Q1 2024 Phillips Edison & Co Inc Earnings Call

Operator: Good day, and welcome to Phillips Edison and Company's first quarter 2024 earnings call. Please note this call is being recorded. I will now turn the call over to Kimberly Green, head of investor relations. Kimberly, you may begin.

Good day and welcome to Phillips Edison <unk> Company first quarter 2024 earnings call. Please note. This call is being recorded I will now turn the call over to Kimberley Greene head of Investor Relations.

Kim Green: Kimberly you may begin.

Kimberley Greene: Okay.

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 Once we conclude our prepared remarks, we will open the call to Q&A. After today's call, an archived version will be published on our website.

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 Once we conclude our prepared remarks people will open the call to Q&A. After today's call an archived version will be published on our website.

Kim Green: As a reminder, today's discussion may contain forward-looking statements about the company's view of future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties, as described in our FDC filings, specifically in our most recent Form 10-K and 10-Q. And our discussion today will reference certain non-GAP funding. Information regarding our use of these measures and reconciliations of these measures to our GAP results is available in our earnings press release and supplemental information packet, which have been posted on our website.

Kim Green: As a reminder, today's discussion may contain forward looking statements about the company's future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings specifically in our most recent Form 10-K.

Kim Green: And 10-Q.

Kim Green: In our discussion today will reference certain non-GAAP financial measures information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our earnings press release, and supplemental information package, which have been posted on our website.

Kim Green: Please note that we have also posted a presentation with additional information. Our caution on forward-looking statements also applies to these materials. Now, I'd like to turn the call over to Jeff Edison, our Chief Executive Officer.

Kim Green: Please note that we have also posted a presentation with additional information our caution on forward looking statements also apply to these materials.

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

Jeffrey S. Edison: Thank you, Kim, and thank you, everyone, for joining us today. The PICO team delivered another solid quarter of growth, with Same Center NOI increasing by 3.7 percent. NARED FFO increased 4.9 percent, and CORE FFO increased 4.5 percent. The continued strength of our operating performance is attributable to our differentiated and focused strategy of owning grocery-anchored neighborhood shopping centers anchored by the number one or two grocer by sales in the market, the PICO team's ability to drive results at the property level, and the many advantages of the suburban markets where we operate our centers. The continued strong performance of our portfolio has allowed us to affirm our 2024 core FFO guidance range. The midpoint represents year-over-year growth of 3%, despite significant interest expense headwinds of nearly $0.10 per share.

Jeffrey S. Edison: Thank you Kim and thank you everyone for joining us today.

Jeffrey S. Edison: The <unk> team delivered another solid quarter of growth with same center NOI, increasing by three 7% at NAREIT.

Jeffrey S. Edison: NAREIT <unk> increased four 9% and core at that though increased four 5%.

Jeffrey S. Edison: The continued strength of our operating performance is attributable to our differentiated and focused strategy of owning grocery anchored neighborhood shopping centers anchored by the number one or two grocer sales in the market. The Pico team's ability to drive results at the property level and the many advantages of the suburban markets.

Jeffrey S. Edison: Where we operate our centers.

Jeffrey S. Edison: The continued strong performance of our portfolio has allowed us to affirm our 2024 core <unk> guidance range.

Jeffrey S. Edison: Mid point represents year over year growth of 3%. Despite significant interest expense headwinds of nearly 10 cents per share. We believe we can continue to deliver positive earnings growth despite interest expense headwinds.

Jeffrey S. Edison: We believe we can continue to deliver positive earnings growth despite interest expense headwinds. Today, we see a continued strong operating environment and a transaction market that is increasingly more active. The consumer remains resilient, and our grocers continue to drive strong, recurring foot traffic to our centers.

Jeffrey S. Edison: Today, we see a continued strong operating environment and the transaction market is increasingly more active.

Jeffrey S. Edison: The consumer remains resilient and our grocers continue to drive strong recurring foot traffic to our centers.

Jeffrey S. Edison: Occupancy remains high at 97%, which gives us pricing power. Leasing demand continues to be elevated for our inline spaces, and we have limited exposure to big box retailers. Retention remains strong, and the PICO team continues to be proactive in getting spaces back and driving significantly higher rents. This is reflected in our continued strong new rent spread. In addition, PICO continues to benefit from a number of positive macroeconomic trends that create strong tailwinds and drive strong neighbor demand. We have a great balance sheet, and we are well positioned for our creative acquisitions and growth. During the first quarter, we acquired two shopping centers and one land parcel for a total of $56 million.

Jeffrey S. Edison: Occupancy remains high at 97% lease, which gives us pricing power.

Jeffrey S. Edison: <unk> demand continues to be elevated for our in line spaces, and we have limited exposure to big box retailers.

Retention remains strong and the <unk> team continues to be proactive in getting spaces back and driving significantly higher rents.

Jeffrey S. Edison: This is reflected in our continued strong new rent spreads.

Jeffrey S. Edison: In addition, Pico continues to benefit from a number of positive macroeconomic trends that create strong tailwind and drive strong neighbour demand we.

Jeffrey S. Edison: We have a great balance sheet, and we are well positioned for accretive acquisitions and growth.

Jeffrey S. Edison: During the first quarter, we acquired two shopping centers and one land parcel for a total of $56 million.

Jeffrey S. Edison: We remain confident in our ability to acquire high-quality centers and attractive returns as the transaction market opens up further. While it's early in the year, we continue to successfully find attractive acquisition opportunities. Activity in the second quarter remains strong. Given the current environment, we are reaffirming our guidance of $200 to $300 million of net acquisitions for the year. We have the capabilities and leverage capacity to acquire much more if attractive opportunities materialize.

Jeffrey S. Edison: We remain confident in our ability to acquire high quality centers at attractive returns as the transaction market opens up further.

Jeffrey S. Edison: While it's early in the year, we continue to successfully find attractive acquisition opportunities.

Jeffrey S. Edison: Activity in the second quarter remained strong.

Jeffrey S. Edison: Given the current environment, we are reaffirming our guidance of $200 million to $300 million of net acquisitions for the year.

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

Jeffrey S. Edison: We continue to target unlevered IRRs of 9% or greater for our acquisitions. As a reminder, the acquisitions that we completed in the second half of 2023 underwrote to over nine and a half percent on levered IRR.

Jeffrey S. Edison: We continue to target Unlevered, IRR of 9% or greater for our acquisitions.

Jeffrey S. Edison: As a reminder, the acquisitions that we completed in the second half of 2023 underwrote to over 95% Unlevered IRR.

Jeffrey S. Edison: We will maintain our disciplined approach and focus on creatively growing our portfolio. We're hopeful that buy-ins will continue to increase throughout the year. Looking beyond 2024 and assuming a more stable interest rate environment and acquisitions market, we continue to believe our portfolio can deliver mid to high single-digit core FFO per share growth on a long-term basis, driven by both internal and external growth.

Jeffrey S. Edison: We will maintain our disciplined approach and focus on accretively growing our portfolio.

Jeffrey S. Edison: We're hopeful that buyers will continue to increase throughout the year.

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

Jeffrey S. Edison: This will be driven by both internal and external growth.

Jeffrey S. Edison: We remain committed to successfully executing our growth strategy. Our high-quality portfolio, anchored by top grocers in favorable suburban markets, supported by one of the best balance sheets in the sector, provides a long-term, steady earnings growth profile. PICO generates more alpha with less beta given our focused and differentiated strategy. As previously announced by Kroger and Albertsons, the estimated closing date for the proposed merger was pushed back to later this year.

Jeffrey S. Edison: We remain committed to successfully executing our growth strategy, our high quality portfolio anchored by top grocers in favorable suburban markets supported by one of the best balance sheets in the sector provides a long term steady earnings growth profile.

Jeffrey S. Edison: Pico generates more alpha with less beta given our focused and differentiated strategy.

Jeffrey S. Edison: As previously announced by Kroger and Albertsons. The estimated closing date for the proposed merger was pushed back to later this year.

Jeffrey S. Edison: Also this week, Kroger added 166 stores to the disposition list for CNF. We remain cautiously optimistic about the impact of this merger on PICO. We continue to believe it is ultimately a positive for PICO, for our centers, and for the communities that our centers serve. However, the market still gives the merger a low probability of occurring.

Jeffrey S. Edison: Also this week Kroger added 166 stores to the disposition list to CNS.

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

Jeffrey S. Edison: The market's still gets the merger a low probability of occurring.

Jeffrey S. Edison: But should the merger close and 579 stores, now on the list, are sold to CNS, we believe the impact on PICA is a net positive. Our Albertson stores will be operated by Kroger, which reinvests regularly in its stores and produces higher sales volumes. If the merger does not occur, our Albertsons-anchored centers will continue the strong performance that they have produced to date. I will now turn the call over to Bob to provide more color on the operating environment. Bob?

Jeffrey S. Edison: But should the merger close and 579 stores now on the list are sold to CNS. We believe the impact on Pico is a net positive.

Jeffrey S. Edison: Our albertson stores will be operated by Kroger, which reinvest regularly in their stores and produces higher sales volumes.

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

Jeffrey S. Edison: I will now turn the call over to Bob to provide more color on the operating environment Bob.

Robert F. Myers: Thank you, Jeff, and good afternoon, everyone, and thank you for joining us. We had another quarter of strong operating results and leasing momentum. We continue to see high retailer demand with no current signs of slowing down. PECO's leasing team continues to convert retailer demand into high occupancy with higher rents at our centers. Portfolio occupancy remained high and ended the quarter at 97.2%. Anchor occupancy remained high at 98.4 percent, and during the quarter, we executed five anchor leases, including Alta Beauty at Hillfiger Shopping Center, Five Below at Bear Creek Plaza, Crunch Fitness at Kirkwood Marketplace, and two Medtail uses, Rise Center at Ocean Breeze Plaza and a Medical Center at Colonial Promenade. In the first quarter, we received six anchor boxes back. We currently have just 15 vacant anchor spaces in our portfolio.

Robert F. Myers: Thank you, Jeff and good afternoon, everyone and thank you for joining us.

Robert F. Myers: We had another quarter of strong operating results and leasing momentum.

Robert F. Myers: We continue to see high retailer demand with no current signs of slowing down.

Robert F. Myers: <unk> leasing team continues to convert retailer demand and our high occupancy with higher rents at our centers portfolio occupancy remained high and ended the quarter at 97, 2% leased.

Robert F. Myers: Anchor occupancy remained high at 98, 4% and during the quarter, we executed five anchor leases, including Ulta beauty.

Robert F. Myers: Hilfiger shopping center five below at Bear Creek Plaza Crunch fitness at Kirkwood marketplace and to Med tail users right Center and Ocean Breeze Plaza and a medical center at colonial Promenade.

Robert F. Myers: In the first quarter, we received six anchor boxes back. We currently have just 15 vacant anchor spaces in our portfolio importantly, we were able to drive significantly higher rents on these units for reference the six basis had an average ABR at $8 <unk> and five we executed this quarter.

Robert F. Myers: Had an average ABR of $18 37.

Robert F. Myers: Importantly, we were able to drive significantly higher rents on these units. For reference, these six spaces had an average ABR of $8.06, and the five we executed this quarter had an average ABR of $18.37, a 128% average increase. Activity for anchor leases currently out for signature is extremely positive, and we are currently experiencing the strongest anchor demand we've seen in over 20 years. Inline occupancy ended the quarter at 94.8 percent, an increase of 50 basis points year-over-year and a sequential increase of 10 basis points in the fourth quarter.

Robert F. Myers: 128% average increase.

Robert F. Myers: Activity for anchor leases currently out for signature is extremely positive and we are currently experiencing the strongest anchor demand we've seen in over 20 years.

Robert F. Myers: In line occupancy ended the quarter at 94, 8% an increase of 50 basis points year over year, and a sequential increase of 10 basis points from the fourth quarter.

Robert F. Myers: New neighbors added in the first quarter, including quick service restaurants, such as Nashville Hot Chicken.

Robert F. Myers: Right, Great Starbucks in Wingstop, several med tail uses health and beauty retailers, such as hand in stone sold us along and other necessity based goods and services.

Our acquisitions in the first quarter were 96% leased at closing buying centers with some vacancy we will continue to allow us to drive growth given <unk> unique external growth strategy. We have added new disclosures for same center leased and economic occupancy, which you can find in our supplemental information packet.

Robert F. Myers: New neighbors added in the first quarter included quick-service restaurants such as Nashville Hot Chicken, The Great Greek, Starbucks, and Wingstop, several retail uses, health and beauty retailers such as Hand and Stone, Sola Salons, and other necessity-based goods and services.

Robert F. Myers: We continue to believe that we can push same center inline occupancy another 100 to 150 basis points given the continued strong retailer demand.

Robert F. Myers: Our acquisitions in the first quarter were 96% leased at closing. Buying centers with some vacancy will continue to allow us to drive growth. Given PECO's unique external growth strategy, we have added new disclosures for same center leased and economic occupancy, which you can find in our supplemental information package. We continue to believe that we can push same-center in-line occupancy another 100 to 150 basis points given the continued strong retailer demand. In terms of new lease activity, we continue to have success driving higher rents. Comparable new rent spreads for the first quarter were 29.1%.

Robert F. Myers: In terms of new lease activity, we continue to have success in driving higher rents comparable new rent spreads for the first quarter were 29, 1%.

Robert F. Myers: Our in line new rent spreads were a record high 37, 4% in the first quarter, which compares to our trailing 12 month average of 27, 7%.

Robert F. Myers: We continue to capitalize on strong renewal demand and are making the most of the opportunity to improve lease language at renewal and drive rents higher in the first quarter. We achieved a 16, 9% increase in comparable renewal rent spreads are in line renewal spreads remain high at 19, 2% in the first.

Robert F. Myers: Quarter, which compares to our trailing 12 month average of 18, 2%.

Robert F. Myers: These increases in spreads reflect the continued strength of the leasing and retention environment, we expect new and renewal spreads to continue to be strong throughout the balance of this year and into the foreseeable future.

Robert F. Myers: Our in-line new rent spreads were a record high 37.4% in the first quarter, which compares to our trailing 12-month average of 27.7%. We continue to capitalize on strong renewal demand and are making the most of the opportunity to improve lease language at renewal and drive rents higher. In the first quarter, we achieved a 16.9% increase in comparable renewal rent spreads. Our inline renewal spreads remained high at 19.2% in the first quarter, which compares to our trailing 12-month average of 18.2%.

Robert F. Myers: Progress continues in terms of neighbor retention and while growing rents at attractive rates.

Robert F. Myers: <unk> retention rate remained strong in the first quarter, our NII retention rate is 83% well ahead of the historical five year average of 78%.

Robert F. Myers: Higher retention means less downtime and lower Ti spend in the first quarter. We spent only <unk> 54 per square foot on tenant improvements for renewals.

Robert F. Myers: We also remained successful at driving higher contractual rent increases are new and renewal in line leases executed in the first quarter had average annual contractual rent bumps of two and 3% respectively. Another important contributor to our long term growth.

Robert F. Myers: These increases and spreads reflect the continued strength of the leasing and retention environment. We expect new and renewal spreads to continue to be strong throughout the balance of this year and into the foreseeable future. Progress continues in terms of neighbor retention, and while growing rents at attractive rates, PICO's retention rate remained strong in the first quarter. Our overall retention rate is 83%, well ahead of the historical five-year average of 78%. Higher retention means less downtime and lower TI spend. In the first quarter, we spent only $0.54 per square foot on tenant improvements for renewals.

Robert F. Myers: The leasing spreads that we're achieving and the strength of our leasing pipeline are clear evidence of the continued high demand for space in our grocery anchored neighborhood shopping centers <unk>.

Robert F. Myers: <unk> pricing power as a reflection of the strength of our focused strategy and the quality of our portfolio.

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

Robert F. Myers: We also remain successful at driving higher contractual rent increases. Our new and renewal inline leases executed in the first quarter had average annual contractual rent bumps of two and three percent, respectively. Another important contributor to our long-term growth. The leasing spreads that we are achieving and the strength of our leasing pipeline are clear evidence of the continued high demand for space in our grocery-anchored neighborhood shopping centers. PICO's pricing power is a reflection of the strength of our focus strategy and the quality of our portfolio.

Robert F. Myers: <unk> the impact of these demand factors are further amplified due to limited new supply over the last 10 years and going forward given that current economic returns do not justify new construction.

Robert F. Myers: A healthy mix of national regional and local retailers adds many benefits to our grocery anchored portfolio, 70% of our rents come from neighbors offering necessity based goods and services and our top grocers continue to drive strong reoccurring foot traffic to our centers.

Robert F. Myers: He goes three mile trade area demographics include an average population of 67000 people and then average median household income of 87000, which is 12% higher than the U S median.

Robert F. Myers: PECO continues to benefit from a number of positive macroeconomic trends that create strong tailwinds and drive robust neighbor demand. These trends include a resilient consumer, hybrid work, migration to the Sunbelt, population shifts that favor suburban neighborhoods, and the importance of physical locations and last mile delivery. The impact of these demand factors is further amplified due to limited new supply over the last 10 years and going forward, given that current economic returns do not justify new construction.

These demographics are in line with the store demographics of Kroger, and Publix, which are peak those top two neighbors.

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

Robert F. Myers: We also enjoy a well diversified neighbor base.

Robert F. Myers: Our top neighbor list is comprised of the best grocers in the country.

Our largest non grocer neighbor makes up only one 2% of our rents and that Nabors T J Maxx.

Robert F. Myers: All other non brochure neighbors are below 1% of ABR.

Robert F. Myers: Put a finer point on neighbor mix Pico has no exposure to luxury retail and very limited exposure to distressed retailers are top 10 Nabors currently on our watch list represent just 2% of ABR with no one retailer representing more than 40 basis points of ABR.

Robert F. Myers: A healthy mix of national, regional, and local retailers adds many benefits to our grocery-anchored portfolio. 70% of our rents come from neighbors offering necessity-based goods and services, and our top grocers continue to drive strong, reoccurring foot traffic to our centers. PICO's three-mile trade area demographics include an average population of 67,000 people and an average median household income of $87,000, which is 12% higher than the U.S

Robert F. Myers: While our bad debt was slightly elevated in the first quarter, we actively monitor the health of our neighbors were not concerned about bad debt in the near term, particularly given the strong retailer demand to note. This does not attributed to national bankruptcies as we don't have any meaningful concentrations from an operation standpoint.

Robert F. Myers: We have always taken an aggressive stance to get spaces back and in today's environment. The team is taking an even more aggressive stance on opportunities, where we can get higher spreads. We are seeing 40% inline rent spreads on the units, we're getting back 27% of our ABR is derived from local neighbors.

Robert F. Myers: These demographics are in line with the store demographics of Kroger and Publix, which are PECO's top two neighbors. Our centers are situated in trade areas where our top grocers are profitable, and our neighbors are successful. We also enjoy a well-diversified neighbor base. Our top neighbor list is comprised of the best grocers in the country. Our largest non-grocer neighbor makes up only 1.2% of our rents, and that neighbor is TJ Maxx. All other non-grocer neighbors are below 1% of ABR. To put a finer point on the neighbor mix, PECO has no exposure to luxury retail and very limited exposure to distressed retailers.

Robert F. Myers: The majority of our local neighbor rents come from retailers offering necessity based goods and services are local neighbors are successful businesses run by a hard working entrepreneurs. They have healthy credit and are less susceptible to corporate bankruptcy caused by weaker performing locations.

Robert F. Myers: Local neighbors offer favorable economic returns are typical local retailer receives less capital at the beginning of their lease except more P code friendly lease terms and has high retention rates.

Robert F. Myers: Heiko retained 85% of local neighbors in the first quarter.

Robert F. Myers: Our top 10 neighbors currently on our watch list represent just 2% of ABR, with no one retailer representing more than 40 basis points of ABR. While our bad debt was slightly elevated in the first quarter, we actively monitor the health of our neighbors. We are not concerned about bad debt in the near term, particularly given the strong retailer demand. To note, this is not attributed to national bankruptcies, as we don't have any meaningful concentrations. From an operations standpoint, we have always taken an aggressive stance to get spaces back.

Robert F. Myers: We're in line local neighbors renewal rent spreads remained strong at 22%.

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

Our in line local neighbors are resilient and had been in our shopping centers for $9 seven years on average.

Robert F. Myers: In addition to our strong rental growth trends, we continue to expand our pipeline of ground up out parcel development and repositioning projects here.

Robert F. Myers: During the first quarter, we stabilized four projects and delivered over 180000 square feet of space to our neighbors. These four projects add incremental NOI of approximately $2 3 million annually. They provide superior risk adjusted returns and have a meaningful impact in our long term NOI growth.

Robert F. Myers: In today's environment, the PICO team is taking an even more aggressive stance on opportunities where we can get higher spreads. We are seeing 40% in-line rent spreads on the units we are getting back. Additionally, 27% of our ABR is derived from local neighbors.

Robert F. Myers: We continue to expect to invest $40 million to $50 million annually and ground up development and repositioning opportunities with weighted average cash on cash yields between 9% and 12%. This activity remains a great use of free cash flow and produces attractive returns with less risk our team.

Robert F. Myers: The majority of our local neighbors' rents come from retailers offering necessity-based goods and services. Our local neighbors are successful businesses run by hardworking entrepreneurs. They have healthy credit and are less susceptible to corporate bankruptcy caused by weaker performing locations; local neighbors offer favorable economic returns. A typical local retailer receives less capital at the beginning of their lease, accepts more PICO-friendly lease terms, and has high retention rates. PICO retained 85% of local neighbors in the first quarter. For in-line local neighbors, renewal rent spreads remain strong at 20.2%. Importantly, local retailers meaningfully differentiate the merchandise mix that our neighborhood centers offer our customers.

Robert F. Myers: To stay focused on growing this pipeline as the returns are accretive to the portfolio.

Robert F. Myers: In summary, the Pico team remains optimistic given the current strong operating environment and the continued positive momentum, we're experiencing across leasing redevelopment and development.

Speaker Change: Our healthy neighbor mix in grocery anchored strategy positions <unk> well for continued growth the overall demand environment the stability of our centers the strength of our grocers and the capabilities of our team gives us great confidence in our ability to continue to deliver solid operating results I will now turn the call.

John P. Caulfield: All over to John.

John P. Caulfield: John.

John P. Caulfield: Thank you Bob and good morning, and good afternoon, everyone I'll start by addressing our first quarter results then provide an update on the balance sheet and finally speak to our affirmed 2020 for guidance.

Robert F. Myers: Our inline local neighbors are resilient and have been in our shopping centers for 9.7 years on average. In addition to our strong rental growth trends, we continue to expand our pipeline of ground-up out-parcel development and repositioning projects. During the first quarter, we stabilized four projects and delivered over 180,000 square feet of space to our neighbors. These four projects add incremental NOI of approximately $2.3 million annually.

John P. Caulfield: <unk> first quarter 2020 for NAREIT <unk> increased four 9% to $80 1 million or <unk> 59 per diluted share driven by an increase in rental income from our strong property operations results were partially impacted by higher year over year interest expense.

First quarter core <unk> increased four 5% to $81 7 million.

John P. Caulfield: Or <unk> 60 per diluted share driven by increased revenue at our properties from higher occupancy levels and strong leasing spreads partially offset by the aforementioned higher interest expense.

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

John P. Caulfield: Our same center NOI growth in the quarter was three 7% driven by minimum rent growth of four 2% year over year.

John P. Caulfield: Regarding acquisitions during the first quarter, we acquired two shopping centers and one land parcel for a total of $56 million, we had no dispositions during the quarter.

John P. Caulfield: Turning to the balance sheet, we have approximately $570 million of liquidity to support our acquisition plan and no meaningful maturities until November 2025.

Robert F. Myers: Our team continues to stay focused on growing this pipeline as returns are accreted to the portfolio. In summary, the PECO team remains optimistic given the current strong operating environment and the continued positive momentum we're experiencing across leasing, redevelopment, and development. Our Healthy Neighbor Mix and Grocery Anchored Strategy positions PECO well for continued growth. The overall demand environment, the stability of our centers, the strength of our grocers, and the capabilities of our team give us great confidence in our ability to continue to deliver solid operating results. I will now turn the call over to John. Okay?

John P. Caulfield: Our net debt to adjusted EBITDA remained at five one times, our debt had a weighted average interest rate of four 3% and a weighted average maturity of three eight years, when including all extension options.

John P. Caulfield: During the quarter, we entered into an interest rate swap agreements totaling $150 million, the new instrument swap poker to approximately $3 four 5% effective September 22024, and matures on December 31 2025.

John P. Caulfield: The swap helps us manage our floating rate exposure as we have swaps that expired in September and October of 2024.

John P. Caulfield: We ended the quarter at 76% fixed rate debt with 24% floating we continue to monitor the debt market and we will look to access it opportunistically.

John P. Caulfield: While the recent move in long term treasuries has not been favorable credit spreads have improved from year end, we are continually looking at opportunities to enhance our liquidity and extend our debt maturity profile.

John P. Caulfield: Thank you, Bob, and good morning and good afternoon, everyone. I'll start by addressing first quarter results, then provide an update on the balance sheet, and finally speak to our affirmed 2024 guidance. First quarter 2024 NAREAP FFO increased 4.9% to $80.1 million or $0.59 per diluted share, driven by an increase in rental income from our strong property operations. However, results were partially impacted by higher year-over-year interest expenses.

John P. Caulfield: Lack of near term maturities provides us with flexibility to be patient.

John P. Caulfield: Between the significant free cash flow generated by our portfolio in this year and the capacity available on our revolver, we can be strategic in our timing to access that market.

Turning to our guidance for 2024, we have updated the net income per share range to 51 to 55.

We have affirmed our guidance for NAREIT and core <unk>, which reflects a 6% and 3% growth over 2023 at the mid points respectively.

John P. Caulfield: In addition, we have affirmed our range for same center NOI growth of three 5% to 425% given the continuing strong operating environment.

John P. Caulfield: Included in our guidance is the negative impact of uncollectible reserves. We are affirming the range previously provided given the continued strong health of our neighbors. However, we will likely be at the high end of the range for the year, but it's still early and this is being influenced by our team taking an aggressive stance on getting space back to drive higher rent spread.

John P. Caulfield: First Quarter Core FFO increased 4.5% to $81.7 million, or $0.60 per diluted share, driven by increased revenue at our properties from higher occupancy levels and strong leasing spreads, partially offset by the aforementioned higher interest expense. Our same center NOI growth in the quarter was 3.7%, driven by minimum rent growth of 4.2% year over year. Regarding acquisitions during the first quarter, we acquired two shopping centers and one land parcel for a total of $56 million. We had no dispositions during the quarter.

John P. Caulfield: As Bob mentioned earlier.

John P. Caulfield: We currently have several acquisitions in our pipeline either under contract or in contract negotiation. This activity provides a strong start for the year as Jeff mentioned it is still early so we are affirming our acquisition guidance and expect net volume to be in a range of $200 million to $300 million and.

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

John P. Caulfield: Looking beyond 2024, we believe our internal and external growth opportunities gives us a long term growth outlook mid to high single digits for core <unk> per share growth.

John P. Caulfield: Turning to the balance sheet, we have approximately $570 million of liquidity to support our acquisition plan and no meaningful maturity until November 2025. Our net debt to adjusted EBITDA remained at 5.1 times. Our debt had a weighted average interest rate of 4.3% and a weighted average maturity of 3.8 years when including all extension options. During the quarter, we entered into an interest rate swap agreement totaling $150 million. The new instrument swaps SOFR to approximately 3.45% effective September 25, 2024, and matures on December 31, 2025. This swap helps us manage our floating rate exposure as we have swaps that expire in September and October of 2024. We ended the quarter at 76% fixed rate debt and 24% floating.

John P. Caulfield: We expect our comparable our faster growth rate for <unk>, because there should be less tenant improvement dollars invested as we continued to increase same center occupancy.

John P. Caulfield: In the near term, we continue to be impacted by interest rate increases as all borrowers are which impacts our earnings growth that said, we are pleased to guide to positive share growth.

John P. Caulfield: Our 2024, we are updating the range of interest rate expense to $98 million to $106 million, we estimate that higher interest rates could be a headwind of 7% to 11% for the year.

John P. Caulfield: If we added back the per share impact of interest rate increases to our updated 2020 guidance. This would be 7% core SSO growth immediately.

John P. Caulfield: 2024 is continuing to present challenges with high inflation volatile and rising interest rates and global conflict. However, the strength of our integrated operating platform positions <unk> well for long term steady earnings growth. We're excited for the additional growth opportunities ahead. This year, both internal and through acquisitions.

John P. Caulfield: We continue to monitor the debt market and work to access it opportunistically. While the recent move in long-term treasuries has not been favorable, credit spreads have improved from near-end. We are continually looking at opportunities to enhance our liquidity and extend our debt maturity profile. Our lack of near-term maturities provides us with the flexibility to be patient. Between the significant free cash flow generated by our portfolio this year and the capacity available on our revolver, we can be strategic in our timing to access the debt market.

Operator: That we will open the line for questions operator.

Speaker Change: Thank you to ask a question press star one on your telephone keypad.

Speaker Change: Question has been answered and glad to remove yourself from the queue Press star one yes.

Speaker Change: Yes first question is from the line of Caitlin Burrows with Goldman Sachs.

Caitlin Burrows: Hi, everyone I guess good afternoon, maybe just following up John on that last point on the bad debt headwind. So I know.

Caitlin Burrows: The guidance of 60 to 80 basis points and you mentioned it could come in at the high end granted it's still early in the year. It sounds like your neighbors are performing generally very well. So just wondering whats driving the updated view and the one key results and if anything is kind of Pico driven can you go through that nuance.

John P. Caulfield: Turning to our guidance for 2024, we have updated the net income per share range to 51 cents to 55 cents. We've affirmed our guidance for NARED and CORE FFO, which reflects a 6% and 3% growth over 2023 at the midpoints, respectively. In addition, we've affirmed our range for same center NOI growth of 3.25% to 4.25% given the continued strong operating environment. Included in our guidance is the negative impact of uncollectible reserves.

Speaker Change: Well, thanks, Jeff Thanks for the question.

Speaker Change: The R.

Speaker Change: As we look at the.

Speaker Change: Operating environment, when we get to levels of occupancy that we're at right. Now we are taking a very aggressive stance on getting property getting back.

Speaker Change: Neighbors, who are not paying debt that has some impact on what we're talking about here, but we're generally going to continue to be really aggressive at getting spaces back on a go forward basis and that will have an impact.

Speaker Change: But we are not seeing anything secondly, that's happening that is changing those numbers and we do think they will more normalize over the as the year goes through John did you have any additions to that.

John P. Caulfield: We are affirming the range previously provided given the continued strong help of our neighbors. However, we will likely be at the high end of the range for the year, but it's still early. And this is being influenced by our team taking an aggressive stance on getting spaces back to drive higher rent spreads, as Bob mentioned earlier. We currently have several acquisitions in our pipeline, either under contract or in contract negotiation. This activity provides a strong start for the year.

John P. Caulfield: No I think that captures that mean Caitlin we look at it. It is still early in the year end and it can move from quarter to quarter, but as we look at it as Jeff said, we're not seeing anything that is pervasive I mean, this is not driven by national bankruptcies or things and so we are taking an aggressive stance on getting this space back and taken a stair step.

John P. Caulfield: <unk> has talked about we do have we do.

John P. Caulfield: Do expect that at this time, we will be at the higher end of the range, but it's still early to tell and ultimately the important thing for US is that we were able to reaffirm our same store NOI guidance for the year. So we still feel very strong about that.

John P. Caulfield: As Jeff mentioned, it is still early, so we are affirming our acquisition guidance and expecting net volume to be in a range of $200 million to $300 million. If the transaction and capital markets improve, we have the capacity to meaningfully increase this number, but we are comfortable with this guidance range in the current environment. Looking beyond 2024, we believe our internal and external growth opportunities give us a long-term growth outlook of in the mid to high single digits for core FFO per share growth.

Speaker Change: I guess, maybe then just go on Jefferson one.

Speaker Change: No I'm, sorry, it's Bob I'm, just going to add to that.

Robert F. Myers: In light of what we see on the operations platform and the demand that we're seeing for this space even in the spaces that we received back we were able to get over 40% new leasing spreads so as long as we continue to see the demand there it.

It is a <unk>.

Robert F. Myers: Faced by space decision and how hard we push but it is a strategy that we are seeing some benefit from so I'm encouraged by the demand and the spreads we are seeing.

Speaker Change: Got it and then.

Maybe just on the point of the same store NOI guidance being reaffirmed and the episode target being reaffirmed despite higher interest expense I guess can you guys go through some of the offsets of what might be performing better than expected.

John P. Caulfield: We expect a comparable or faster growth rate for AFFO because there should be fewer tenant improvement dollars invested as we continue to increase same-center occupancy. In the near term, we continue to be impacted by interest rate increases, as all borrowers are, which impacts our earnings growth. That said, we are pleased to guide to positive per share growth. For 2024, we are updating the range of interest rate expense from $98 million to $106 million.

Speaker Change: John do you want to take that one.

John P. Caulfield: Sure I'll take that so yes, so ultimately the.

John P. Caulfield: The leasing spread and the leasing activity that Bob is talking about is at the operating level, allowing us to do that we are actually also having better and this gets to the SSO. We are having in forecasting better expense experience than we had anticipated I mean, our NOI margin increased.

John P. Caulfield: We estimate that higher interest rates could be a headwind of $0.07 to $0.11 for the year. If we added back the per share impact of interest rate increases to our updated 2024 guidance, this would be 7% core FFO growth, the midpoint. 2024 is continuing to present challenges with high inflation, volatile and rising interest rates, and global conflict.

John P. Caulfield: A little this quarter, but still we're seeing that.

John P. Caulfield: Things like G&A as well as some of our property level expenses are helped offsetting the increase in interest is something but we're able to manage that and feel good about our guidance ranges.

Speaker Change: Got it okay. Thank you.

Speaker Change: Thanks, Kevin.

Speaker Change: Okay.

Speaker Change: Your next question is from the line of <unk> <unk> with Bank of America.

Speaker Change: Hi, everyone.

Speaker Change: Has it been you if you guys could talk a little bit more about the two banners.

John P. Caulfield: However, the strength of our integrated operating platform positions PICO well for long-term, steady earnings growth. We're excited for the additional growth opportunities ahead this year, both internal and through acquisition. With that, we will open the line for questions. Operator. Thank you. To ask a question, press star 1 on your telephone keypad. If your question has been answered and you would like to remove yourself from the queue, press star 1.

Speaker Change: Acquired in the first quarter <unk> seen a pretty long lead at the point of acquisition now just wondering what the opportunity set that you see in each of the banners.

Speaker Change: And then just wondering on plan.

Speaker Change: For the land parcel that was acquired.

Speaker Change: Why don't I ill cover the two property Bob you can talk through the <unk>.

Speaker Change: Land parcel that we.

Speaker Change: Purchase.

Speaker Change: The.

Speaker Change: The first project, we bought Lake Mary was a.

Operator: Your first question is from the line of Caitlin Burrows with Goldman Sachs. Hi, everyone. I guess good afternoon. Maybe just following up, John, on that last point on the bad debt headwinds. So I know the guidance was 60 to 80 basis points, and you mentioned now it could come in at the high end. Granted, it's still early in the year.

Speaker Change: Center that we have actually looked at for a long time.

Speaker Change: As a publix anchored center, it's one of the best public says it's.

Speaker Change: Its trade area.

We.

Speaker Change: We really like that that particular market outside of.

Speaker Change: Orlando.

Speaker Change: <unk>.

Speaker Change: So we and we did find that there was some very good mark to market opportunities there.

Speaker Change: I think our underwriting was sort of in the.

Caitlin Burrows: It sounds like your neighbors are generally performing very well. So just wondering what's driving the updated view and the one key results? And if anything is kind of PICO-driven, can you go through that nuance?

Speaker Change: Between.

Speaker Change: Nine and nine and a half on an unlevered IRR basis. So we felt pretty good about that.

Speaker Change: <unk>.

Speaker Change: Acquisition.

Speaker Change: Our second acquisition was a very I guess in our mind a very opportunistic.

Jeffrey S. Edison: Well, Caitlin, and Jeff, thanks for the question. As we look at the operating environment, when we get to the levels of occupancy that we're at right now, we're taking a very aggressive stance on getting property, getting back neighbors who are not paying, and that has some impact on what we're talking about here. But we're generally going to continue to be really aggressive at getting spaces back on a go-forward basis, and that will have an impact.

Speaker Change: Purchase it was a property that.

Speaker Change: We had seen for a long time in a market that we were very familiar with and very active in.

Speaker Change: With.

It was in.

Speaker Change: Our higher end market with density with a dominant grocer not in the center, but.

Speaker Change: Within a short distance from the center. So it was in a major.

Jeffrey S. Edison: But we are not seeing anything sectorally that's happening that is changing those numbers, and we do think they will more normalize over as the year goes through. John, did you have any additions to that? No, I think that that covers I mean, Caitlin, we look at it; it is still early in the year, and it can move from quarter to quarter. But as we look at it, as Jeff said, we're not seeing anything that is pervasive.

Speaker Change: In our mine corridor for the suburban shopper.

Speaker Change: <unk>.

Speaker Change: That that was one where we had.

Speaker Change: We were getting.

Speaker Change: A very strong IRR, well north of nine and a half.

Speaker Change: And in a market that we knew really well and we thought it was an opportunity to take advantage of and those were the two acquisitions that I would say going into second quarter.

I would say that we have.

Speaker Change: A good pipeline.

Speaker Change: We have seen.

John P. Caulfield: I mean, this is not driven by national bankruptcies or anything. And so we are taking an aggressive stance on getting the space back and taking the steps that Bob's team has talked about. We do have, you know, we do expect that at this time, we'll be at the higher end of the range, but it's still early to tell. And ultimately, the important thing for us is that we were able to reaffirm our same store NOI guidance for the year. So we feel, you know, feel very strong. I guess maybe then just go on, Jeffrey.

Speaker Change: Almost in terms of the investment committee, we put we put almost twice as many.

Speaker Change: Projects through investment Committee this year through the first quarter as we did last year, obviously last year was a pretty tough first and second.

Second quarter for for product coming on so.

Speaker Change: So we are encouraged by that that we will make may see a little bit.

Speaker Change: Better.

Speaker Change: The opportunities this year than we did.

Speaker Change: In a difficult market from from last year, Bob do you want to go through the outlook.

Robert F. Myers: Purchase as well.

Robert F. Myers: Yes, absolutely so it's called the.

Robert F. Myers: Now, I'm sorry, it's Bob. I'm just going to add to that, you know, in light of what we see on the operations platform and the demand that we're seeing for the space, even in the spaces that we receive back, we were able to get over 40% new leasing spreads. So as long as we continue to see the demand there, it is a space by space decision and how hard we push, but it is a strategy that we're seeing some benefit from.

Robert F. Myers: <unk> point and it's in Tampa, Florida, and this was one that we've had our eyes on and it's about a three acre parcel, we paid right around $2 million for it.

Robert F. Myers: Our national account team.

Robert F. Myers: <unk> has really been marketing this actually for the last six months. So we currently are thinking about separating the three acres and the three one acre parcels and we already have strong interest from national retailers.

Robert F. Myers: So I'm encouraged by the demand and the spreads we're seeing. Got it. And then maybe just on the point of the SAMHSA NOI guidance being reaffirmed and the FFO target being reaffirmed despite higher interest expense, I guess, can you guys go through some of the offsets of what might be performing better than expected? John, do you want to take that one?

Robert F. Myers: Chase banks in the Dutch brothers, the tropical smoothies and urgent care. So again youre going to continue to see demand for these opportunities in the med tail in the fast casual space. So as we can find these opportunities and generate.

Robert F. Myers: The 9% to 12% returns that we're focused on there are great complements to our existing assets. So we want to stay opportunistic and continue to look for land.

John P. Caulfield: Sure, I'll take that. So yeah, ultimately, the leasing spread and the leasing activity that Bob is talking about is at the operating level. As long as we do that, we are actually also having better, and this goes to the FFO, we are having and forecasting better expense experiences than we had anticipated. I mean, our NOI margin, you know, increased a little this quarter, but still, we're seeing that things like GNA, as well as some of our property level expenses are helping offsetting.

Okay. That's good color. Thank you.

Speaker Change: And just a follow up to that.

Speaker Change: How did you find first quarter acquisition.

Speaker Change: And is there any change in thinking around that and match funding strategy you guys have been employing.

Speaker Change: To fund the rest of that.

Speaker Change: Throughout the year or if you could just give your updated online.

Speaker Change: On funding acquisition, Inc. Yes.

Speaker Change: The.

Speaker Change: I would say Lindsay we have reaffirmed our pace. So we anticipate that we will be in that $2 million to $300 million range for the.

John P. Caulfield: So the increase in interest is something, but, you know, we're able to manage that and feel good about our guidance. Got it. Okay, thank you. Thanks, too. Your next question is from the line of Lizzie Doykan with Bank of America. Hi, everyone.

Speaker Change: Acquisitions.

Speaker Change: And.

Speaker Change: We.

Speaker Change: From a pricing standpoint.

Speaker Change: The.

Speaker Change: The market is actually.

Speaker Change: <unk>.

Speaker Change: Continues to have quite a bit of volatility in terms of buyers and sellers expectations in.

Elizabeth Yang Doykan: I was just hoping you guys could talk a little bit more about the two centers acquired in the first quarter. Both seemed pretty well leased at the point of acquisition. So I was wondering about the opportunity set that you see at each of those centers and then just wondering about plans for the land parcel that was acquired. Why don't I cover the two properties, Bob, you can talk through the, the, the land parcel that we purchased, the first project we bought, Lake Mary, was a center that we have actually been looking at for a long time. It is a public anchored center.

Speaker Change: That's not.

Speaker Change: Generally a real positive for volume.

Speaker Change: But it's just it's harder because that match funding that youre talking about is changing.

Speaker Change: In this environment almost daily and so you are.

Speaker Change: It's a difficult time to to.

Sort of figure that out.

Speaker Change: But we're.

Speaker Change: We are staying very.

Speaker Change: Disciplined in terms of the where we see the returns that we've got to get to to make them accretive to where.

Jeffrey S. Edison: It's one of the best publics in its trade area. We, we, you know, we really like that particular market outside of Orlando. And so we, we, and we did find that there were some very good mark to market opportunities there. I think our underwriting was sort of between nine and nine and a half on an unlevered IRR basis. So we felt pretty good about that.

Our model.

And.

Speaker Change: So.

Speaker Change: That's sort of how we're doing in terms of the match funding.

Speaker Change: Last year, we did.

Speaker Change: Tap the ATM.

Speaker Change: <unk>.

Speaker Change: On the equity side.

Speaker Change: And extended all of our debt maturities.

Speaker Change: As well so we.

Speaker Change: We've got our <unk>.

Speaker Change: <unk> that we will be using for these acquisitions and then we will be looking to tie and longer term fixed rate debt as we tie in those acquisitions.

Jeffrey S. Edison: Our second acquisition was, I guess, in our minds, a very opportunistic purchase. It was a property that we had seen for a long time in a market that we were very familiar with and very active in. It was in a higher-end market with density, with a dominant grocer, not in the center, but within a short distance from the center. So it was on a major, in our mind, corridor for the suburban shopper.

Speaker Change: John did you have anything additional on that.

John P. Caulfield: No I think that hits it I mean, we have $570 million of liquidity and we're looking to maintain our flexibility as we are looking to get to our long term target of 10% floating but ultimately feel good about the assets that where we're buying and the opportunities in front of us.

Speaker Change: Thank you Lindsay is that answer your question.

Jeffrey S. Edison: And that was one where we were getting a very strong IRR, well north of nine and a half, and in a market that we knew really well, and we thought it was an opportunity to take advantage of. And those were the two acquisitions I would say going into the second quarter. I would say that we have a good pipeline. We've seen, almost in terms of the investment committee, we put almost twice as many projects through the investment committee this year through the first quarter as we did last year. Obviously, last year was a pretty tough 1st and 2nd quarter for product coming on.

Speaker Change: Yes.

Speaker Change: Alright, great. Thank you.

Speaker Change: Okay. Okay.

Speaker Change: Great.

Speaker Change: Your next question is from the line of Ronald Camden.

Ron E. Meyers: Morgan Stanley.

Ron E. Meyers: Hey, just my first quick one was I remember back at the Investor Day, you talked about sort of.

Ron E. Meyers: Asset management partnerships and so forth just wondering.

Ron E. Meyers: Was there any update on that and what the thinking was.

Ron E. Meyers: Aye.

Ron E. Meyers: We do we are making progress there and I think in the second quarter, we should be at a point, where we will be more openly discussing gift, giving a lot more detail on what they are.

Jeffrey S. Edison: So we are encouraged by that that we may see a little bit better. Bob, do you want to go through the illegal that we purchased as well? Yeah, absolutely. So, you know, it's called Goolsbee Point, and it's in Tampa, Florida.

Ron E. Meyers: But our goal here is do we want to have.

Ron E. Meyers: <unk> bought into.

Ron E. Meyers: These.

Ron E. Meyers: Project at the end of these bonds at before we make any public announcements. So we continue to progress and we hopefully will have more news for you.

Robert F. Myers: And this is one that we've had our eyes on. And it's about a three-acre parcel; we paid right around $2 million for it. And our national account team has really been marketing this for the last six months. So we are currently thinking about separating the three acres into three one-acre parcels. And we already have, you know, strong interest from national retailers and, you know, the Chase Banks and the Dutch Brothers and Tropical Smoothies and Urgent Care.

Ron E. Meyers: In the in the second quarter.

Speaker Change: Great and then my second question was just going to be back to the acquisition pipeline.

Speaker Change: And so far I think you talked about seeing a lot more volumes for this year versus last year.

Speaker Change: All been just because of the environment are you guys doing anything to source differently or to be more creative so like a deal.

Speaker Change: I think it's general volume.

Speaker Change: We are.

We have a system that we've put in place and refined over.

Speaker Change: Probably 25 years of being in this acquiring the grocery anchored shopping centers. So.

Robert F. Myers: So, again, you're going to continue to see demand for these opportunities in the medtail and the fast casual space. So as we can find these opportunities and generate, you know, the nine to 12% returns that we're focused on, they're great complements to our existing assets. So we want to stay opportunistic and continue to look for land. Okay, that's good color.

Speaker Change: But.

Speaker Change: We're obviously updating technology and those things, but in terms of our our core strategy of focusing on.

Speaker Change: <unk> 5800 centers that we want to own and making sure that we're in front of both the owners and the brokers to make sure we see those when they come available.

Speaker Change: That part really is.

Speaker Change: Stayed pretty consistent.

Great. That's it for me thank you.

Speaker Change: Okay. Thanks, Rob.

Elizabeth Yang Doykan: And just to follow up on that, how did you fund the first quarter acquisitions? And is there any change in thinking around the match funding strategy you guys have been employing to fund the rest of this throughout the year? Or if you could just give your updated thoughts on funding acquisitions? Thanks.

Speaker Change: Your next question is from the line of <unk>, St Juste DS Lemon Nuzzo.

Speaker Change: Hi, there. This is Ravi that underlines our Hondo hope you guys are doing well. So just curious if you were to issue 10 year money today what would.

Ravi: What would it cost and I guess what is your interest in doing any alternative financing arrangements can be a convertible debt deal or short term debt.

Jeffrey S. Edison: Yeah. The I would say, Lizzie, you know, we have reaffirmed our pace. So we anticipate that we will be in that two to three hundred million range for the acquisitions. And we from a pricing standpoint, you know, that the the market is is actually, continues to have quite a bit of volatility in terms of buyers and sellers and expectations and, But, you know, that's not... Generally, a real positive for volume, but it's harder because that matched funding that you're talking about is changing in this environment almost daily, and so it's a difficult time to sort of figure that out, but I think we're staying very disciplined in terms of where we see the returns that we've got to get to make them accretive to our model, and so that's sort of how we're doing it in terms of the match funding.

Ravi: What's your appetite for these different options.

Ravi: Sure.

Speaker Change: Great question.

Speaker Change: We are looking at all of them.

Speaker Change: And.

Speaker Change: <unk>.

The.

Speaker Change: Our.

Speaker Change: Our primary focus at this point is too.

Speaker Change: Get into the public.

The longer term public debt markets and so the alternatives the interesting and something that we could that could could could work for us.

Speaker Change: We have not sort of actively pursued those yet, but we are reviewing them because they are there are some some pretty attractive.

Speaker Change: Options there.

Speaker Change: That we will that we're continuing to look at but John any any additions to that.

Jeffrey S. Edison: Last year, we did tap the ATM on the equity side and extended all of our debt maturities as well, so we've got our line that we will be using for these acquisitions, and then we will be looking to tie in longer-term fixed-rate debt as we tie up those acquisitions. John, did you have anything additional on that? No, I think that covers it.

John P. Caulfield: Sure. So we are looking at everything I would say that our long term cost currently if we were to issue would be let's say, 6% to six in a quarter.

John P. Caulfield: The important thing for us in building a track record in the unsecured bond market, we've made great progress.

John P. Caulfield: With investors and speaking with them and building that but we've been waiting for the right opportunity as I mentioned in the prepared remarks.

John P. Caulfield: I mean, we have 570 million in liquidity. And, you know, we're looking to maintain our flexibility as we are looking to get to our long-term target of 10% floating, but ultimately, feel good about the assets that we're buying and the opportunities in front of us. Lizzie, does that answer your question? Yeah, that was great.

John P. Caulfield: The spreads are a little wide at the beginning of the year and now they have improved but the base rate has expanded so it is something that we are actively monitoring but because we have.

John P. Caulfield: Bill test time, and our maturity counter we have the ability to be patient and so we're just wanting to make sure we're accessing and building that reputation and track record in the market that has the most liquidity and availability.

Elizabeth Yang Doykan: Thank you. Your next question is from the line of Ronald Kamden with Morgan Stanley. Hey, just my first quick one was, I remember back at the investor day you talked about the Asset Management Partner. I'm just wondering, was there any update on that?

John P. Caulfield: But that said depending on the market timing and things like that we do evaluate all strategies. If you look at our current balance sheet funding. We use them. All we have we have bank debt, we have secured debt with unsecured bonds. So.

Ronald Kamdem: We are making progress there, and I think in the second quarter we should be at a point where we will be more openly discussing, giving a lot more detail on what they are. But our goal here is that we want to have projects bought into these funds before we make any public announcements. So we continue to progress, and we hopefully will have more news for you in the second quarter. And then my second question was just going to be about the acquisition pipeline. I think you talked about seeing a lot more of everything. Unknown Executive, Ron Meyers, David Wik, Joseph Schlosser, Ron Meyers, Phillips Edisn, http://TheBusinessProfessor.com, I think it's just the general volume.

John P. Caulfield: The thing that we're watching.

John P. Caulfield: Looking forward to accessing and getting more capital to buy more assets.

John P. Caulfield: Okay.

Speaker Change: Thank you that's helpful. Just one more here regarding cap rates this year this quarter.

Speaker Change: Acquisition cap rate was a bit higher than last year's.

Speaker Change: Kelly from modeling perspective because of me.

Speaker Change: Kind of assume that this year's acquisitions will hang around in that six to.

Speaker Change: To 7% range is that what you are seeing based on what's in your pipeline right now.

Kelly: I would stay at the six five.

Kelly: There were specific stories on these two.

Jeffrey S. Edison: I mean, we are, you know, we have a system that we've put in place and refined over, you know, probably 25 years being in this business, acquiring the Gross Ranker Shopping Center. So we have, but, you know, we're obviously updating technology and those things. But in terms of our core strategy of focusing on, you know, 5,800 centers that we want to own and making sure that we're in front of both the owners and the brokers to make sure we see those when they become available, that part really has stayed pretty consistent. Okay, thanks, Rob. Your next question is from the line of Haendel St. Justice, Women's News Office. Hi there, this is Robbie Vade on the line for Haendel St. Justice.

Kelly: Acquisitions were.

Speaker Change: We got pretty favorable pricing, but we haven't really come off of that guidance of.

Speaker Change: 63 to 67 kind of.

Speaker Change: Kind of a range so.

Speaker Change: That's how we're thinking about the year end.

Speaker Change: Again, we'll see how it progresses.

Speaker Change: Q2 marks don't make the.

Speaker Change: The year.

Speaker Change: But.

Speaker Change: Yes.

Speaker Change: I would.

Speaker Change: We don't think there's that much movement from the six and a half kind of.

Speaker Change: Midpoint.

At this point.

Speaker Change: Got it thanks, so much guys.

Speaker Change: Yes.

Speaker Change: Your next question is from the line of Michael Mueller with Jpmorgan.

Michael William Mueller: Yes, Hi, just a quick quick occupancy question, yes, where do you see anchor and overall economic or physical occupancy ending up the year.

Haendel Emmanuel St. Juste: I hope you guys are doing well. Just curious, if you were to issue 10-year money today, what would it... What would it cost? And, I guess, what is your interest in doing any alternative financing or agency via a convertible debt deal or short-term debt? What's your appetite for these different options?

Michael William Mueller: Bob do you want to take that.

Speaker Change: Bob we're missing here.

Robert F. Myers: Sorry, Jeff.

Robert F. Myers: Looking at our pipeline and the demand we're seeing I definitely believe that are in line and our anchor occupancy will be elevated.

Robert F. Myers: <unk>.

Robert F. Myers: It's hard to exactly know what that is but I would certainly think that we would be at the higher range of the 98, eight or nine or the anchor and in the in line.

John P. Caulfield: Yeah, great question. We are looking at all of them, you know, and our primary focus at this point is to get into the public, the longer-term public debt markets. And so the alternatives, though interesting and something that we could, you know, that could work for us. We have not, you know, sort of actively pursued those yet. But we are reviewing them because there are some pretty attractive options there that we will, you know, that we're continuing to look at. But, John, any additions to that?

Robert F. Myers: I, certainly think that will be north of the 94.8 that were seeing today give them given the demand. So at this point I'd say it will certainly be elevated but it's really hard for me to pinpoint exactly what it'll be.

Speaker Change: Got it.

Speaker Change: Okay. Thank you.

Thanks, Michael.

Speaker Change: Your next question is from the line of <unk> <unk> with BMO capital markets.

Speaker Change: Hi, Good afternoon, just hoping you could give a little bit more color on on the bad debt.

John P. Caulfield: Sure. So, we are looking at everything. I would say that, you know, our long-term cost, currently, if we were to issue, would be, you know, let's say six to six and a quarter. The important thing for us is building a track record in the unsecured bond market. We've made great progress with investors and speaking with them, and building that, but we've been waiting for the right opportunity.

Speaker Change: It sounds like it's not driven by national tenants or is it is it being driven more by some of the smaller mom and pop in lines and just curious if you could break it out how much of the bad debt was related to just tenant closures or bankruptcies versus.

Speaker Change: You guys being proactive and trying to get higher leases upon renewal or re leasing of that space.

Speaker Change: John do you want to take that one.

Speaker Change: Sure.

Good afternoon one.

John P. Caulfield: So as we look at the bad debt. It is not when I say, it's not related to national I would say it it.

John P. Caulfield: As I mentioned in the prepared remarks, the spreads were a little wide at the beginning of the year, and now they've improved, but the base rate has expanded. So it is something that we are actively monitoring. But because we have, but that said, depending on the market timing and things like that, we do evaluate all strategies. If you look at our current balance sheet funding, we use them all.

John P. Caulfield: It could be disputes as well so I was saying, it's not national bankruptcy, so and Youre looking at those names that are going that that's not impacting there was contribution to the bad debt from from national from regional and from local neighbors.

John P. Caulfield: As we look at it I would say the majority of it.

John P. Caulfield: Was just kind of.

John P. Caulfield: A few neighbors that might've had larger balances, but I would say the portion that we influence is probably close to half maybe a little bit less than that in terms of that but when we take those actions. It takes us to a more conservative place, which is why becomes outside and the leasing momentum that we've got is an estimate that we have.

Haendel Emmanuel St. Juste: We have We have bank debt, we have security. This is something that we are watching, and we are looking forward to accessing and getting more capital to buy more assets. Thank you. That's helpful. Just one more here.

Haendel Emmanuel St. Juste: Regarding cap rates, this year, this quarter's acquisition cap rate was a bit higher than last year's. Can we, from a modeling perspective, kind of assume that, you know, this year's acquisitions will hang around the six, eight to seven range? Is that what you're seeing based on what's in your pipeline right now? I would stay at the six and a half.

John P. Caulfield: Taking action more quickly, which does kind of trigger our internal processes to take them to a full reserve more so it's specific instances, which is why we're not seeing anything trend wise are saying that we've got any concerns on a broad basis and as we look ahead, we're quite opportunistic or else. We would have made other adjustments but I.

Jeffrey S. Edison: There were specific stories on these two acquisitions where, you know, we got pretty favorable pricing, but we haven't really come off of that guidance of, you know, 6-3 to 6-7 kind of a range. So that's how we're thinking about the year and, you know, again, we'll see how it progresses. You know, two marks don't make a year, but, you know, I would say, We don't think there's that much movement from the six and a half kind of midpoint at this point. Got it.

John P. Caulfield: It's complemented by the rent growth that youre seeing the leasing activity and the spreads that we're seeing and so we continue to be to be bullish.

Speaker Change: And then maybe if I could just push back I guess, what change to where you felt that you needed to take reserves around those disparate group of tenants.

Speaker Change: Demand is still strong and hey.

Speaker Change: Hey, guys feeling great about the neighbors in general.

Speaker Change: John in terms of why we took the those things I mean, I think I think that.

Speaker Change: When you change when you move.

John P. Caulfield: Youre sort of strategy thinking to look we wanted to get the space back as quickly as we can and marked them to market.

Michael William Mueller: Thanks so much, guys. Your next question is from the line of Michael Mueller with J.P. Morgan. Yeah, hi, just a quick, quick occupancy question. I guess, where do you see anchor and overall economic or physical occupancy ending up the year? Bob, do you want to take that? Bob, we're missing you. Sorry, Jeff.

John P. Caulfield: That that debt is a.

John P. Caulfield: In this environment, where you have the level of demand from the retailers.

John P. Caulfield: We're taking a.

John P. Caulfield: That is a natural.

John P. Caulfield: Sort of strategic.

John P. Caulfield: Movement, it's not a it's not like we haven't always done that its just that were.

Robert F. Myers: Looking at our anchor pipeline and the demand we're seeing, I definitely believe that our inline and our anchor occupancy will be elevated. It's hard to exactly know what that is, but I would certainly think that we would be at the higher range of the 98.8 or 98.9 on the anchor, and in the inline, I certainly think that we'll be north of the 94.8 that we're seeing today, given the demand. So at this point, I'd say it'll certainly be elevated, but it's really hard for me to pinpoint exactly what it'll be. Okay, that was it.

John P. Caulfield: It is an increased impetus to do that when youre getting 40% rent spreads.

John P. Caulfield: And that is going to.

John P. Caulfield: <unk>.

John P. Caulfield: Yeah.

John P. Caulfield: That will accelerate the process of.

John P. Caulfield: Yes.

John P. Caulfield: Putting someone who is.

John P. Caulfield: On the <unk>.

John P. Caulfield: Right on the edge of whether how youre going to do it you're going to want to go you are going to want to be more aggressive about that and youre going to be more aggressive in terms of.

John P. Caulfield: The retention on those.

John P. Caulfield: Rents and Thats that.

John P. Caulfield: I mean that is.

I think youre going to see.

John P. Caulfield: Among.

A number of our peers as they get closer to.

Michael William Mueller: Thank you. Thanks, Michael. Your next question is from the line of Juan Sanabria with BMO Capital Markets. Good afternoon.

John P. Caulfield: A high level of occupancy like where we're at and for US. It's we see it as a huge opportunity for us and we're going to we're going to pursue it aggressively and it will have I think it will you will see some bumps up and down in the.

Juan Carlos Sanabria: Just hoping you could give a little bit more color on the bad debt. It sounds like it's not driven by national tenants. Is it being driven more by some of the smaller mom and pop in lines? And just curious if you could break it out, how much of the bad debt was related to just tenant closures or bankruptcies versus... You guys being proactive and trying to get higher leases upon renewal or release in that space? John, do you want to want to take that one? Sure. Good afternoon, Juan.

John P. Caulfield: And bad debt.

John P. Caulfield: <unk>.

John P. Caulfield: But with the opportunity we have.

John P. Caulfield: We're going to do that and we think we will see outsized growth.

John P. Caulfield: On the top line not not in the in this slide in but that will weigh more than off.

John P. Caulfield: <unk> any now.

John P. Caulfield: Negative sort of accounting impacts you have from reserves.

John P. Caulfield: Does that.

John P. Caulfield: The answer.

John P. Caulfield: So as we look at the bad debt, it is not, when I say it's not related to national, I would say it could be disputes as well. So I was saying it's not a national bankruptcy. So when you're looking at those names that are going, that's not impacting. So it's specific instances, which is why we're not seeing anything trend-wise or saying that we've got any concerns on a broad basis. And as we look ahead, we're quite opportunistic; otherwise, we would have made other adjustments.

Speaker Change: It does yes, im not sure John wanted to add anything.

Speaker Change: If not on.

Speaker Change: The address.

Sorry, John.

John P. Caulfield: No I was going to say you again go ahead sorry.

John P. Caulfield: And then just on the acquisition side.

John P. Caulfield: I'm a little bit surprised that you guys are.

John P. Caulfield: As bullish but with similar cap rates given changes in the cost of capital not so much on the debt side with the push and pull of rates and spreads, but just on the on the equity side.

John P. Caulfield: Sure.

John P. Caulfield: How do you think about.

John P. Caulfield: Your implied cap rate, that's gone up as the equity markets a profit sold off.

John P. Caulfield: But I think it's complemented by the rent growth that you're seeing, the leasing activity, and the spreads that we're seeing. And so we continue to be bullish. And maybe if I could just push back, I guess what changed to where you felt that you needed to take reserves around this disparate group of tenants?

John P. Caulfield: And then each of ABN require a higher returns.

John P. Caulfield: On a cap rate or IRR.

John P. Caulfield: And just yes.

You guys have been very acquisitive, but your cost of capital changes every day and is deteriorating a little bit. So how do you guys just broadly thinking about that.

So.

John P. Caulfield: As Youll recall when we when we.

John P. Caulfield: First came out the IPO.

John P. Caulfield: Our targeted Unlevered IRR was an eight.

John P. Caulfield: And.

Jeffrey S. Edison: With demand still strong, are you guys feeling good about the neighbors in general? John, in terms of why we took those things, I mean, I think that when you change your sort of strategic thinking to, look, we want to get the spaces back as quickly as we can and mark them to market, that is, in this environment where you have the level of demand from the retailers, we're taking, that is a natural sort of strategic movement. It's not, I mean, it's not like we haven't always done that.

John P. Caulfield: As the market is move we move that to a nine.

John P. Caulfield: And the product that we are seeing is underwriting north of benign.

John P. Caulfield: And some of it well north of benign.

John P. Caulfield: To us those are accretive opportunities at the at where things are today.

And.

John P. Caulfield: They're there.

John P. Caulfield: One of the advantages of being in the market on a regular basis as you will take advantages and there will be times, where.

John P. Caulfield: You won't hit you won't hit the cycle perfectly.

John P. Caulfield: But you will.

John P. Caulfield: If you look at what we bought last year, I mean that underwrote to north of well north of benign and a half and we feel good on a long term basis that that will more than be there'll be significantly accretive to two.

Jeffrey S. Edison: It's just that we have an increased impetus to do that when you're getting 40% rent spreads. And that is going to accelerate the process of, you know, putting someone who is, You know, on the right side of whether how you're going to do it, you're going to want to go, you're going to want to be more aggressive about that. And you're going to be more aggressive in terms of, you know, the retention on those rents, and that's, that's, I mean, that is what I think you're going to see among a number of our peers as they get closer to, you know, a high level of occupancy.

Speaker Change: The company. So that's how we think about it.

Speaker Change: And we get.

Speaker Change: More aggressive less aggressive based upon that spread between where we can invest the money in and where what our cost of capital is in that.

Speaker Change: Youll see that.

Speaker Change: Throughout the history of the company that Thats that that's been a very successful.

Jeffrey S. Edison: Like where we are at. And for us, we see it as a huge opportunity for us, and we're going to, we're going to pursue it aggressively. And it will have, I think it will, you will see some bumps up and down in the bad debt, but with the opportunity we have, we're going to do that. We think we'll see outsized growth on the top line, not, not in this line, but that will weigh more than up with any negative sort of accounting impacts you have from reserves. Does that answer your question? Yes, it does. Yeah, I'm not sure if John wanted to add anything. If not, just on the accolades, search.

Speaker Change: Strategy for Us and.

So are we.

Going to be as aggressive this year, if we don't get the kind of pricing while our cost of capital is more so the answer is no but.

Speaker Change: We will be in the market and we will I mean I'm comfortable.

Speaker Change: Comfortable we'll find opportunities there'll be highly accretive for for what we what we do.

Speaker Change: Does that what does that answer your question.

Thanks, Jeff I appreciate it.

Speaker Change: Yes.

Speaker Change: Your next question is from the line of Dori Kesten with Wells Fargo.

Dori Lynn Kesten: Hi, Thanks. Good morning can you comment on your intentions with the swaps maturing later this year and then just generally.

Floating rate exposure are you most comfortable with.

Yes.

Dori Lynn Kesten: Dara. Thanks for the question of John do you want to sort of walk through through that.

John P. Caulfield: Sure. So we are we are 24% floating today, we do have swaps that mature later this year, we did opportunistically execute swap agreement for $150 million in the first quarter at that point in time.

John P. Caulfield: No, I was going to say you're good, go ahead, sorry. And then just on the acquisition side. I'm a little bit surprised that you guys are so bullish but with similar cap rates given changes in the cost of capital, not so much on the debt side with the push and pull of rates and spreads, but just on the equity side. I mean, how do you think about... weighing, you know, your implied cap rate that's gone up as the equity markets have broadly sold off and the need to maybe require a higher return on the Caprador

John P. Caulfield: It was we believed there was going to be higher for longer and it was ultimately there were six rate cuts at the time so.

John P. Caulfield: We move Opportunistically, but on a long term basis, our plan to get to our long term fixed rate.

Target of 90%, we would like to do that through incremental financing risk.

John P. Caulfield: With fixed rate instruments, primarily in the unsecured bond market. So as we move forward. We are at it at an elevated rate with regards for our floating rate debt exposure, but as we look at it also I mean, even though it is higher for longer there is stability there and we view that there's more likelihood that that rates will come down that didn't go up from here.

John P. Caulfield: And just, you guys have been very acquisitive, but you know, your cost of capital changes every day and is deteriorating a little bit. So how do you guys broadly think about that? So as you recall, when we first came out with the IPO, our targeted unlevered IRR was an 8. And as the market has moved, we moved that to a 9.

John P. Caulfield: And so we are choosing to maintain that flexibility and as we look at swaps swaps are useful as you have in the floating rate debt instrument underneath it and so as we are moving towards and choosing to exercise in the unsecured bond market, which we would certainly hope to do in the next six months to 12 months that will help move.

Jeffrey S. Edison: And the product that we are seeing is underwriting north of a 9, and some of it well north of a 9. To us, those are accretive opportunities at where things are today. And they're One of the advantages of being in the market on a regular basis is you will take advantages, and there will be times where you won't hit the cycle perfectly. But you will. I mean, look at what we bought last year. I mean, that underwrote well north of a nine and a half.

John P. Caulfield: But in the near term, we are having a higher rate.

John P. Caulfield: Percentage higher percentage of floating but we are also positive. He is our overall earnings growth is allowing us to deliver positive SSO growth and so as we were just waiting for that right opportunity to lock in locking rates and begin extending our durations.

Jeffrey S. Edison: And we feel good on a long-term basis that that will be more than just, that will be significantly creative for the company. So that's how we think about it. And you know, we get more aggressive and less aggressive based upon that spread between where we can invest the money and where, you know, what our cost of capital is. And that, you know, you'll see that, throughout sort of the history of the company, that that's been a very successful strategy for us. And, you know, so are we going to be as aggressive this year if we don't get the kind of pricing? Well, our cost of capital is higher, so the answer is no.

Speaker Change: Okay sure one of our one of our.

Speaker Change: Dori I just switched because as Jeff one of our strategies as we've talked about is make sure. We're match funding when when we can and.

Speaker Change: Our our view is that.

Speaker Change: Six month or one year.

Speaker Change: Swap does not match funding.

Speaker Change: And that's why we're being patient and waiting till we have where we can get duration.

Speaker Change: At rates that we find favorable.

Speaker Change: And we will continue to do that I mean, we said our balance sheet up to be able to do that and it's one of the advantages of having one of the better balance sheets in the spaces that we can.

Juan Carlos Sanabria: But we will be in the market, and we will. I mean, I'm comfortable we'll find opportunities that are highly accretive to what we do. Does that answer your question? Thanks, Jeff.

Speaker Change: We can be opportunistic and enter these markets, but our our strategy over time will be to actually match fund on a longer term basis not.

Dori Lynn Kesten: I appreciate it. Yeah, yeah. Your next question is from the line of Dori Kesten with Wells Fargo. Thanks. Good morning.

Dori Lynn Kesten: Can you comment on your intentions with the swaps maturing later this year and then just generally? What floating rate exposure are you most comfortable with over the next few years? Dori, thanks for the question. John, do you want to sort of walk through that?

Speaker Change: Not doing.

Speaker Change: Two year swaps or 18 months swaps those those will be part of the thing, but they're very.

Speaker Change: And in my mind, they have a very minimal impact on the true sort of risk of the company, where where our longer term that is where we're focused on getting the balance sheet.

John P. Caulfield: Sure. So we are, we are 24% floating today. We do have swaps that mature later this year. We did opportunistically execute a swap agreement for $150 million in the first quarter. At that point in time,

Speaker Change: Okay.

Then what what category of retailers be financing easier to push escalators higher for English team continue to have more difficult conversations.

Speaker Change: Okay.

Speaker Change: Bob do you want to cover that.

Yeah sure.

Robert F. Myers: Great question, So where we continue to see a lot of the demand is still at our restaurants and our quick service.

John P. Caulfield: It was, you know; we believed it was going to be higher for longer, and it was ultimately, there were six rate cuts at the time. So we move opportunistically. But on a long-term basis, our plan to get to our long-term fixed rates, you know, target of 90 percent. We would like to do that through incremental financing with a fixed rate, primarily in the unsecured bond market. So as we move forward, we are at an elevated rate with regard to our floating rate debt exposure. But as we look at it also, I mean, even though it has been paired for longer, there is stability there.

Robert F. Myers: Restaurants health and beauty med tail.

A little bit from <unk>.

Robert F. Myers: Some entertainment like fitness uses as an example.

As we mentioned earlier over 70% of our rent is from necessity based goods and services so from a merchandising standpoint.

Robert F. Myers: That's where we continue to see the positive leasing spreads of the 29% in the renewal spreads you saw at 16, 9% and then.

Robert F. Myers: But we've had a lot of success with escalators with our local neighbors so 27%.

John P. Caulfield: And we view that there's more likelihood that rates will come down than go up from here, so we are choosing to maintain that flexibility. And as we look at swaps, swaps are useful as you have the floating rate debt instrument underneath it.

Robert F. Myers: Of our inline our local neighbors and even when I believe the number was 19%.

Robert F. Myers: Renewal spreads for the first quarter with a local neighbors and you'll find typically.

John P. Caulfield: And so as we are moving towards and choosing to invest in the unsecured bond market, which we would certainly hope to do in the next 6 to 12 months, that will help move us up. And in the near term, we are having a higher rate. Okay, Dori, one of our one of our Oh, Dori, I just was gonna say this, Jeff, one of our strategies is we've talked about is, you know, make sure we're matched funding when we can, and, you know, our view is that, you know, a six month or one year swap swap is not matched funding.

Robert F. Myers: With that type of merchandising play that you can you can generate higher escalators and we are seeing.

Robert F. Myers: Between two five and 3% renewal escalators in addition to the year one.

Robert F. Myers: $16 nine overall or.

Robert F. Myers: Our in lines at 19, so we continue to see.

Robert F. Myers: Opportunities in the segments that are service based necessity based so I'm not seeing any cracks in terms of I'm seeing consistency across the portfolio in terms of retention.

John P. Caulfield: And that's why we're, you know, being patient and waiting till we have a situation where we can get duration at rates that we find favorable. And we'll continue to do that. I mean, we set our balance sheet up to be able to do that.

Robert F. Myers: And then our Merchandizing strategy. So it's it's working.

Speaker Change: Yeah, Okay. Thank you.

Speaker Change: Your next question is from.

Payout: Your next question is from the line of payout at Saia.

Payout: Which bank.

Payout: Yes.

Payout: And.

Payout: Most of my questions have been asked but I just had a quick one.

Jeffrey S. Edison: And, you know, one of the advantages of having one of the better balance sheets in the space is that we, you know, we can, we can be opportunistic and enter these markets. But our strategy over time will be to actually match funds on a longer-term basis, not, you know, not doing, you know, two-year swaps or 18-month swaps. Those will be part of the thing.

Payout:

Payout: And it's not <unk> specific but just shopping centers in general.

Payout: Everyone's kind of talking about will be strong demand at this point and everyone has very good.

Payout: So the environment was very strong the stocks in general I think again, having a bit of a rough ride that sort of just because of everyones general 2024 <unk> per share growth profile. So the question is well.

Payout: The mental this was wrong.

Payout: <unk> stock themselves cost of capital is somewhat challenging.

Jeffrey S. Edison: But they're very, I mean, in my mind, they have a very minimal impact on the true sort of risk of the company where our longer-term data is where we're focused on getting the balance. And then what category of retailers have you found it's been easier to push escalators higher for? And which do you continue to have more difficult conversations with?

Payout: Viewpoint that remember we start to see private equity get more involved in this space again.

Speaker Change: Yes, the answer is yes.

Speaker Change: I I don't think.

Speaker Change: Blackstone has sort of said that theyre going to do anything.

Of significance on the on the retail side.

Robert F. Myers: Bob, you want to want to cover that? Yeah, sure. Great question.

Speaker Change: But.

Speaker Change: There is significant.

Speaker Change: Private equity interest out there.

Robert F. Myers: So where we continue to see a lot of demand is still in our restaurants and our quick service restaurants, Health and Beauty, Medtail, a little bit from some entertainment, like fitness uses, as an example. You know, as we mentioned earlier, over 70% of our rent is from necessity-based goods and services, so from a merchandising standpoint, that's where we continue to see the positive leasing spreads of the 29% and the renewal spreads.

Speaker Change: So some of it's mispriced, so probably not really.

Speaker Change: A threat in the business or our opportunity.

Speaker Change: To be a buyer in this market, but there is there.

Speaker Change: We're.

Speaker Change: We're seeing some a number of firms that are there.

Speaker Change: They're circling and theirs, they theyre seeing that.

Speaker Change: These underlying fundamentals are going to create long term growth and.

Speaker Change: It can be bumpy for a little while but they when they look out three to five years. They are saying look I can get those.

Robert F. Myers: You saw 16.9%, and then, you know, we've had a lot of success with escalators with our local neighbors. So 27% of our in-line customers are local neighbors, and even when I believe the number was 19% on renewal spreads for the first quarter with our local neighbors, you'll find typically with that type of merchandising play that you can generate higher escalators, and we are seeing between 2.5% and 3% renewal escalators in addition to year one. 16.9 overall or are in lines at 19.

Speaker Change: Mid teen Levered returns, maybe not 20, but I can get mid teens and in an environment like this and that's that that will they will pull the trigger on that so.

Speaker Change: Our belief is that they are.

Speaker Change: Going to become more and more a part of the retail market that they've been out of pretty significantly for a significant period of time and it's it's it's all.

Dori Lynn Kesten: So we continue to see opportunities in these segments that are service-based and necessity-based. So I'm not seeing any cracks in terms of, I'm seeing consistency across the portfolio in terms of retention and then our merchandising strategies. So it's working. Okay, thank you. Your next question is from the line of Teo Okusanya with Deutsche Bank. Good afternoon.

Speaker Change: My My read is it's all based on the fundamentals I mean, they're looking at the.

Speaker Change: The lack of new.

Speaker Change: Demand there there are some costs and we are bidding some of the.

Speaker Change: The big boxes of some of our peers that also appears facing and that is a.

Speaker Change: That is a cost, but when you get through that period of time.

Speaker Change: There is some pretty significant opportunity and you can see it in our rent spreads I mean those are not.

Omotayo Tejumade Okusanya: Most of my questions have already been asked, but I do have a quick one. And it's not Pico specific, but just shopping centers in general. You know, everyone's kind of talking about really strong demand at this point. You know, everyone has a very good, the environment feels very strong. The stocks, in general, I think, again, are having a bit of a rough ride this year, just because of everyone's general 2024 FFO per share growth profile.

Speaker Change: I mean those are not normal.

Speaker Change: Rent spreads so those are the rent spreads of item.

Speaker Change: We're really strong operating environment, and so I I think youre going to I think youll see them entering where and how it will be interesting, we'll see how that plays out.

Thank you for that color.

Yes.

Speaker Change: Your next question is from Todd Thomas with Keybanc capital.

Todd Michael Thomas: Yes, hi, thanks.

Todd Michael Thomas: I just wanted to go back to.

Omotayo Tejumade Okusanya: So the question is, if fundamentals are so strong, you know, stocks themselves, cost of capital is somewhat challenging. Is there a viewpoint that maybe we should start to see private equity get more involved in this space again? Um, yeah, the answer is I'm yes.

Todd Michael Thomas: Investment activity a little bit.

Todd Michael Thomas: Comments about the current pipeline they sound encouraging in terms of what you are underwriting what's what's in the pipeline.

Todd Michael Thomas: And John you mentioned that there are some properties tied up does.

Jeffrey S. Edison: I don't think Blackstone has sort of said that they're going to do anything of significance on the retail side. But there is significant private equity interest out there, some of it mispriced, so probably not really a threat to the business or an opportunity to be a buyer in this market.

Todd Michael Thomas: Under our contract to get you to the $2 million to $300 million range in guidance such that.

Todd Michael Thomas: You have the range.

Todd Michael Thomas: <unk> accounted for at this point in the year and the volume slowdown a bit more in the second half.

Jeffrey S. Edison: But we're seeing a number of firms that are aware, they're circling, and there's they see that these underlying fundamentals are going to create long-term growth. And it, you know, it can be bumpy for a little while, but when they look out, you know, three to five years, they're saying, Look, I can get those, you know, mid-teen levered returns, maybe not 20, but I can get mid-teens in an environment like this.

Todd Michael Thomas: Hey, Todd Thanks for the call.

Todd Michael Thomas: We do not have I mean, we have a.

Todd Michael Thomas: This year wood.

Todd Michael Thomas: If we were to gas will be a more stabilized year than than last year in terms of more gradual increases we don't we don't have a full commitment on the.

Speaker Change: On our guidance.

Speaker Change: But we do it we anticipate that happening over the year.

Jeffrey S. Edison: And that's that they will pull the trigger on that. So my, our belief is that they are going to become more and more a part of the retail market that they've been out of pretty significantly for a significant period of time. And it's, it's, my read is it's all based on the fundamentals. I mean, they're looking at, you know, the lack of new demand there, there are some, you know, costs in rebidding some of the, the big boxes of some of our peers that are so facing, and that is, you know, that that is a cost. But when you get through that period of time, there's some pretty significant opportunities, and you can see it in our rent spreads. I mean, those are not normal rent spreads.

Speaker Change: Think it will be.

Speaker Change: Like last year that was very.

Speaker Change: Fourth quarter <unk>.

Speaker Change: Oriented I think we've got I think we've got a more consistent flow this year, but again, it's you know it's early in the year and stuff can happen and we will see how that how that plays out but.

We.

Speaker Change: We would assume it will be.

Speaker Change: Pretty.

Speaker Change: Consistent with the.

Speaker Change: On a quarter by quarter basis at this point.

Speaker Change: Okay does that makes sense that's helpful. Yeah sure absolutely.

Speaker Change: Then can you talk a little bit about the quality of the product that you are underwriting.

Jeffrey S. Edison: So those are rent spreads of a really strong operating environment. And so I, I think you're going to, I think you'll see them entering where and how it will be interesting. We'll, we'll see how that plays out. Thank you, Paula.

Looks compared to what you've seen more recently.

Speaker Change: And is everything that youre buying predominantly smaller format grocery anchored products similar product to what you own today.

Todd Michael Thomas: Your next question is from Todd Thomas with KeyBank Capital. Yeah, hi, thanks. I just wanted to go back to investment activity a little bit. And, you know, the comments about the current pipeline sound encouraging in terms of what you're underwriting and what's in the pipeline. And, John, you mentioned that there are some properties tied up. Does what's under contract get you to the $200 million to $300 million range and guidance such that, you know, you have the range sort of accounted for at this point in the year, and the volumes slow down a bit more in the second half? Hey, Todd, thanks for the call.

Speaker Change: Yes so.

Speaker Change: <unk>.

Speaker Change: Okay.

Speaker Change: I would say the quality is pretty consistent.

Speaker Change: So when you look at that sort of targeted 5800 centers, we've got it's a pretty consistent group of projects.

Speaker Change: The.

Speaker Change: I do I do think there are some select opportunities that.

Speaker Change: Don't fit perfectly in the box, but a really great opportunities that we will.

Speaker Change: We're willing to take advantage of.

Speaker Change: Some shadow anchored stuff that where we can get really strong growth and returns.

Speaker Change: Some stuff that has a small amount of T J Max exposure or that kind of thing we might we would look at.

Speaker Change: But as a whole it's going to be that.

Jeffrey S. Edison: We do not have I mean, we have a this year would be a more stabilized year than last year in terms of more gradual increases. We don't have a full commitment to our guidance yet, but we anticipate that happening over the year. I don't think it will be like last year, which was very fourth-quarter oriented.

Speaker Change: It's going to be what you expect from us.

Speaker Change: Hundred and 15000 square foot number one or two grocer.

Speaker Change: And we are seeing enough of that to where we obviously, we feel good with our with our guidance and not no no drop off I wouldn't see any drop operating in in terms of quality that we're seeing it's a pretty it's pretty consistent with what we have.

Jeffrey S. Edison: I think we've got a more consistent flow this year, but again, it's early in the year, and stuff can happen, and we'll see how that plays out. But we would assume it will be pretty consistent with the, you know, on a quarter by quarter basis at this point. Okay. Does that make sense, Todd?

Speaker Change: Have seen on an ongoing basis, just the bi theres more volume and that makes us feel a little bit better.

Speaker Change: Okay, and then just one more if I could here.

Speaker Change: You said previous previously that you have.

Speaker Change: Capacity to acquire about $200 million on a leverage neutral basis with with.

Todd Michael Thomas: Yeah, sure. And then, you know, can you talk a little bit about the quality of the product that you're underwriting, how that looks compared to what you've seen more recently? And is everything that you're buying, you know, predominantly smaller format, grocery-anchored, similar product to what you own today? Um, yeah, so, I would say the quality is pretty consistent.

Speaker Change: With free cash flow.

Speaker Change: Sure.

Speaker Change: With I guess amounts above that being on the line.

Speaker Change: It sounds like from your comments that youre comfortable taking up leverage a little bit here and utilizing the line in the near term and it's been a fairly volatile capital markets environment and sort of interest rate outlook.

Speaker Change: Which has continued to change John.

Jeffrey S. Edison: When you look at that sort of targeted 5,800 centers we've got, it's a pretty consistent group of projects. I do think there are some select opportunities that don't fit perfectly in the box, but are really great opportunities that we're willing to take advantage of. Some shadow-anchored stuff where we can get really strong growth and returns, some stuff that has a small amount of TJ Maxx exposure, or that kind of thing we would look at.

Speaker Change: You mentioned, you expect rates to come down.

Speaker Change: But just curious if that's sort of the right strategy and what gives you confidence that that.

Speaker Change: The right strategy.

Speaker Change: So.

Speaker Change: We are not projecting any.

Speaker Change: Any kind of significant change in our leverage.

Speaker Change: So.

Speaker Change: That we will be in the <unk>.

Speaker Change: Some are between five and five five.

Speaker Change: If we execute our strategy as we anticipated this year. So we don't I don't I don't think there will be any real movement in that part of it.

Jeffrey S. Edison: But as a whole, it's going to be what you expect from us, 115,000 square feet, number one or two grosser. And we are seeing enough of that to where, obviously, we feel good with our guidance. And no drop off; I wouldn't see any drop off or anything in terms of the quality that we're seeing. It's pretty consistent with what we have seen on an ongoing basis. There's more volume, and that makes us feel a little bit better. Okay. And then just one more if I could get here.

Speaker Change: And.

Speaker Change: But.

Speaker Change: The the.

Speaker Change: The opportunity is.

Speaker Change: Yeah.

Speaker Change: One of the reasons, we hate giving guidance on on acquisitions is it we're not we're really disciplined in terms of what we buy and so.

Speaker Change: If it's not there it's not there, but we're if it's there and it's going to get sold and we can get it at our kind of pricing, we're going to be a buyer for it because we know what we can do there and what that can generate growth wise in.

Todd Michael Thomas: I think you said previously that you have the capacity to acquire about $200 million on a leverage-neutral basis with free cash flow, with I guess amounts above that being on the line. Sounds like from your comments that you're comfortable taking up leverage a little bit here and utilizing the line in the near term. And it's been a fairly volatile capital markets environment and sort of interest rate outlook, which has continued to change.

Speaker Change: The business over not over just six months, but over a sustained.

Speaker Change: Five to seven year period of time that we're doing our underwriting it and that's that.

Speaker Change: That's.

Speaker Change: We think thats the right strategy and we don't but again, we're not this is not a lever up model that we're trying I mean, we're we.

Speaker Change: We are committed to keeping a very strong balance sheet and not not getting out over our skis on that in that regard.

Speaker Change: Hey, I'll just add to that I mean, as Jeff said, our long term leverage target is in the five and a quarter five and a half range and when we talk about being leverage neutral and the growth that we have.

John P. Caulfield: John, you mentioned you expect rates to come down, but just curious if that's sort of the right strategy and what gives you confidence that that's the right strategy? So, uh, we are not projecting any kind of significant change in our leverage. Um, so, uh, that, you know, we, we've, you know, we'll, we'll, we'll be in the, you know. Robert Mueller, Jeffrey Spector, Dori Kesten, Devin Murphy, Juan Sanabria, Jeffrey Epstein, Um, you know, the, the, opportunity is going to... One of the reasons we hate giving guidance on acquisitions is that we're really disciplined in terms And so, if it's not there, it's not there.

Speaker Change: Leveraging fill in acquisitions does mean that you are adding that you're just maintaining your debt to EBITDA is that cash flow grows.

Speaker Change: With regards to the comment that I made about interest rates.

Speaker Change: We because of the growth that Jeff just spoke to in the assets that we're buying.

Speaker Change: I will say this our acquisitions are not being made on that on a basis dependent for rates to go down.

Speaker Change: I don't mean to imply that at all I think what we're saying is that we are floating temporarily as we look to execute that long term match strategy and so we have got positive leverage.

Jeffrey S. Edison: But if it's there and it's going to get sold, and we can get it at our kind of price, we're going to be a buyer for it because we know what we can do there and what that can generate growth-wise in the business over, not over just six months, but over a sustained five to seven year period of time that we're doing our underwriting in. We think that's the right strategy, and we don't, but again, this is not a levered-up model that we're trying. I mean, we're committed to keeping a very strong balance sheet and not getting out over our skis on that, in that regard. Hey, I'll just add to that.

Speaker Change: Today and going forward and so we are it is something that we are going to be opportunistic about but managing our leverage cautiously.

Speaker Change: Yeah, Todd I think on the on that I mean, I think the way we look at it is.

Speaker Change: If I.

Speaker Change: I wouldn't say that we're anticipating a decline in rates.

Speaker Change: But I would say that that we think that there's more.

Speaker Change: Down I'd like if you if you're looking at it from a pure risk standpoint, we think that it is more likely that they would.

Speaker Change: Go down over the next couple of years then.

Speaker Change: They would go up theyre, probably pretty range bound.

Speaker Change: We're really waiting to see if they stay range on and we're really talking about the 10 year because that's really what our focus is on is that getting that that longer duration capital so that but.

John P. Caulfield: I mean, as Jeff said, our long-term leverage target is in, you know, the five and a quarter, five and a half range, you know, and when we talk about being leverage neutral and the growth that we have, leverage neutral and acquisitions do mean that you are adding debt, you're just maintaining your debt to EBITDA as that cash flow grows. And with regard to the comment that I made about interest rates, maintaining, We, because of the growth that Jeff just spoke about and the assets that we're buying, I will say this, our acquisitions are not being made on a basis dependent on rates. I don't mean to imply that at all.

Speaker Change: We are not economists, but.

Speaker Change: We're in this business, we are making bets on where we think interest rates are going to go in terms of what we how you how you lay out your your inner.

Speaker Change: The interest rate exposure and Thats, what we are.

Speaker Change: What we're doing and we'll we'll continue to manage it that way.

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

John P. Caulfield: I think what we're saying is that we are floating temporarily as we look to execute that long-term match strategy. And so we've got positive leverage, you know, today and going forward. And so we are. It is something that we are going to be opportunistic about, but you know, managing our leverage, you know, with caution. Yeah, Todd. I think on that. I mean, I think the way we look at it is, if we, I wouldn't say that we're anticipating a decline in rates.

Jeffrey S. Edison: Great well, thanks, everybody for being on the call and thank you operator.

Jeffrey S. Edison: In closing, we're proud of what <unk> accomplished in the first quarter, our differentiated and focused strategy and our talented team combined to create a market leader in the shopping center business. We continue to enjoy a strong operating environment as we talked about our neighbors remained healthy and we don't see any cracks.

We're confident that the <unk> team will continue to deliver market leading results.

Jeffrey S. Edison: We have one of the lowest leverage balance sheets in the shopping center space and with our fortress balance sheet and ample liquidity, we do remain prepared for opportunities as they arise because well positioned to continue to successfully grow as we look forward. We believe we provide our investors with more alpha and less data.

Jeffrey S. Edison: But I would say that we think that there's more down, I'd like if you're looking at it from a pure risk standpoint, we think that it is more likely that they would go down over the next couple years, then they would go up. They're probably pretty range-bound, which, you know, we're really waiting to see if they stay in that range. And we're really talking about the 10 year because that's really what our focus is on is, you know, getting that longer duration capital. So that, but you know, we are not economists.

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

Speaker Change: Thank you for your time today, everyone have a great weekend.

Speaker Change: This concludes today's accomplished you may now disconnect.

Speaker Change: [music].

Jeffrey S. Edison: But, you know, because we're in this business, we are making bets on where we think interest rates are going to go in terms of what we, you know, how you lay out your, your, your interest rate exposure. And that's what we're, you know, that's what we're doing. And we'll continue to manage it that way. This concludes the question and answer session. I will now turn the conference back over to Jeff Edison for some closing remarks. All right.

Jeffrey S. Edison: Well, thanks, everybody, for being on the call, and thank you, operator. In closing, you know, we're proud of what PECO accomplished in the first quarter. Our differentiated and focused strategy and our talented team combined to create a market leader in the shopping center business. We continue to enjoy a strong operating environment, as we talked about. Our neighbors remain healthy, and we don't see any cracks.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: [music].

Jeffrey S. Edison: We're confident that the PECO team will continue to deliver market-leading results. We have one of the lowest leveraged balance sheets in the shopping center space, and with our fortress balance sheet and ample liquidity, we do remain prepared for opportunities as they arise. PICO is well positioned to continue to successfully grow as we look forward. We believe we provide our investors with more alpha and less beta.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Jeffrey S. Edison: On behalf of the management team, I'd like to thank our shareholders, Pico Associates, and our neighbors for their continued support. Thank you for your time today, and everyone have a great weekend. This concludes today's conference. You may now disconnect.

Speaker Change: Yeah.