. And then, maybe, I'll hand it to Steve in terms of how that flows through the guidance. Yeah. I mean, from a guidance perspective, if you remember going back to our initial guidance, we had about a hundred basis points of drag and same property analyzed for this tenant disruption. And as I said in my prepared remarks, that's sort of down at 40 basis points of same property analyzed drag.
Steven T. Gallagher: And we you know as I said in my prepared remarks that sort of down at 40 basis points of same property NOI drag and then you know.
Steven T. Gallagher: While we're seeing great trends in the revenues deemed uncollectible, we still think we'll end up the year, because it's mainly timely timing related in the 75 to 110 basis points of total revenue.
Steven T. Gallagher:
Speaker Change: So hopefully that helps.
Speaker Change: Okay, and then just shifting over to the transaction market.
Speaker Change: Given what rates have done.
Speaker Change: Maybe talk around kind of what youre seeing out there buyer appetite.
Brian T. Finnegan: And then, while we're seeing great trends in the revenues deemed uncollectible, we still think we'll end up with the year because it's mainly timing-related in the 75 to 110 basis points of total revenue. So hopefully that helps. Okay, and then just shifting over to the transaction market, you know, given what rates have done, maybe talk about kind of what you're seeing out there in terms of buyer appetite. You know, and how do we think about your strategy this year? I mean, should we expect you to be net acquirers this year? I'll just take it quickly, and then I'll hand it to Mark, Samir.
Speaker Change: Hum.
Speaker Change: How do we think about your strategy. The strategy. This year I mean should we expect you to be net acquirers. This year. Thanks.
Speaker Change: I'll just take it quickly and then I'll hand, it to Mark Samir we have talked on the last several calls you've heard Jim talk about it about being patient being crude it and the market starting to come our way a little bit as it relates to seller expectations and as I pointed out in my opening remarks, we started to see that in the deal we closed last week, but let me.
Speaker Change: Let mark touch on the overall transaction market, what he's saying.
Mark T. Horgan: Well, thanks, Brian well one of the things we mentioned on our first quarter call that we think we've got the ability to source, some well priced asset level capital out of our portfolio. So if you look at those sales in Q1, the blended cap rate with a mid four cap.
Mark T. Horgan: We have talked on the last several calls, you've heard Jim talk about it, about being patient, being prudent, and the market starting to come our way a little bit as it relates to seller expectations. And as I pointed out in my opening remarks, we started to see that in the deal we closed last week. Well, thanks, Brian.
Speaker Change: And in part driven by the sell them all once 63rd which we do think is it really a good example of our capital allocation discipline. When we sold it as we kind of looked at the value creation, we thought would be available on our redevelopment and where we transacted. We thought we were capturing that value today. What do we do think provides really well priced capital to push the growth plans forward in the market.
Mark T. Horgan: Well, one of the things we mentioned on the first quarter call is that we think we've got the ability to source some well-priced after-level capital out of our portfolio. So if you look at those sales in Q1, the blended cap rate was a mid-four percent cap. In part, driven by the sale at Mall 163rd, which we do think is a really good example of our capital allocation discipline. When we sold that asset, we kind of looked at the value creation we thought would be available in redevelopment, and where we transacted, we thought we were capturing that value today, which we do think provides really well-priced capital to push the growth plans forward in the market.
Speaker Change: With respect to acquisitions in the overall market as we've highlighted we were pretty cautious on the market, but we're definitely seeing more attractive opportunities today as sellers come to the market are much more realistic in terms of pricing given some of the capital market changes that you've referenced and we also have we're really pleased with the close of West Center last week, we bought that at a low.
Speaker Change: Seven cap and a very affluent part of long Island next to a center we call three villages.
Speaker Change: And we see really strong mark to market at West Center, but ultimately as we continue the cluster of investments as we have in the past, we see the ability to drive value across both centers are in long island. So we think we'll be a bit more constructive on acquisitions going forward, we're not going to give guidance as we as we dealt with respect to volume here, but you.
Mark T. Horgan: With respect to acquisitions and the overall market, as we've highlighted, you know, we were pretty cautious in the market, but we're definitely seeing more attractive opportunities today as sellers that come to the market are much more realistic in terms of pricing, given some of the capital market changes that you've referenced. We will say we're really pleased with the close of West Center last week; we bought that at a low seven-cap in a very affluent part of Long Island, next to a center we call Three Villages.
Speaker Change: You should expect us to remain disciplined but we are seeing a building pipeline today and that last point Samir is important I just and what that is we are going to remain patient.
Speaker Change: With our self funded business plan with the growth and you're seeing the growth come through in our operations the growth that we're delivering quarter after quarter, it's not.
Brian T. Finnegan: And we see a really strong mark to market at West Center. But ultimately, as we continue to cluster investments, as we have in the past, we see the ability to drive value across both centers on Long Island. So we think we'll be a bit more constructive on acquisitions going forward. We're not going to give guidance as we don't with respect to volume here. But you know, you should expect us to remain disciplined. We are seeing a building pipeline today. And that last point, Samir, is important.
Speaker Change: <unk>.
Speaker Change: We have to.
Speaker Change: Go to the external growth front from an acquisition standpoint, but we're encouraged by what we're seeing in the transaction market overall.
Speaker Change: Thank you.
Speaker Change: The next question comes from Todd Thomas with Keybanc capital markets. Please proceed.
Todd Michael Thomas: Hi, Thanks, good morning.
Todd Michael Thomas: I just first wanted to touch on the leasing environment, which you know has has continued to be strong and.
Todd Michael Thomas: In other sector as you know, we've heard about capital markets volatility and the higher interest rate environment, having an impact on on tenant demand.
Brian T. Finnegan: I just end with that, as we are going to remain patient. We have a self-funded business plan with growth, and you're seeing the growth come through in our operations, the growth that we're delivering quarter after quarter. It's not that we have to go on the external growth front from an acquisition standpoint, but we're encouraged by what we're seeing in the transaction market overall. Thank you. The next question comes from Todd Thomas with KeyBank Capital Markets. Please proceed. Hi, thanks. Good morning.
Todd Michael Thomas: Longer decision, making also having an impact on expansion plans it doesn't sound like you're seeing that across your portfolio based on your comments around leasing demand is is that the right read and what you know why why as tenant demand in retail.
Todd Michael Thomas: You know not not necessarily being impacted.
Todd Michael Thomas: I just first wanted to touch on the leasing environment, which, you know, has continued to be strong. In other sectors, you know, we've heard about capital market volatility and the higher interest rate environment having an impact on tenant demand, you know, longer decision making, also having an impact on expansion plans. It doesn't sound like you're seeing that across your portfolio, based on your comments around leasing demand. Is that the right read?
Todd Michael Thomas: To the same degree yeah, well I think on the first part Todd we remain incredibly encouraged by what we're seeing on the leasing front you look at the volume during the quarter of 700000, it's in line with the volume that we did first quarter of last year and that's after we grew occupancy of 110 basis points that we talked about coming.
Todd Michael Thomas: Out of New York ICSC tenants there, we're looking at plans for stores and 25 and 26, that's still the conversations. We're having is we have a full schedule heading into ICSC in Vegas. This year and I think in terms of why you are seeing it it's really a couple of reasons first the supply environment remains incredibly.
Brian T. Finnegan: And why is tenant demand and retail, you know, not necessarily being impacted to the same degree? Well, I think on the first part, Todd, we remain incredibly encouraged by what we're seeing on the leasing front. You look at the volume during the quarter of 700,000, it's in line with the volume that we did in the first quarter of last year. And that's after we grew occupancy by 110 basis points, and we talked about coming out of New York ICSE, tenants there were looking at plans for stores in 25 and 26.
Todd Michael Thomas: <unk>, there's just not a lot out there in terms of vacancy and then you just look at the uses that continue to thrive in this environment and it's everybody, who we're doing business with whether that's specialty grocery whether that health and wellness, whether that's Q S. Our restaurants, whether that's value apparel these businesses.
Brian T. Finnegan: That's still the conversations we're having as we have a full schedule heading into ICSE Vegas this year. And I think in terms of why you're seeing it, there are really a couple reasons. First, the supply environment remains incredibly constricted.
Todd Michael Thomas: Continued to perform well theyre very intentional with their store opening plans. They know the markets that they want to be in.
Todd Michael Thomas: And they want to get ahead of space that you could potentially get back our teams not just talking to them about our vacancies of which we have a lot less today, they're talking about the spaces that we can ultimately get back like during the quarter, where we took back a big lots of it was expiring next year and we backfill that with an all day at a 50% rent uptick. So these are the types of tenants that are.
Brian T. Finnegan: There's just not a lot out there in terms of vacancy. And then you just look at the uses that continue to thrive in this environment, and it's everybody who we do business with, whether that's specialty grocery, whether that's health and wellness, whether that's QSR restaurants, whether that's value apparel. These businesses continue to perform well. They're very intentional with their store opening plans. They know the markets that they want to be in, and they want to get ahead of space that they could potentially get back. Our team is not just talking to them about our vacancies, of which we have a lot fewer today.
Todd Michael Thomas: Expanding and we mean, we remain incredibly encouraged and look forward to the ICSC show here in a couple of weeks to continue to push things forward.
Todd Michael Thomas: Okay, and then Steve you mentioned that revenues deemed uncollectible.
Brian T. Finnegan: They're talking about the spaces that we could ultimately get back, like during the quarter when we took back a big lot that was expiring next year, and we backfilled that with an Aldi at a 50% rent increase. So these are the types of tenants that are expanding, and we remain incredibly encouraged and look forward to the ICSE show here in a couple weeks to continue to push things forward. Okay, and then Steve, you mentioned revenues deemed uncollectible, you know, at 75 to 110 base points of total revenue, that that's the historical level for the portfolio, you maintain that here for the year, but with the first quarter's, you know, sort of favorable result, that would imply an above average level of revenues deemed uncollectible in the remaining quarters, can you just reconcile that against, you know, the sort of positive comments As we've discussed in the past, cash-based accounting can lead to volatility and revenues deemed uncollectible from quarter to quarter.
Todd Michael Thomas: At 75 to 110 basis points of total revenue that that's the historical level for the portfolio you maintained that here for the year, but with the one first quarter you know sort of favorable result that would imply an above average level of revenues.
Todd Michael Thomas: [noise] deemed uncollectible and the remaining quarters can you just reconcile that against.
Todd Michael Thomas: That's sort of the positive comments here about tenant health and and the lack of tenant disruption so far to date.
Speaker Change: Sure you know as we've discussed in the past cash base of accounting it can lead to volatility in revenues deemed uncollectible from quarter to quarter as I mentioned in my prepared remarks, we recognized 2 million net in the quarter related to collections of real estate tax rate reconciliations from cash basis tenants and we expect this to reverse as we move through the year.
Speaker Change: It's typically the seasonality on these nonrecurring collection is focused in the first half of the year versus the second half of the year and Todd look this is kind of the first normalized year, where we're not seeing as much on the out of period collection front. So as we came into the year. We felt like we were appropriately conservative in terms of that.
Todd Michael Thomas: That line item and we're seeing some good trends and we're certainly encouraged there are categories and tenants who were keeping an eye on but to your point and as I pointed out in my opening remarks, all the work. The team has done across the portfolio has positioned us for a stronger underlying tenant base, but we felt it was prudent.
Steven T. Gallagher: As I mentioned in my prepared remarks, we recognize $2 million net in the quarter related to collections of real estate tax reconciliations from cash-based tenants. And we expect this to reverse as we move through the year. And typically, the seasonality on these non-recurring collections is focused in the first half of the year versus the second half.
Todd Michael Thomas: As we are in kind of a normal course year for the first full operating year for since pre pandemic to really get some get some further trends on that number as we balance of the year.
Speaker Change: Okay alright, thank you.
Brian T. Finnegan: And Todd, look, this is kind of the first normalized year where we're not seeing as much on the out-of-period collection front. So as we came into the year, we felt like we were appropriately conservative in terms of that line item. And we're seeing some good trends, and we're certainly encouraged. There are categories and tenants who we're keeping an eye on. But to your point, and as I pointed out in my opening remarks, all the work the team did across the portfolio has positioned us for a stronger underlying tenant base.
Todd Michael Thomas: Thank you. The next question comes from Alexander Goldfarb with Piper Sandler. Please proceed.
Alexander David Goldfarb: Alexander Your line is live.
Alexander David Goldfarb: Sorry about that.
Alexander David Goldfarb: Yeah, I'm here, sorry, I had the mute on.
Alexander David Goldfarb: Good morning down there. Good morning, just first obviously wishing Jim Speedy recovery and Brian and Steve Testament to you guys for such a strong quarter. Despite.
Alexander David Goldfarb: Your coach sidelines, so obviously speaks to the team and culture that Jim is Bill Lu.
Speaker Change: Let me ask you. This first question, Brian you know that I've asked a lot about ways that you guys have improved your leverage with tenants to drive you know NOI, etc, but specifically on the leases themselves not the capex not the commissions or anything like that but on the actual leases are you guys finding ways to increase the actual cash mark.
Brian T. Finnegan: But we felt it was prudent to, as we are in kind of a normal course year for the first full operating year since pre-pandemic, to really get some further trends on that number as we balance it out. Okay.
Todd Michael Thomas: Thank you. Thank you. The next question comes from Alexander Goldfarb with Piper Center. Please proceed. Alexander, your line is live. Sorry about that. Yeah, yeah, I'm here. Sorry, I had the mute on.
Speaker Change: On the leases or the way the lease structures are which I'm assuming are mostly triple net theres really not any leverage that you have in there to have you know two to expand your the cash that you drive out of the leases themselves you know, whether it's recoveries or bill backs or whatever.
Alexander David Goldfarb: Good morning down there. Just first, obviously wishing Jim, you know, a speedy recovery and Brian and Steve testament to you guys for such a strong quarter despite your coach, you know, being on the sidelines. It obviously speaks to the team and culture that Jim has built. Let me ask you this first question, Brian. You know that I've asked a lot about ways that you guys have improved your leverage with tenants to drive, you know, NLI, etc.
Speaker Change: Trying to think along those lines what first I appreciate the kind words about you and we certainly miss them and I think the results speak to that really the confidence and the broader team in terms of the team's ability to continue to deliver in and we were really excited by it and the work that they did to start the year at.
Alexander David Goldfarb: But specifically on the leases themselves, you know, not the CapEx, not the commissions or anything like that. But on the actual leases, are you guys finding ways to increase the actual cash margin on the leases? Or the way the lease structures are, which I'm assuming are mostly triple net, there's really not any, you know, leverage that you have in there to have, you know, to expand your, you know, the cash that you drive out of the leases themselves, you know, whether it's recoveries or billbacks or whatever, you Well, I first appreciate the kind words about Jim; we certainly miss him.
Speaker Change: One of the things that it's been encouraging to US is not just what you see in in right. It's not just what you see in rent increases which across the portfolio. This quarter, our new ramp thoughts were about 2.5% that's versus in place of one 5%. We continue to make a lot of progress there small shops, we're closer to 3%.
Speaker Change: But to your point about what are some of the other things. We're doing we are absolutely looking at Cam language and softening that I'm looking at carve outs and space carve outs in certain leases to ensure that the investments that we're making in our centers. We're getting paid back for we've been extremely focused on eliminating noncumulative caps.
Brian T. Finnegan: And I think the results speak to the confidence in the broader team in terms of the team's ability to continue to deliver. And we're really excited by that and the work that they did to start the year. One of the things that's been encouraging to us is not just what you see in the rate, it's not just what you see in the rent increases, which across the portfolio this quarter, our new rent bumps were about 2.5%. That's versus an average of 1.5%. We continue to make a lot of progress there. However, small shops were closer to 3%.
Speaker Change: Ross the portfolio really eliminating caps in general and then we have been laser focused in terms of where.
Speaker Change: Where we are deploying fixed cam we've done that with a lot of local tenants, it's about 22% of our of our ABR.
Speaker Change: We're growing those fixed cam rates it at four at over 4% today, and where more setting those rates. We have really good visibility in terms of the opex spend so there are other things in the least in terms of how we're driving income the other thing that we're doing particularly with restaurants in this environment as being much more aggressive on the percentage rent.
Brian T. Finnegan: But to your point about what some of the other things we're doing, we are absolutely looking at CAM language and softening that up, looking at carve outs in space, carve outs in certain leases to ensure that the investments that we're making in our centers are getting paid back for. We've been extremely focused on eliminating non-cumulative caps across the portfolio, really eliminating caps in general. And then we have been laser focused in terms of where we are deploying fixed CAM. We've done that with a lot of local tenants. It's about 22% of our ABR.
Speaker Change: Really understanding what their sales projection is a shopping center really understand so we were setting those breakpoints appropriately. So we can not just drive a very high rate. Initially like you saw with the small shop rents of $30 a square foot during the quarter, but that we can also recognize some upside if they perform well. So all of these things I think doesn't speak to the environment.
Speaker Change: But it's not just the environment right. It's all the stuff that we've done at our shopping centers here over the past few years in terms of the tenants that we brought and the traffic that we're generating it's allowing us to drive these things with really great tenants.
Brian T. Finnegan: We're growing those fixed CAM rates at over 4% today, and when we're setting those rates, we have really good visibility in terms of the op-ex spend. So there are other things in the lease in terms of how we're driving income. The other thing that we're doing, particularly with restaurants in this environment, is being much more aggressive on the percentage rent front, really understanding what their sales projections are for the shopping center.
Speaker Change: Okay. The second question is in May.
This is just sort of urban myths or you know social media legend, but you here.
Speaker Change: Is that back in all of these weight loss drugs as deterring people too.
Speaker Change: Cut down on what they eat although you know try and go into a chick fil a or in and out and you wait in line forever. So is all of this weight loss stuff. The Internet legend is this just sort of myth or are you actually seeing or hearing any of your food tenants actually talk about this well in internet and Miss Assai.
Brian T. Finnegan: So we're setting those break points appropriately so we can not just drive a very high rate initially, like you saw with the small shop rents of $30 a square foot during the quarter, but we can also recognize some upside if they perform well. So all these things speak to the environment, but it's not just the environment, right?
Brian T. Finnegan: I'd wellness has become more essential and what I mean by that is if you think about the.
Speaker Change: How people are thinking about their overall health and fitness expansion and metal expansion and the quality of better operators in the <unk> space. There was an article out in the journal I think last week related to how people are willing to pay more at chipotle than they are at mcdonalds because.
Brian T. Finnegan: It's all the stuff that we've done in our shopping centers here over the past few years in terms of the tenants that we've brought in, and the traffic that we're generating. It's allowing us to do these things with really great tenants. Okay, the second question is, and maybe this is just sort of an urban myth or, you know, a social media legend, but, you know, you hear about Zempak and all these weight loss drugs deterring people from, you know, cutting down on what they eat, although, you know, try going into a Chick-fil-A or In-N-Out and you wait in line forever. So is all this weight loss stuff, the internet legend, is this just some sort of myth?
Speaker Change: It's a healthier proposition right they feel like they're getting healthier food. So I think this does tie into overall wellness and generally when when we're seeing that folks get in shape. They want to stay in shape and so there we're seeing a better quality of gym, operator were being seeing a better quality of medical.
Alexander David Goldfarb: Or are you actually seeing or hearing any of your food tenants actually talk about this? Because it's a healthier proposition, right? They feel like they're getting healthier food, so I think this does tie into overall wellness. And generally, when we're seeing folks get in shape, they want to stay in shape. And so we're seeing a better quality of gym operator, and we're seeing a better quality of medical service use at our shopping centers.
Speaker Change: Service use at our shopping centers and then you are seeing a better quality in terms of those higher end healthier options like sweet Greens and cava that are really focused on expanding their suburban footprint. So again, whether it's those epic or something else. What we are seeing is that people are much more folks.
Alexander David Goldfarb: And then you are seeing better quality in terms of those higher-end, healthier options like Sweetgreens and Kava that are really focused on expanding their suburban footprint. So again, whether it's Ozempic or something else, what we are seeing is that people are much more focused on their health and their well-being. And we're seeing that come through in the deals that we sign in our center. Okay, thanks. The next question comes from Juan Sanabria with BMO Capital. Please proceed. Hi, good morning. I'm hoping for a speedy recovery for Jim as well.
Alexander David Goldfarb: On their health and their well being and we're seeing that come through in the deals that we saw at our centers.
Juan Carlos Sanabria: Okay. Thanks.
Juan Carlos Sanabria: The next question comes from Juan San Bruno with BMO capital. Please proceed.
Speaker Change: Hi, good morning, and are hoping for a speedy recovery for Jim as well.
Juan Carlos Sanabria: Just wanted to piggyback on Alex's question there.
Juan Carlos Sanabria: The story this morning out of Walmart shuttering its health centers.
Speaker Change: Again, just internet Mathur anecdotal it does seem like there's been a huge proliferation of urgent cares and understandably so with just the ease.
Juan Carlos Sanabria: I just wanted to take back on Alex's question there about meeting the customers where they are. But just curious about your exposure to some of these Medtail or Urgent Care companies, specifically the credit risk there, or is that trend kind of past its peak? Just curious about your general thoughts on that.
Juan Carlos Sanabria: Oh about meeting the customers, where they are but just curious on how you're feeling about your exposure to some of this med Taylor urgent care and specifically in the credit risk there or is that trend kind of passed its peak just curious on your general thoughts to that.
Brian T. Finnegan: Unknown Speaker Yeah, I think Medtail has become an important part of our shopping centers. I mean, back to Alex's question, just in terms of our lease structures, right? Our lease structures today allow for more fitness, they allow for more medical, they allow for restaurants that are closer to their shopping center, to their stores, they allow for pads that are closer to their stores, because these retailers, these anchors, recognize the traffic, they recognize their customers that are going to these places.
Brian T. Finnegan: Metals to become an important part of our shopping centers I mean back to Alex's question just in terms of our lease structures right. Our lease structures today allow for more fitness they allow for more medical they allow for restaurants that are closer to their shopping center to their stores. They allow for pads that are closer to their stores because all these retailers. These anchors they.
Brian T. Finnegan: As the traffic they recognize their customer that's going to these places <unk> been a good component of our tenant mix in terms of urgent care operators in terms of a Dennis in terms of some of the medical service operators, we've even done some things with kind of a pet hospitals to the interesting thing about these users want as they're incredibly.
Brian T. Finnegan: Medtail has been a good component of our tenant mix in terms of urgent care operators, in terms of dentists, in terms of some of the medical service operators. We've even done some things with kind of pet hospitals, too. The interesting thing about these uses, Juan, is they're incredibly well capitalized.
Brian T. Finnegan: And because they are more capital intensive, they're more expensive to build out, but they're generally the highest rent payers in the shopping center because they want some of the most high-profile spaces. So we think it's a good component of our shopping centers. And just as it relates, since you bring up credit underwriting, I think it does go back to some of the trends that we're seeing in retention and move outs. We put in a very robust credit underwriting process when coming out of COVID.
Brian T. Finnegan: Well capitalized and because they are more capital intensive than more expensive build outs, but they're generally the highest rent payers in the shopping center because they want some of the most high profile spaces. So we think it's a good component of our shopping centers and is it just as it relates since you bring up credit underwriting I think it does go back to some of the trends that we're seeing in.
Brian T. Finnegan: <unk> and move outs, we put a very robust credit underwriting process and coming out of Covid and you're seeing that pay dividends in terms of the underlying credit based collection trends that we're seeing as well as what's coming through and those move outs and retention. So thats something even with those uses we're laser focused when we are putting some capital to work.
Brian T. Finnegan: And you're seeing that pay dividends in terms of the underlying credit base, the collection trends that we're seeing, as well as what's coming through in those move-outs and retention. So that's something, even with those uses, we're laser focused when we are putting some capital to work in terms of what the underlying credit base is. And so far, we feel pretty good about the operators who we're bringing to our centers and the strength of them. Thanks.
Brian T. Finnegan: In terms of what the underlying credit base is in and so far we feel pretty good about the operators, who are bringing to our centers and the strength of those signatures.
Speaker Change: Thanks, and then for my follow up I'm, just hoping you could expand a little bit on clustering and where really the opportunity lies is it supposed to be more efficient way.
Mark T. Horgan: And then for my follow-up, I just hope you could expand a little bit on clustering and where really the opportunity lies. Is it just to be more efficient with internal costs of running those assets that are close by and maybe using man hours or FTEs for both centers versus having to double up if they were further apart, or is it related to being able to more efficiently put retailers where they're best placed? So, just curious if you could expand on the importance of clustering for you. Why don't I have Mark take that?
Mark: Our internal costs of running those assets that are close by and maybe.
Mark: In man hours or our Ftes for both centers versus having to double up if there were further apart.
Mark: Or is it related to being able to more efficiently put retailers where their best place.
Mark T. Horgan: Just curious if you could expand on the importance of question for you why don't I have mark take that yeah.
Mark T. Horgan: Yeah, it's a number of the items you hit on. We've got a very strong platform here, and we find that when we put assets in front of the platform, we perform better. We perform better, because of some of the issues you're talking about, we can be much more efficient with operations. When you're a large landlord in a market, you can be very efficient with the contracts you get for cleaning and things like that.
Mark T. Horgan: Yes, it's a number of the items that you had on we've got a very strong platform here and we find them we put assets in front of the platform. We perform better we perform better because of some of the issues you're talking about we can be much more efficient operations when you're a large landlord in a market you can be very efficient with the contracts you get for cleaning and things like that ultimately.
Mark T. Horgan: When you are the larger landlords in a market you can know where retailers want to be you got the leasing folks who are laser focused on finding where retailers want to move too and that helps us both with the app with the assets. We run today. It also helps us find opportunities to buy something and nowhere, we can drive value. So we're not really guessing where the value can be driven on acquisitions, we have a real clear business plan as to where we are.
Mark T. Horgan: Ultimately, when you're the larger landlord in a market, you know, where retailers want to be, you've got the leasing folks who are laser focused on finding where retailers want to move to. And that helps us both with the assets we run today.
Brian T. Finnegan: It also helps us find opportunities to buy something and know where we can drive value. So we're not really guessing where the value can be driven on acquisitions; we have a really clear business plan as to where retailers want to be, what the center is missing, and what's needed to get the center up to speed. And ultimately, one of the things we see is we can be more efficient than many small landlords in these markets; we can see that flow through the NOI almost day one on these. Yeah, and one, Mark, I'll hit most of the points. I would just add to the point of understanding the market, right?
Mark T. Horgan: I wanted to be what the senators missing what's needed to do to get the center up to speed and ultimately one of the things we see as we can be more efficient than many small landlords in these markets. So again, we see that.
Speaker Change: Hello through the NOI almost day, one on these acquisitions and one Marc highlighted most of the points I would just add to the point of understanding the market or do you think about in Philadelphia, Plymouth meeting, where our office is down there we own two assets one of the best intersections of that Submarket, if youre, a small shop tenants coming to that market.
Brian T. Finnegan: You are coming to us right and that's the same thing in San Diego. That's the same thing in Houston and it's the same thing in the center that we just bought in long island. So it does allow us both from a merchandising standpoint to really see some of the best operators that are coming into those markets and certainly when you control both sides of the street or you're close by it allows us those efficiencies that mark was talking about.
Brian T. Finnegan: You think about Philadelphia, Plymouth Meeting, where our offices down there; we own two assets, one of the best intersections in that submarket. If you're a small shop tenant coming into that market, you're coming to us, right? And that's the same thing in San Diego.
Brian T. Finnegan: But also improves our ability to drive rate.
Speaker Change: Thank you.
Brian T. Finnegan: Thank you. The next question comes from Craig Mailman with Citi. Please proceed.
Brian T. Finnegan: That's the same thing in Houston. It's the same thing in the center that we just bought on Long Island. So it does allow us both from a merchandising standpoint to really see some of the best operators that are coming into those markets. And certainly, when you control both sides of a street or you're close by, it allows us those efficiencies that Mark was talking about but also improves our ability to drive rates. Thank you. Thank you. The next question comes from Craig Mailman with Citi. Please proceed. Hey, good morning.
Speaker Change: Hey, good morning.
Craig Allen Mailman: Brian just wanted to go back to your commentary on the on the kind of lower churn higher retention here.
Brian T. Finnegan: Alright.
Craig Allen Mailman: We understand it's always better to keep it lower capex, but as you guys are trying to remerchandise centers and kind of bring a b or ease up over time.
Craig Allen Mailman: How much of kind.
Craig Allen Mailman: Give us a toggle do you guys have versus having that retention high versus making sure you're not renewing tenants that maybe don't fit the five to 10 year strategic vision for that center.
Craig Allen Mailman: Yes, it's a great question and just say that we've never manage this portfolio for occupancy occupancy gains of the results of all the good things that we've been doing across the portfolio and we're going to continue to be opportunistic and very intentional in terms of proactively taking space back and you look at our anchor deals over the last year about a quarter of them were <unk>.
Craig Allen Mailman: Brian, just want to go back to your commentary on the kind of lower churn and higher retention here. Uh, you know, I fully understand it's always better to keep a tenant with lower capex. But as you guys are trying to re-merchandise centers and kind of bring ABRs up over time, how much of a, kind of, toggle do you guys have versus having that retention high versus making sure that you're not renewing tenants that maybe don't fit the five to 10 year strategic vision for that center? Yeah, it's a great question.
Craig Allen Mailman: Space, we took back proactively right. So when we see the opportunity to drive rents or to put it better tenant in and to do it accretively, we're going to do it the interesting thing and really why we're highlighting the retention and the move out just because we have significantly improved the tenant base of this portfolio. Those tenants are staying with us theyre investing in their businesses.
Brian T. Finnegan: And just say that we've never managed this portfolio for occupancy. Occupancy gains are the results of all the good things that we've been doing across the portfolio. And we're going to continue to be opportunistic and very intentional in terms of proactively taking space back. If you look at our anchor deals over the last year, about a quarter of them were spaces we took back proactively. Right?
Brian T. Finnegan: And their businesses and they are renewing at among the highest rates that we've ever had in the portfolio. So it's really been a good mix I do feel like an occupancy at these levels that allow us it allows us to be much more opportunistic in terms of ultimately when we do take space back, but particularly in this environment as I mentioned the discussions we're gonna be having we're having them.
Brian T. Finnegan: So when we see the opportunity to drive rents or to put a better tenant in and to do it accretively, we're going to do it. The interesting thing and really why we're highlighting the retention and the move out is because we have significantly improved the tenant base of this portfolio. Those tenants are staying with us, they're investing in their businesses, and they're renewing at among the highest rates that we've ever had in the portfolio. So it's really been a good mix.
Brian T. Finnegan: Now, but we're certainly going to be having them in a couple of weeks at ICSC are going to be about hey, what's coming back next year and what's coming back in 2026. So that tenants can get ahead of that so I really appreciate the question. It's still a very important part of what we do but we were encouraged though by the retention trends and the low move outs.
Brian T. Finnegan: I do feel that occupancy at these levels allows us to be much more opportunistic in terms of ultimately when we do take space back. But particularly in this environment, as I mentioned, the discussions we're going to be having, we're having them now, but we're certainly going to be having them in a couple of weeks at ICS are going to be about, hey, what's coming back next year? And what's coming back in 2026 so that tenants can get ahead of that? So I really appreciate the question. It's still a very important part of what we do.
Brian T. Finnegan: As well to start the year I just think it speaks to the overall health of the portfolio.
Brian T. Finnegan: And as you guys are renewing some of the tenants that are seeing the value and the work you guys have done I mean are you seeing a noticeable uptick in some of those renewals escalators or I know Alex hit on some of the terms and things, but are there negotiations easier to push through some of the things that maybe pre renovations were kind of a steeper.
Brian T. Finnegan: Ill.
Brian T. Finnegan: Yeah, I think that's coming through in our in our renewal growth and I think we're now nine consecutive quarters over over 10% renewal growth across the portfolio, it's coming and those escalators and with small shops during the quarter, we were pushing close to 3% and some parts of the country, where we're doing 3% to 4% I meant.
Brian T. Finnegan: But we were encouraged, though, by the retention trends and the low move-out rates, as well, to start the year. I just think it speaks to the overall health of the portfolio. And as you guys are renewing some of these tenants that are seeing the value and the work you guys have done, I mean, are you seeing a noticeable uptick in some of those renewal escalators? Or, you know, I know Alex has worked on some of the terms and things, but are the negotiations easier to push through some of these things that maybe pre-renovations were kind of a steeper hill?
Brian T. Finnegan: We are converting folks to fixed cam in some cases, particularly local tenants, where we know we can set that range. We feel good about it for the next several years and we're getting strong growth rates of 4% to 5% in that so yeah. That's certainly a component of what we do what we've been doing and it is a big reason to that are the primary driver of that is all.
Brian T. Finnegan: Yeah, it's coming through in our renewal growth. And I think we've had nine consecutive quarters of over 10% renewal growth across the portfolio. It's coming through those escalators, and with small shops during the quarter, we were pushing close to 3%. In some parts of the country, we're doing three to 4%.
Brian T. Finnegan: The work that we've done in our centers. It's also really expensive to move a business today and the environment in terms of the supply environment and availability is pretty tight too so that's helping us as well.
Brian T. Finnegan: I mentioned we are converting folks to fixed GAM in some cases, particularly local tenants, where we know we can set that rate, and we feel good about it for the next several years. And we're getting strong growth rates of four to 5% in that. So yeah, that's certainly a component of what we do and what we've been doing, and it is a big reason for that to be the primary driver of all the work that we do in our centers. It's also really expensive to move a business today.
Speaker Change: And if I could sneak one more in for Steve.
Brian T. Finnegan: The 61% of ABR to commence the remainder of the year is that 61% of the annualized.
Brian T. Finnegan: Or is that on a kind of what's going to actually impact 'twenty four.
Brian T. Finnegan: Yeah, I mean the.
Brian T. Finnegan: Commencing during the year I think it's also listed in the supplemental is about 41, but we do expect it to sort of come in ratably throughout the year, Yes, that's the annual number yeah Craig.
Speaker Change: Okay, Alright, perfect. Thank you.
Brian T. Finnegan: The next question comes from Hondo thing tooth with Mizuho Securities. Please proceed.
Brian T. Finnegan: And the environment, in terms of supply and availability, is pretty tight, too, so that's helping us. If I could sneak one more in for Steve,
Speaker Change: Hey, guys. Thanks for taking my question.
Speaker Change: Best wishes Jim.
Speaker Change: No we appreciate it.
Steven T. Gallagher: The 61% of ABR to commence the remainder of the year, is that 61% of the annualized number? Or is that a kind of what's going to actually impact 24? Yeah, I mean, the amount commencing during the year is about 41. But we do expect it to sort of come in ratably throughout the year. Yeah, Craig.
Steve: I was hoping we could talk a little bit about the.
Steven T. Gallagher: The redevelopment pipeline beyond this year I think you've talked about.
Steven T. Gallagher: Delivering about half of it this year yoga and that 9% plus range. So what are the prospects for back filling so would expect the sizing.
Steven T. Gallagher: The yield to be relatively the same as you're bringing projects on board, just curious where that pipeline could be heading so we've talked about it we mentioned on our last call that we expect about $150 million to $200 million of deliveries each year, that's effectively what we've been delivering and we're going to deliver on the high side of that this year with a number of those projects that I mentioned.
Steven T. Gallagher: Okay. All right. Perfect. Thank you. The next question comes from Haendel St. Juste with Missouho Securities. Please proceed.
Haendel Emmanuel St. Juste: Hey guys, thanks for taking the question and best wishes to Jim. I was hoping we could talk a little bit about the redevelopment pipeline beyond this year. I think you talked about delivering about half of it this year, and yields are in that 9% plus range. So what are the prospects for backfilling?
Haendel Emmanuel St. Juste: It's really encouraging that we have several years of visibility to that going forward handle with projects that are soon to be in the pipeline remember the projects that we're bringing in are lower risk because they are generally pre lease we have upped our leasing thresholds across the portfolio in this environment you know our underwriting.
Brian T. Finnegan: Should we expect the sizing and the yield to be relatively the same as you bring new projects on board? Just curious where that pipeline could be heading.
Brian T. Finnegan: It's gotten a bit tighter in terms of.
Brian T. Finnegan: So we've talked about it. We mentioned on our last call that we expect about $150 to $200 million of deliveries each year. That's effectively what we've been delivering. We're going to deliver on the high side of that this year with a number of those projects that I mentioned. It's really encouraging that we have several years of visibility into that going forward handout with projects that are soon to be in the pipeline.
Brian T. Finnegan: Really driving more to that kind of higher to the single digits and into the low double digits from a return standpoint, but we feel like we have several years of that $1 $50 million to $200 million of deliveries and the timing a lot of this is going to be driven by leases ultimately when we can get to those leases or when we complete our first phase and then we decide that we want to come back for phase two.
Brian T. Finnegan: We just opened a couple of weeks ago, a sprouts in Los Angeles, and a former big lots space that was a phase two of a project a few years. After we took a kmart back and put a burlington and they choose fitness and it allowed us to be able to not only bring sprouts in but strike an economic deal that we were more comfortable with at that time, I think that would've been.
Brian T. Finnegan: Remember, the projects that we're bringing in are lower risk because they're generally pre-leased. We have upped our leasing thresholds across the portfolio in this environment. Our underwriting has gotten a bit tighter in terms of really driving more to that kind of higher single digits and into the low double digits from a return standpoint.
Brian T. Finnegan: Pretty challenging had we not gotten that first phase done. So as you think about the projects going forward, we do feel pretty good about that run rate and it's going to be a mix of ultimately when we can get to those leases to be able to execute and then second phases of projects than handle one thing I would add using one of my favorite Jim Taylor terms as we can find more coal for the fire on the acquisition side.
Brian T. Finnegan: But we feel like we have several years of that $150 million to $200 million of deliveries. And the timing, a lot of this is going to be driven by leases, ultimately when we can get to those leases or when we complete a first phase and then we decide that we want to come back for phase two. You know, we just opened Sprouts in Los Angeles a couple of weeks ago in a former big lot space.
Brian T. Finnegan: Like we've done over the years with plasma via the CE Venice, or if you need the springs I came in with some really great redevelopment opportunities. So we think we can continue to find opportunities to develop that pipeline over time.
Speaker Change: Great. Appreciate the color there guys one more just on retention you've seen retention here remained pretty sticky in this kind of upper 80, low 90% range is that kind of the expectation of near term with the portfolio occupancy where it is the the demand you're seeing and then you know.
Brian T. Finnegan: That was phase two of a project a few years after we took a Kmart back and put a Burlington and a Choose Fitness in. It allowed us to be able to not only bring Sprouts in but strike an economic deal that we were more comfortable with at that time. I think that would have been pretty challenging had we not gotten that first phase done.
Brian T. Finnegan: How does that how.
Speaker Change: How much can that benefit your leasing related capex on a go forward. Thanks, yes, well to the last point, it's obviously.
Brian T. Finnegan: So as you think about the projects going forward, we do feel pretty good about that run rate. And Haendel, one thing I would add using one of my favorite Jim Taylor terms is, we can find more coal for the fire on the acquisition side, like we've done over the years with Plaza Valle de Ci, Venice, or Benita Springs. I came in with some really great redevelopment opportunities. So we think we can continue to find opportunities to build that pipeline over time. Great Appreciate the color there, guys.
Brian T. Finnegan: Lot cheaper to keep a tenant in place than it is to backfill a tenant right I would say generally though our team across the board has done a nice job holding costs in line negotiating work scopes that are favorable and then the tenant side they've been more willing really coming out of the pandemic and some of the supply chain issues to take more existing conditions, So I'd say that.
Brian T. Finnegan: We've been more efficient Fisher.
Brian T. Finnegan: Fishing is we can be on the new lease front, but back to Craig's question. We've been encouraged by the retention trends and in this environment and how we've improved the portfolio you would expect those to trend up but that's not going to drive our decisions ultimately of when we take space back we've got a very low rent basis in place our anchor deals are.
Haendel Emmanuel St. Juste: One more just on retention. We've seen retention here remain pretty sticky in this kind of upper 80, low 90% range. Is that kind of the expectation near term with the portfolio occupancy where it is the demand you're seeing? And then, you know, how does that, how much can that benefit your leasing related CapEx on a go forward? Yeah.
Haendel Emmanuel St. Juste: Less than nine box and we've been signing those leases at over 15. So you look at that upside when I say those anchor leases at nine under $9. That's expiring over the next three years. So we feel pretty good about our ability to take space back and bring leases to market and we're going to be intentional and prudent about it but with some of the stronger operators that we've put in.
Brian T. Finnegan: Well, to the last point, it's obviously a lot cheaper to keep a tenant in place than it is to replace a tenant, right? I would say, generally, though, our team across the board has done a nice job holding costs in line, negotiating work scopes that are favorable. And then on the tenant side, they've been more willing, really coming out of the pandemic and some of the supply chain issues, to take more existing conditions. So I'd say we've been more efficient, as efficient as we can be on the new lease front.
Brian T. Finnegan: Our centers they do want to stay they do want to continue to invest in their businesses with us and you're seeing that come through in the retention rate. So I guess I'd summarize by saying, it's a mix and we're not going to let that metric, though drive our decisions, we're going to do what's right for the shopping center and continue to be opportunistic where we can make money.
Brian T. Finnegan: But back to Craig's question, we've been encouraged by the retention trends. And in this environment, and with how we've improved the portfolio, you'd expect those to trend upward. But that's not going to drive our decisions, ultimately, about when we take space back.
Speaker Change: And then just to follow up on that I guess, giving your willingness to take back the space.
Brian T. Finnegan: Does that suggest that the snow rents that spread which has remained pretty pretty elevated in the high 300 to 400 for some time.
Speaker Change: Yes that.
Brian T. Finnegan: So spread will remain in that range or.
Brian T. Finnegan: Or can we see that actually come in over the next year. Thanks.
Brian T. Finnegan: We've got a very low rent basis in place. Our anchor deals are less than nine bucks, and we've been signing those leases for over 15. So you look at that upside, when I say those anchor leases are under $9, that's expiring over the next three years. So we feel pretty good about our ability to take space back and bring leases to market. And we're going to be intentional and prudent about it.
Brian T. Finnegan: I think you would expect it to tighten over time I mean, there was a lot of space that we took back last year, but I think what that spread does give us good visibility to future growth rate and it reached a record this quarter at $68 million as Steve mentioned about two thirds of that is going to come in this year, but that's a good thing right when you're when you're raising lease occupancy and that spreads will continues to grow.
Brian T. Finnegan: But with some of the stronger operators that we've put into our centers, they do want to stay, they do want to continue to invest in their businesses with us, and you're seeing that come through in the retention. So I guess I'd summarize by saying it's a mix, and we're not going to let that metric, though, drive our decisions.
Brian T. Finnegan: It just gives good visibility on future growth, but I think over time, you would expect that to tighten a bit.
Speaker Change: Great. Thank you.
Brian T. Finnegan: Yeah.
Brian T. Finnegan: The next question comes from Dori Kesten with Wells Fargo. Please proceed.
Speaker Change: Thanks. Good morning can you comment on your current level of interest and acquaint portfolio are there any out there today.
Brian T. Finnegan: We're going to do what's right for the shopping center and continue to be opportunistic where we can make money. And just to follow up on that, I guess, given your willingness to take back some of this space, does that suggest that the snow rent, you know, that spread, which has remained pretty elevated in the high 300s, the 400s for some time, does that suggest that, [inaudible] Great, thank you. The next question comes from Dori Kesten with Wells Fargo. Please proceed. Thanks. Good morning. Can you comment on your current level of interest in acquiring the portfolio? And are there any out there today that you've heard of?
Brian T. Finnegan: You've heard us.
Dori Lynn Kesten: Yes, I would just start by saying, it's not something that.
Dori Lynn Kesten: We've said we have to it's something that we've looked at it it's it doesn't fit for us in terms of what we're doing and all the things that Mark had talked about and I'll give it to market and second what he and his team have done a great job in terms of one asset at a time continuing to grow in the markets that we like to grow in but it's it's in.
Dori Lynn Kesten: Option for us, it's not something that we would say absolutely. Yes are absolutely no too I'd have to work for us. So mark do you want to expand on that a little bit absolutely. There. There are certainly larger pools of assets that are seeking tend to transact in today's environment. I think most folks are approaching the outside on a one off basis, which makes sense. We are certainly seeing.
Dori Lynn Kesten: Yeah, I would just start by saying it's not something that, You know, we've said we have, it's something that we've looked at, it's, it's Mark Horgan, Unknown Attendee, Ki Kim, Linda Tsai, Caitlin Burrows, Steven Gallagher, Paulina Rojas, Steven Gallagher, Brian Finnegan, Brian Horgan, Jeffrey Spector, Dori Kesten, Juan Sanabria, Paulina Rojas, Steven Gallagher, Brian Horgan, Jeffrey Spector, Brian Horgan, Brian Horgan, Jeffrey Spector, Brian Horgan, Jeffrey Spector, Brian Horgan, Jeffrey Spector, [inaudible] [inaudible] Great, thank you. Once again, ladies and gentlemen, as a reminder, please keep all questions limited to one or two questions. With that, our next question comes from Jeff Spector with Bank of America. Please proceed. Great, good morning.
Jeffrey Alan Spector: Being a cap rate differential as as assets get get larger in size cap rates are a little wider.
Jeffrey Alan Spector: With that said.
Jeffrey Alan Spector: I agree with Brian we're gonna be disciplined as we as we look at putting capital out and so if there's a deal that makes sense and it works for US we would pursue it.
Jeffrey Alan Spector: To the extent it doesn't we wouldn't.
Dori Lynn Kesten: Okay.
Jeffrey Alan Spector: Okay. Thank you.
Dori Lynn Kesten: Once again, ladies and gentlemen, as a reminder, please keep your questions limited to one or two questions with that our next question comes from Jeff Spector with Bank of America. Please proceed.
Jeffrey Alan Spector: I'd also like to express my best wishes for Jim and a speedy recovery. Congratulations on the quarter. My first question, maybe, you know, we discussed a lot today, you touched on ICSD. With ICSD coming up, I guess, any particular goals for the team? As you said, it sounds like you're working mainly on maybe 25 into 26. Jeff, well, first, I appreciate the kind words and the thoughts for Jim.
Jeffrey Alan Spector: Great. Good morning, I'd also like to express my best wishes for Jim and the speed of recovery. Congrats on the quarter. My first question, maybe we've discussed a lot today.
Jeffrey Alan Spector: On ICSC with ICSC coming up I guess any particular goals for the team.
Jeffrey Alan Spector: As you said it sounds like you're working mainly on maybe 25% to 26th.
Speaker Change: Yeah, Jeff first I appreciate the kind words and the thoughts for Jim We always go into that conference with a certain number of new tenants that we want to bring out of it we want to bring we highlight for the team and really track Yeah, Who's brought a new deal out of it that didn't happen at the conference and then what are some things that we've moved forward in.
Brian T. Finnegan: We always go into that conference with a certain number of new tenants that we want to bring out of it. We highlight them for the team and really track who's brought a new deal out of it that didn't happen at the conference. And then what are some things that we've moved forward in terms of some of those larger projects in our pipeline, which, as I mentioned, are generally pre-leased, but we may have a space or two left. I mean, those three things are kind of the biggest things.
Brian T. Finnegan: Some of those larger projects in our pipeline, which as I mentioned are generally pre leased but we may have a space or two left I mean, those three things are kind of the biggest things that come out we always highlight for the team to the new concepts that we're in the booth for the first time and we expect to see a lot of those and we don't really necessarily.
Brian T. Finnegan: That come out, we always highlight for the team, the new concepts that we're in for the first time, and we expect to see a lot of those. And we don't really necessarily sign leases at ICSE anymore, in terms of actually signing them in the booth. Although, at New York ICSE, we did have one of our national tenants come in and signed a number of consents and gave us hard copies there.
Brian T. Finnegan: <unk> signed leases at ICSC anymore in terms of actually signing them into those although at New York ICSC. We did have one of our national tenants came in and signed a number of consensus and gave us hard copies. There. So thats always a win as well, but I would say kind of those three things related to new tenants deals you didn't expect coming out of it and then ultimately.
Brian T. Finnegan: So that's always a win as well. But I'd say kind of those three things related to new tenants, deals you didn't expect coming out of it, and then ultimately moving some larger things forward on our reinvestment project. Okay, thank you. And then, in terms of store openings and markets, can you talk a little bit more about what you're seeing in terms of demand for particular regions or markets? Thank you.
Brian T. Finnegan: Moving some larger things forward on our reinvestment projects.
Speaker Change: Okay. Thank you and then in terms of store openings and the market can you talk a little bit more about what youre seeing in terms of demand for particular.
Brian T. Finnegan: What's been encouraging to us is it's been fairly broad-based across the portfolio. Like I mentioned, those three grocer deals that we did during the quarter, they were in three different regions. We've seen strong demand and strong occupancy growth really across the portfolio. Obviously, the Southeast remains very hot, and the tightness in supply is probably a bit tighter there, tighter in Southern California.
Speaker Change: Regions or markets. Thank you and it's been encouraging to US is it's been fairly broad based across the portfolio like I've mentioned those three grocer deals that we did during the quarter. They were in three of our three different regions.
Brian T. Finnegan: We've seen strong demand in small and strong occupancy growth really across the portfolio. Obviously, the southeast remains very hot and.
Brian T. Finnegan: The tightness in supply is probably a bit tighter there tighter in southern California, but I would say, though even in places like in the northeast and the Midwest. We continue to see very strong demand. So what's been encouraging to US is it's fairly broad based and it's really because as mark was touching on I mean, we've had an intentional strategy in terms of where we located our.
Brian T. Finnegan: But I would say, though, even places like the Northeast and the Midwest, we continue to see very strong demand. So what's been encouraging to us is its fairly broad base. And it's really because, as Mark was touching on, I mean, we've had an intentional strategy in terms of where we've located our centers and where we're operating today. So in those markets, the trends have been pretty consistent across the country. Thank you. The next question comes from Greg McGinniss with Scotiabank. Please proceed. Hey, good morning.
Greg Michael McGinniss: And where we're operating today so in those markets the trends are pretty consistent across the board.
Greg Michael McGinniss: Thank you. Our next question comes from Greg Mcginniss with Scotiabank. Please proceed.
Greg Michael McGinniss: Sorry if I missed this, but Jim previously communicated an expectation for the announcement of a new CFO by early April. Is there an update there, or should we expect that decision to remain on hold until he gets back? Yeah, well, first I'd say, Greg, that we're really fortunate to have Steve in the seat. He's really stepped up. He's built a great team down in Plymouth, and we're fortunate to have him.
Greg Michael McGinniss: Good morning, sorry.
Greg Michael McGinniss: Sorry, if I missed this but Jim previously communicated an expectation.
Speaker Change: From the outspend of new CFO by early April is there an update there should we expect that decision to remain on hold until he got it well first I'd say that we're really fortunate to have Steve in the seat and he has really stepped up he has built a great team down in Plymouth and fortunate to have him I would expect that he would continue in that role until we have further.
Brian T. Finnegan: I would expect that he'd continue in that role until we have a further announcement. We're not putting a timetable on it, but I'd say we're lucky to have him. Okay, thanks. And then in that 75 to 100 basis points of expected bad debt expense and guidance, is there anything built in that specifically or maybe generally addresses the risk from big lots? And are any of those leases expiring in the near term? Would you potentially release any of those?
Brian T. Finnegan: [noise] announcement, we're not putting a timetable on it but I'd say, we're lucky to have him in the seat.
Speaker Change: Okay. Thanks.
Brian T. Finnegan: And then in that 75 to 100 basis points of expected bad debt expense guidance is there anything built in that specifically, maybe generally addresses the risks big lots.
Brian T. Finnegan: And are those any of those leases expiring in the near term would you potentially re lease any of those and should we expect them all to be taken back and backfill. This yes, you can yes, I'd say just generally for the watch list and it does tie in to bad debt a little bit I mean, it's certainly names and categories that everyone. On this call would expect that we'd have.
Greg Michael McGinniss: Or should we expect them all to be taken back and backfilled as we can? Yeah, I'd say just generally for the watch list, and it does tie into bad debt a little bit. I mean, these are certainly names and categories that everyone on this call would expect that we'd have as it relates to big lots. But since you raised them, we focused just on the real estate. And I think we talked about this on the last call. First of all, we have no more expirations this year. Our rents in those spaces are below $7 a foot, and we've been signing them for $15.
Greg Michael McGinniss: As it relates to big lots I mean since you raised them. If we focus just on the real estate and I think we talked about this on the last call first of all we have no more explorations. This year our rents in those spaces are below $7 a foot we've been signing them at $15, we leased a big lot space during the quarter that is.
Brian T. Finnegan: We leased a big lot space during the quarter that expires next year to Aldi at a 50% uptick outside of Portland, Maine. So we continue to look at opportunities for every tenant where we might potentially want to take some space back, but not getting into particular tenant names, but we feel like we're adequately provisioned for our watch list as we head through the balance sheet. Yeah, and I think, you know, as I mentioned earlier, in terms of just our capacity to absorb tenant disruption, not focused on any names, we have 40 basis points of drag on our base rent.
Brian T. Finnegan: Spires next year to all of the at a 50% uptick outside of Portland, Maine.
Brian T. Finnegan: So we continue to look at opportunities really for every.
Brian T. Finnegan: Tenant, where we might potentially want to take some space back but.
Brian T. Finnegan: But not getting into particular netted that particular tenant names, but we feel like we're adequately provisioned for our watch list as we head through the balance of the year.
Brian T. Finnegan: Yeah, and I think as I mentioned earlier in terms of just our capacity to absorb tenant disruption not focused on any names, we have 40 basis points of drag in our base rent.
Brian T. Finnegan: And that's really because that's where the ultimate cost would go through if we ended up getting those spaces back into bankruptcy. And then, on top of that, we have the 75 to 110 percent of total revenues in the revenues deemed uncollectible line. So, you know, we still think we're well positioned there to absorb a variety of outcomes as we move through the year. The next question comes from Floris Van Jeets with Compass Point. Please proceed. Hey, good morning, guys.
Speaker Change: And Thats really because thats, where ultimately that would go through if we ended up getting those spaces back into bankruptcy and then on top of that we have that 75 to one third of total revenues and the revenue is deemed uncollectible lines. So we still think we're well positioned there to absorb a variety of outcomes as we move through the year.
Brian T. Finnegan: Hmm.
Speaker Change: Okay. Thank you.
Speaker Change: You bet. The next question comes from Floris Van <unk> with Compass point. Please proceed.
Floris Gerbrand Hendrik Van Dijkum: Somewhat unprecedented times, obviously, with no permanent CEO and permanent CFO and obviously, best wishes to Jim, hope he recovers speedily. I know you can't really comment much, but I know it's on everybody's mind, but maybe you could give some insight into how the board thinks about this and what kind of steps the board is taking to plan for eventualities and backup plans, if you will. Floris, like we talked about at the beginning, and first of all, I appreciate the well wishes for Jim.
Speaker Change: Hey, good morning, guys.
Floris Gerbrand Hendrik Van Dijkum: Somewhat unprecedented times, obviously with.
Floris Gerbrand Hendrik Van Dijkum: No permanent CEO and permanent CFO, and obviously best wishes to Jim Hope he recover speedily.
Floris Gerbrand Hendrik Van Dijkum: I know you can't really comment much but I know, it's on everybody's mind, but maybe could you.
Floris Gerbrand Hendrik Van Dijkum: Give some insight into how the board thinks about this and what kind of steps. The board is taking to plan for eventualities and.
Floris Gerbrand Hendrik Van Dijkum: Backup plans if you will.
Floris Gerbrand Hendrik Van Dijkum: Like we talked about at the beginning and first of all I appreciate the well wishes for Jim We look forward to having him back here soon but we're not saying much more outside of what's in the release and we continue to operate business as usual here and we don't until we have a further update that's what we're going to.
Brian T. Finnegan: We look forward to having him back here soon, but we're not saying much more outside of what's in the release. You know, we continue to operate business as usual here, and we don't, until we have a further update, that's what we're going to. [inaudible] Okay.
Brian T. Finnegan: To communicate as it relates to Jim.
Floris Gerbrand Hendrik Van Dijkum: By the way, operations seem to be going well. You talked a little bit about Medtail, and they're sort of the secular demand driver for open air from Medtail. Maybe you could touch upon what percentage of leasing you're seeing from that segment, and how you think about when you're looking at Medtail, it's not necessarily traditional sales information that you get, particularly for some of these outpatient clinics, etc. How do you judge the profitability, and how do you set rents for this tenant category?
Brian T. Finnegan: Okay.
Floris Gerbrand Hendrik Van Dijkum: By the way operations seem to be going well.
Floris Gerbrand Hendrik Van Dijkum: <unk> talked a little bit about med tail, and they're sort of the secular demand.
Floris Gerbrand Hendrik Van Dijkum: Driver for open air from Med <unk>, maybe if you could touch upon what percentage of leasing.
Floris Gerbrand Hendrik Van Dijkum: We're seeing from that segment and how do you think about.
Floris Gerbrand Hendrik Van Dijkum: When youre looking at met its not necessarily traditional sales information that you get particularly for some of these oh.
Floris Gerbrand Hendrik Van Dijkum: Outpatient clinics et cetera, how do you judge the the profitability and how do you set rents for this this tenant category.
Brian T. Finnegan: So thinking about just, as I mentioned, from a tenant underwriting perspective on these operators, because we are putting some capital in, some of them are public companies, and their financial information is readily available, I would say, generally, those rents have been top of the market where we ultimately don't get health ratios. We do sometimes have a sense, from a traffic perspective, we can look at the traffic they're generating depending on the size of the operator, but I would say, broadly, those are some of the highest rent payers in the space because they're looking for high-profile space, generally NCAPs, generally looking to be on pads, and they are competing with tenants who we have a very good idea of what their occupancy costs are.
Brian T. Finnegan: So thinking about just as I mentioned, we from a tenant when from a tenant.
Brian T. Finnegan: Underwriting perspective on these operators because we are putting some capital and some of them are public companies that their financial information is readily available I would say generally those rents have been top of market, where we ultimately don't get health ratios, yes, we do have a sense sometimes from a traffic.
Brian T. Finnegan: Perspective, we can look at traffic, they're generating depending on the size of the operator, but I would say broadly those are some of the highest rent payers in the space because they are looking for high profile space generally and caps generally looking to be on pads and they are competing with tenants, who we have a very good.
Brian T. Finnegan: Idea of what their occupancy costs are so I'd say broadly when we're underwriting these spaces, we have a good sense when we're underwriting some of these tenants and we get their financials, we have a good sense of that.
Brian T. Finnegan: So I'd say broadly when we're underwriting these spaces, we have a good sense of their profitability, we have a good sense of their underlying financial wherewithal, but I would say broadly that they're among the highest rent payers that we see in our. And in terms of potential percentage of leasing demand, where it is today, and where you see it going? Yeah, so we did five new ones this quarter in terms of specific medical uses, and it's going to be a range, right?
Brian T. Finnegan: Their profitability, we have a good sense of our underlying financial wherewithal, but I would say broadly, though they are among the highest rent payers that we see in our centers.
Brian T. Finnegan: And in terms of potential percentage of leasing demand where it is today.
Brian T. Finnegan: Yes, so we did five new ones this quarter.
Brian T. Finnegan: In terms of specific medical uses and it's going to be a range right I mean that would be call. It.
Brian T. Finnegan: I mean, that would be call it, you know, 4% of what we ultimately did from an account perspective during the quarter. Again, I would just point out that it is a part of the merchandising puzzle that we're putting together in these centers, where we could potentially add an urgent care, where we could potentially add dentists, where we could potentially add medical service use. So I would just say it's something that we continue to look at. The next question comes from Tayo Adfanya of Deutsche Bank. Please proceed. Yes, good morning.
Omotayo Tejamude Okusanya: 4% of what we ultimately did from a count perspective during the quarter.
Brian T. Finnegan: Again, I would just point to it as a part of the merchandising puzzle that we're putting together in these centers, where we could potentially add an urgent care work, if we potentially add.
Omotayo Tejamude Okusanya: Dennis work, we can actually potentially add medical service shoes. So I'd just say, it's something that we continue to look at.
Brian T. Finnegan: Thanks.
Brian T. Finnegan: The next question comes from Tayo Okusanya with Deutsche Bank. Please proceed.
Omotayo Tejamude Okusanya: I just wanted to get your thoughts on the latest developments with the Kroger-Albertson merger and this idea of their willingness to kind of spin off more stores, whether you generally think that's good or bad for the shopping century. Yeah, I think just broadly, I mean, we don't have much more to report outside of what's been publicly disclosed. I'd say it's with the FTC right now and with the courts in terms of whether it ultimately moves forward.
Omotayo Tejamude Okusanya: Hi, yes, good morning.
Omotayo Tejamude Okusanya: <unk>.
Omotayo Tejamude Okusanya: Let me get your thoughts on the latest developments with the quote.
Omotayo Tejamude Okusanya:
Omotayo Tejamude Okusanya: Yeah.
Omotayo Tejamude Okusanya: Idea of.
Omotayo Tejamude Okusanya: Spin off mall stores, what are you generally think that good or bad.
Omotayo Tejamude Okusanya: The shopping center REIT.
Omotayo Tejamude Okusanya: Yes, I think just broadly I mean, we don't have much more to report outside of Whats then.
Omotayo Tejamude Okusanya: <unk> publicly disclosed.
Omotayo Tejamude Okusanya: With the FTC right now and with the courts in terms of if it ultimately moves forward and what we've said in the past and what we really believe is that our portfolio sets up very well no matter. What the outcome is we do think a merger would be beneficial particularly for <unk>.
Omotayo Tejamude Okusanya: And what we've said in the past, and what we really believe is that our portfolio sets up very well, no matter what the outcome is; we do think a merger would be beneficial, particularly for Albertsons in terms of scale and in terms of some of the digital infrastructure that Kroger has that is a bit ahead of where Albertsons is. But ultimately, when you look at the few markets where we do have overlap, it's places like Denver, Dallas, and Southern California.
Omotayo Tejamude Okusanya: Albertsons in terms of scale and in terms of some of the digital infrastructure that Kroger has it is a bit ahead of where albertsons is but ultimately you look at the few markets, where we do have overlap it's places like Denver, Dallas, Southern California. I mean, these are some of the strongest markets that we have across the portfolio we have very many.
Omotayo Tejamude Okusanya: I mean, these are some of the strongest markets that we have across the portfolio. We have very minimal overlap with our Kroger fleet in the Midwest; we have very little overlap with our Kroger fleet in the Southeast, which is really the bulk of our overall exposure.
Omotayo Tejamude Okusanya: Overlap with our Kroger fleet in the Midwest, we have very little overlap with our Kroger fleet and the South East, which is really the bulk of our overall exposure. So we feel pretty good no matter what the outcome is these stores are high producing.
Brian T. Finnegan: So we feel pretty good no matter what the outcome is; these stores are highly profitable from a sales volume perspective, they've kept their COVID bumps and continue to grow sales, and these stores have been invested in as well. So it remains to be seen, we're watching it closely, but we feel well positioned no matter what happens. Okay, thank you.
Brian T. Finnegan: From a sales volume perspective, they've kept their COVID-19 bumps and continue to grow sales in these stores had been invested in as well so.
Brian T. Finnegan: Remains to be seen we're watching it closely but we feel well positioned no matter what happens.
Omotayo Tejamude Okusanya: And then if I could just sneak in one more sticking with this kind of M&A theme, but as it pertains to the shopping center read, again, and if you point out and if you kind of see more public to public deals, as you've seen in the past few years, again, the stocks themselves are not, you know, really moving that much on a year to date basis. Valuations, this is very cheap relative to historical levels. And you have pretty much the entire sector talking about fundamentals being the best way that it is. I'll have Mark take that one.
Speaker Change: Okay. Thank you and then if I could just sneak in one more sticking with this kind of M&A thing, but as it pertains to the shopping center REIT again, and if your point then it would kind of seem more public to public deals that you've seen in the past few years again, the stops themselves or not.
Mark: So really moving that much on a year to date basis valuations.
Omotayo Tejamude Okusanya: Cheap relative to historical levels.
Mark: Pretty much the entire talking about fundamentals.
Omotayo Tejamude Okusanya: Yeah.
Omotayo Tejamude Okusanya: Yeah, look, we've certainly seen some strong consolidation trends in the open air space. We think that's been a trend. It's been a trend, frankly, people have been talking about in open air retail for many years. And really, this is kind of the first large wave we've seen in some time.
Omotayo Tejamude Okusanya: I'll, let mark take that one.
Mark: Yeah look we've certainly seen some songs holiday shows trends in the open air space. We think that's been a trend that's been trying to frankly people and people have been talking about an open air retail for many years and really this is kind of the first large wave we've seen in some time.
Mark T. Horgan: You know, from our perspective, we're going to continue to drive forward our business plan, which we think is delivering top of sector results. And that's what we're focused on currently. The next question comes from Caitlin Burrows with Goldman Sachs. Please proceed. Hi, good morning, everyone.
Caitlin Burrows: From our perspective, we're going to continue to drive forward our business plan, which we think is delivering top of sector results and that's what we're focused on currently.
Caitlin Burrows: Thank you.
Mark T. Horgan: The next question comes from Caitlin Burrows with Goldman Sachs. Please proceed.
Caitlin Burrows: I know we've talked about it in a few different ways, the leasing strength, but I was wondering if you could give some additional details on kind of who's most active these days with leasing on the small shop side and the big box side. And maybe over the past year, could you share some detail on who's gotten more active versus pulled back at all? Yeah, I think it's a great question, Caitlin.
Caitlin Burrows: Hi, Good morning, everyone I know, we've talked about it in a few different ways the leasing strength, but wondering if you could give us some additional details on kind of who is most active these days with leasing on the small shop side and the big box side and maybe over the past year could you share some detail on who has gotten more active versus pulled back at all.
Brian T. Finnegan: First of all, from an anchor perspective, we continue to see great trends in specialty grocery, whether that's from Sprouts, whether that's from Aldi, whether that's from Whole Foods, who are really picking up their store opening plans as well. So that's been encouraging across the board. We've also seen, [inaudible]
Speaker Change: I think it's a great question Caitlin a first of all from an anchor perspective, we continue to see great trends in specialty grocery whether thats from from sprouts, whether that's from from all the whether that's from from whole foods is really picking up their store opening plans as well. So that's been encouraging across the board. We've also seen some.
Brian T. Finnegan: And then in that kind of 10,000 square foot box range, it's incredibly competitive, the likes of the five below ultra Sephora, Skechers, JD Sports coming out of the mall. So from a junior box perspective, those all remain incredibly active. And then on the small shop space, QSR restaurants and very well capitalized QSR restaurants are driving a lot of that expansion. And we're going to talk about that in a minute
Brian T. Finnegan: Great local grocers, we signed one outside of Minneapolis. This year. Some good ethnic grocers in markets El Rancho Party Heritage Grocer growth Heritage Grocer group, we signed them in Houston. This quarter, we continue to see really good strength in value apparel from both from Burlington, Ross and T. J.
Brian T. Finnegan: <unk> Ross is pushing into the northeast they've done very well in some of their initial rollout in the Midwest, but this is kind of a new white space for them as well and then in that kind of 10000 square foot box ranges is incredibly competitive the likes of the buy below Ulta Sephora Skechers JD sports coming out of the mall so from a junior.
Caitlin Burrows: And what's interesting there is, just as I talked about earlier, some of the depth and quality of those operators that maybe historically were closer to central business districts, which with some of the trends they've been seeing in suburban retail are positioning more of their store opening plans for the suburbs. So that's been really encouraging.
Caitlin Burrows: Box perspective, those all remain incredibly active and then on the small shop space <unk> restaurants, and very well capitalized USR restaurants are driving a lot of that expansion and what's interesting. There is just as I talked about earlier some of the depth and quality of those operators that maybe historically you were closer to central business districts, which.
Caitlin Burrows: With some of the trends <unk> been seeing in suburban retail are positioning more of their store opening plans for the suburbs. So that's been really encouraging.
Brian T. Finnegan: And then just a quick follow-up on the Long Island acquisition in the quarter. You guys mentioned a low 7% cap rate and that there were some good mark-to-market opportunities among other benefits. That 7% cap rate, is that on the in-place NOI, or are some near-term benefits expected? Yeah, that 7% cap rate, what I'm quoting you is, quote, unquote, the in-place NOI. I know that includes a 3% management fee that's non-cash from our perspective, but that's the cap rate I'm quoting. Okay, thanks. The next question comes from Anthony Powell with Barclays. Please proceed. Hi, good morning. Just one for me.
Speaker Change: Got it makes sense and then just a quick follow up on the long Island acquisition in the quarter, you guys mentioned, a low 7% cap rate and that there were some good mark to market opportunities among other benefits that 7% cap rate is that on the in place NOI or some near term.
Anthony Franklin Powell: They are expecting.
Anthony Franklin Powell: The 7% cap rate what I'm quoting you is quote unquote the in place NOI I'd note that includes a 3% management fee. That's that's noncash Mark perspective.
Anthony Franklin Powell: Catherine I'm quoting to you.
Anthony Franklin Powell: Got it okay. Thanks.
Brian T. Finnegan: The next question comes from Anthony Powell with Barclays. Please proceed.
Anthony Franklin Powell: Morning. So ancillary and other rental income and percentage rents contributed nicely to Santa Ana wide growth in a quarter, I think, point 6% total. What's the effect of those two line items going forward? Yeah, I think when you just think about same property NOI in total, right, that the trajectory of that will mainly be driven by base rent throughout the year. You know, as you know, base rent contributed 3.8% to the same property NOI growth in Q1.
Anthony Franklin Powell: Hi, Good morning, just one for me.
Anthony Franklin Powell: Ah so ancillary and other rental income and percentage rents contributed nicely to same store NOI grew up in a quarter I think 0.6% total.
Anthony Franklin Powell: We expect from those two line items going forward.
Anthony Franklin Powell: Yes, I think when you just think about the same property NOI in total right. The trajectory of that will mainly be driven by base rent throughout the year.
Anthony Franklin Powell: Base rent contributed three 8% same property NOI growth in Q1, and that was mainly due to higher occupancy and rent spreads and we expect that to accelerate throughout the year as I mentioned in my prepared remarks.
Anthony Franklin Powell: That was mainly due to the higher occupancy and rent spreads. And we expect that to accelerate throughout the year, as I mentioned in my prepared remarks of 425 to 475 contribution to the same property NOI. Those lineups, as you go down, are sort of seasonality, right?
Anthony Franklin Powell: 425 to 475 contribution to same property NOI.
Anthony Franklin Powell: Those as you go down or sort of seasonality right. So they change quarter to quarter as you move throughout the year and then there is some volatility in there.
Steven T. Gallagher: So they change quarter to quarter as you move throughout the year, and there's some volatility in there. So, you know, as I'm thinking about same property NOI, I would probably focus more on that base rent line. Because I think ultimately, that's going to be what drives that performance. Yeah, I think I would just highlight, though, a percentage rent. We continue to see some night trends. I mentioned grocers holding that kind of post-pandemic bump.
Steven T. Gallagher: So.
Steven T. Gallagher: As I'm thinking about same property NOI I'd focus probably more on that base rent line, because I think ultimately that's going to be what drives.
Steven T. Gallagher: That performance, Yeah, I think just I would just highlight though a percentage rent and we continue to see some nice trends I mentioned grocers holding that kind of post pandemic bump and our specialty leasing team does a great job of finding different ways to drive income from our portfolio as you can imagine as our teams filling up boxes, we have less opportunity for some of those short term deals.
Brian T. Finnegan: And our specialty leasing team does a great job of finding different ways to drive income from our portfolio. As you can imagine, as our team's filling boxes, we have less opportunity for some of those short-term deals. But they're doing a great job with things like solar and EV charging stations and really utilizing our parking lots. Okay, thanks a lot.
Brian T. Finnegan: But they're doing a great job of it like things like solar and EV charging stations and really utilizing our parking lots to.
Anthony Franklin Powell: The next question comes from Mike Mueller with J.P. Morgan. Please proceed. Yeah, hi.
Brian T. Finnegan: Okay. Thanks, a lot.
Michael William Mueller: Thank you.
Anthony Franklin Powell: The next question comes from Mike Mueller with Jpmorgan. Please proceed.
Michael William Mueller: It looks like, I mean, your option leases always tend to produce the lowest friend spreads. Are those generally tied to anchor leases? And do you ever have the ability to use fair market resets?
Michael William Mueller: Yes, hi, it looks like I mean, your option leases always tend to produce the lowest rent spreads are those generally tied to anchor leases and do you ever had the ability to use fair market resets just given the strong demand backdrop.
Brian T. Finnegan: Just given the strong demand backdrop? Yeah, it's a great question. Just first, as it relates to kind of the option productivity, the count was in line with where we've been the last few quarters. The reason that you're seeing the GLA uptick is that we had three spaces, two Home Depots and a Kroger all over 100,000 square feet that took their options during the quarter. I think the removal of options or reducing options is something our team has been laser focused on. We've almost been able to get rid of those with local tenants. I think they were just over 10% during the quarter.
Brian T. Finnegan: It's a great question just first as it relates to kind of the option productivity. The count was in line with where we've done the last few quarters. The reason youre seeing the GLA uptick we had three spaces to home depots and a kroger all over 100000 square feet that took their options during the quarter.
Brian T. Finnegan: I think we're moving options are reducing options is something our team has been.
Brian T. Finnegan: Laser focused on.
Brian T. Finnegan: <unk> been able to get rid of those with local tenants I think they were just over 10% during the quarter.
Brian T. Finnegan: What we've also been able to do with some anchor tenants is maybe where they were getting four options in the past, they're now getting two. And to your point about fair market value, five years ago, that was really more of a West Coast concept. And where we've had to give those with national tenants, we've been introducing that really across the country and setting those rates with growth. So we don't like options; they're totally in the tenant's favor.
Brian T. Finnegan: What we've also been able to do with some anchor tenants as maybe where they were getting for options in the past that are now getting to and to your point about fair market value five years ago that was really more of a west coast type concept and where we've had to give those with national tenants, we've been introducing that really across the country and setting those rates with <unk>.
Brian T. Finnegan: Growth. So we don't like options are totally in the tenant's favor we've been focused on removing them. If you sit in leasing committee on a Friday you'd hear hey, do you have to give that tenancy option or can you give that tenant a fair market value option. So it is something that we are continue to be laser focused on but the activity during the quarter is just in relation.
Brian T. Finnegan: We've been focused on removing them. If you sat on the leasing committee on a Friday, you'd hear, hey, do you have to give that tenant the option? Or can you give that tenant a fair market value option? So it is something that we continue to be laser focused on. But the activity during the quarter is just in relation to the... Got it. Okay. That was it.
Michael William Mueller: Thank you. Thanks, Mike. The next question comes from Paulina Rojas with Green Street. Please proceed with your question. Good morning.
Brian T. Finnegan: To the pool.
Paulina Alejandra Rojas: Got it okay that was it. Thank you thanks, Mike.
Michael William Mueller: The next question comes from Paulina Rojas with Green Street. Please proceed with your question.
Paulina Alejandra Rojas: Good morning.
Paulina Alejandra Rojas: You mentioned there are always 10 categories that you are watching closely. So what are those categories today? Yeah, I think if you look at some in the home category, there's been some a bit of challenges there after a big pop coming out of COVID. There are some level of entertainment uses. Entertainment's a very small piece of what we do. We only have about 1% of our rent come from movie theaters.
Michael William Mueller: Hi.
Paulina Alejandra Rojas: You mentioned there are always some categories that you were watching closely so what are those categories today.
Paulina Alejandra Rojas: Yeah, I think there if you look at some in the home category. There is there's been some a bit of challenges thereafter, a big pop coming out of Covid. There are some level of entertainment uses entertainment is a very small piece of what we do we only have about 1% of our rent comes.
Brian T. Finnegan: But I'd say that the entertainment category and there are some discounters that are on there, certainly as well. That watch list has certainly gone down, certainly.
Paulina Alejandra Rojas: From movie theaters, but I'd say that entertainment category and there are some discounters that are on there certainly as well that watch list has gone down certainly and again you look at the underlying credit base of the portfolio and you can see that coming through from a from a move out perspective from a retention perspective as well as just our collection rates.
Paulina Alejandra Rojas: And again, you look at the underlying credit base of the portfolio, and you can see that coming through from a move-out perspective, from a retention perspective, as well as just our collection rates and from small shop tenants continue to remain very strong. But those are some of the categories I'd say we're keeping our eye on. And then I have a very, like, big picture, general question.
Paulina Alejandra Rojas: From small shop tenants continue to remain very strong, but those are some of the categories I'd say, we're keeping our eye on.
Paulina Alejandra Rojas: And then I have a very like.
Brian T. Finnegan: Do you think it makes a big difference for tenants today to be in a re-owned property or in another privately owned center? And I asked him, of course, tenants, you know, if they preferred and owners with better balance sheets committed to investing in the center, etc. But I'm trying to get a sense of the quality of private operators in the industry and whether tenants perceived a big benefit in being in a redone center. They definitely do. And I think it's a matter of whether or not you have performed, right?
Speaker Change: Big Picture question do you think it makes a big difference for tenants date to own property or in another.
Brian T. Finnegan: Just one center.
Brian T. Finnegan: I assume of course tenants.
Brian T. Finnegan: Prefer and.
Brian T. Finnegan: Owners with better balance sheet committed to invest in the center et cetera, but I'm trying to have a sense of how.
Brian T. Finnegan: The quality of private operators in the industry and whether its tenants perceive it.
Brian T. Finnegan: A big benefit in being in every town center.
Brian T. Finnegan: Definitely do and I think it's a matter of have you performed right have you been able to execute on delivering their space have you been able to execute on bringing other tenants that are going to help them drive traffic. This is the one asset class, where it really matters, who your neighbors right and have you been able to put that tenant mix together to ensure that they are.
Brian T. Finnegan: Have you been able to execute on delivering their space? Have you been able to execute on bringing in other tenants that are going to help them drive traffic? This is the one asset class where it really matters who your neighbor is, right?
Brian T. Finnegan: And have you been able to put that tenant mix together to ensure that they're successful at the property? Have you continued to invest in the center as we have? So I think that's certainly looking at your track record historically, and then even from a negotiation standpoint, right? How quickly do you take you through the lease?
Brian T. Finnegan: As successful as the property have you continued to invest in the center as we have so I think that's certainly looking at how your track record historically and then even from a negotiation standpoint right. How quickly does it take you to get through the lease how quickly can they count on you to be able to get a consent from a tenant to be able to ultimately do there.
Brian T. Finnegan: How quickly can they count on you to be able to get consent from a tenant to be able to ultimately use it? And I think our team's done a great job historically of being able to perform on that. So certainly, I don't think it just matters if it's public versus private. I also think it matters who it is in the public space.
Brian T. Finnegan: And I think our team has done a great job historically of being able to perform on that so certainly I don't think it matters. If it's public versus private I also think it matters, who it is in the public space and I'd put our team up with anybody in terms of our ability to execute and our ability to deliver with our national retail partners.
Mark T. Horgan: And I'd put our team up with anybody in terms of our ability to execute and our ability to deliver with our national retail partners. Yeah, I would add that there are certainly some excellent privately held retail owners in the United States, no question about it. One of the things that we really benefit from is the scale that we've been able to reach to invest in our platform, to have those tenant relationships, to understand where tenants want to be, and to have great relationships on the operating side. That's a real benefit for us. As we think about our external growth program, certainly we have talked to all the privately held folks about assets they might sell.
Mark T. Horgan: I would add there there are certainly some some excellent privately held retail owners in the United States and there's no question about it.
Mark T. Horgan: One of the things that we really benefit from is the scale that we pay the REIT to invest in our platform to have those tenant relationships to understand where tenants want to be have great relationships on the operating side Thats a real benefit from us as we think about our external growth program certainly we talked to all the privately held folks about assets they might sell but we're also focused on a lot of the assets.
Mark T. Horgan: But we're also focused on a lot of the assets that are held in small partnerships for families. And that's the vast majority of the market for a lot of the assets we chase. We think about some of the great acquisitions we've made over the years. They came from smaller family operators that didn't have the wherewithal that some of the operators like we have to drive value to the centers.
Mark T. Horgan: That are held in small partnership for families and that's the vast majority of the markets a lot of assets. We chase, we think about some of the great acquisitions, we've made over the years they've come from from smaller family operator that didn't have the wherewithal that some of the operators like we have to drive value centers. So we're excited about continued options continued optionality as we think about external growth here.
Paulina Alejandra Rojas: So we're excited about continued optionalities as we think about external growth here. Makes sense. Thank you.
Linda Tsai: Thank you. The next question comes from Linda Tsai with Jeffrey's. Please proceed. Just one quick one. Given higher demand, are payback periods on building out for new tenants going down at all? They are Linda, and I'd say they are.
Speaker Change: Makes sense. Thank you thanks Paulina.
Linda Tsai: Thank you. The next question comes from Linda Tsai with Jefferies. Please proceed.
Linda Tsai: Just one quick one.
Linda Tsai: Higher demand our payback periods on building out for new tenants going down at all.
Brian T. Finnegan: And it goes back to just generally both tenants' willingness to take more existing conditions. And yes, competition for space is allowing us to drive better terms in those work scopes, but we're seeing them go down. Any quantification around how much it's going down?
Linda Tsai: They are Linda I'd say, they are and it goes back to just generally both tenants' willingness to take more existing conditions and yes competition for space, allowing us to drive.
Brian T. Finnegan: Better terms in those in those work scopes, but we're seeing them go down for sure.
Linda Tsai: I don't have the exact number, but I just say, from a trend perspective, it is something that we have been ahead of and looking at, and generally something that we look at anecdotally when it's coming in through committee in terms of what the payback is. And because of the fact that we have seen tenants take more, whether it's as-is deals or be more efficient in terms of in-place bathrooms, facades, and loading docks, we're seeing some positive trends. I mean, we can circle back with the exact number for you.
Brian T. Finnegan: Any quantification around how much its going down.
Linda Tsai: I don't have the exact number but I would just say from a trend perspective. It is something that we have been we have been ahead of and looking at and generally something that we look at it I think anecdotally when it's coming in through committee in terms of what the payback is.
Linda Tsai: And because of the fact that we have seen tenants.
Linda Tsai: Take more.
Linda Tsai: It's as is deals or be more efficient in terms of in place.
Linda Tsai: <unk> facades and loading docks that were seeing some positive trends I mean, we can circle back with the exact number for you.
Brian T. Finnegan: Thanks. The next question comes from Ki Bin Kim with Truist Securities. Please proceed. Thank you. First, best wishes to Jim. I think most people on this call really like the guy and hope he does well.
Brian T. Finnegan: Thanks.
Speaker Change: The next question comes from Keybanc, Kim with Troy Securities. Please proceed.
Speaker Change: Thank you.
Speaker Change: First best wishes, so Jim I think most people on this call really liked the guy.
Ki Bin Kim: So if I just looked at your results and looked at your leasing volume and spreads, you know, I would think the US consumer is on really good footing, right? And your occupancy levels are high. But I also kind of go back to thinking about the Sports Authority or Barnes, and there are many retailers that open stores right up to bankruptcy.
Speaker Change: He does well.
Brian T. Finnegan: Yeah.
Ki Bin Kim: So if I just looked at your results and your leasing volume and spreads you know I would think the U S consumers on really good footing right and your occupancy levels are high.
Ki Bin Kim: But I always kind of go back to thinking about the sports authority or barn centers. Many retailers that open floor is right up the debate bankruptcy. So I was just curious you know what you're hearing or seeing on the ground in terms of consumer strength or weakness in different categories. When we can see it come through in our traffic rate, which has continued to grow year.
Brian T. Finnegan: So I was just curious, you know, what you're hearing or seeing on the ground in terms of consumer strength or weakness in different categories. Yeah, we can see it come through in our traffic, which has continued to grow year over year. We had good traffic trends in both March and February, although it was a little bit light in January.
Brian T. Finnegan: Over year, we had good traffic trends in both March and February it was a little bit light in January just some seasonality that from weather standpoint, but other than that we've seen some growth year over year and tie back to the credit underwriting standards that we've been doing I mean, this isn't just for small shops right. When our team is looking.
Brian T. Finnegan: <unk> at an investment we are looking at whats been there last would've been their comp sales performance right. What's is this a market that they've expanded and how much capital are we putting into the space. So that certainly goes into our decisions and I think you've heard Jim talk about it on.
Brian T. Finnegan: Unknown Speaker 0, several calls in terms of how targeted this demand is. This isn't the kind of exuberant demand chasing rooftops or chasing greenfield development. This is infill demand where tenants have realized that they're performing in a given market where they feel like they can put another store in, and they're coming back to kind of more existing centers or centers that have been invested in. So we feel really good about the intentional demand, and you think about the data that our retailers have today versus some of the names that you mentioned. They know their customers a lot better than we do because they get the credit card data.
Brian T. Finnegan: Several calls in terms of how targeted this demand is this isn't kind of exuberant demand chasing rooftops or chasing Greenfield development. This is infill demand where tenants have realized that they are performing in a given market where they feel like they can put another store in and they're coming back to.
Brian T. Finnegan: It kind of more existing centers are centers that have been invested in so we feel really good about the intentional demand and you think about the data that our retailers have today versus some of the names historically that you mentioned they know their customers eat a lot better than already because we do because they get the credit card data. So I think when they're looking at their pro forma is they feel pretty good about ultimately.
Brian T. Finnegan: So I think when they're looking at their pro formas, they feel pretty good about ultimately hitting those sales projections. So I'd say overall that we're certainly encouraged, but we're doing a lot more work today around those decisions than we ever have. And on the urgent care topic, I was just curious. At least in New York, it does feel like these places charge more than just seeing your primary care physician or going to your regular doctor.
Brian T. Finnegan: Hitting those sales projections, so I'd say overall that we're certainly encouraged but we're doing a lot more work today around those decisions than we ever have.
Brian T. Finnegan: And on the urgent care topic health I was curious.
Brian T. Finnegan: At least in New York It does feel like these places charge more than just senior primary care physician or going to be a regular doctor.
Ki Bin Kim: I'm not sure if that's the case across the country, but I'm just curious if, in this inflationary environment, if that is a higher-cost offering, if that's having an impact on consumer decisions. I also think it's based on insurance, and a lot of insurances are going to push folks to urgent care versus kind of primary decisions. So I think that depends on a given environment, but ultimately, it's the convenience, right, associated with it, right? To go and not be sure if you can get an appointment; you can pop in and be there in an hour or so.
Ki Bin Kim: I'm not sure if that's the case across the country, but I'm just curious if in this inflationary environment.
Ki Bin Kim: If that is a higher class offering if that's having an impact on consumer decisions.
Ki Bin Kim: I also think it's based off of insurance and a lot of insurances are gonna push folks to urgent cares versus kind of a primary physician. So I think that depends on a in a given.
Ki Bin Kim: Environment, but.
Ki Bin Kim: Ultimately, it's the convenience right associated with it right to go and not sure. If you can get an appointment you can pop in and being there in an hour associated in some circumstances, where you may pay a little bit more youre getting the care that you need very quickly.
Brian T. Finnegan: So even in some circumstances where you may pay a little bit more, you're getting the care that you need very quickly. Okay, thank you. The next question comes from Greg McGinniss with Scotiabank. Please proceed.
Greg Michael McGinniss: Okay. Thank you.
Greg Michael McGinniss: The next question comes from Greg Mcginniss with Scotiabank. Please proceed.
Greg Michael McGinniss: Hey, thanks for the follow-up. I just had a couple quick ones on development. With the recent acquisition next to Three Villages, does that provide you ownership of that entire retail block, or are there still some unowned adjacent parcels? And does the acquisition unlock larger redevelopment opportunities, or what was the reasoning behind that? Yeah, so when you look at Three Villages and WestCenter, ultimately, there is kind of a third portion of that center where the other grocer is. And when we're talking about redevelopment there, I think, over the long term, given the incredibly supply-constrained market there, there could be non-retail uses. But that's not our plan.
Greg Michael McGinniss: Okay.
Speaker Change: Hey, thanks for the follow up.
Speaker Change: Just had a couple of quick ones on development.
Greg Michael McGinniss: The recent acquisition extra three villages does that provide the ownership of that entire retail block or are there still some unknowns adjacent parcels parcels.
Greg Michael McGinniss: And does the acquisition unlock larger redevelopment opportunities or what was the reasoning behind the acquisition.
Greg Michael McGinniss: So when you when you look at three villages in West Central ultimately there is kind of a third portion of that center, where the other grocer as and when we're talking about redevelopment there.
Greg Michael McGinniss: Probably over the long term given the incredibly supply constraint market. There there could be non retail uses but thats not our plan. Our plan is to take advantage of owning West center in three villages and really drive value across our retail platform. We have it in advance or for example, since we know on West Center, we may be able to build it.
Mark T. Horgan: Our plan is to take advantage of owning WestCenter and Three Villages and really drive value across the retail platform we have in advance there. For example, since we now own WestCenter, we may be able to build an NCAP drive there, which we would not have been able to do before. And conversely, the landlord who owned before couldn't do that either. So that's really just a small example; we think about that clustering and the ability to put those two together to drive more value across both centers than you could by owning just one or the other. Okay, thanks.
Mark T. Horgan: And cap drive through there, which we would not be able to do before and Conversely, the landlord who owned it before it can do that either so that's really just a small example, if we think about that clustering and ability to put those two together to drive more value across both center then you could owning just one or the other.
Greg Michael McGinniss: And then as a follow-up, we also noticed that Kessler Plaza and Northeast Plaza moved from major to minor redevelopments in the supplemental disclosure. Why'd you decide against multifamily at Kessler and what changed at Northeast? Yeah, I think we're always looking, Greg, at what the highest and best use is for the shopping center. I mean, we have Northeast Plaza, it's just outside of Buckhead in Atlanta.
Mark T. Horgan: Okay. Thanks.
Greg Michael McGinniss: And then as a follow up we also noticed that Kessler Plaza in northeast Boston the move from major to minor redevelopments in the supplemental disclosure.
Greg Michael McGinniss: Why did you decided against multifamily at Kessler and what changed at northeast.
Greg Michael McGinniss: We're always looking Greg it what the highest and best use is for the shopping center I mean, we have in northeast Plaza. It's just outside of Buckhead and Atlanta, We've had a ton of retail demand there and I think what the chance some of the challenges that we've been seeing in the multifamily market are causing us to re look at this as well but.
Brian T. Finnegan: We've had a ton of retail demand there, and I think some of the challenges that we've been seeing in the multifamily market are causing us to relook at this as well. But ultimately, if we see that we can drive great value, and it could be the highest and best use for retail, it makes sense. We also have some underlying leases there from a timing perspective. So we're balancing, okay, what can we do there long term? What's the demand from a retail standpoint? And how do we get to that space, right?
Brian T. Finnegan: If we see that we can drive great value and it could be highest and best use for retail. It makes sense. We also have some underlying leases there from a timing perspective. So we're balancing okay. What can we do there long term whats the demand from a retail standpoint, and how do we get to that space right. How can we ultimately execute with some of the leases that we have.
Brian T. Finnegan: How can we ultimately execute on some of the leases that we have in place? And then we found just a fantastic medical deal, speaking of Medtail, that we were able to get done at that location in Dallas at an incredible uptick in rent with a minimal capital investment that made sense versus the timing of when we ultimately think we could execute on multifamily. So just because we'll show that to you ultimately, so you have visibility into the pipeline going forward, but things change, right? And we're nimble.
Brian T. Finnegan: In place and then we found just a fantastic.
Brian T. Finnegan: Medical deal speaking of metals that we were able to get done in at that location in Dallas at an incredible uptick in rent with a minimal capital investment.
Brian T. Finnegan: That made sense versus the timing of when we ultimately think we could execute on multifamily. So just because I think we show that to you. Ultimately so you have visibility into the pipeline going forward, but things change right and we were nimble.
Mark T. Horgan: And I think the plans that we have in place now are allowing us to really drive and create value for those centers and in those markets. One other thing I would add, you know, if you look at our redevelopment plan, we've been getting great yields, which have been higher than, say, a multifamily project. And from a risk-reward perspective, we are a retail owner; we know what we're doing in those situations
Brian T. Finnegan: And I think the plans that we have in place now are allowing us to really drive and create value for those centers and in those markets.
Mark T. Horgan: One other thing I would add and you look at our redevelopment plan, we've been getting great yields which have been higher than say, a multifamily project and from a risk reward perspective, we are a retail on are we know what we're doing in those situations as we look at capital allocation, where we're trying to be very disciplined and to the extent there is really great multifamily demand we may sell.
Mark T. Horgan: As we look at capital allocation, we're trying to be very disciplined. And to the extent there is really great multifamily demand, we may sell it like we did a couple of years ago in College Park, Maryland, where we sold 1.6 acres for $32 million to a developer.
Mark T. Horgan: I'll, let like we did a couple of years ago in College Park, Maryland, where we sold 1616 acres for $32 million to a developer. So we're going to always look for the right way to find good low cost capital and drive the business forward from here.
Mark T. Horgan: So we're going to always look for the right way to find good, low-cost capital and drive the business forward from here. Okay, thank you both for the color, and Brian, nice job quarterbacking this call. Thanks, we appreciate it. We miss him but look forward to having him back here.
Mark T. Horgan: Okay. Thank you both for the color and Brian Nice job Quarterbacking. The skull [laughter]. Thanks, we appreciate it we miss him, but and look forward to having him back here soon.
Stacy Slater: Thank you. At this time, I would like to turn the floor back over to Stacy Slater for closing comments. Thank you everyone for your time today and also for all your support. Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.
Stacy Slater: Thank you at this time I would like to turn the floor back over to Stacy Slater for closing comments.
Stacy Slater: Thanks, everyone for your time today and for all your support.
Stacy Slater: Yeah.
Stacy Slater: Thank you. This does concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.