Q1 2024 Acadia Realty Trust Earnings Call

Okay.

Operator: Thank you for standing by, and welcome to the Acadia Realty Trust first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker Change: Thank you for standing by and welcome to Acadia Realty Trust first quarter 'twenty to 'twenty four earnings conference call. At this time, all participants are in a listen only mode.

Alexander J. Levine: And even now, with people back to work, those tenants continue to post solid sales growth, and their performance remains well above pre-pandemic levels. And number four, of course, is basic supplies. There is no vacancy on the waiting list of tenants that consider Armitage to be a must-have location.

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

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

Jose Villegas: I would now like to hand the call over to Jose Vilches. Please go ahead. Good morning, and thank you for joining us for the first quarter 2024 Acadia Realty Trust earnings conference call. My name is Jose Villegas, and I'm an analyst in our Capital Markets Department. Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by forward-looking statements.

Alexander J. Levine: We are able to promote a highly competitive leasing environment, drive rents while we continue to curate. But this is not unique to Arminage; this is our way of identifying the right markets and the right Scale meaningfully and doing what we do best to drive. We swap out Armitage for Greenwich Avenue, the Gold Coast, Knox Henderson and Dallas, or M Street, and it's largely the same dynamic. Barriers to Entry, and we have performance. On Melrose, it's a similar recipe, but in the case of Melrose, you can add luxury to the list of ingredients.

Jose Wheelchairs: Good morning, and thank you for joining us for the first quarter of 2020 for Acadia Realty Trust Earnings Conference call. My name is Jose vouchers and I'm, an analyst in our capital markets Department before we begin please be aware that statements made during the call that are not historical maybe deemed forward looking statements within the meaning of the Securities Exchange Act of 1934 and actual results may differ materially.

From those indicated by forward looking statements.

Jose Villegas: Due to a variety of risks and uncertainties, including doses closed in the company's most recent form, 10K, and other periodic volumes with the FCC, forward-looking statements speak only as of the date of this call, April 30, 2024, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operations and added operating income. Please see Acadia's earnings press release posted on its website for reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures.

Due to a variety of risks and uncertainties.

Speaker Change: Does this close in the company's most recent Form 10-K, and other periodic filings with the SEC forward looking statements speak only.

As of the date of this call April 32024, and the company undertakes no duty to update them.

Speaker Change: During this call management may refer to certain non-GAAP financial measures, including funds from operations and other.

Alexander J. Levine: We know that luxury expansion is one of the strongest catalysts for rent. I've seen this play out over the last 36 months in Soho, on the Gold Coast, in Chicago, on Madison Avenue, and even in. It's no mystery that luxury tenants are capable of paying strong loans, but it is the ripple effect that luxury has on the overall market that makes the biggest, Clustering of Advanced Contemporary and Aspirational Brands and the competition for space around those luxury tenants that truly drives rent in America.

Speaker Change: Operating income. Please go to this earnings press release posted on its website for reconciliations of these non-GAAP financial measures, but the most directly comparable GAAP financial measures.

Jose Villegas: Once the call becomes open to questions, we ask that you limit your first round to two questions per caller to give everyone the opportunity to participate. You may ask further questions by re-entering the queue, and we will answer a sign for you.

Speaker Change: The call becomes open for questions.

Speaker Change: You limit your first round to two questions per caller to give everyone the opportunity to participate.

I ask further questions by Reinsert yourself into the queue and we want to assign permits.

Kenneth F. Bernstein: Now it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's Management Remarks. Great job, Jose. Welcome, everyone. I'm here with John and Stuart and A.J. Levine, and I'll give a few comments, then hand the call over to A.J.

Speaker Change: It's my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer will begin today's management remarks.

Kenneth F. Bernstein: Job Jose. Thank you welcome everyone I'm here with John Stewart, and Nate Jay Levine and I'll give a few comments then hand the call over to a J and then John will discuss our earnings guidance and our balance sheet metrics and after that our teams here to take questions.

Alexander J. Levine: Clustering is one by-product of that secular shift of luxury and advanced contemporary tenants pivoting away from malls and department stores and focusing primarily on our high-growth. This is not a fact; it is the new reality for these dynamic tenants that are focusing their growth on where their customers want to be. Now, I say this all with the caveat that, despite our efforts... We will not get all of our under-market space back, not all of it. But over the next three to five years, we should be able to make a meaningful dent in unlocking that embedded value within our portfolio. Some of that will occur through Naturalisa.

Kenneth F. Bernstein: Then John will discuss our earnings guidance and our balance sheet metrics, and after that, our team is here to take questions. As you can see in our earnings release, our first quarter performance was strong and continues a multi-year trend of peer-leading top-line growth that is reflective of both the cyclical as well as the secular tailwinds that our portfolios experience. I'll let AJ and John discuss the building blocks of our NOI growth going forward and the moving pieces of our earnings in detail, but in short... A strong rebound and continued acceleration of the street retail component of our As A.J.

Kenneth F. Bernstein: As you can see in our earnings release, our first quarter performance was strong and continues a multi year trend.

Kenneth F. Bernstein: Leading topline growth that is reflective of both the cyclical as well as the secular tailwind.

Kenneth F. Bernstein: That our portfolio is experiencing.

Job Jose: I'll, let a J and John discussed the building blocks of our NOI growth going forward and the moving pieces of our earnings in detail, but in short.

Job Jose: The strong rebound in continued acceleration of the street retail component of our portfolio continues to drive this performance.

Alexander J. Levine: Some will come from those fair market value resets that are relatively unique to street, and others, as our team has shown their ability to do. Accelerated through our Pry Loose strategy, where we are constantly looking for opportunities to pry loose leased space, Accelerate a Positive Mark Tomorrow. Now, not all streets have begun their rebound. In San Francisco and on North Michigan Avenue, those markets are slower to recover. It falls squarely into the bucket of when and not if.

Kenneth F. Bernstein: As John will discuss, the combination of strong contractual growth and favorable recurring mark-to-market opportunities is positioning us for continued strong internal growth going forward. And, as John will discuss, the stability of our balance sheet, further enhanced with our recent extension and expansion of our bank credit facility, positions us with limited maturity and Limited Floating Rate Exposure. All of this supports our goal of creating superior top-line growth at the property level and then having that growth translate into bottom-line earnings growth. The positive trends we're seeing in both supply and demand dynamics and retailer performance mean that we are past this being just a cyclical COVID recovery story.

Job Jose: As Jay will discuss the combination of strong contractual growth.

Job Jose: Favorable recurring mark to market opportunities is positioning us for continued strong internal growth going forward.

And as John will discuss the stability of our balance sheet further enhanced with our recent extension and expansion of our bank credit facility.

Job Jose: Positions us with limited maturities.

Job Jose: And limited floating rate exposure.

Job Jose: All of this supports our goal of creating superior top line growth at the property level.

Job Jose: And then having that growth translate into bottom line earnings growth.

Job Jose: The positive trends, we're seeing in both supply demand dynamics and retailer performance means that we are past this being just a cyclical COVID-19 recovery story, even once we get our portfolio to full economic occupancy.

Alexander J. Levine: In the meantime, we can afford to be patient, and we're using this time to figure out the highest and best. In San Francisco, for example, both of our projects are under serious consideration. The addition of significant residential... Too early to go into detail, but we are spending this time exploring what would be needed to advance those goals. North Michigan.

Kenneth F. Bernstein: Even once we get our portfolio to full economic occupancy, our internal growth still looks strong, and that's because our street retail components should provide long-term growth of a couple hundred basis points higher than our suburban average. Our goal here is to continue to craft a portfolio. Driven by Street Retail, that has the highest likelihood of producing superior annual net effective growth in excess of wherever the new normal lands for both inflation and GDP growth.

Job Jose: Our internal growth still looks strong and that's because our street retail component.

Job Jose: Should provide long term growth of a couple hundred basis points higher than our suburban assets.

Job Jose: Our goal here is to continue to craft the portfolio driven by street retail.

Alexander J. Levine: The interest we're seeing is starting to feel like the early days of recovery on 5th Avenue in Madison. Still a ways to go, but there are several retailers that are circling the market, and when they land... should kick start that recovery that we always knew was coming. And earlier this year, we were happy to see a luxury tenant like Paul Stewart relocate from the Gold Coast to 822 North Michigan Avenue, just one block south of our asset at 840 North. Turning to City Point, the wind is firmly at our backs, and things continue to fall into place. Scaffolding is down.

Job Jose: That has the highest likelihood of producing superior annual net effective growth.

Job Jose: In access of wherever the new normal lives for both inflation.

Job Jose: And GDP growth.

Kenneth F. Bernstein: So this brings us to external growth. While the bid-ask spread for transactions is still a bit wide, and bond market volatility is elongating that reconciliation, the spread is narrowing, and we're beginning to see actionable opportunities for external growth. This is true both as it relates to additions to our core portfolio, as well as opportunities for our investment management platform. First, in terms of balance sheet additions, here, our primary focus will be adding street retail to our core portfolio, both due to what we view as compelling risk-adjusted returns and because we believe our shareholders will be rewarded by our continuing to grow this differentiated strategy in the public market, where we are the only REIT with this We have several hundred million dollars of deals consistent with this focus in our pipeline. Some are further along than others, but the stars still have to align.

Job Jose: So this brings us to external growth.

Job Jose: Well the bid ask spread for transactions is still a bit wide.

And the bond market volatility is elong gating that reconciliation.

Job Jose: The spread is narrowing.

Job Jose: And we're beginning to see actionable opportunities for external growth.

Job Jose: This is true both as it relates to additions to our core portfolio.

As well as opportunities for our investment management platform.

Job Jose: First in terms of balance sheet additions here, our primary focus will be adding street retail to our core portfolio.

Both due to what we view as compelling risk adjusted returns and because we believe our shareholders will be rewarded by our continuing to grow this differentiated strategy in the public markets.

Alexander J. Levine: The park is finished, scheduled to open this month, and will finally unlock those valuable spaces facing the park that we've been strategically holding. Fogo de Chao had their grand opening last month and has already added a new vibrant, Stretching the hours of operation along, is in possession of their space and is working to meet an anticipated opening in the. Including Sephora and Fogo, we will add nine tenants to CityPoint this year, representing over 40,000 square feet of With all the pieces continuing to fall into place, we will look back on 2024 as a transformative year for CityPoint and for downtown. So, I'm wrapping it all up. Strong Fundamentals, a Favorable Supply-Demand Dynamic, and the ability to leverage those factors. Better Curation. For more information, visit www. FEMA.gov. With that, I will turn things over to you.

Job Jose: Where we are the only REIT with this is a major focus.

Job Jose: We have several hundred million dollars of deals consistent with this focus in our pipeline. Some are further along than others and the star is still have to align.

Kenneth F. Bernstein: So we'll see how many actually come to fruition, but I am more encouraged today than I have been in a long time. In terms of funding, we should be able to do this accretively and on a leverage-neutral basis through a variety of different sources, including capital recycling from portions of our core portfolio that might not be as high-growth or as mission-critical. Loan lease lines, we have, subsequent to quarter end, finalized an agreement for the sale and recapitalization of one of our high-quality but lower-growth suburban assets currently in our core portfolio.

Job Jose: So we'll see how many actually come to fruition, but I am more encouraged today than I have been in a long time.

Job Jose: In terms of funding, we should be able to do this accretively and on a leverage neutral basis through a variety of different sources, including capital recycling from portions of our core portfolio that might not be as high growth or as mission critical long lease lines, we have subsequent to quarter end.

Job Jose: Finalized an agreement for the sale and recapitalization of one of our high quality, but lower growth suburban assets currently in our core portfolio, assuming it closes as anticipated this quarter, we will retain a 5% ownership stake plus customary fees for operating the asset within additional promote potential.

Kenneth F. Bernstein: Assuming it closes as anticipated this quarter, we will retain a 5% ownership stake plus customary fees for operating the asset, with then additional potential upside on the eventual refund. The transaction is anticipated to set the table for future acquisition opportunities with this institution, and it will be modestly accretive at closing, but then create more growth as we redeploy the capital. Along with our focus on accretively growing our core portfolio, we're also seeing opportunities through our investment management platform, where we can leverage our skills, leverage our deal flow, and match it with our institutional capital relationship. The benefits of this component are that it's a profitable business. It enables us to punch above our weight.

Job Jose: Syed on the eventual resale.

Job Jose: The transaction is anticipated to set the table for future acquisition opportunities with this institution and it will be modestly accretive at closing, but then create more growth as we redeploy the capital.

John Gottfried: Thanks, AJ, and good morning. We are off to a strong start with our operating results and key metrics coming in ahead of our expectations. We have also made considerable progress on our balance sheet. In addition to improving our debt to EBITDA by over half a turn during the quarter... We also successfully extended the maturity of our $750 million unsecured facility by an additional four years, along with up-sizing our borrowing capacity, all while maintaining our. I will now provide some further guidance, starting with our first quarter results. We reported FFO of 33 cents per share.

Job Jose: One was our focus of Accretively growing our core portfolio. We're also seeing opportunities through our investment management platform, where we can leverage our skills leverage our deal flow and match it with our institutional capital relationships.

Job Jose: The benefits of this component or it's a profitable business.

Job Jose: It enables us to punch above our weight it makes us better investors.

Kenneth F. Bernstein: It makes us better investors. It also enables us to participate in special situations, whether it's transactions like Albertsons or Mervins or distressed debt, where being solely reliant on the public market may not be the right fit. We also have several deals in our pipeline in this category. After quarter end, we put one deal under contract and are in the process of completing our diligence. These deals will likely look similar in structure to our Fund 5 business, and similar to the capital recycling that we're doing in our core business, we will fund this activity with the recycling of capital in this platform as well. Now keep in mind...

Job Jose: It also enables us to participate in special situations, whether it's transactions like albertsons, our mervyn's or distressed debt, where being solely relying on the public market may not be the right fit.

Job Jose: We also have several deals in our pipeline in this category after quarter end, we put one deal under contract and are in the process of completing our diligence. These deals will likely look similar in structure to our fund five business.

John Gottfried: Coming in slightly ahead of our expectations with strong tenant credit, along with solid property operating, and we are continuing to see encouraging trends within our portfolio. But as we just issued our guidance a few weeks ago, we felt it was a little too premature to make such an upward shift. But we remain on track to meet, if not, hopefully, exceed our expectations, which, as a reminder, were year-over-year FFO growth of 7.5% after stripping out promotion companies.

Job Jose: And similar to the capital recycling that we're doing in our core we will fund this activity with the recycling of capital in this platform as well.

Kenneth F. Bernstein: Given our size, it doesn't take much volume to move the needle for us. Even a few acquisitions, whether on balance sheets or in our investment management platform, can have an important impact on earnings. So to conclude...

Job Jose: Now keep in mind.

Job Jose: Given our size it doesn't take much volume to move the needle for us even a few acquisitions whether on balance sheet.

Job Jose: Or in our investment management platform can have an important impact to earnings so to conclude.

Kenneth F. Bernstein: It was another strong quarter for us on multiple fronts. And as we think about the three key drivers of our business, first, maintaining solid internal growth. AJ will walk you through our strong results and continued momentum. Second, we are maintaining a solid balance sheet, and John will walk you through our progress here and the important recasting of our bank. And then finally, creating accretive external growth. I discussed that briefly, and I suspect I'll be spending more time discussing this on future calls as well. And so, with that, I'd like to thank the team for their hard work this last quarter, and I'll turn the call over to Abe.

Kenneth F. Bernstein: It was another strong quarter for us on multiple fronts and as we think about the three key drivers of our business first maintaining solid internal growth AJ, who will walk you through our strong results in contingent continued momentum.

Kenneth F. Bernstein: Second is maintaining a solid balance sheet and John will walk through our progress here and the important recasting of our bank facility.

John Gottfried: With this projected earnings growth being driven by an increase of 5-6% in our same store on October 1st. In addition to year-over-year growth, I thought it would be helpful to walk through our sequential growth and how we see that quarterly trajectory contributing to our annual... Consequently, our first quarter FFO grew by approximately 7%, increase of about two cents a share after excluding promotes. 3 cents a termination income that we highlighted in our, And precisely as we had anticipated, it was our core NOI, or more specifically, our differentiated street retail portfolio that, Before diving into the numbers, I'm going to pause and do a quick overview of how we report and discuss our results, both those that are newer to the name, as well as a refresher for those that know... All of these numbers can be easily traced back to our financial statements in Supplemental, and we are always available to assist should anyone have any questions.

Abe: And then finally, creating accretive external growth.

Abe: I'll discuss that briefly and I suspect they'll be spending more time discussing this on future calls as well and so with that I'd like to thank the team for their hard work this last quarter and I will turn the call over to Asia.

AJ Levine: Thanks Ken. So once again, I'm happy to report that from where I sit, and from what I'm hearing and seeing from our retailers, the positive trends, both secular and cyclical, that have fueled a strong recovery over the last 36 months, continue unabated. That's True for Our Suburban, even more so on the high growth. Higher Barrier-to-Entry Streets where we operate, from SoHo to Melrose Place, the Gold Coast to M Street, and everywhere in between.

Abe: Great. Thanks, Ken.

AJ Levine: So once again I'm happy to report that from where I sit and from what I'm hearing and seeing from our retailers the positive trends, both secular and cyclical that are fueled a strong recovery over the last 36 months continue unabated.

AJ Levine: It's true for our suburban assets, but even more so on the high growth higher barrier to entry streets, where we operate from Soho to Melrose place the gold coast to M Street and everywhere in between we are still seeing more demand than the markets can accommodate.

AJ Levine: Our tenants are healthy and their sales are significantly above where they were in 2019.

AJ Levine: There continues to be a shift out of department stores, and non a malls and into open Air Street retail and for the vast majority of our retailers. The physical store remains the primary driver of profitability for their businesses.

AJ Levine: And as time moves along we're seeing leases getting signed well ahead of where we thought rents. We're just one quarter prior.

John Gottfried: Total NOI, defined as our share of net operating income from our core and fund- This sequentially increased by approximately 4% from the 41.8 million that we reported in the fourth quarter of 2010. In terms of quarterly run rate, prior to factoring in any acquisitions or divestitures, we expect that this $43.4 million that we reported this quarter will increase to approximately $45 million. Within the $43 million of ProRata NOI, our share of fund NOI was sequentially flat at approximately $7.5 million.

Job Jose: Okay.

AJ Levine: Now Ken mentioned the building blocks of NOI growth in our portfolio, while we continue to outperform and provide a higher rate of growth in our peer set.

AJ Levine: Well it starts with our ethanol pipeline.

AJ Levine: At the end of the quarter, our ethanol pipeline set at $7 7 million, which represents five 5% of in place ABR that includes the $1 2 million. We added in the first quarter and we've already doubled that number in April which puts us right on pace with last year we.

AJ Levine: We see no signs of a deceleration and have an additional $6 million of ABR in advanced stages of negotiation and of course, it's only April and there are no meaningful expirations on the horizon.

AJ Levine: It is worth noting that the vast majority of that SNL pipeline originates from our street portfolio, which provides for higher contractual increases.

John Gottfried: Thus, it was our core portfolio that drove our sequentially increasing by about 5% or about 2 cents of incremental FFO to 36%. And to drill down even further, it was the street retail portion of our core portfolio that drove... sequentially increasing by about two million dollars or two cents a dollar. And just to be clear, I am referring to total, pro-radical NOI growth, inclusive of redevelopments, not same-store growth, which I will discuss later. And I want to reiterate a point that I made last.

AJ Levine: Typically 3% per annum as opposed to the blended one 5% typical of suburban assets.

AJ Levine: And of course, they are those F&B resets at outsized mark to market opportunities that are embedded in our street portfolio.

Job Jose: So, let's expand on that a bit and use Armitage Avenue in Chicago as a proxy for what's happening across our streets.

AJ Levine: So the average retail rent on our 12 buildings on Armitage is around $80 per square foot.

Job Jose: We are receiving offers to backfill space upwards of $120 a foot.

Job Jose: So over the next several quarters, which should have the ability to mark to market, a large percentage of that portfolio at close to a 50% spread.

AJ Levine: In fact since the end of the quarter, we signed a new lease at <unk> 23, West Armitage at a 50% spread.

John Gottfried: We remain on track to grow our total core NOI, and the 4% projected growth is even with the 500 basis point drag from our redevelopment projects at North Michigan Avenue in Chicago and 5559 Street in San Francisco. As we discussed last call, the long-discussed impact from these redevelopment projects is now behind us.

AJ Levine: So why is that.

AJ Levine: Number one scale.

AJ Levine: We control 12 buildings on the street no other single landlord controlled more on the four relevant blocks on Armitage than we do.

AJ Levine: And having scale not only gives us pricing power, but it allows us to curate the street and foster the best ecosystem of tenants to drive traffic and accelerate sales growth.

AJ Levine: Number two barriers to entry.

AJ Levine: Four blocks, that's the entire market the L train to the west and Halston to the east continues to serve as a barrier that a certain category of retailer just won't cross.

John Gottfried: Our share of NOI from these three assets... 664 and 840 North Michigan Avenue in Chicago and 555 9th Street in San Francisco declined from approximately $9 million of NOI in 2009 to less than $2 million, which we believe demonstrates the resiliency and strength of our portfolio by achieving solid growth in spite of the adversity. Now moving from total NOI to same.

AJ Levine: If youre looking for space, <unk>, Armitage, where your first and only call.

AJ Levine: Number three is performance.

AJ Levine: Armitage is just one example of a street that saw a lift in sales as a result of Covid.

AJ Levine: People were staying closer to home and shopping local and even now with people back to work those tenants continue to post solid sales growth and their performance remains well above pre pandemic levels.

John Gottfried: As outlined in our release, we reported 5.7% same-store growth. And again, while early, our model has us trending towards the upper end of our 5% to 6% initial guidance. It's also worth highlighting that the first quarter of this year faced a headwind of about a hundred... April 20, 2023 Bankruptcy of Bed Bath & Beyond. As we've previously discussed, this location in Brandywine, Delaware was profitably released to Dick's House of Sports, with an anticipated rent commencement date in the fall of 2020. As A.J.

AJ Levine: And number four of course is basic supply demand no.

AJ Levine: No vacancy on the street.

AJ Levine: Waiting list of tenants that consider armitage to be a must have location and we are able to promote a highly competitive leasing environment, where we can drive rents, while we continue to curate the street.

AJ Levine: But this is not unique to Armitage. This is our street retail business identifying the right markets and the right streets, where we can scale meaningfully and do what we do best to drive growth.

AJ Levine: You can swap out Armitage for Greenwich Avenue, the gold Coast Knox Henderson in Dallas or M Street, and it's largely the same dynamic we have scale, we have barriers to entry and we have performance.

AJ Levine: No rose at a similar recipe, but in the case of Melrose you can add luxury to the list of ingredients and we know that luxury expansion is one of the strongest catalysts for rent growth. We've continuously seen this play out over the last 36 months in Soho on the Gulf Coast, and Chicago on Madison Avenue, and even in Williamsburg.

John Gottfried: discussed, we've sequentially increased our signed, not yet open, pipeline by approximately 10% during the quarter to 7.7%. As a reminder, this $7.7 million is just our core same store, signed, not yet open. Approximately $6 million of this amount is coming from... In terms of timing, approximately 30% of the side, not yet open pipeline is expected to commence during the second quarter, with the remaining balance weighted towards September and October.

AJ Levine: So it's no luxury I mean, no mystery that luxury tenants are capable of paying strong rents.

AJ Levine: But it is the ripple effect that luxury has on the overall market that makes the biggest impact is the clustering of the dance contemporary and aspirational brands and the competition for space around those luxury tenants that truly drives rent in a market.

AJ Levine: Clustering is one byproduct of that secular shift of luxury and advanced contemporary tenants pivoting away from malls and department stores, and focusing primarily on our high growth streets.

John Gottfried: I wanted to provide a moment, giving an update on our growth expectations from our street portfolio over the next subweek. AJ gave a great overview of the retail demand and opportunities for mark to markets across. It's worth mentioning that while I share AJ's optimism and I am seeing the same trends, our internal models do not, meaning we have built in more conservative estimates in the base case I'm about to present. Our base case is projecting growth of $20 million of incremental NOI and 18 cents of FFO from our street retail portfolio. And just for some further, the starting point is year-end 2023. You are at year-end $2,000.

AJ Levine: This is not a fad.

AJ Levine: This is the new reality for these dynamic tenants that are focusing their growth on where their customer wants to shop.

AJ Levine: Now I say this all with the caveat that despite our efforts we will not get all of our under market space back all at once.

AJ Levine: But over the next three to five years, we should be able to make a meaningful dent in unlocking that embedded value within our portfolio. Some of that will occur through natural lease up and some will come from those fair market value resets that are relatively unique to street retail.

AJ Levine: And others is our team has shown their ability to do will be accelerated through our pry loose strategy, where we are constantly looking for opportunities to pry loose leased space and accelerate the positive mark to market.

AJ Levine: Now not all streets have begun their rebound in San Francisco on North, Michigan Avenue, those markets are slower to recover but fall squarely into the bucket of when and not if.

John Gottfried: And this is just the same store, meaning it excludes the two North Michigan Avenue redevelopments, which, as we just discussed, is only upside for us going forward, should this iconic retail corridor rebound faster than our base case model. And as we discussed previously, neither are 2020 for guidance or base case multi-year projection, factor in any near. Getting back to the $20 million, this growth equates to about 10% annual growth.

AJ Levine: In the meantime, we can afford to be patient and we're using this time to figure out highest and best use for each of our projects.

AJ Levine: In San Francisco for example, both of our projects are under serious consideration for the addition of significant residential to meet a city and state push for additional housing.

AJ Levine: Too early to go into detail, but we are spending this time exploring what would be needed to advance those initiatives.

AJ Levine: On North Michigan the.

AJ Levine: The interest we're seeing starting to feel like early days of recovery on fifth Avenue and Madison Avenue.

John Gottfried: Which means our same-story NRI growth should continue trending well above historical norms for the next several years. But keep in mind, we are not anticipating, nor do we need 10% annual growth from street to street. While we still have a lot of embedded growth remaining, once we get past this profitable lease-up, our base case model is showing stabilized, net effective rental growth of about 4% from our streets, which is double what we are projecting from our sales. $20 million of incremental NOI is being driven by a combination of lease-up, and mark-the-markets on expiring leases.

AJ Levine: Still a ways to go but there are several retailers that are circling the market and when they land they should kickstart that recovery that we always knew was coming.

AJ Levine: And earlier this year you are happy to see a luxury tenant like pulse Stuart relocate from the Gulf Coast to <unk> 22, North Michigan Avenue, just one block south of our asset at 840 North Michigan.

AJ Levine: Turning to city point, the wind is firmly at our backs in the pieces continue to fall into place.

AJ Levine: <unk> is down the park is finished is scheduled to open this month and we can finally unlock those valuable spaces facing the park that we have been strategically holding back.

AJ Levine: Forward, a chow had their grand opening last month and has already added a new vibrancy and stretching the hours of operation along Prince Street.

AJ Levine: And Sephora, who will anchor the opposite end of Prince Street is in possession of their space and is working to meet the anticipated opening in the summer.

AJ Levine: Including support and <unk>, we will add nine tenants to city point this year, representing over 40000 square feet of GLA.

John Gottfried: 3% contractual growth. As outlined in our supplemental, our street is approximately 84% occupied in March, and We Anticipate Achieving Full Occupancy, which we define as 95% by late 2025, early 2025, which gets us an incremental $10 million of A.B. We have made meaningful progress on our..., more than half, or about $6 million if executed. Included in our signed, not yet open, pipeline in March.

AJ Levine: With all the pieces continuing to fall into place we will look back on 2024 as a transformative year for city point and for downtown Brooklyn, So wrapping it all up.

AJ Levine: Strong fundamentals.

AJ Levine: <unk> sales growth healthy tenants, a favorable supply demand dynamic and the ability to leverage those factors into better curation and of course sustained rent growth on our streets.

AJ Levine: And with that I will turn things over to John.

Ken: Thanks, a J and good morning.

AJ Levine: We are off to a strong start with our operating results and key metrics coming in ahead of our expectations.

AJ Levine: We have also made considerable progress on our balance sheet.

AJ Levine: In addition to improving our debt to EBITDA by over half a turn during the quarter. We also successfully extended the maturity of our $750 million unsecured facility by an additional four years.

John Gottfried: We anticipate incremental NOI of $4 million for marking to market street rents on expiring leases over the next, and we are optimistic we have upside here if A.J. and his team are successful in the Pry Luce strategy.

AJ Levine: Along with upsizing, our borrowing capacity, all while maintaining our existing credit spreads.

AJ Levine: I will now provide some further color.

AJ Levine: Starting with our first quarter results, we reported <unk> 33 per share coming in slightly ahead of our expectations with strong tenant credit along with solid property operating fundamentals.

John Gottfried: And lastly, we anticipate another $6 million in escalations that are building. I recognize I just threw out a lot of numbers, but given our excitement at these trends we are seeing... We felt this level of granularity was important, so please reach out with any questions should any of these points need clarification. Now moving to our ballot.

AJ Levine: And we are continuing to see encouraging trends within our portfolio, but as we just issued our guidance a few weeks ago. We felt it was a little too premature to make it upward revision at this point.

AJ Levine: But we remain on track to meet if not hopefully exceed our expectations.

AJ Levine: As a reminder was year over year <unk> growth of seven 5% after stripping out promote income.

AJ Levine: With this projected earnings growth being driven by an increase of 5% to 6% and our same store NOI.

John Gottfried: We have had a busy and productive few months in the capital... In addition to extending our $750 million unsecured lending facility by an additional four years. We have also improved our debt to EBITDA by more than half, along with clear visibility of a pathway to get us back into the fives by. In terms of the extension of our unsecured facility, we are thrilled with the... strong support that we receive from our long-standing capital. Not only do we have the full support of our bank group to extend our facility at the current price,

AJ Levine: In addition to year over year growth I thought it would be helpful to walk through our sequential growth and how we see that quarterly trajectory contributing to our annual expectations.

AJ Levine: Sequentially, our first quarter <unk> grew by approximately 7% or an increase of about two cents a share after excluding promotes and <unk> <unk> of termination income that we highlighted in our release.

AJ Levine: And precisely as we had anticipated it was our core NOI or more specifically, our differentiated street retail portfolio that drove this growth.

AJ Levine: But before diving into the numbers I'm going to pause and do a quick overview of how we report and discuss our results. Both those that are newer to the name as well as a refresher for those that know us well.

AJ Levine: All of these numbers can be easily traced back to our financial statements and supplemental and we are always available to assist should anyone have any questions first our total NOI defined as our share of net operating income from our core and fund business.

John Gottfried: The facility was oversubscribed, enabling us to upsize. Not pivoting, I wanted to spend a moment to talk about our interest rate exposure, or more importantly, the lack thereof. As outlined in our release, we have no significant debt maturities for the next. Secondly, and this is worth highlighting, is I believe we may be an outlier here amongst through our use of interest rate swaps. We have locked in base interest rates on all of our floating rate debt, leaving us with virtually no exposure to interest rates until mid-2027, along with Significant Swap Protection, extending through

AJ Levine: Was $43 4 million for the fourth quarter for the first quarter.

AJ Levine: And this sequentially increased by approximately 4% from the $41 8 million that we reported in the fourth quarter of 2023.

AJ Levine: And in terms of quarterly run rate prior to factoring in any acquisitions or dispositions, we expect that this $43 4 million.

AJ Levine: That we reported this quarter will increase to approximately $45 million by Q4 of this year.

AJ Levine: Within the $43 million of pro rata NOI, our share of fund NOI was sequentially flat at approximately $7 $5 million.

AJ Levine: Thus it was our core portfolio that drove our growth sequentially, increasing by about 5% or about two cents of incremental <unk> to $36 million.

AJ Levine: And to drill down even further it was the street retail portion of our core portfolio that drove this growth.

John Gottfried: Just to further highlight what I believe is differentiation, our hedging and risk management strategy manages interest rates independently from the maturities of our variable rate obligations, meaning we have interest rate swaps that are not coterminous with the maturities of our variable rate debt, the most significant being the $750 million of variable rate debt. And just to be clear, we are not in the business of speculating on... Rather, our risk management strategy is to dollar cost average in our SWOT portfolio, which enables us to manage and mitigate the exact risk that is appropriate.

AJ Levine: Sequentially, increasing by about $2 million or the two sets of about that and just to be clear I am referring to total pro rata core NOI growth inclusive of redevelopment not same store, which I will discuss in a moment.

AJ Levine: And I want to reiterate a point that I made last call. We remain on track to grow our total core NOI inclusive of Redevelopments by 4% in 2024.

AJ Levine: And the 4% projected growth is even with the 500 basis point drag from our redevelopment projects at North Michigan Avenue in Chicago, and 505 ninth Street in San Francisco.

AJ Levine: As we have discussed last call the long discussed the impact from these redevelopment projects is now behind us.

AJ Levine: Our share of NOI from these three assets, meaning 664, and 840, North Michigan Avenue in Chicago, and 555 ninth Street in San Francisco declined from approximately $9 million of NOI in 2023 to less than $2 million in 2024.

John Gottfried: As it relates to our fund debt, given the buy-fix-sell nature of this business, we appropriately match fund our assets and liabilities and utilize shorter duration debt. Thus, our prior year earnings have already experienced the impact of the rapid rise in short... If and when the Fed starts cutting rates, every 100 basis points is about a penny of upside to our efforts.

AJ Levine: Which we believe demonstrates the resiliency and strength of our portfolio by achieving solid growth in spite of these significant headwinds.

AJ Levine: Now moving from total NOI same store NOI.

AJ Levine: As outlined in our release, we reported five 7% same store growth for the quarter.

AJ Levine: And again, while early our model has us trending towards the upper end of our 5% to 6% initial guidance range.

John Gottfried: So in summary, not only does our balance sheet have the necessary flexibility and liquidity to pursue the external opportunities we are seeking, limited to a charity, full, and being fully hedged against interstate volatility, but we are well positioned to ensure that the continued top-line NOI growth from our portfolio is dropped to our bottom line. With that, we will now open up the call. Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again.

AJ Levine: It's also worth highlighting that the first quarter of this year faced a headwind of about 100 basis points from the April 2023 bankruptcy, a bed bath and beyond.

AJ Levine: As we've previously discussed dislocation and Brandywine, Delaware was profitably release to Dick's House of sport with an anticipated rent commencement date in the fall of this year.

AJ Levine: As Jay discussed we sequentially increased our side not yet open pipeline by approximately 10% during the quarter to $7 $7 million.

AJ Levine: As a reminder, the $7 $7 million is just our core same store side not yet open pipeline.

AJ Levine: Approximately $6 million of this amount is coming from street leases.

Operator: Please ask one question and one follow-up, then return to the queue. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jeffrey Spector of B of A Security. Your question, please, Jeff. Hi, good morning. It's Lizzie Doykan on for Jeff.

AJ Levine: In terms of timing approximately 30% of the side not yet open pipeline is expected to commence during the second quarter with the remaining balance weighted towards September and October of this year.

AJ Levine: I wanted to provide a moment, giving you an update on our growth expectations from our street portfolio over the next several years.

AJ Levine: A J.

AJ Levine: Great overview of the retail demand and opportunities for mark to markets across our street markets.

Elizabeth Yang Doykan: Congratulations on the quarter. I was hoping to, I guess, get an update on what's new in terms of what you're seeing in terms of transactional activity, especially now that you have some clarity on activity. You're hoping to close on with a couple institutional partners. So, I guess, starting with one, what are the key opportunities for capital cycling today? And then, two, are you? What are you coming closer to in terms of the acquisition side? Sure, so let me take a crack at both of them.

Speaker Change: And it's worth mentioning that while I share ages optimism and I'm seeing the same trends our internal models do not meaning we have built in more conservative estimates in the base case I'm about to discuss.

AJ Levine: Our base case is projecting growth of $20 million of incremental NOI or.

AJ Levine: Or 18 sets of <unk> from our street retail portfolio alone.

AJ Levine: And just for some further context.

AJ Levine: The starting point is at year end 2023 through you at year end 2027.

AJ Levine: And this is just same store, meaning it excludes the two north Michigan Avenue redevelopment, which is as we just discussed is only upside for us going forward should this iconic retail corridor rebound faster than our base case model as anticipated.

Kenneth F. Bernstein: As I mentioned in our prepared remarks, Lizzie, what I said is the bid-ask spread is narrowing. There are buyers and sellers showing up for a variety of open areas, and Wall. The volatility of the bond market is elongating that process. We are seeing interest from both buyers and sellers for a variety of products. The most crowded, most focused trade is supermarket anchored. It was very defensive during Covid necessity based.

AJ Levine: And as we discussed previously neither our 2024 guidance our base case multiyear projections factor in any near term recovery.

AJ Levine: Getting back to the $20 million.

AJ Levine: This growth equates to about 10, 10% annual growth, which.

AJ Levine: Which means our same store NOI growth should continue trending well above historical norms for the next several years, but keep in mind, we're not anticipating nor do we need 10% annual growth from our streets in perpetuity.

AJ Levine: While we still have a lot of embedded growth remaining once we get past this profitable lease up our base case model is showing stabilized net effective rental growth of about 4% from our streets, which is double what we're projecting from our suburban portfolio.

Kenneth F. Bernstein: And institutions are continuing to focus there, so I would say that's where you're seeing the most opportunity to sell assets, and probably the most. And then in the other areas of open air retail on the suburban side, the more junior anchor focused or sometimes referred to as power centers, buyers and sellers are both showing up, and we're seeing deals, albeit, sellers who are showing up now are probably motivated. Bids are still in the higher yield range, and so those sellers are probably showing up because they either are finite life funds, have capital expenditures necessary for that asset or elsewhere, or other rede

AJ Levine: In terms of building blocks, the $20 million of incremental NOI is being driven by a combination of lease up mark to market on expiring leases and 3% contractual growth in terms of lease up as outlined in our supplemental our street is approximately 84% occupied at March 31.

AJ Levine: And we anticipate achieving full occupancy, which we defined as 95% by late 2025, early 2026, which gives us an incremental incremental $10 million of ABR.

AJ Levine: And we have made meaningful progress on our lease up calls with more than half or about $6 million of executed Street leases included in our signed not open pipeline at March 31.

AJ Levine: Secondly, mark to markets, we anticipate incremental NOI of about $4 million from marking to market Street rents unexpired leases over the next several years.

Kenneth F. Bernstein: And if you can find those type of sellers who are motivated to get out, they can get out at a reasonable price, but we're also seeing buyers up. So that's the suburb where we're seeing the best. The most compelling Risk-Adjusted Returns is on the street retail side. Now, it's gonna take a while, but as AJ pointed out, retailer demand is very strong. So as we think about what kind of deals are we going to find? Part of it is what you're going in. What's your purchase price per square foot or other?

AJ Levine: And we are optimistic we have upside here AJ and his team are successful in the private strategy discussed in his remarks.

AJ Levine: And lastly, we anticipate another $6 million coming from the 3% Escalations that are built into our street leases.

AJ Levine: I recognize I just throw out a lot of numbers, but given our excitement at these trends. We are seeing we felt this level of granularity was important so please reach out with any questions for any of these points need clarification.

AJ Levine: Now moving to our balance sheet.

AJ Levine: We have had a busy and productive few months in the capital markets front.

AJ Levine: In addition to extending our $750 million unsecured lending facility by an additional four years.

AJ Levine: We have also improved our debt to EBITDA by more than half a turn.

Kenneth F. Bernstein: But the other side of it, because we are focused on value creation, is where might there be re-tenanting opportunities? So while the bid and ask spread between buyer and seller is still a little wide, the enthusiasm from our retail customers assists us in underwriting assets. That enthusiasm from the retailers is as strong as I've seen in a while.

AJ Levine: Along with clear visibility of a pathway to get us back into the fives by yearend.

AJ Levine: In terms of the extension of our unsecured facility, we are thrilled with the execution and the strong support from that we receive from our long standing capital providers.

AJ Levine: Not only do we have the full support of our bank group to extend our facility at the current pricing the facility was oversubscribed, enabling us to upsize our borrowing capacity.

Speaker Change: Now pivoting to interest rates I wanted to spend a moment to talk about our interest rate exposure or more importantly, the lack thereof.

Kenneth F. Bernstein: The final point to this, then, of what it takes to put these deals together is, Where is the lending? Now, base rates are problematic, and we are in a higher, longer world, but as it relates to proceeds available and spread, that market is healing as well, especially for companies like Acadia. So there are some borrowers who are finding it incredibly difficult to refinance, but as John outlined, we have great access to capital.

AJ Levine: Starting with our core as outlined in our release, we have no significant debt maturities for the next several years.

AJ Levine: Secondly, and this is worth highlighting as I believe we may be an outlier here amongst our peers.

AJ Levine: But through our use of interest rate swaps, we have locked in base interest rates on all of our floating rate debt, leaving us with virtually no exposure to interest rates until mid 2027, along with significant swap protection extending through 2030.

AJ Levine: And just to further highlight what I believe is differentiation, our hedging and risk management strategy is to manage interest rates independently from the maturities of our variable rate obligations, meaning we have interest rate swaps that are not coterminous with the maturities of our variable rate debt. The most significant being the 750 million.

Kenneth F. Bernstein: So to summarize, we are seeing opportunities both as a buyer and a seller in the suburbs. The sellers that are showing up are motivated for a variety of factors. The bid-ask spread is still wide, but as long as we're being selective in what we're choosing, we do think that there will be good risk adjustment. That being said, the area that we're most excited about, although we still have some work in front of us, is to add street retail to our core portfolio because of the embedded growth that we're seeing and the fact that the risk-adjusted returns and the going in yields are enabling us to acquire assets on an accretive basis. Final point on that. Take a step back, if we are, in fact, in a higher for longer economy, if once the Fed settles through whatever it's going to do, and inflation runs hotter.

AJ Levine: Our variable rate debt that we just extended.

AJ Levine: And just to be clear, we are not in the business of speculating on interest rates.

AJ Levine: Our risk management strategy strategy is to dollar cost average in our swap portfolio.

AJ Levine: Which enables us to manage and mitigate the exact risk that has just played out.

AJ Levine: And as it relates to our fund debt given the buy fix sell nature of this business, we appropriately match fund our assets and liabilities and utilize shorter duration shorter duration debt.

AJ Levine: Thus our prior year earnings have already experienced the impact of the rapid rise in short term rates.

AJ Levine: So if and when the fed starts cutting rates every 100 basis points as about a penny of upside to our F. L.

AJ Levine: So in summary, not only does our balance sheet have the necessary flexibility and liquidity to pursue the external opportunities, we are seeing but with limited maturities and a fully and being fully hedged against interest rate volatility. We are well positioned to ensure that the continued topline NOI growth from our portfolio will drop to our.

Kenneth F. Bernstein: We want to make sure we own a portfolio that has a high likelihood of being able to drive top line and bottom line growth in excess of that higher longer inflation rate, and the street retail component, for the reasons that A.J. discussed, that's situated for that. So we think acquiring those assets will provide our shareholders with compelling, I know I threw a lot at you, but hopefully that answered your question. And just as a separate follow-up question, going back to AJ's comments on one luxury tenant that relocated from Gold Coast to North Michigan Avenue, is this a sign of, or maybe are you seeing other signs of luxury showing up in other street retail markets besides Melrose and the others that AJ commented on?

AJ Levine: Bottom line.

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

Speaker Change: Thank you as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one one again. Please ask one question and one follow up then return to the queue. Please.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Our first question.

AJ Levine: Comes from the line of Jeffrey Spector with Bofa Securities. Your question. Please Jeffrey.

Speaker Change: Hi, Good morning, it's slippy dragging on for Geoff Congrats on the quarter.

Speaker Change: I was hoping.

AJ Levine: Two I guess.

AJ Levine: An update on <unk>.

AJ Levine: Now in terms of what Youre seeing on.

AJ Levine: Transactional activity.

AJ Levine: Especially now that you have some clarity.

Alexander J. Levine: AJ, why don't you cover... Yeah, I mean, certainly within our portfolio, we've seen luxury show up in markets like Williamsburg where it's historic. You might not have expected that. And even as we look to some of our growth markets, we've seen luxury show up in Nashville, we've seen luxury show up in, So, you know, luxury expansion is very real. It's not, you know, isolated to New York,

AJ Levine: Activity Youre, helping a close on a couple of institutional partners.

AJ Levine: I guess starting with one.

AJ Levine: What are the key opportunities for capital cycling.

AJ Levine: Today and then.

AJ Levine: Two are you.

Ken: What are you coming closer to in terms of the acquisition side.

Speaker Change: Sure so.

AJ Levine: Let me take a crack at at both of them.

Speaker Change: As I mentioned in our prepared remarks Lindsay the what I said is the bid ask spread is narrowing meaning there are buyers and sellers showing up.

Alexander J. Levine: It's something that's happening, and it's some of that. Secular trends of retailers in general, and luxury specifically, have recognized that they want to control their relationship with their retailers, and the best way is for them to control their... So, we are seeing that migration, and open air retail, especially street retail, is the best channel for those kind of retailers to step forward. I think you're going to see that trend. Thanks for the time.

AJ Levine: For a variety of open air retail.

AJ Levine: And while the volatility of the bond market is elongated that process, we are seeing into.

AJ Levine: Interest from both buyers and sellers for a variety of products. The most crowded most focused trade is supermarket anchored it was very defensive during COVID-19 necessity based.

AJ Levine: And institutions are continuing to focus there so I would say thats, where youre seeing.

AJ Levine: The most opportunity to sell assets.

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

AJ Levine: And probably the most competition.

AJ Levine: Then in the other areas of open air retail on the suburban side, the more junior anchor focused or sometimes referred to as power Center.

AJ Levine: Buyers and sellers are both showing up and we're seeing deals, albeit.

Todd Michael Thomas: First question, I'm just curious, you know, with, with, you know, some of these new relationships that you're sort of entering into, I guess, first, are they new relationships? Or are some of these or any of these legacy fund investors? And then, you know, is this, you know, should we think about, you know, you know, strategic sort of investments like this in lieu of a fund six vehicle? Or should we assume that fund six fundraising is, is also either ongoing or will begin at some point in addition to these new relationships? So.

AJ Levine: Sellers, who are showing up now are probably motivated for some reason other than profit taking.

AJ Levine: Bids are still in the higher yield range and so those sellers are probably showing up because they either are finite life funds.

AJ Levine: Capital expenditures necessary for that asset or elsewhere.

AJ Levine: Or other redeployment opportunities and if you can find those type of sellers, who are motivated to get out they can get out at a reasonable price, but we're also seeing buying opportunities. So that's on the suburban side, where we're seeing the best.

AJ Levine: Most compelling risk adjusted returns is in the street retail side now, it's going to take a while but as Jay pointed out the retailer demand is very strong. So as we think about what kind of deals are we going to buy.

Kenneth F. Bernstein: I think that this format will serve our shareholders better than a one-size-fits-all fund. Oh, Again, that could change, Todd, and the investors are similar. There's some overlap, but it's also new institutions.

AJ Levine: Part of it is what youre going in yield what's your purchase price per square foot or otherwise, but the other side of it because we are focused on value creation is where might there be re tenant opportunities.

Kenneth F. Bernstein: The rationale for this is that while we still believe that that side of our business, the investment fund management business, is important, this is a component of our dual platform for the reasons I outlined before. We're more excited in this current environment, where we don't think leverage is going to be as much of a tailwind for buyers as it was during the last couple decades. You think the lower leverage..., public vehicle is where we're going to be able to drive more growth first and foremost.

AJ Levine: And so while the bid and ask spread between buyer and seller.

AJ Levine: It's still a little wide the enthusiasm from our retailers which greatly.

AJ Levine: Assists us in underwriting assets that enthusiasm from the retailers is as strong as I've seen in a while.

AJ Levine: Final point to this then what is it taking to put these deals together is where is the lending community.

AJ Levine: Now base rates are problematic and we are in a higher longer world.

Kenneth F. Bernstein: Fund 5, which is thankfully, teeing up to be very successful, but it took us twice as long to deploy that capital, and that elongated investment cycle is not, friendly to our LPs or our shareholders. And so being able to do things on a smaller, more strategic basis seems to make sense. The Fund. Fund 5, let's say, or any of our funds, is a one-size-fits-all. Cooler than Vest, which is great, and having that discretionary capital is something that is very beneficial, however.

AJ Levine: But as it relates to proceeds available and spread that market is healing as well.

AJ Levine: Especially for companies like Acadia. So there are some borrowers who are finding it incredibly difficult to refinance but as John outlined we have great access to capital. So to summarize we are seeing opportunities both as a buyer and a seller in the suburban side.

AJ Levine: The sellers that are showing up.

AJ Levine: Our motivated for a variety of factors bid ask spread is still wide, but as long as we're being selective in what we're choosing.

AJ Levine: We do think that there will be good risk adjusted returns.

Kenneth F. Bernstein: That high teen's return that is required, especially in a higher interest rate environment, is going to be more difficult, and the one-size-fits-all nature of it, a little more difficult going forward. My friends on the private equity side of that business are certainly feeling it. Now, to the extent that they can go do... industrial development or single-family rental and all that, there's ways they can pivot, But we want to stay focused on open-air retail. That's our core comp. So, what we are doing now is working with different institutions, with different leverage desires, and different return goals. Some may be more core plus, low teens versus high.

AJ Levine: That being said the area that we're most excited by although we still have some work in front of US is to add street retail.

AJ Levine: To our core portfolio.

AJ Levine: Because of the embedded growth that we're seeing there.

AJ Levine: And the fact that the risk adjusted returns in the going in yields are enabling us to acquire assets on an accretive basis.

AJ Levine: Final point on that just to take a step back.

AJ Levine: If we are in fact.

AJ Levine: In a higher full longer economy.

AJ Levine: If once the fed settles through whatever it's going to do.

AJ Levine: And inflation runs hotter, we wanted to make sure we own a portfolio.

AJ Levine: That has a high likelihood of being able to drive topline and bottomline growth.

Kenneth F. Bernstein: Some may have other initiatives, such as distressed debt, and we can thus curate it better that way. You put it all together, and it's very likely going to look similar in terms of cash flows and revenues. So some of you might say it's a distinction without a difference.

AJ Levine: In excess of that higher longer inflation rate.

AJ Levine: And the street retail component for the reasons that Jay discussed is best situated for that so we think acquiring those assets will provide our shareholders with compelling upside.

AJ Levine: I know I threw a lot at you but.

Speaker Change: Hopefully that answered your question that's helpful. Thanks, Thanks for the comment Ken.

Kenneth F. Bernstein: Fine, but I do think this will enable us to be a little more flexible as we focus on our main mandate right now and going forward, which is to drive our core portfolio growth, both internal and, now that we're getting more confident, external. Okay, well, will additional investments with the investor that you're selling a 95% stake in a suburban asset to, you know, will they be, you know, similar going forward with, you know, Acadia having a 5% stake?

Speaker Change: And just to add.

Speaker Change: Separate follow up question.

AJ Levine: Going back to AG comment.

AJ Levine: One luxury tenant that relocated from.

AJ Levine: North Michigan Avenue is this a sign of maybe are you seeing other signs of luxury showing up and other street retail markets. Besides now rather than the others.

AJ Levine: Jay.

AJ Levine: Commented on.

AJ Levine: Hey, Jay why don't you cover that yeah, I mean, certainly within our portfolio, we've seen luxury show up in markets like Williamsburg, where historically you.

Kenneth F. Bernstein: And then are there any additional core suburban assets that might be sold to, you know, in a similar manner? Yeah, so let me start with the second part of that, which is throughout our portfolio. We are constantly deciding which assets it makes sense to recycle out of either because they are.

AJ Levine: You might not have expected that.

AJ Levine: And even as we looked at some of our growth markets, you've seen luxury show up in Nashville, you've seen luxury show up.

AJ Levine: In Austin.

AJ Levine: So luxury expansion is very real it's not isolated to New York L. A.

AJ Levine: Chicago.

AJ Levine: It's something that's happening everywhere.

AJ Levine: And if some of that.

AJ Levine: Sick.

AJ Levine: Secular trend.

Kenneth F. Bernstein: lower growth, or not mission critical, or just not consistent with our growth strategy. And so, yes, there are. But we certainly do not need to rush to the exits. So you're not going to see us fire sailing anything.

AJ Levine: Retailers in general in luxury specifically recognizing that they want to control their relationship with their retailers and the best way is for them to control their store.

AJ Levine: So we are seeing that migration and open air retail, especially street retail is the best channel for those kind of retailers to step forward I think youre going to see that trend continue.

Kenneth F. Bernstein: And if we don't do any more of those recycles, we can still grow this company. But there certainly are opportunities, then whether it's with this institution or some of the others that Reggie Livingston and the team are working with, some of that will be very dependent, Todd, on the kind of opportunities we see going forward. When you and I spoke a year ago, I thought the biggest opportunities would be distressed death. Now, in fact, as it relates at least to retail, it doesn't look like that's gonna be the window of opportunity. There's gonna be other situations, too.

Speaker Change: Thanks for the time.

Speaker Change: Thank you.

Speaker Change: Our next question.

AJ Levine: Comes from the line of Todd Thomas of Keybanc Capital markets. Your line is open Todd.

Ken: Hi, Thanks.

Speaker Change: First question, just curious you know with with.

AJ Levine: Some of these new relationships that you're sort of entering into I guess first or are they new relationships or are some of these or any of these legacy fund investors and then.

Kenneth F. Bernstein: So we'll see the right investor, the right assets, and we'll be able to match it that way. And we're feeling pretty good about new institutional interest. Keep in mind... private institutions, for the most part, have been sidelined out of retail for the last five plus years. And so they need partners like us to execute as they wanna pivot out of some of other asset classes and back. Okay, that's helpful.

AJ Levine: Is this should we think about.

AJ Levine: Yeah.

AJ Levine: Strategic sort of investments like this and Lou.

AJ Levine: A fun six vehicle or should we assume that fund six fund raising is is also either ongoing or will begin at some point. In addition to these new relationships.

AJ Levine: So.

AJ Levine: We think that BS this format will serve our shareholders better than a one size fits all fund six.

Todd Michael Thomas: And if I could real quick, one follow-up, one for John, just, you know, the terminated disposition in the quarter that was three cents, are you still working toward an asset sale? And is there, you know, any additional color you can provide around the impact that that asset sale may ultimately have on results in the near term, either accretion or dilution that's factored into guidance? Um, maybe talk about that a little bit as a result of, um, you know, the original guide. Yeah, no, absolutely, Todd.

AJ Levine: Again that could change Todd and the and the investors are similar there is some overlap, but it's also new institutions.

AJ Levine: The rationale for this.

AJ Levine: Is that while we still believe that that side of our business.

AJ Levine: Investment Fund management business is a important component of our dual platform for the reasons I outlined before we're more excited in this key.

AJ Levine: Current environment, where we don't think leverage is going to be as much of a tailwind for buyers as it was during the last couple of decades, we think the lower leveraged.

AJ Levine: <unk> vehicle is where we're going to be able to drive more growth first and foremost secondly fund five which thankfully is teeing up to be very successful, but it took us twice as long to deploy that capital and that elongated investment cycle isn't.

John Gottfried: So it's a vacant building at this point, and the highest and best use for that is not a retail development. The Go-Forward Drag.

John Gottfried: Taxes and our numbers, and, As Ken just mentioned, we're not going to buy or sell anything, but we're looking for the right time, not a meaningful needle mover in terms of proceeds or otherwise. The amount of that payment we got was fair; it was under contract. So that was because of the size of it, and we had carrying and opportunity costs as we were holding that for a buyer. All right. Thank you. It probably shows up back, and they are for sale one of these days.

AJ Levine: Friendly to our Lps or our shareholders and so being able to do things on a smaller more strategic basis seems to make sense final point.

AJ Levine: The fund.

AJ Levine: Fund five, let's say or any of our funds are a one size fits all.

AJ Levine: <unk> investment, which are great and having that discretionary capital is something that is very beneficial. However.

AJ Levine: That high teens return that is required.

AJ Levine: Especially in a higher interest rate environment is going to be more difficult than the one size fits all nature of it.

John Gottfried: And again, it wasn't even that large an asset. It was a meaningful payment. So we did want to, Thank you. Our next question comes from the line of Linda Tsai of Jeffries Group. Your question, please, Linda. Hi, yes, the 20 million of NOI 18 cents from FFO coming online from street year end 23 through 27. What does the cadence look like?

AJ Levine: A little more difficult going forward my friends in the private equity side of that business are certainly feeling it now to the extent that they can go do.

AJ Levine: Industrial development or single family rental and all that there's ways they can pivot.

AJ Levine: But we want to stay focused and open air retail that's our core competency. So what we are doing now is working with different institutions with different leverage desires.

AJ Levine: And different return goals.

AJ Levine: Some may be more core plus low teens versus high teens. Some they have other initiatives such as distressed debt and we can thus curated better that way you put it altogether and it is very likely going to look similar in terms of cash flows and revenues. So some of you might say it's.

Linda Tsai: Yeah, so Linda, I'd say that if we look at, near term, that's pretty significant, $6 million, http://TheBusinessProfessor.com, Clear Visibility, third of that shows up in the second quarter and the balance of that in the fall. So, you know, call that a big chunk of that is the balance of what we've already shown up. So that's the, you know, that's the Lisa piece. And then, you know, AJ talked about demand, I think. All in, but the sign was not open.

AJ Levine: Stinker without a difference fine, but I do think this will enable us to be a little more flexible as we focus on our main mandate right now going forward, which is to drive our core portfolio growth both internal and then now as we're getting more confident X.

Speaker Change: Certainly as well.

Ken: Okay, well additional investments with the <unk>.

John Gottfried: Biggest piece of the 10... Mark to Markets, I think those are going to come in sporadically, so I think about those will come in cadence-wise. You know, I don't want to say evenly, but relatively evenly, and then the 3% growth that is contractual. So, say we're going to be exactly 10% year-over-year, I think. I don't know if I'm wrong about that, but I do see a relative... Trajectory. Thanks. And then I'm just confirming that if the Fed cuts rates every 100 bps, is that one set benefit on an annual basis?

AJ Levine: With the investor that Youre, selling a 95% stake in <unk>.

AJ Levine: In a suburban asset too.

AJ Levine: Will they be similar going forward with Acadia, having a 5% stake and then are there any additional core suburban assets that might be sold to <unk>.

AJ Levine: Manner.

Ken: Yes, So let me start with the second part of that which is.

AJ Levine: Throughout our portfolio, we are constantly looking at which assets.

AJ Levine: Does it make sense to recycle out of either because they are.

AJ Levine: Lower graph or not mission critical or just not consistent with our growth strategy and so yes. There are we certainly do not need to rush to the exits so youre not going to see us fire sailing anything else.

AJ Levine: And if we don't do any more of those recycles, we can still grow this company just fine.

Linda Tsai: Great. Last question. Could you talk a little bit about the pricing for the contracts you announced in your press release to sell a core suburban asset and then the one you're under contract to buy? We'll talk about that more next quarter when everything hopefully closes, but Well, since that was your third question, and since I don't want to answer it, we'll leave it at that. Thanks. It wasn't creative, so I think we can say that.

AJ Levine: But there are certainly that opportunity, whether it's with this institution or some of the others that.

AJ Levine: Richard Livingstone and the team are working with some of that will be very dependent Todd.

AJ Levine: Kind of opportunities, we see going forward.

Ken: When you and I spoke a year ago I thought the biggest opportunities would be distressed debt.

AJ Levine: Now in fact as it relates at least to retail it doesn't look like that's going to be the window of opportunity. There is going to be other situations. So we'll see right investor right assets, and we'll be able to match it that way.

AJ Levine: We're feeling pretty good to very good.

Linda Tsai: Thank you. Our next question comes from the line of Craig Mailman of Citi. Your line is open, Craig. Hey, everyone.

AJ Levine: New institutional interest because keep in mind that.

AJ Levine: Private institutions for the most part.

AJ Levine: Have been sidelined out of retail for the last five plus years and so they need partners like us to execute as they want to pivot out of some of other asset classes and back into retail.

Craig Mailman: Um, so John, I know you want to be conservative at this point in the year, but I feel like maybe shadowing guidance here. So I wanted to kind of ask you some of the sensitivities around the midpoint. You know, I know AJ said he's seen rents or feels better about rents today than he did even a quarter ago.

Speaker Change: Okay. That's helpful and if I could real quick one follow up one for John just.

AJ Levine: The terminated disposition in the quarter that that was <unk> are you still working toward an asset sale and is there any additional color you can provide around the impact that.

AJ Levine: That asset sale may ultimately have on on results in the near term either accretion or dilution that's factored into guidance and.

John Gottfried: These, the deals are slightly accretive, that Ken doesn't want to give pricing on versus the range versus some of these, you know, moving pieces. What kind of the maybe could you maybe bracket maybe the plus or minus at this point in the year that you could see if all these kind of hit at least on what your view of timing could be? Yeah, so I think certainly, and again, the So let's start with tenant credit, as I highlighted, tenant credit. We had a, As I mentioned on the last quarter call, we had three sets of... FFO built in for tenant credit. We are trending better. That's, that's one. On the upside, that was a pop.

AJ Levine: Maybe talk about that a little bit as it results to.

AJ Levine: The original guidance.

Ken: Yeah, no absolutely Todd so its a vacant building at this point that that was the terminated contract and highest and best use for that is not a retail retail developments. So it's really a sort of a non ancillary parcel. The go forward drag is going to be a nominal amount of.

AJ Levine: Of interest and taxes in our numbers and you know like it's kind of just mentioned, we're not going to buy yourself anything.

AJ Levine: But looking for the right time to sell so this is not a meaningful needle mover in terms of of proceeds or are otherwise the amount of that payment. We got was just it was under contract for an extended period of time.

John Gottfried: The second piece, Craig, which is harder to do because it's sometimes, sometimes it is off and out, is that we have a big sign. And that is purely timing; if we miss by a month either positive or negative, that's going to accelerate NOI, and vice versa if we miss by a few weeks, rent commencement on new lease is another one, just given the volume that's out there, and we have great estimates and a great team that works day and night. But that's a, that is a variable. Other upside is just on, So one of the benefits. So if A.J.

AJ Levine: So that was with the size of it and we had carrying an opportunity cost as we were holding that for a buyer that ultimately.

AJ Levine: Defaulted, given where the rates rent in their development plan for the asset.

Ken: Okay alright, thank you.

AJ Levine: Maybe one last point there same store. This was this was not in our same store pool into the $3 million.

AJ Levine: The asset either way. So it's one it's not part of our same store pool I just want to make sure that was clear as well.

AJ Levine: It probably shows up back in.

AJ Levine: Our for sale one of these days and again it wasn't even that large an asset it was a meaningful payments. So we did want to segregate it.

Speaker Change: Thank you.

AJ Levine: Our next question comes from the line of Linda Tsai.

Jefferies Group: Jefferies Group your question please Linda.

AJ Levine: Hi, yes, the $20 million of NOI 18 cents from SFO coming online from Street yearend 23 through 27, what does the cadence look like.

John Gottfried: AJ signs a suburban lease... We'll be thrilled with that, but we're not going to see NOI until the end of the year. I've just given the build-out process versus on the street. AJ can sign a lease and get that up and running. I think AJ's ability to, and his team, to get Lisa's signed, and Open, website. And, you know, in terms of the goals for the

Ken: Yeah, So I would say that if we look at the near term.

AJ Levine: That's pretty significant and that we have $6 million and a sign that you are open. So that's when we have the most <unk>.

AJ Levine: Clear visibility to so about a third of that shows up.

AJ Levine: And we will commence during the second quarter and the balance of that in the fall of this year. So call that a big chunk of that is going to be 25. So it's a very strong 25 at the balance of what we've already executed shows up.

John Gottfried: AJ doesn't have to sign another lease to commence this year to achieve our goal. So we've built. We've met our goals there.

AJ Levine: So that's the that's the lease up piece of then Ajay talked about demand I think that'll be sprinkled in but decided not opened as the biggest biggest.

AJ Levine: Biggest piece of the $10 million, we have from from that bucket.

John Gottfried: So, again, acquisitions, you know, we have no access, and I could keep going on about some of the points. Acquisition upside, so Pipeline, our Monday morning... We haven't closed on anything yet, so I'm certainly not going to raise money on something we haven't done, but that's another opportunity where we haven't closed on anything. So I think I've thrown a bunch of things out there, but I would really focus on the time that we last spoke to the... Okay, no, no, that's helpful.

AJ Levine: Mark to markets I think those are going to come in sporadically. So I think thats the $4 million that we spoke about those will come in cadence wise, you know I think relatively.

AJ Levine: Don't want to say evenly, but relatively evenly and then the 3% growth that is contractual that will come in each each year. So.

AJ Levine: I don't want to say, we're going to be exactly 10% year over year, I think that would be proven wrong on that but I do see a relatively smooth trajectory of the 10%. The next couple of years as we as we work through this.

AJ Levine: Thanks, and then just confirming if the fed cuts rates every 100 bps is that once that benefit on an annual basis.

AJ Levine: Yes.

AJ Levine: Great.

Speaker Change: Last question the contracts you announced in your press release to sell core suburban asset and then the one year under contracted by could you talk a little bit about the pricing.

AJ Levine: We'll talk about that more next quarter, when everything hopefully closes but.

Craig Mailman: And I guess as we think about street, that seems like that could be a kind of a pretty big swing factor here. Yeah, I guess two questions on that. Anything on fair market value adjustments that you guys see today that could positively impact that, you know, isn't in guidance but is looming out there? And then the second one, I guess AJ has an easy rest of the year since he already hit his mark.

Speaker Change: Well since that was your third question and since I don't want to answer it we'll leave it at that.

AJ Levine: Okay.

AJ Levine: Thanks.

AJ Levine: Sure the.

AJ Levine: It was accretive so I think we can say that.

AJ Levine: So accretive.

Speaker Change: Thank you.

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

AJ Levine: Of Craig Mailman of Citi. Your line is open Craig.

Speaker Change: Hey, everyone.

AJ Levine: So Jonathan I know you want to be conservative at this point of the year, but I feel like.

Speaker Change: It may be shadow raised guidance here. So I wanted to kind of ask you some of the sensitivities around the midpoint I know AJ said he seeing rents are it feels better about rents today than you did even a quarter ago.

Alexander J. Levine: But what, what's the pipeline look like above and beyond what was in the plan at this point that maybe could hit and positively impact kind of 24? Yeah, I'll jump in. I mean, look, a lot of the talk about the Pryor strategy, right, and these opportunities for positive markets that are peppered throughout the portfolio. Those are all, for the most part, incremental changes put out there. I think Arminage Avenue is a great place to start, probably lose a good amount of that space over the coming quarters and years. So I think that's the template, right?

AJ Levine: These.

AJ Levine: The deals are slightly accretive that Ken doesn't want to give pricing on.

AJ Levine: And tenant credit is kind of trending in a positive way so as we think about the $1 28.

AJ Levine: Versus the range versus some of these moving pieces.

AJ Levine: What's kind of the.

Speaker Change: Maybe could you could you bracket, maybe plus or minus at this point the year.

AJ Levine: That you could see.

AJ Levine: If all these kind of hit at least of what your your view of timing could be.

Speaker Change: Yes, so I think certainly and again the decision to raise was literally just focused on weeks ago that we issued our original guidance. So I think that was the primary driver of it but in terms of where are the sensitivities is to the midpoint of the range. So we talk with tenant credit as I highlighted in my room.

Alexander J. Levine: But those are, again, peppered throughout the portfolio. You can't have the amount of growth that we've seen over the last few years and not have those opportunities. So that was a great question. Yeah. Anything in the pipeline?

AJ Levine: Mark's tenant credit we had a I think I mentioned on last quarter call we had three.

AJ Levine: <unk> called <unk> <unk> built in per ton of credit we are trending better towards that so I think we could be done on kind of credit that's one sensitivity to to the upside that was a positive trend first quarter.

Craig Mailman: kind of above and beyond your kind of goal for the year that looks promising. Yeah. That's Ken saying it.

AJ Levine: Second piece, Craig, which is harder to do because it's sometimes that sometimes is often outside of our control.

Kenneth F. Bernstein: Yes, there is. Yeah, I mean, we have... I think the takeaway from all of this, listening to John's answer, is that we do not have any interest rate exposure. We do not have any maturities.

AJ Levine: As we have a big sign that they're open pipeline.

AJ Levine: And that is purely timing, if we miss by a month, but either.

AJ Levine: Positive that's going to accelerate NOI in income or vice versa. We missed by a few weeks. So I think the rent commencement on new leases is is another one just given the volume that's out there and we have great estimates at a great team that spends day and night focused on that.

Kenneth F. Bernstein: We don't have any balance sheet concerns. The big plus and minus is just gonna be rent commencement dates and that obviously when we have this much embedded growth and that can impact either to the positive or the negative, but Retailer Demand, And the rents we're getting and the spreads we are getting, whether it is through fair market value resets, and we have some of those, or pry loose and re-tenanting, whether it shows up in 24 or 25, we'll do our best to make sure it shows up sooner rather than later, but we're going to work even harder to make sure it shows up at maximum levels because long-term that's what's going to create. That's helpful. Can I sneak one more in?

AJ Levine: But thats a that is a variable that could could slightly deviated from where we expected.

AJ Levine: The other upside is just on on the leasing front. So one of the benefits of the streets of AJ signs of suburban lease today at anchor.

AJ Levine: We'll be thrilled with that but we're not going to see NOI until some point in 'twenty five just given the build out process versus on the street with 84% currently occupied.

AJ Levine: Jay can sign a lease and get that up and paying this year. So I think we've made conservative projections. There. So I think a J 's ability to and his team to get leases signed and open that's a chance for for upside.

AJ Levine: And in terms of the goals for the year.

AJ Levine: Adrian doesn't have the signed another lease to commence this year to achieve our goals. So we built an appropriate reserves around around leases. We've met our we've met our goals. There. So again acquisitions here, we have no <unk> it I could keep going on and some of the points acquisition upside So pipeline, our Monday morning meetings as busy as they've ever been which is when we go through investments.

AJ Levine: We haven't closed on anything yet so I'm certainly not going to raise on something we haven't done, but that's another opportunity where we haven't factored that in.

Craig Mailman: Just how do you balance, Ken, I know you guys want to do all street retail, keep that 100% for yourself. But clearly, you guys have a niche there, and the partners, potential partners know that. How do you kind of segment that and keep enough for yourself without, you know, offending partners? A critical issue that I should have.

Speaker Change: So I guess on a bunch of things out of upside in there, but I would really focus the lack of a guidance range on just the.

AJ Levine: At the time that we last spoke to the market as to our expectation.

AJ Levine: Okay.

Speaker Change: That's helpful.

AJ Levine: I guess as we think about street that seems like that could be.

AJ Levine: Kind of a.

AJ Levine: A pretty big swing factor here.

Ken: Yes, I guess two questions on that anything on fair market value adjustments that you guys see today that could positively impact that.

Kenneth F. Bernstein: We discussed in detail before the distinction between being in a fund business where we are fiduciaries and we have to go get waivers, and we've successfully done that. The distinction between that and what we're doing now is that there are decision makers on the other side of the table. Some of them are saying they want to participate in street retail, and if we can unlock portfolios of larger sizes, they could be great additions.

AJ Levine: Is it in guidance, but is looming out there and then the second one I guess AJ has an easy rest of the year security hit is his mark, but what what's the pipeline look like above and beyond what was in plan at this point that maybe could.

AJ Levine: Positively impact kind of 24.

AJ Levine: Yes, I'll jump in I mean look a lot of the.

Kenneth F. Bernstein: So that's fine. But the others are more focused on our suburban initiatives, which, frankly, I'd rather leverage our institutional relationships and keep in our investment management platform. So the conflicts are less. We manage them successfully historically for the initiatives we want to do on the balance sheet in our Infinite Life Vehicle because we do believe that the lower leveraged infinite life vehicle that is the re is coming into a period where it will be a strategic advantage as opposed to during the tougher time periods when leverage and thus the private equity model are used. Great, thanks.

AJ Levine: We've talked about the pricing strategy right and these opportunities for positive mark to market that are peppered throughout the portfolio.

AJ Levine: Those are all for the most part incremental to what we've put out there I think Armitage Avenue is a great <unk>.

AJ Levine: Example of that right 80 dollar put foot rents average on the street $120 a foot market and that is a market, where we are going to have the ability to pry loose a good amount of that space over the coming quarters at year. So I think that's the template right, but those are again peppered throughout the portfolio.

Ken: Leo you can have the amount of growth that we've seen over the last few years and not have those opportunities embedded throughout.

Speaker Change: So that was the first question.

AJ Levine: Yep.

AJ Levine: Anything in the pipe.

AJ Levine: Kind of above and beyond your kind of goal for the year that looks promising.

AJ Levine: Yes.

AJ Levine: That can saying it.

AJ Levine: Yes.

AJ Levine: We have I think the takeaway from all of this listening to John's answer.

Ki Bin Kim: Thank you. Our next question comes from the line of Ki Bin Kim of Truist. Your question, please, Ki. Thanks, good morning. On Russian Walton, the lease occupancy rate declined to 59%. I'm just curious if that, you know, what's happening there. Asia?

AJ Levine: Because we do not have any interest rate exposure, we do not have any maturities. We don't have any balance sheet concerns the big plus and minus is just gonna be rent commencement dates and that obviously when we have this much embedded growth that can impact either to the positive or the negative.

AJ Levine: Retailer demand and the rents were getting and the spreads we're getting whether it is through fair market value resets and we have some of those or pry loose and re tenant thing.

Alexander J. Levine: Yeah, nothing we didn't anticipate. That's a very tight mark, basically no supply there, and we're already under LOI to backfill that profitably at a higher rent. Of course, the tightness of that market is why we're seeing, again, this spillover back onto North Michigan Avenue. We mentioned it with Paul Stewart.

AJ Levine: Whether it shows up in 'twenty four 'twenty five we'll do our best to make sure. It shows up sooner rather than later, but we're going to work even harder to make sure. It shows up at maximum levels because long term, that's what it's going to create the value.

Speaker Change: That's helpful can I sneak one more in.

Speaker Change: Just how do you balance Ken I know you guys wanted to do all street retail keep that 100% for yourself, but clearly you guys have a niche there and the partners potential partners know that how do you kind of.

Ki Bin Kim: So, you know, in a market as tight as that, it's not always the worst thing in the world to be getting back in. And Westshore Expressway was put into the redevelopment pipeline. I'm not sure if that had any kind of noticeable impact on your consumer NOI, but if you can just provide some color on what the plans are for that asset. Yeah, so keep in mind I probably should have mentioned the name when I asked Todd's question. West Shore Expressway is that for us.

AJ Levine: Segment that.

AJ Levine: And keep enough for yourself without.

AJ Levine: Yes.

Speaker Change: Sending partners Chris.

AJ Levine: Critical issue that I should have.

AJ Levine: Discussed in detail before the distinction between being in a fund business, where we are fiduciaries and we have to go get waivers and we've successfully done that.

AJ Levine: The distinction between that and what we're doing now is there are decision makers on the other side of the table.

AJ Levine: Some of them, who are saying they want to participate in street retail and if we can unlock portfolios of larger size.

Ki Bin Kim: Okay. Okay. Okay. Okay. And in terms of some of these assets on the streets, where you're getting the fair market value resets, you know, at some point, the thesis for holding that asset becomes much more tied to the individual retailer that might be doing really well versus the real estate. You know, what do you think about that, Ken? Is that something that maybe rises to maybe be a disposition candidate? Or, you know, is there more, you know, the gift that keeps on giving later on in the future that you might want to hold on to?

AJ Levine: They could be great additions, so that's fine, but the others are more focused in our suburban initiatives, which frankly, I'd, rather leverage our institutional relationships and keep in our investment management platform. So the conflicts or less we manage them successfully historically will manage.

AJ Levine: Them successfully now, but if anything it gives us clear room to run.

AJ Levine: The initiatives, we want to do on balance sheet in our infinite light vehicle, because we do believe that.

AJ Levine: The lower leveraged infinite light vehicle that is the REIT.

Kenneth F. Bernstein: Yeah, so a critical issue. The way we think about any given market that we own, any given corridor, whether it's Armitage Avenue, Melrose Place, Soho. Supply and Demand, and rent to sales. How are the tenants?

AJ Levine: Is coming into a period, where it will be a strategic advantage as opposed to during the tougher time periods, where leverage and thus the private equity model.

AJ Levine: With superior.

Ken: Great. Thanks.

Speaker Change: Thank you.

Speaker Change: Our next question.

AJ Levine: Comes from the line of <unk> bin Kim of tourists.

Kenneth F. Bernstein: So, if we're in a market... The supply-demand imbalance is imbalanced, and look, during the so-called retail Armageddon, we went through that in a lot of markets, and as A.J. As I mentioned now, it's gone the other way, and there are more tenants vying for space than there are... But, separately of supply and demand, we have to look at how our tenants perform. And there we will think about that specific tenant and whether retailers in general on a given corridor are doing well, but that tenant is not.

Speaker Change: <unk> please.

Ken: Thanks, Good morning.

AJ Levine: On rush and Walton leased occupancy rate declined to 59% I'm just curious if thats whats happening there.

AJ Levine: Hey, Jeff Yeah, nothing we didn't anticipate that.

AJ Levine: It's a very tight market.

AJ Levine: Basically no supply there and we're already under LOI to backfill that space profitably at a higher rent than the previous tenant was taking and of course the tightness of that market is why we are seeing again this spillover back onto North Michigan Avenue, We mentioned it with Paul Stewart.

AJ Levine: No. The market is tight is that it's not always the worst thing the world to be getting back space.

Kenneth F. Bernstein: And then the first thing AJ is going to try to do is replace that tenant that's part of the Pri-Luce. If we see broader reasons for concern in a given corridor or are overexposed to a given tenant who has no interest in departing, then that could be a disposition candidate. And we have periodically done that overall. What we've been pleasantly surprised with so far is tenant performance, in general, especially in relation to 2019, tenant performance has been strong. So we've not had many of those issues to date, but it is something we certainly would watch. Thank you, guys.

AJ Levine: And west Shore Expressway, what's put into redevelopment pipeline.

Speaker Change: I'm not sure if that had any kind of noticeable impact on your same store NOI, but.

AJ Levine: If you can just.

AJ Levine: Provide some color on what the plans are for that asset.

AJ Levine: So Kevin and I, probably should've mentioned and the name when I responded to I believe it was Todd's question, but west Shore Expressway is that asset there was under contract just to be clear.

AJ Levine: Okay, great redevelopment that is not so that was the asset we were talking about.

AJ Levine: And.

AJ Levine: You touched on some of these assets on the streets, where youre getting the fair market value resets.

AJ Levine: At some point the thesis for holding that asset becomes much more tied to the individual retailer that might be doing really well versus the railroad estate.

Kenneth F. Bernstein: Thank you. Our next question comes from the line of Michael Mueller of JPMorgan. Please go ahead, Mike.

Speaker Change: How do you think about that Ken is that something that maybe rises up to maybe a disposition candidate or.

Michael William Mueller: Yeah, hi, Ken, I think you mentioned early on that the 50 million disposition was going to be modestly accretive before redeploying the proceeds. Just curious how that math works, because it typically kind of usually cuts the other way when I think of dispositions. Yeah, the joys of an inverted yield curve, meaning our borrowing costs can be in the fives and sixes. So there's not that immediate. Did I explain that right, John

Speaker Change: Is there more.

AJ Levine: The gift that keeps on getting later on in the future that you might want to hold onto.

AJ Levine: Yes, so critical issue.

AJ Levine: The way, we think about any given market that we own any given carter, whether its Armitage Avenue Melrose place.

AJ Levine: So how.

AJ Levine: Supply demand.

AJ Levine: Rent to sales how are the tenants performer.

AJ Levine: So if we're in a market.

AJ Levine: The <unk>.

AJ Levine: Supply demand is imbalanced and look during the so called retail Armageddon and we went through that in a lot of markets and as Jay has mentioned now.

John Gottfried: Yes, plus the fees, Mike. So I think there's an addition to the fact that you have pockets there, but also the fees.

AJ Levine: On the other direction and Theres more tenants vying for space and aerospace.

John Gottfried: Got it. Okay. And then maybe one follow-up question on the street occupancy and the target of going from 84 to 95% by early, late late 20. I think it was late, late, 20. Can you give us a sense of, like, a ballpark average rent number or rent per square foot number that we should be thinking of? Yeah, Mike. I would love to be able to do that, to be honest.

AJ Levine: But separate of supply and demand we have to look at how our tenants performing.

AJ Levine: And there we will think about that specific tenant.

AJ Levine: Ted if retailers in general on a given card are doing well, but that tenant is not there.

AJ Levine: Then first thing a J is going to try to do is replace that tenant that's part of the <unk> strategy. If we see broader reasons for concern in a given corridor or we're overexposed to a given tenant who has no interest in departing then that could be a disposition candidate and we have periodically done that overall.

Michael William Mueller: But given different markets, there's upper floors, lower floors, it would... Difficult to do, that's why we're... Right. So I think I would love to just say, $92 a foot, I think it's the $4 million is the best way to get there. I'm going to give a quick rant on and reminder that of all of our different metrics, occupancy is the unfortunately least relevant and least correlative to our peers because of the disparity in our assets. But if...

AJ Levine: <unk>, what we've been pleasantly surprised with so far is.

AJ Levine: Tenant performance in general, especially relevant in relation to 2019. The tenant's performance has been strong. So we've not had many of those issues to date, but it is something we certainly would watch closely.

Speaker Change: Thank you guys.

AJ Levine: Sure.

Speaker Change: Thank you.

Speaker Change: Our next question.

AJ Levine: It comes from the line of Michael Mueller of J P. Morgan. Please go ahead Michael.

Speaker Change: Yes, hi.

AJ Levine: Ken I think you mentioned early on that $50 million disposition was going to be modestly accretive before redeploying. The proceeds just curious how that math works because it typically kind of usually cuts the other way when I think of dispositions.

John Gottfried: I assume John's right, and I do, on the $4 million. Assume AJ is right, in the next couple of years, we get to that number; we probably succeed that way. If one of our suburban boxes goes away, then again, it could be a $2 rent, it could have no economic impact, it could change those metrics. So please don't rely too much on that; rely on our economic growth, and that, I think, will be the best. We feel very good about that economic growth.

AJ Levine: Yes.

AJ Levine: Joys of an inverted yield curve Michael.

AJ Levine: Meaning our borrowing costs going to be in the fives and sixes.

AJ Levine: So theres not that immediate dilution did I explain that right John Yes, it's implicit piece, Mike. So I think Theres. In addition to the fact that we do have do have some pockets there, but also the fees that we'll learn from that as well.

Speaker Change: Got it Okay and then maybe one follow up question on the street occupancy in the target of going from 84% to 95% by early.

Kenneth F. Bernstein: We feel pretty good about the occupancy as well because, AJ, I don't know why you would hold back on any leasing, but it's not going to work from a square. We're trying. If we can come up with that economic metric, we certainly can. Okay, thank you. Thank you. Our next question comes from the line of Floris Van Dijkum of Compass Point. Please go ahead, Floris.

AJ Levine: Late late 'twenty I think it was late 'twenty early 'twenty six can you give us a sense like a ballpark average rent number rent per square foot number that we should be thinking up.

Ken: Yes, Mike I would love to be able to do that to be honest, but given different markets. There is upper floors lower floors. It would be difficult to do that's why we threw in the number right. So I think I would love to just say $92 a foot I think it's the $4 million is the best way to get there.

Michael William Mueller: Thanks. Good afternoon, guys. Question. Maybe if you can give us a little bit more color on what is in your same store pool and how rent spreads can be misleading. I'm particularly referring to the 5.2% average cash rent spread, but you only did 22 leases, yet obviously, your same store was significantly higher. What percentage of your leasing activity is in your same store pool? Maybe talk about some of the non-same store pool, or what do you pull out, for example, splitting spaces or non-comparable? I would imagine CityPoint is probably in your non-comparable pool.

Speaker Change: Given just given the range upper floor lower floor and across different markets, maybe I don't know Ken if you have a different view, but I'm going to give a quick ramp.

AJ Levine: And reminder, that of all of our different metrics occupancy is unfortunately, least relevant and lease correlative to our peers because of the disc.

AJ Levine: Disparity in our assets.

AJ Levine: But if we assume John's right than I do on the $4 million and we assume a J is right in the next couple of years, we get to that number.

AJ Levine: We probably succeed that way if one of our suburban boxes goes away and then again it could be a $2 rent it could have no economic impact it could change those metrics.

Michael William Mueller: Maybe if you could give us a little bit more detail on that. Judges to set the pace, touch on the fact that not all spreads are created equal, touch on comparable non- Yeah, so let's first start with the exact assets that are not in there. First, it's our core only.

AJ Levine: So please don't rely too much on that rely on our economic growth.

AJ Levine: And that I think will be the best way to do it and we feel very good about that economic growth I feel pretty good about the occupancy as well because a J I don't know why you would hold back on any leasing.

AJ Levine: But it's not going to work from a square footage basis right.

Floris Gerbrand Hendrik Van Dijkum: So it's just our core portfolio that, Secondly, in terms of the assets that are not in there within our core, that's, if you look on our redevelopment page, in the supplemental, we list out the big ones being [inaudible] those are stripped out. So I think those are the individual assets that are not within our core. And then, in terms of comparable, And I'm going to let A.J.

AJ Levine: If we can come up with that economic metric, we certainly will share it.

Ken: Okay. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question.

AJ Levine: Comes from the line of.

AJ Levine: Floris van <unk>.

Speaker Change: Compass point. Please go ahead floors.

AJ Levine: Thanks.

Ken: Good afternoon guys.

AJ Levine: Question.

Speaker Change: Maybe if you could give us a little bit more color on what is in your same store pool and how.

John Gottfried: talk about that. In terms of how we think about carving up space and why that's not.., which is a good portion of our street leases are not going to show up because we are accommodating the tenants where we are, buying and locations where we have critical mass and we can accommodate to attend. Cutting Up Space. So that's a good portion, agents banned on on on that But in terms of, Spreads Spreads Spreads, Keep in mind what's in our sign not yet open, those were the spreads that we signed last quarter that were in the... Those are in our signed, not yet open, that haven't commenced yet, that haven't, So I think it's, it's one there's a timing delay between but also a mix that a good portion of the leases that are not not part of that.

AJ Levine: Rent spreads can be misleading.

AJ Levine: Referring to the five 2% average.

AJ Levine: Cash rent spreads, but you only did 22 leases yet your obviously your your same store was significantly higher what percentage of your leasing activity is in your same store pool, and maybe talk about some of the non same store pool or what do you pull out for example, splitting.

AJ Levine: Splitting spaces or non comparable I would imagine city point is probably in your non comparable pool, maybe you can give us a little bit more detail on that.

Ken: Yes, Jon just to set the table.

AJ Levine: Touch on the fact that not all spreads are created equal in terms of duration touch on comparable non comparable.

Speaker Change: Yes of course, its first start with the exact assets that are not in there first is our core only so it's just our core portfolio that we print spreads for a second in terms of the assets that are not in there within our core that's looked at a redevelopment page in the supplemental we list out the big ones being.

John Gottfried: So that's a one and I'm going to let AJ do the piece on, you know, how we're cutting up space, but getting back, not all spreads are created equal. Unknown Attendee, John Gottfried, Elizabeth Doykan, Kenneth Bernstein, Paulina Rojas, Alexander, Get a shot to Mark to Mark, at least every 10 years, if not, We're marking to mark, much

AJ Levine: San Francisco North Michigan Avenue. Those are those are stripped out. So I think those are the ones. The individual assets that are not within our within our same store.

AJ Levine: And then in terms of comparable not comparable.

AJ Levine: And I'm going to let a J talk about that that piece of it in terms of how we think about carving up space and why that's not going to go in there which is a good portion of our street leases are not going to show up because we are accommodating the tenants where we are.

AJ Levine: <unk> and locations, where we have critical mass and we can accommodate a tenant's need cutting up space. So that's a good portion of the street that I'm going to let a J.

Alexander J. Levine: So internally, we think about the CAGR on the lease from what is Page PAGE of NUMPAGES www.verbalink.com, [inaudible] double, that the growth there. So that's one, just not all, created equal given that a suburban nation might not get that back for 30 years versus we've gotten. [inaudible] So AJ, why don't you talk a bit about is that a lot of them aren't going to be there based on what the way that.

AJ Levine: Hey, Jay expand on that piece of it but in terms of the spreads throughout the percentage for the quarter keep in mind within our signed not yet open those where the spreads that we signed last quarter that were in the 40% 50% range. Those are in our signed not yet opened that haven't commenced yet that haven't.

AJ Levine: Contributor door same store growth yet so I think it's it's one there is a timing delay between signing and occupancy, but also a mix that a good portion of the leases that we're signing are not in that part of that so that's the one that I'm going to let a J hit the <unk>.

AJ Levine: Sure.

AJ Levine: The piece on how we think about cutting up cutting up space, but getting back to Ken's point.

Alexander J. Levine: Yeah, look, at the end of the day, it's all about maximizing value and accommodating. Sometimes that means combining spaces. Sometimes that means demising spaces. I think we're fortunate. St. Laurent on the Gold Coast, for instance, that was... (inaudible) St. Laurent had to expand, right?

AJ Levine: Not all spreads are created equal.

AJ Levine: Keep in mind that on the street.

AJ Levine: We get a shot to mark to market.

AJ Levine: At least every 10 years, if not five years, depending on the lease duration, so we're marking to market <unk>.

AJ Levine: Much faster so internally, we think about the CAGR on the lease from what is the CAGR, we get from the time, we sign it to the time, we get another crack at resetting it in.

AJ Levine: The CAGR coming from a street as compared to a suburban even before you factor in the cost net effectively has doubled.

AJ Levine: As part of that that the growth there. So that's one just not all these spaces is created equal given that a suburban lease you might not get that back for 30 years versus we've gotten within the street, 3% growth and the mark to market after five or 10 years. So hey, Jay why don't you talk a bit about just in terms of the comparable leases that a lot of them aren't going to be.

Alexander J. Levine: They were looking for a larger space. So, not necessarily a conforming lease, but certainly an important and an impactful lease nonetheless. The number you should be focusing on is the total...

AJ Levine: They're based on what the way that we can cut up and cargo space.

AJ Levine: I look at the end of the day, it's all about maximizing value and accommodating what your tenants are looking for.

AJ Levine: Sometimes that means combining spaces, sometimes that means demised spaces I think we're fortunate just because of the scale that we have in these markets that we can accommodate what these tenants are looking for I mean, do you think about Saint Laurent on the gold Coast for instance that was two spaces that we combined like casino Ron had the need to expand right. They were looking for.

Alexander J. Levine: Right. And not necessarily because of the number of conforming leases that we have. And I think it's also good to, you know, it's also important to point out, and the folks at Green Street were kind enough to remind us that when we are carving up space or combining, the money that we're spending to do that is much smaller as a percentage of ABR than when we're doing it in... So really, again, it comes down to maximizing value, and it comes down. Thanks.

AJ Levine: Larger space, so not necessarily a conforming lease, but certainly an important and impactful lease nonetheless.

AJ Levine: The number you should be focusing on this total leasing volume right and not necessarily the number of conforming leases that we have and I think it's also good to point out. It's also important to point out and the folks at Green Street were kind enough to remind us that when we are carving up space for combining space. The money that we're spending to do that is much smaller as a percentage of ABR than when we're.

AJ Levine: In our suburbs.

AJ Levine: So really again it comes down to maximizing value and it comes down to accommodating with the tenants looking for and sometimes it doesn't fit into the existing space.

Floris Gerbrand Hendrik Van Dijkum: No, it's helpful, and I think that it can be misleading sometimes for people to focus too much on the spreads. It's, ultimately, about NOI growth. Maybe if you could, if I could get your comment, Ken, maybe, if you had money that you wanted to deploy today, where would you go, which street markets, street retail markets you find right now are the most compelling? Is it New York? Is it DC? Is it Chicago?

AJ Levine: Great.

Ken: Okay. Thanks.

AJ Levine: One I think that it can be misleading sometimes too.

AJ Levine: For people focus too much on the spreads it's ultimately it's about the the NOI growth.

AJ Levine: Maybe if you could.

AJ Levine: I could get your comment.

AJ Levine: Ken maybe if you hedge.

AJ Levine: The money that you wanted to deploy today.

AJ Levine: Which street markets.

AJ Levine: Street retail markets.

AJ Levine: You find right now are the most compelling is it New York is it is it DC is that Chicago.

Floris Gerbrand Hendrik Van Dijkum: You know, where do you see the biggest opportunities? And I know you have to be somewhat cagey here because you're presumably looking at all of them, but is there much of a difference in the returns available as you look at those markets? The way to think about it, and I am going to be cagey, Floris; I'm not going to mention specific markets; there are one or two markets.

AJ Levine: Where where do you see the.

AJ Levine: The biggest opportunities I know you have to be somewhat caged, you're here, because you're presumably looking at all of them.

AJ Levine: But is there much of a difference between in the return.

AJ Levine: Returns available as you look at those markets.

AJ Levine: The way to think about it and I am going to be cagey for us or not and I mentioned specific markets, there's one or two markets Chicago for instance, where we see a nice rebound, but we have plenty of exposure. There. So I'd be reluctant to see us add there, but thats really specific to acadia not to where we see necessarily the.

Floris Gerbrand Hendrik Van Dijkum: Chicago for instance where we see a nice rebound, but we have plenty of exposure there So I'd be reluctant to see us out there, but that's really specific to Acadia not to where we see necessarily the opportunities otherwise we think about Markets in a few different categories one is kind of early stage pathway of growth Henderson Avenue in Dallas is an example of that where we haven't yet added value We haven't yet brought the retailers AJ mentioned the ones that we have on Armitage Avenue or the ones that you'd see on Green Street in Chicago in Soho so early pathway to growth and there are a variety of markets as long as they are ripe For the kind of retailers we do business, Then there's those that present opportunity for significant mark-to-market, but are well-established. And M Street in Georgetown is a prime example. It went through a...

AJ Levine: Otherwise, we think about markets in a few different categories. One is kind of early stage.

AJ Levine: Pathway of growth Henderson Avenue in Dallas, as an example of that where we haven't yet added value. We haven't yet brought the retailers a J mentioned the ones that we have on Armitage Avenue or the ones that you would see on Greene Street in Chicago.

AJ Levine: So how so early pathway to growth and there are a variety of market as long as they are ripe for the kind of retailers, we do business with.

AJ Levine: Then there's those that present opportunity for significant mark to market, but are well established.

AJ Levine: And M Street in Georgetown is a Prime example, it went through a retailer cleansing process. If you will during COVID-19.

Kenneth F. Bernstein: Retailer Cleaning Process, if you will, during COVID. And we're seeing significant rental growth in already an established market, but probably less mature. And then the final are the more mature ones, Greenwich Avenue in Connecticut, which got a COVID lift.

AJ Levine: And we're seeing significant rental growth already an established market for probably less mature.

AJ Levine: And then the final or the more mature ones Greenwich Avenue in Connecticut got a COVID-19 lift we're enjoying strong tenant demand, but probably doesn't seem to have that kind of growth and then your pricing should adjust for all of those different factors established market.

Kenneth F. Bernstein: We're enjoying strong tenant demand, but it probably doesn't need to have that kind of growth, and then your pricing should adjust for all of those different factors. An established market generally gets lower cap rates, but if it has lower growth, then we might tap the brakes a bit more on. And then overall, what we're trying to provide is a nice blend for our shareholders, some early stage, some moderate, some more mature, so that we can have a stable pipeline of growth.

AJ Levine: It generally gets lower cap rates, but if it has lower growth than we might tap the breaks a bit more on that and then overall, we're trying to provide is a nice blend for our shareholders. Some early stage some moderate some more mature so that we can have a stable.

Kenneth F. Bernstein: My final point around that is where luxury shows up right now, there's a lot of room to grow. And so we're certainly keeping close contact with our retailers to understand where the luxury retailers may want to show up. Thanks, Ken. Thank you. Our next question comes from the line of Paulina Rojas Schmidt, of Greenstein. Your question, please, Pauline. Good morning.

AJ Levine: Pipeline of growth final points around that.

AJ Levine: Is where luxury shows up right now there's a lot of room to draft and so we're certainly keeping.

AJ Levine: In close contact with our retailers to understand where the luxury retailers may want to show up.

Ken: Thanks, Ken.

AJ Levine: Sure.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: It comes from the line of Paulina Rojas Schmidt.

Speaker Change: Of Green Street your question. Please paulina.

Paulina Alejandra Rojas: Can you please add more color around the and Increased Occupancy, which was north of 100 basis points in street retail and suburban after. And Paulina, what's your question on the movement in occupancy sequentially from Q4 to Q1? Is that the question? Yes.

Speaker Change: Good morning, and can you piece of color around this.

AJ Levine: Placed occupancy which.

AJ Levine: It was north of 100 basis points in street retail and suburban assets.

Ken: It probably was your question on it is the movement in occupancy sequentially from Q4 to Q1 is that is that the question.

John Gottfried: But basically, what I'm saying, it wasn't just one category, but a few, and a little more, a little more than I was expecting due to seasonality. Yeah, so it was, and we tried to articulate it in our release, but the biggest driver of that was 70 basis points from one of our suburban athletes that moved out. Another 15 basis points. The space that we got back, and beyond that. Inc., https://www.academia.org.

AJ Levine: Yes, that's basically what im seeing it wasn't just one category, but a few and lidl and more and.

AJ Levine: And even more than I was expecting you to seasonality.

AJ Levine: Yes.

AJ Levine: It was and we tried to articulate it in our in our release, but the biggest driver of that was the.

AJ Levine: 70 basis points from a identify there was actually a liquor store at one of our suburban assets that that moved out that was 70 basis points and another 15 basis points was the space that we got back on on rush and Walton in Chicago and beyond that.

AJ Levine: Nothing of significance that again going back to <unk>.

AJ Levine: Ken's remarks, and really following up on my remarks is that notwithstanding this occupancy or I'll call. It a dip if you look at the NOI growth, we actually increased because were replacing that we're putting in higher higher dollar rents, which doesn't show up those percentages. So I think.

John Gottfried: All rights reserved. Ken's remarks, and really following up on my remarks, is that notwithstanding this occupancy, I'll call it... If you look at the NOI growth, we actually increased it, https://www.youtube.com.uk. I know it's a metric we need to think about. But for us, it's really the rent behind those occupancies that's much more impactful than that $10 loan. [inaudible] Okay, and we have talked about acquisitions. I'm curious, what is the IRR hurdle that you have for acquisitions?

AJ Levine: I know, it's a metric we need to think about their focus on but for us. It's really the rent behind those occupancy that's much more impactful than that $10 liquor store that moved out that I believe <unk> already backfill that.

AJ Levine: Yes, we've signed a lease for that space.

Speaker Change: Okay, and we have talked about at our precision I'm curious what is the IRR hurdle that you have for acquisition.

AJ Levine: Okay.

AJ Levine: The IRR and I won't get into that specific deal.

AJ Levine: Once they close and next quarter, we'll talk about but in general.

AJ Levine: The irr's on a well.

AJ Levine: We will vary depending on the risk and the cash flows from call it core plus which would be on a levered basis.

AJ Levine: Low teens.

Paulina Alejandra Rojas: Hey, so the IRRs, and I won't get into that specific deal. Once they close next quarter, we'll talk about, but in general, the IRRs on a will vary depending on the risk and the cash flows from, call it core plus, which would be on a levered basis, on through to the high teens for [inaudible] Pricing I'm thinking about is assuming limited or no cap rate. Okay, but what about street retail? Yeah, I'm looking at it more from the perspective of what is the minimum return that you expect, more so than the actual price that you're getting. So it's still a very legitimate question.

AJ Levine: Through to high teens for.

AJ Levine: For a heavier lift either redevelopment or more opportunistic and things like that.

AJ Levine: Keeping in mind that right now.

AJ Levine: Unlevered returns might be the better metric <unk>.

AJ Levine: Investors still talk about it on levered basis, and who knows where cap rate compression would be so the.

AJ Levine: Pricing I am thinking about is assuming limited or no cap rate compression.

Speaker Change: Okay, but what about street retail.

AJ Levine: <unk>.

AJ Levine: Yes.

AJ Levine: Looking at more from the perspective of what is the minimum return that you expect more more so than the absolute pricing that you're getting.

AJ Levine: Or it's still.

AJ Levine: Still.

Kenneth F. Bernstein: And I'm, again, going to be a little bit cagey because it depends on a variety of factors. But the way to think about it is that it seems as though the lowest cap rates are for high-quality supermarkets. That high-quality supermarket anchor is going to, in general, throw off about 2% growth and seems to be trading in, I'm hearing some below six going in yield, some above, but in that range. And that seems to be the lowest cap rate trades that were. Street Retail, as we've been talking about, should be, seems to be throwing off at least twice that level of growth.

AJ Levine: And that's a very legitimate question and im again going to be a little bit cagy because it depends on a variety of factors, but the way to think about it is that.

AJ Levine: It seems as though the lowest cap rates are for high quality supermarket anchor.

AJ Levine: Is that high quality supermarket anchored is going to in general throw off about 2% growth.

AJ Levine: And seems to be trading in I'm hearing some below six going in yield some above but in that range.

AJ Levine: And that seems to be the lowest cap rate trades that we're seeing street retail as we've been talking about.

AJ Levine: Should be seems to be throwing off at least twice that level of growth. So if it was 200 basis points for that supermarket anchored it could be 400 basis points on a stabilized basis for the street retail so.

Kenneth F. Bernstein: So if it was 200 basis points for that supermarket anchor, it could be 400 basis points on a stabilized basis for street retail. So you're getting similar growth in yield on a stabilized asset, similar growth in yield, twice the growth for street retail, that feels pretty compelling. Now, add to that we're talking about value-add, recapitalization, a variety of other transactions that may or may not conform to simple going in yields plus growth, but that twice the growth for the same price feels pretty darn compelling and should produce higher IRRs, whether they are low teens or high teens. The devil's in the details, and I won't get into that today.

AJ Levine: Getting similar going in yield on on a stabilized asset similar going in yield.

AJ Levine: With twice the growth for street retail that feels pretty compelling to us now add to it that we're talking about value add recapitalization, a variety of other transactions that may or may not conform to simple going in yield plus growth, but that twice the growth, but at the same price feels pretty darn competitive.

AJ Levine: <unk> should produce higher IRR, whether they are low teens or high teens, the Devil's in the details.

AJ Levine: And I won't get into that.

Paulina Alejandra Rojas: As we start getting deals done, we'll give you much better visibility. Okay, and then if I can, I'm guessing I'm the last one. What's your opinion about digital native retailers? This was a growing category a few years ago, and now some of them are showing weakness. We have the likes of Bonobos, outdoor voices.

AJ Levine: Yet today as we start getting deals done, we'll give you much better visibility around that.

AJ Levine: Okay.

AJ Levine: And then if I kind of I'm guessing I'm the last one.

AJ Levine: What's your opinion about digitally native retailers.

AJ Levine: Retailers this was.

AJ Levine: Growing category, a few years ago now.

AJ Levine: <unk>.

AJ Levine: Some of them are showing witness the likes of bonobos outdoor voices and so.

Kenneth F. Bernstein: And so, what do you think? Yeah, so let's make a distinction between and. Yes, you are the last call. So I'm going to explain this people want to hang up, they feel, But make a distinction between DTC, direct-to-consumer, and Digitally Native because for a while, we were blending those two terms. DTC is alive and well. Direct-to-consumer is what luxury retailers are doing; it's what athleisure retailers are doing. They want to control their space and have a direct connection in an omni-channel world, whether it is online or through the stores, whether it is using social media or their flagship locations to drive that. DTC is alive. Digitally Native was a transition that a bunch of retailers during the Retail Armageddon started online and wanted to transition to stores because they needed the store; it was the only pathway to profit.

Speaker Change: What do you think.

Speaker Change: Yes, so and let's make a distinction between and yes. You are the last call. So I'm going to explain this people want to hang up feel free to do that but.

AJ Levine: But make a distinction between DTC direct to consumer.

AJ Levine: And digitally native because for a while we were blending those two terms.

AJ Levine: DTC is alive and well direct to consumer is what luxury retailers are doing it's what athleisure retailers are doing is they want to control their space.

AJ Levine: And having direct connection in an Omnichannel world.

AJ Levine: Whether it is online or through the stores, whether it is using social media or their flagship locations to drive that relationship DTC is alive and well.

AJ Levine: Digitally native was a transition that a bunch of retailers during their retail Armageddon started online and wanted to transition to stores because they needed. The store. It was the only pathway to profitability. Some have made it to the other side successfully.

Kenneth F. Bernstein: Some have made it to the other side successfully and will continue to thrive in an omnichannel world. And then others you've mentioned may not. And that's fine because some of them have been very exciting. They're great for the streets, and they'll do just fine.

AJ Levine: And we will continue to thrive in an Omnichannel World and then others, you've mentioned may not and Thats fine because some of them have been very exciting is they're great for streets and they'll do just fine others. As Jay has mentioned are part of our <unk> strategy, we have two bonobos or maybe three.

Kenneth F. Bernstein: Others, as A.J. has mentioned, are part of our Pry-Loose strategy. We have two bonobos, or maybe three, and all of them are well below market price.

Kenneth F. Bernstein: So if they don't make it, we'll make money. But the final point is... When I talk to my private equity and venture friends, if they're considering backing a digital native, the only way they're going to do it is if they have a... Real Estate Strategy, because that is the pathway to profitability.

AJ Levine: And all of them are well below market. So if they don't make it will make money, but the final point is when I talk to my private equity and venture friends.

AJ Levine: If theyre considering backing a digitally native.

AJ Levine: The only way they're going to do it is if they have a real estate.

AJ Levine: State strategy, because that is the pathway to profitability. So there'll be shake out it will not have any material impact to our earnings other than if we can pry loose.

Kenneth F. Bernstein: So there'll be shakeout. It will not have any material impact on our earnings other than if we can pry loose. And it is the natural evolution of, Well, thank you so much for the caller. Thank you. I would now like to turn the conference back to Ken Gottfried for closing remarks, sir. The perfect combination of John and Ken.

AJ Levine: And it is the natural evolution.

AJ Levine: Of retailing.

Ken: Well. Thank you so much for the color.

AJ Levine: Sure.

Speaker Change: Thank you.

AJ Levine: I would now like to turn the conference back to Ken Godfrey for closing remarks, Sir.

Kenneth F. Bernstein: Thank you all for taking the time. We look forward to, This concludes today's conference call. Thank you for participating. You may now, Please like and subscribe. See you next time. [inaudible]

AJ Levine: The perfect combination of John and Ken. Thank you all for taking the time, we look forward to speaking to you soon.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

AJ Levine: [music].

AJ Levine: Yeah.

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Speaker Change: Thank you.

AJ Levine: [music].

AJ Levine: Yes.

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AJ Levine: And.