Q2 2024 Retail Opportunity Investments Corp Earnings Call

Welcome to Retail Opportunity Investments second quarter 2024 conference call.

Operator: Participants are currently in a listen-only mode. Following the company's prepared remarks, the call will be open to questions. I would now like to introduce Lauren Silveira, the company's Chief Officer.

Operator: Following the company's preparatory marks, the call will be open for questions.

Participants are currently in a listen-only mode. Following the company's prepared remarks, the call will be open for questions. I would now like to introduce Lauren Silveira, the company's Chief Officer.

Lauren Severer: I would now like to introduce Lauren Severer, the company's kind of like officers. Thank you.

Lauren N. Silveira: Before we begin, please note that certain matters which we will discuss on today's call are forward-looking statements within the meaning of federal securities laws. These forward-looking statements involve risks and other factors, which can cause actual results to differ significantly from future results that are expressed or implied by such forward-looking statements. Investors should refer to the company's filings with the SEC, including its most recent annual report on Form 10-K, to learn more about these risks and other factors.

Speaker: Before we begin, please note that certain matters which we will discuss on today's call are forward-looking statements within the meaning of federal securities laws. These forward-looking statements involve risks and other factors which can cause actual results to differ or significantly from future results that are expressed or implied by such forward-looking statements. Participants should refer to the company's filings with the SEC, including our most recent annual report on Form 10-K, to learn more about these risks and other factors.

Lauren N. Silveira: Thank you. Before we begin, please note that certain matters which we will discuss on today's call are forward-looking statements within the meaning of federal securities laws.

These forward-looking statements involve risks and other factors, which can cause actual results to differ significantly from future results that are expressed or implied by such forward-looking statements.

Lauren N. Silveira: Participants should refer to the company's filings with the SEC, including our most recent annual report on Form 10-K , to learn more about these risks and other factors.

Speaker: In addition, we will be discussing certain non-GAAP financial results on today's call. Reconciliation of these non-GAAP financial results to GAAP results can be found in the company's quarterly supplemental, which is posted on our website.

Lauren N. Silveira: In addition, we will be discussing certain non-GAAP financial results on today's call. Reconciliation of these non-GAAP financial results to GAAP results can be found in the company's quarterly supplemental, which is posted on our website. Now I'll turn the call over to Stuart Tanz, the company's Chief Executive Officer. Stuart? Thank you, Lauren.

Lauren N. Silveira: In addition, we will be discussing certain non-GAAP financial results on today's call. Reconciliation of these non-GAAP financial results to GAAP results can be found in the company's quarterly supplemental, which is posted on our website.

Stuart Tanz: Now, I'll turn the call over to Stuart Tans, the company's Chief Executive Officer.

Stuart Tanz: Stuart? Thank you, Lauren, and good day, everyone. Here with Lauren and me today is Michael Haines, our chief financial officer, and Rick Shovel, our chief operating officer. Demand for space across our portfolio continues to be strong, and we continue to work hard at making the most of it, leasing space at a near-record pace. In fact, year-to-date, we've already leased over 776,000 square feet. Additionally, we continue to achieve releasing rent growth, posting a 12% increase on new leases for the second quarter, representing our 50th consecutive quarter, extending over 12 plus years, dating back to when we first commenced reporting properties statistics in 2012, when we owned just 35 shopping centers.

Stuart A. Tanz: Thank you, Lauren, and good day, everyone. Here with Lauren and me today are Michael Haines, our Chief Financial Officer, and Rich Schoebel, our Chief Operating Officer. Demand for space across our portfolio continues to be strong, and we continue to work hard at making the most of it, leasing space at a near record pace. In fact, year-to-date, we've already leased over 776,000 square feet. Additionally, we continue to achieve rental growth, posting a 12% increase on new leases for the second quarter, representing our 50th consecutive quarter extending to over 12 plus years, dating back to when we first commenced reporting property statistics in 2012, when we owned just 35 shopping malls.

Lauren N. Silveira: Now, I'll turn the call over to Stuart Tanz, the company's Chief Executive Officer. Stuart? Thank you, Lauren, and good day, everyone. Here with Lauren and me today is Michael Haines, our Chief Financial Officer, and Rich Schoebel, our Chief Operating Officer.

Speaker Change: Demand for space across our portfolio continues to be strong and we continue to work hard at making the most of it, leasing space at a near-record pace.

Speaker Change: In fact, year-to-date, we've already leased over 776,000 square feet.

Speaker Change: Additionally, we continue to achieve re-leasing rent growth, posting a 12% increase on new leases for the second quarter.

Speaker Change: representing our 50th consecutive quarter extending over 12 plus years

Speaker Change: Dating back to when we first commenced reporting property statistics in 2012, when we owned just 35 shopping centers.

Stuart Tanz: As we have grown our portfolio nearly threefold since, we have consistently achieved releasing rent growth every year and every quarter.

Stuart A. Tanz: As we have grown our portfolio nearly three-fold since, we have consistently achieved rental rate growth every year and every quarter. With respect to acquisitions, as we reported on our last call, early in the second quarter, through a long-standing off-market relationship, we acquired for $70 million an excellent core grocery-anchored shopping center. The property serves as the primary shopping center anchoring a master plan community known as Bresci Ranch that is situated in one of the most sought-after affluent submarkets in San Diego. Truly irreplaceable real estate. The Center features not just one but two strong supermarkets, Trader Joe's and Stater Brothers, both of which are long-standing tenants of ours.

Speaker Change: As we have grown our portfolio nearly three-fold since, we have consistently achieved releasing rent growth every year and every quarter.

Stuart Tanz: With respect to acquisitions, as we reported on our last call, early in the second quarter, through a long-standing off-market relationship, we acquired for 70 million an excellent core grocery anchor shopping center. The property serves as the primary shopping center anchoring a master-planned community known as Bresy Ranch, that is situated in one of the most sought-after affluent submarkets in San Diego, truly irreplaceable real estate. The center features not just one, but two strong supermarkets, Trader Joe's and State of Brothers, both of which are long-standing tenants of ours. Looking ahead, there are a number of opportunities for us to enhance the underlying value and grow the center's cash flow through enhancing the in-line tenant mix, as well as releasing below market space, which we are already working on.

Speaker Change: With respect to acquisitions, as we reported on our last call, early in the second quarter through a long-standing off-market relationship, we acquired for $70 million an excellent core grocery-anchored shopping center.

Speaker Change: The property serves as the primary shopping center anchoring a master plan community known as Bresci Ranch that is situated in one of the most sought-after affluent submarkets in San Diego, truly irreplaceable real estate.

Speaker Change: The Center features not just one, but two strong supermarkets, Trader Joe's and Stater Brothers, both of which are long-standing tenants of ours.

Stuart A. Tanz: Looking ahead, there are a number of opportunities for us to enhance the underlying value and grow the Center's cash flow through enhancing the in-line tenant mix as well as releasing below-market space, which we are already working on. With respect to dispositions, we recently sold a property for approximately $57 million. The Center that we acquired back in the early days of ROIC.

Speaker Change: Looking ahead, there are a number of opportunities for us to enhance the underlying value and grow the Center's cash flow through enhancing the inline tenant mix, as well as releasing below market space, which we are already working on.

Stuart Tanz: With respect to dispositions, we recently sold the property for approximately 57 million. It's a center that we acquired back in the early days of ROIC. Over the years, we substantially immersed in diets and repositioned the center, significantly increasing the cash flow along the way, surpassing our initial goals and projections. Notwithstanding the center being a stable property today, looking ahead, we felt the growth prospects were limited, and now was an appropriate time to sell this particular property. From our perspective of selling this property, while essentially at the same time that we were acquiring an irreplaceable asset like Bresy, no doubt enhances the long-term strength and appeal of our overall portfolio, as well as our ability to continue growing cash flow going forward.

Speaker Change: With respect to dispositions, we recently sold a property for approximately $57 million.

Stuart A. Tanz: Over the years, we've substantially re-merchandised and re-positioned the Centre, significantly increasing the cash flow along the way, surpassing our initial goals and projecting... Notwithstanding the Centre being a stable property today, looking ahead, we felt the growth prospects were limited, and now was an appropriate time to sell this particular property. From our perspective, selling this property, while essentially at the same time that we were acquiring an irreplaceable asset like Bressie, no doubt enhanced...

Speaker Change: It's a centre that we acquired back in the early days of ROIC. Over the years, we've substantially re-merchandised and repositioned the centre, significantly increasing the cash flow along the way, surpassing our initial goals and projections.

Speaker Change: Notwithstanding the Centre being a stable property today, looking ahead we felt the growth prospects were limited and now was an appropriate time to sell this particular property.

Speaker Change: From our perspective, selling this property, while essentially at the same time that we were acquiring an irreplaceable asset like Bressie, no doubt enhances the value of the property.

Stuart A. Tanz: The long-term strength and appeal of our overall portfolio, as well as our ability to continue growing cash flow going forward. Now I'll turn the call over to Michael Haines to take you through our financial results for the second quarter and the first six months.

Speaker Change: The long-term strength and appeal of our overall portfolio, as well as our ability to continue growing cash flow going forward.

Michael Haines: Now, we'll turn the call over to Michael Haines to take you through our financial results for the second quarter and the first six months.

Michael B. Haines: Thanks Stuart. For the three months ended June 30, 2024, the company had $83 million in total revenues and $28 million in operating income. For the first six months of 2024, the company had $169 million in total revenues and $58 million in operating income. On a same-center cash basis, net operating income for the second quarter of 2024 increased by 1.7%, an increase of 3.7% for the first six months. The 3.7% increase for the first half of the year is above our same center NLI guidance range for the full year of 1 to 2%.

Michael B. Haines: Now I'll turn the call over to Michael Haines to take you through our financial results for the second quarter and the first six months. Mike? Thanks Stuart. For the three months ended June 30, 2024, the company had $83 million in total revenues and $28 million in operating income.

Michael Haines: Mike, thanks to the three months in the June 30, 2024, the company had 83 million in total revenues and 28 million in operating income. For the first six months of 2024, the company had 169 million in total revenues and 58 million in operating income. On the same center cash basis, that operating income for the second quarter of 2024 increased by 1.7% and increased by 3.7% for the first six months. The 3.7% increase for the first half of the year is above our same center analyzed guidance range for the full year of 1 to 2%.

Speaker Change: For the first six months of 2024, the company had $169 million in total revenues and $58 million in operating income.

Speaker Change: On a same-center cash basis, net operating income for the second quarter of 2024 increased by 1.7% and increased by 3.7% for the first six months.

Speaker Change: The 3.7% increase for the first half of the year is above our same center NOI guidance range for the full year of 1-2%. However, as we discussed on our last call, given the ongoing anchor space releasing activity, there will be some downtime between leases, which is reflected in our guidance.

Michael Haines: However, as we discussed on our last call, given the ongoing anchor space releasing activity, there will be some downtime between leases, which is reflected in our guidance. Gapment income attributable to Commissioner Holders sold was 7.4 million for the second quarter of 2024, equating to $0.6 per division share. And for the first six months of 2024, Gapment income was 18.4 million, or 14 cents per division share. Funds for operations for the second quarter of 2024 told us 34.1 million, equating to 25 cents per division share. And for the first six months of 2024, FLO told us 72.1 million, or 54 cents per division share.

Michael B. Haines: However, as we discussed on our last call, given the ongoing anchor space releasing activity, there will be some downtime between leases, which is reflected in our guidance. Gap in income attributable to common shareholders was $7.4 million for the second quarter of 2024, equating to $0.06 per diluted share, and for the first six months of 2024, gap in income was $18.4 million, or $0.14 per diluted share.

Speaker Change: Gap in income attributable to common shareholders sold at $7.4 million for the second quarter of 2024, equating to $0.06 per diluted share. And for the first six months of 2024, gap in income was $18.4 million, or $0.14 per diluted share.

Michael B. Haines: Customer operations for the second quarter of 2024 totaled $34.1 million, equating to $0.25 per diluted share, and for the first six months of 2024, SFO totaled $72.1 million, or $0.54 per diluted share. Turning to our balance sheet, during the second quarter, we retired in full a $26 million mortgage. As a result, we currently only have one mortgage loan remaining.

Speaker Change: Customer operations for the second quarter of 2024 totaled $34.1 million, equating to $0.25 per diluted share. And for the first six months of 2024, FFO totaled $72.1 million, or $0.54 per diluted share.

Michael Haines: During tour balance sheet, during the second quarter, we retired in full a $26 million mortgage. As a result, we currently only have one mortgage loan remaining for 34 million, meaning that 94 or 95 shopping centers are unencumbered, equating to about 99% of our total portfolio GLA. And the last remaining mortgage matures in 15 months from now. With respect to the $250 million of senior notes that mature in December, our objectives are to refinance the bonds through a long-term public bond offering, preferably a 10-year deal. Depending on how interest rates in the bond market evolve during the second half of the year, we may also look to refinance possibly the same time our 200 million term loan.

Speaker Change: Turning to our balance sheet, during the second quarter, we retired in full a $26 million mortgage. As a result, we currently only have one mortgage loan remaining.

Richard K. Schoebel: The total is $34 million, meaning that 94 of our 95 shopping centers are unencumbered, equating to about 99% of our total portfolio GLA. The last remaining mortgage matures in 15 months from now. With respect to the $250 million of senior notes that mature in December, our objective is to refinance the bonds through a long-term public bond offering, preferably a 10-year deal. Depending on how interest rates in the bond market evolve during the second half of the year, we may also look to refinance, possibly at the same time, our $200 million turn line.

Speaker Change: for $34 million, meaning that 94 of our 95 shopping centers are unencumbered, equating to about 99% of our total portfolio GLA.

Speaker Change: And the last remaining mortgage matures in 15 months from now.

Speaker Change: With respect to the $250 million of senior notes that mature in December , our objective is to refinance the bonds through long-term public bond offering, preferably a 10-year deal.

Speaker Change: Depending on how interest rates in the bond market evolves during the second half of the year, we may also look to refinance, possibly at the same time, our $200 million term loan. Assuming we do, then looking ahead, other than the $34 million mortgage, we would have no debt maturing for the next two plus years.

Michael Haines: So, mean we do, then looking ahead, other than the $34 million mortgage, we would have no debt maturing for the next two-plus years.

Richard K. Schoebel: To me, we do, and looking ahead, other than the $34 million mortgage, we would have no debt maturing for the next two plus years. Now I'll turn the call over to Rick Schoebel, our COO, to discuss property operations.

Richard Schoebel: Now, from the call of a group shovel or COO to discuss property operations.

Richard Schoebel: Rich, thanks, Mike. As Stuart highlighted, demand for space across our portfolio is strong, coming from both existing and prospective tenants. In terms of prospective tenants, there's no shortage of demand coming from a broad range of destination tenants, especially new children enrichment concepts, most notably academic, robotic, and exercise themed concepts. Additionally, main-state destination tenants in the business, self-care, and wellness sectors continue to expand, along with restaurants, including traditional restaurants, as well as new digital kitchen-only concepts. There are two common themes amongst these diverse tenants. First, they are strategically seeking to expand only in select, very specific markets on the West Coast, markets where we have a strong, established presence.

Richard K. Schoebel: Thanks, Mike. As Stuart highlighted, demand for space across our portfolio is strong, coming from both existing and prospective tenants. In terms of prospective tenants, there's no shortage of demand coming from a broad range of destination tenants, especially new children's enrichment concepts, most notably academic, robotic, and exercise-themed concepts. Additionally, mainstay destination tenants in the fitness, self-care, and wellness sectors continue to expand, along with restaurants, including traditional restaurants, as well as new digital kitchen-only concerts. There are two common themes among these diverse tenants.

Richard K. Schoebel: Now I'll turn the call over to Rick Schoebel, our COO, to discuss property operations. Rich? Thanks, Mike. As Stuart highlighted, demand for space across our portfolio is strong, coming from both existing and prospective tenants.

Richard K. Schoebel: In terms of prospective tenants, there is no shortage of demand coming from a broad range of destination tenants, especially new children enrichment concepts, most notably academic, robotic, and exercise-themed concepts.

Speaker Change: Additionally, mainstay destination tenants in the fitness, self-care, and wellness sectors continue to expand, along with restaurants, including traditional restaurants, as well as new digital kitchen-only concepts.

Richard K. Schoebel: First, they are strategically seeking to expand only in select, very specific markets on the West Coast, markets where we have a strong established presence. And second, they are seeking to lease space in necessity-centric shopping centers that are well-situated and highly protected mature communities, which again, is exactly what our portfolio offers. From our perspective, these diverse destination tenants serve as a natural value-add complement to the grocery-anchored daily necessity focus of our portfolio and business. As Stuart commented, we continue to make the most of the demand.

Speaker Change: There are two common themes amongst these diverse tenants. First, they are strategically seeking to expand only in select, very specific markets on the West Coast, markets where we have a strong, established presence.

Richard Schoebel: and second, they're seeking to leave space in the Cessity Centric Shopping Center that are well situated and highly protected mature communities, which again is exactly what our portfolio offers. From our perspective, these diverse destination tenants serve as a natural value-add compliment to the growth re-anchored daily necessity focus of our portfolio and business. As Stuart commented, we continue to make the most of the demand. During the second quarter, we leased 393,000 square feet, which is the second most active second quarter on record for the company. Breaking the 393,000 square feet down, we signed 40 new leases totaling 117,000 square feet, achieving a 12% increase in same space-based rent, as Stuart highlighted.

Speaker Change: And second, they are seeking to leave space in necessity-centric shopping centers that are well-situated and highly protected mature communities, which again, is exactly what our portfolio offers.

Speaker Change: From our perspective, these diverse destination tenants serve as a natural value-add complement to the grocery-anchored daily necessity focus of our portfolio and business.

Stuart A. Tanz: During the second quarter, we leased 393,000 square feet, which is the second most active second quarter on record for the company. Breaking that number down, we signed 40 new leases totaling 117,000 square feet, achieving a 12% increase in same-space base rent, as Stuart highlighted. Additionally, we renewed 276,000 square feet of valued tenants, achieving a 6% increase in base, notwithstanding the bulk of the renewals being tenants that exercised long-standing fixed renewal options, many of which did so early.

Speaker Change: As Stuart commented, we continue to make the most of the demand. During the second quarter, we leased 393,000 square feet, which is the second most active second quarter on record for the company.

Stuart A. Tanz: Breaking the 393,000 square feet down, we signed 40 new leases totaling 117,000 square feet, achieving a 12% increase in same space base rent as Stuart highlighted.

Richard Schoebel: Additionally, we renewed 276,000 square feet of valued tenants, achieving a 6% increase in base rent, notwithstanding the bulk of the renewals being tenants that exercised long-standing fixed renewal options, many of which did so early. In step with our second quarter strong leasing activity, our portfolio leased rate increased to 97% as of June 30th. Breaking that down between shop and anchor space, our shop space was 96% leased, and our anchor space was 98% leased. In terms of getting new tenants open, we had another successful active quarter. Specifically, tenants representing upwards $2 million of incremental annual base rent on a cash basis open their businesses and commence paying rent during the second quarter.

Speaker Change: Additionally, we renewed 276,000 square feet of valued tenants, achieving a six percent increase in base rent, notwithstanding the bulk of the renewals being tenants that exercised long-standing fixed renewal options, many of which did so early.

Stuart A. Tanz: In step with our second quarter strong leasing activity, our portfolio lease rate increased to 97% as of June 30th. Breaking that down between shop and anchor space, our shop space was 96% leased, and our anchor space was 98%. In terms of getting new tenants open, we had another successful active quarter. Specifically, tenants representing upwards of $2 million of incremental annual base rent on a cash basis opened their businesses and commenced paying rent during the second quarter.

Speaker Change: In step with our second quarter strong leasing activity, our portfolio lease rate increased to 97% as of June 30th. Breaking that down between shop and anchor space, our shop space was 96% leased and our anchor space was 98% leased.

Speaker Change: In terms of getting new tenants open, we had another successful active quarter.

Speaker Change: Specifically, tenants representing upwards of $2 million of incremental annual base rent on a cash basis open their businesses and commence paying rent during the second quarter.

Richard Schoebel: Additionally, in step with our strong leasing activity, new leases signed during the second quarter added over $2.5 million of incremental annual base rent, bringing our total incremental rent from new leases that haven't commenced yet to approximately $7.3 million as of June 30th.

Stuart A. Tanz: Additionally, in step with our strong leasing activity, new leases signed during the second quarter added over $2.5 million of incremental annual base rent, bringing our total incremental rent from new leases that haven't commenced yet to approximately $7.3 million as of June 30. Lastly, at June 30, we had 17 anchor leases scheduled to mature next year in 2025. Two of the 17 have already renewed here. As to the other 15... Based on tenant discussions to date, we currently expect that at least 13 of the 15 anchors will renew, and possibly all 15, which again speaks to the strength of our portfolio and the strength of our anchor tenant base. Now I'll turn the call back over to you. Thanks, Rich.

Speaker Change: Additionally, in step with our strong leasing activity, new leases signed during the second quarter added over two and a half million dollars of incremental annual base rent, bringing our total incremental rent from new leases that haven't commenced yet to approximately 7.3 million as of June 30th.

Richard Schoebel: Lastly, at June 30th, we had 17 anchor leases scheduled to mature next year in 2025. Two of the 17 have already renewed here just recently. As to the other 15, based on tenant discussions today, we currently expect that at least 13 of the 15 anchors will renew and possibly all 15 could, which again speaks to the strength of our portfolio and the strength of our anchor tenant base.

Speaker Change: Lastly, at June 30th we had 17 anchor leases scheduled to mature next year in 2025. Two of the 17 have already renewed here just recently.

Speaker Change: As to the other 15, based on tenant discussions to date, we currently expect that at least 13 of the 15 anchors will renew and possibly all 15 could, which again speaks to the strength of our portfolio and the strength of our anchor tenant base.

Stuart Tanz: Now I'll turn the call back over to Stuart. Thanks, Rich. Based on our solid portfolio performance during the first half of the year, together with what we see on the horizon with our core portfolio in the second half of the year, we have raised the lower end of our initial FFO guidance. In terms of the higher end of our initial guidance, which was largely based on growing our portfolio back at the start of the year, there was increasing activity in the acquisition market driven in part by the market's expectation that interest rates would be cut soon.

Stuart A. Tanz: Based on our solid portfolio performance during the first half of the year, together with what we see on the horizon with our core portfolio in the second half of the year, we have raised the lower end of our initial FFO guidance. In terms of the higher end of our initial guidance, which was largely based on growing our portfolio back at the start of the year, there was increasing activity in the acquisition market, driven in part by the market's expectation that interest rates would be cut soon.

Speaker Change: Now, I'll turn the call back over to Stuart. Thanks, Rich.

Stuart A. Tanz: Based on our solid portfolio performance during the first half of the year, together with what we see on the horizon with our core portfolio in the second half of the year, we have raised the lower end of our initial FFO guidance.

Speaker Change: In terms of the higher end of our initial guidance, which was largely based on growing our portfolio back at the start of the year, there was increasing activity in the acquisition market driven in part by the market's expectation that interest rates would be cut soon.

Stuart A. Tanz: Based on the momentum that was building, we expected that 2024 would potentially prove to be another productive year on the acquisition front, and we set our initial guidance accordingly. However, as the year has progressed, debt financing costs have not come down, and seller expectations in terms of pricing and carpets have not moved. As a result, the market has been largely idle. Additionally, the uncertain economy continues to weigh on the acquisition market, making it unclear, as we sit here today, when the market could pick back up again and become more favorable. In light of these factors, we are now assuming no additional acquisition activity in terms of our guidance for the second half of the year. Accordingly, we have lowered the high end of our initial FFO guidance.

Stuart Tanz: Based on our productive year on the acquisition front, and we set our initial guidance accordingly. However, as the year has progressed, debt financing costs have not come down, and seller expectations in terms of pricing and carapids have not moved. As a result, the market has been largely idle. Additionally, the uncertain economy continues to weigh on the acquisition market, making it unclear as we sit here today when the market could pick back up again and become more favorable. In light of these factors, we are now assuming no additional acquisition activity in terms of our guidance for the second half of the year.

Speaker Change: Based on the momentum that was building, we expected that 2024 would potentially prove to be another productive year on the acquisition front, and we set our initial guidance accordingly.

Speaker Change: However, as the year has progressed, debt financing costs have not come down and seller expectations in terms of pricing and cap rates have not moved. As a result, the market has been largely idle.

Speaker Change: Additionally, the uncertain economy continues to weigh on the acquisition market, making it unclear, as we sit here today, when the market could pick back up again and become more favorable.

Speaker Change: In light of these factors, we are now assuming no additional acquisition activity in terms of our guidance for the second half of the year. Accordingly, we have lowered the high end of our initial FFO guidance.

Stuart Tanz: Accordingly, we have lowered the high end of our initial FFO guidance. With respected dispositions, we do have a couple of properties that we may move forward with selling during the second half of the year, but only 20 around 25 million, assuming both properties were to be sold.

Operator: With respect to dispositions, we do have a couple of properties that we may move forward with selling during the second half of the year, but only totaling around $25 million, assuming both properties were to be sold. Meanwhile, while the acquisition market remains muted, we continue to focus on growth opportunities within our core portfolio. Expanding on Richard's remarks regarding upcoming anchor maturities going forward over the next several years, a growing number of our maturing, long-standing anchor tenants do not have any remaining renewal options to access.

Speaker Change: With respect to dispositions, we do have a couple of properties that we may move forward with selling during the second half of the year, but only totaling around $25 million assuming both properties were to be sold.

Stuart Tanz: While the acquisition market remains muted, we continue to focus on growth opportunities within our core portfolio, expanding on Rich's remarks regarding upcoming anchor maturities. Going forward over the next several years, a growing number of our maturing, longstanding anchor tenants do not have any remaining renewal auctions to exercise. Given that many of these anchor releases were originated a long time ago, some by as much as 20 to 30 years ago, these anchor releases are significantly below market today. Safe to say, we intend to make the most of these releases and opportunities over time, capitalizing on the long-term strength and appeal of our grocery anchor, the subsidy-based portfolio, and our sought-after highly protected markets.

Speaker Change: While the acquisition market remains muted, we continue to focus on growth opportunities within our core portfolio.

Speaker Change: Expanding on Richard's remarks regarding upcoming anchor maturities, going forward over the next several years, a growing number of our maturing long-standing anchor tenants do not have any remaining renewal options to exercise.

Operator: Given that many of these anchor leases were originated a long time ago, some by as much as 20 to 30 years ago, these anchor leases are significantly below market value today. Safe to say, we intend to make the most of these release opportunities over time, capitalizing on the long-term strength and appeal of our grocery-anchored, necessity-based portfolio and our sought-after, highly protected market. Now we will open up the call to your questions.

Speaker Change: Given that many of these anchor leases were originated a long time ago, some by as much as 20 to 30 years ago, these anchor leases are significantly below market today.

Speaker Change: Safe to say, we intend to make the most of these releasing opportunities over time, capitalizing on the long-term strength and appeal of our grocery-anchored, necessity-based portfolio and our sought-after, highly protected markets.

Operator: Now we will open up the call for your questions. Operator? Thank you. If you would like to ask a question, please press star 11 on your telephone. You will then hear an automated message advising your hand has been raised. If you would like, at that time, wait for your name and your company to be announced before proceeding with your question. One moment for the first question.

Operator: Thank you. If you would like to ask a question, please press star 11 on your telephone. You will then hear an automated message advising your hand has been raised. If you would like, at that time, wait for your name and your company to be announced before proceeding with your question. One moment for the first question. Today our first question will be from Dori Kesten of Wells Fargo Security. Your line is open.

Speaker Change: Now, we will open up the call for your questions.

Speaker Change: Operator.

Speaker Change: Thank you. If you would like to ask a question, please press star 1 1 on your telephone. You will then hear an automated message advising your hand has been raised.

Speaker Change: If you would like...

Speaker Change: At that time, wait for your name and your company to be announced before proceeding with your question. One moment for the first question.

Dori Kesten: Today, our first question will be coming from Dory, Kessin of Wells Fargo Security. Your line is open. Good morning, Dory. Good morning. The deceleration in St.

Speaker Change: Today, our first question will be coming from Dori Kesten of Wells Fargo Security. Your line is open.

Operator: Good morning, Dori. Hey, good morning. The deceleration in same-score NOI growth that's implied for the second half of the year, is that evenly spread among Q3 or 4? Is there anything you'd want to point out as maybe differentiated by quarter?

Operator: Well, the things for 1.7% for the second quarter are.

Stuart Tanz: Toronto, I growth that implies that the second half of the year is that even the spread among Q3 or 4 is anything you'd want to point out is maybe differentiated by Q3? The second half of the year is the second half of the year. We're keeping the same sort of guidance of one to two percent because the back half, we're expecting it to be not as strong as first half, obviously, because just the way the numbers were comparing this year to the last year's results.

Speaker Change: Good morning, Dori.

Dori Lynn Kesten: Hey, good morning. The deceleration in SAMHSA ROI growth that's implied for the second half of the year, is that evenly spread among Q3 or 4? Is there anything you'd want to point out as maybe differentiated by quarter?

Operator: No, sorry, second half of the year. Second half of the year.

Speaker Change: Well the things for 1.7% for the for the second quarter is...

Operator: Second half of the year. Yeah, we're keeping the same sort of guidance of 1% to 2% because the back half, we're expecting it to be not as strong as the first half, obviously, because just the way the numbers work comparing this year to last year's results.

Speaker Change: No, sorry, the second half of the year.

Speaker Change: The second half of the year. Yeah, we're keeping the same sort guidance of 1% to 2% because the back half, we're expecting it to be not as strong as first half obviously because of just the way the numbers work comparing this year to last year's results.

Operator: Okay, and then I think on the updated list of dispositions out of Albertsons and Kroger, you guys have a number of stores potentially to be operated by CNS. Can you give us an updated view of the situation from your perspective, and does the new team there, or I guess potentially there, ease your operating concerns?

Stuart Tanz: And then, I think, on the updated list of decisions that have been covered, you guys have a number of stores potentially to be operated by Christina. Can you give us an updated view of the situation from your perspective, and do the new teams there, or I guess potentially there, ease your operating concerns? Yeah, I mean, from a least perspective, we have 32 leases in total that have with Kroger and Alvarsons. Only eight are being sold right now to CNS, six of which are in Oregon and two are in Washington. None of the 18 leases that we have with Kroger and Alvarsons in California are being sold to CNS.

Speaker Change: Okay, and then I think on the updated list of dispositions out of Albertsons, Kroger, you guys have a number of stores potentially to be operated by. Can you give us an updated view of the situation from your perspective? And does the new team there, or I guess potentially there, ease your operating concerns?

Operator: Yeah, I mean, from a...

Operator: Yeah, I mean, from a lease perspective, we have 32 leases in total that we have with Kroger and Albertsons. Only eight are being sold right now to CNS, six of which are in Oregon, and two are in Washington. None of the 18 leases that we have with Kroger and Albertsons in California are being sold to CNS. And in terms of the transaction, you know, we continue to communicate with both Kroger and Albertsons and conduct business as usual, including renewing one of their leases in the second quarter. However, because they're still waiting to see if the merger goes through, you know, they're not in a position to discuss the merger, and we haven't spoken to CNS. Okay. Thank you. [inaudible]

Speaker Change: Yeah, I mean from a lease perspective, we have 32 leases in total that have with Kroger and Albertsons.

Speaker Change: Only eight are being sold right now to CNS, six of which are in Oregon.

Speaker Change: and Tour in Washington. None of the 18 leases that we have with Kroger and Albertsons in California are being sold to CNS.

Stuart Tanz: and in terms of the transaction, you know, we continue to communicate with both Program and Alpersons and conduct business as usual, including renewing one of their leases in the second quarter. However, because they're still waiting to see if the merger goes through, you know, they're not in a position to discuss the merger, and we haven't spoken to CNS. Okay, thank you. Yep. Thank you.

Speaker Change: And in terms of the transaction,

Speaker Change: You know, we continue to communicate with both Kroger and Albertsons and conduct business as usual, including renewing one of their leases in the second quarter.

Speaker Change: However, because they're still waiting to see if the merger goes through, you know, they're not in a position to discuss the merger and we haven't spoken to CNS.

Operator: Thank you. One moment for the next question, and our next question will be coming from Todd Thomas, of KeyBank Capital Markets. Your line is open.

Operator: One moment for the next question.

Speaker Change: Okay, thank you.

Speaker Change: [inaudible]

Speaker Change: Thank you. One moment for the next question.

Todd Thomas: And our next question will be coming from Todd Thomas of KeyBank Capital Markets. Your line is open. Good morning, Todd. Hi, thanks. Good morning. A couple of questions. I get your comments about lower level of net investment activity going forward. We're now talking about rate cuts, again, later in the year and into 2025.

Speaker Change: And our next question will be coming from Todd Thomas of KeyBank Capital Markets. Your line is open.

Operator: Hi, thanks. Good morning.

Speaker Change: Good morning, Todd.

Todd Michael Thomas: Hi, thanks. Good morning.

Todd Michael Thomas: A couple of questions. I guess first, Stuart, you know, your comments about lower level of net investment activity going forward. We're now talking about rate cuts again.

Stuart A. Tanz: A couple of questions, I guess. First, Stuart, you know, your comments about the lower level of net investment activity going forward. We're now talking about rate cuts again later in the year and into 2025. So is it is it more about timing, just given the uncertainty around rate cuts and what was sort of previously anticipated and that investment activities are delayed, or are sellers just unwilling to transact at the current prices? And can you talk a little bit about, you know, sort of where that bid-ask spread is today?

Stuart Tanz: So is it more about timing, just giving the uncertainty around rate cuts and what was sort of previously anticipated, and that investment activity is delayed, or are our sellers just unwilling to transact the current prices? And can you talk a little bit about, you know, sort of where that bid-ask spread is today? Sure. Well, I mean, yes, it's timing as it relates to interest rates. And I think, as I said in my comments, you know, sellers are still reluctant to, you know, given the interest rate environment and the fact that the market is somewhat idle, sellers are still reluctant to bring their properties to market.

Speaker Change: later in the year and into 2025. So is it more about timing?

Todd Michael Thomas: Just given the uncertainty around rate cuts and what was sort of previously unanticipated and that investment activities delayed or are sellers just unwilling to transact the current prices and can you talk a little bit about you know sort of where that bid-ask spread is today?

Stuart A. Tanz: Sure. Well, I mean, yes, it's timing as it relates to interest rates. And I think, as I said in my comments, sellers are still reluctant to, given the interest rate environment and the fact that the market is somewhat idle, sellers are still reluctant to bring their properties to market. [inaudible] Going forward and looking into 2025, assuming that interest rates do move, we do anticipate, hopefully, that the acquisition market will pick up a bit more.

Speaker Change: Sure. Well, I mean, yes, it's timing as it relates to interest rates. And I think, as I said in my comments,

Speaker Change: You know, sellers are still reluctant to, you know, given the interest rate environment and the fact that the market is somewhat idle, sellers are still reluctant to bring their properties to market.

Stuart Tanz: Going forward and looking into 25, assuming that interest rates, we do see some movement in interest rates. We do anticipate, hopefully, that the acquisition market will pick up a bit more. But, you know, as we said in the comments at the start of the year, we anticipated more activity. And when, you know, when interest rates didn't come down, that came, you know, that certainly came to a halt very quickly.

Speaker Change: Going forward and looking into 2025, assuming that interest rates, we do see some movement in interest rates.

Stuart A. Tanz: But, you know, as we said in the comments at the start of the year, we anticipated more activity. And when, you know, interest rates didn't come down, that certainly came to a halt very quickly. So sellers are still on the sidelines right now, and we'll see how things move in the second half of the year.

Speaker Change: We do anticipate, hopefully, that the acquisition market will pick up a bit more, but...

Speaker Change: You know, as we said in the comments at the start of the year, we anticipated more activity and when, you know, when interest rates didn't come down, that came, you know, that certainly came to a halt very quickly.

Stuart Tanz: So we'll see how things move on the second half of the year.

Speaker Change: So sellers are still on the sidelines right now, and we'll see how things move on the second half of the year.

Michael Haines: Okay, and Mike, can you discuss the impact to guidance from the lower levels of net investment activity and the capital raising, you know, the equity issuance, which you're now not assuming, you know, relative to your prior expectations. You know, what did that amount to, you know, with the updated guidance? Yeah, I think in our last call, we've talked about how for every 100 million the net of investment activity, it added about a penny of FFO, which is why we, since we're removing all acquisition activity going forward for the balance of the year, that's way pulled down the high end of the guidance.

Michael B. Haines: Okay, and Mike, can you discuss the impact on guidance from the lower levels of net investment activity and the capital raising, the equity issuance, which you're now not assuming relative to your prior expectations? What did that amount to with the updated guidance?

Speaker Change: Okay, and Mike, can you discuss the impact to guidance?

Mike: From the lower levels of net investment activity and the capital raising, you know, the equity issuance, which you're now not assuming, you know, relative to your prior expectations, you know, what did that amount to, you know, with the updated guidance?

Michael B. Haines: Yeah, I think in our last call, we talked about how for every $100 million in the net of investment activity, it added about a penny of FFO, which is why we, since we're removing all acquisition activity going forward for the balance of the year, that's why we pulled down the high end of the guidance.

Mike: Yeah, I think in our last call, we talked about how for every $100 million in the net of investment activity, it added about a penny of FFO, which is why we, since we're removing all acquisition activity going forward for the balance of the year, that's why we pulled down the high end of the guidance.

Todd Thomas: Okay, and then just shifting over to the operational side. So, you know, I'm just curious; there's been a little bit of an increase in some tenant credit concerns. You took down your bad debt expense slightly at the midpoint. You know, can you talk a little bit about the health of the tenant base today, you know, versus three months ago, and you know, are some of these, you know, bankruptcies or announced or closure announcements? Are there, you know, any changes to the, you know, sort of, you know, outlook, the forward outlook, just based on some of these announcements that we've seen more recently.

Richard K. Schoebel: Okay. And then just shift over to the operational side. So, you know, I'm just curious. There's been a little bit of an increase in some tenant credit concerns. You took down your bad debt expense slightly at the midpoint. You know, can you talk a little bit about the health of the tenant base today, you know, versus three months ago? And, you know, are some of these, you know, bankruptcies or announced store closure announcements? Are there, you know, any changes to the, you know, sort of, you know, outlook, the forward outlook, just based on some of these announcements that we've seen more recently?

Speaker Change: Okay, and then just shifting over to the operational side. So, you know, I'm just curious, there's been a little bit of an increase in some tenant credit concerns. You took down your bad debt expense slightly at the midpoint. You know, can you talk a little bit about

Speaker Change: the health of the tenant base today, you know, versus

Speaker Change: Three months ago and you know are some of these you know bankruptcies or announced foreclosure announcements are there you know any changes to the you know sort of you know outlook the the forward outlook just based on some of these announcements that we've seen more recently.

Michael Haines: The tenant base continues to perform well, Todd. You know, receivables are consistent with historic averages. You know, I think we've been very fortunate. A lot of the names, the tenant names you've heard in the news, we have very little exposure to, and where we've had exposure, you know, either leases have been accepted or purchased through the bankruptcy process, or you know, the tenants have come out of bankruptcy and kept the leases. So there's been a very little impact from the tenants in the news.

Richard K. Schoebel: The tenant base continues to perform well, Todd. You know, receivables are consistent with historic averages.

Speaker Change: The tenant base continues to perform well, Todd. You know, receivables are consistent with historic averages.

Richard K. Schoebel: You know, I think we've been very fortunate. A lot of the names, tenant names you've heard in the news, we have very little exposure to. And where we have had exposure, you know, either leases have been accepted or purchased through the bankruptcy process, or, you know, the tenants have come out of bankruptcy and kept the leases. So there's been very little impact from the tenants in the news.

Speaker Change: I think we've been very fortunate. A lot of the tenant names you've heard in the news, we have very little exposure to. Where we've had exposure, either leases have been accepted or purchased through the bankruptcy process or the tenants have come out of bankruptcy and kept the leases.

Todd Thomas: Okay, got it.

Richard K. Schoebel: Okay, got it. Any update on the coal backfill at Fallbrook? I think there was potential for, you know, rent to commence either very late this year or early next year to the extent that you were able to get a lease signed. Is there any update on the progress there? Sure. Yeah, you know, I think

Speaker Change: Very little impact from the tenants in the news.

Stuart Tanz: Any update on the Cole's backfill at Ballbrook? I think there was potential for rent to commence either very late this year or early 25, to the extent that you were able to get a lease signed. Is there? Yeah, you know, I think at this point, during the second quarter, you know, we signed leases totaling about 45,000 square feet of the 179,000 square feet of available anchor space. You know, there's that lease appending 134,000 square feet remaining. We currently have a signed L.O.Y. In the largest space, the Cole's space you're referring to, which is 115,000 square feet.

Speaker Change: Okay, got it. Any update on the coals backfill at Fallbrook? I think there was potential for, you know, rent to commence either very late this year or early 25 to the extent that you were able to get a lease signed. Is there any update around the progress there?

Richard K. Schoebel: Sure. Yeah, you know, I think at this point during the second quarter, we signed leases totaling about 45,000 square feet of the 179,000 square feet of available anchor space. You know, there's at least 134,000 square feet remaining. We currently have a signed LOI in the largest space, the coal space you're referring to, which is 115,000 square feet. We continue to work to finalize the lease with the prospective tenant who's a long-term national tenant of ours. And the remaining 19,000 square feet, we're contemplating right now splitting the space into two, and we're in discussions with two prospective tenants for that space. All right, thank you.

Speaker Change: Sure. Yeah, you know, I think at this point, during the second quarter, you know, we signed leases totaling about 45,000 square feet of the 179,000 square feet of available anchor space.

Speaker Change: There's, I believe, a pending 134,000 square feet remaining.

Stuart Tanz: We continue to work to finalize the lease with the prospective tenant, who's a long-term national tenant of ours. And the remaining 19,000 square feet, we're contemplating right now, splitting the space into two. And we're in discussions with two prospective tenants on that space. All right, thank you. Yep. Thank you.

Speaker Change: We currently have a signed LOI in the largest space, the coal space you're referring to, which is 115,000 square feet.

Speaker Change: We continue to work to finalize the lease with the prospective tenant, who's a long-term national tenant of ours. And the remaining 19,000 square feet, we're contemplating right now splitting the space into two, and we're in discussions with two prospective tenants on that space.

Speaker Change: All right, thank you.

Speaker Change: Yep.

Speaker Change: Thank you. One moment for our next question.

Craig Mailman: One moment, next question is coming from Craig Millman of City Your Line. It's open. Good morning, Craig. Good morning. Hey, how are you guys? Just one fall of Fall. Just one fall of the anchor, anchor lease, an opportunity store. I know you've been excited to finally start to get, you know, bigger chunks that is back without extension options here. Can you just give us a distance, at least in your early talks or analysis here? I know it's hard to give exactly where you think rent spreads could be, but you know, some type of viewpoint to maybe where OCRs on some of these are and what that could indicate at least in terms of what you think rents could go on some of these renewals?

Operator: Thank you. One moment for our next question. My next question is coming from Craig Millman of City. Your Line is open.

Speaker Change: and a and a and an NFI an NFI an NFI NFI NFI NFI NFI

Speaker Change: Our next question is coming from Craig Mailman of City Your Line is open.

Operator: Hey, how are you guys? Just want to follow up on the anchor leasing opportunities, Stuart. I know you've been excited to finally start to get, you know, bigger chunks back without the extension options here. Can you just give us a sense, at least in your early talks or analysis here? I know it's hard to give exactly where you think rent spreads could be, but, you know, some type of view to maybe where OCRs on some of these are and what that could indicate, at least in terms of what you think rents could go on some of these renewals.

Speaker Change: Good morning, Craig. Good morning.

Craig Allen Mailman: Hey, how are you guys?

Craig Allen Mailman: Just want to follow up on...

Craig Allen Mailman: I just want to follow up on the anchor leasing opportunities, Stuart. I know you've been excited to finally start to get, you know, bigger chunks of these back without extension options here. Can you just give us a sense, at least in your early talks or analysis here,

Speaker Change: I know it's hard to give exactly where you think rent spreads could be, but, you know, some type of viewpoint to maybe where OCRs on some of these are and what that could indicate, at least in terms of what you think rents could go on some of these renewals.

Stuart Tanz: Sure. And you want that broken down anchor versus not anchor, or just around the anchor? Just around the anchor, because that, I mean, both, too. I mean, I'm just trying to get a sense. You guys are impacted a little bit this year on the same store side by, you know, some timing issues around, you know, commencement on sign leases. We're looking into next year. It feels like you have an opportunity to maybe get some premium spreads on what's leasing, and then you get the benefit of the commencement of some of these leases. So just trying to get a sense, as we look in the 25 for all the strips where growth could be accelerated a little bit without trying to get guidance out of you, but just sort of the pieces to maybe build up to what kind of same sort of look like next.

Stuart A. Tanz: Sure, and do you want that broken down anchor versus non-anchor or just around the anchor?

Operator: Just around the anchor because that, um... I mean, both, too. I mean, I'm just trying to get a sense.

Speaker Change: Sure, and you want that broken down anchor versus non-anchor or just around the anchor?

Stuart A. Tanz: You guys are impacted a little bit this year on the same store side by, you know, some timing issues around, you know, commencements on signed leases. As we're looking into next year, it feels like you have an opportunity to maybe get some premium spreads on what's leasing, and then you get the benefit of the commencement of some of these leases. So just trying to get a sense as we look into 25 for all the strips where growth could reaccelerate a little bit without trying to get guidance out of you, but just sort of the pieces to maybe build up to what kind of same store could look like next year.

Speaker Change: I'll just surround the anchor because that, um...

Speaker Change: I mean both too. I mean I'm just trying to get a sense.

Speaker Change: You guys are impacted a little bit this year on the same store side by, you know, some timing issues around, you know, commencements on signed leases as we're looking into next year.

Speaker Change: It feels like you have an opportunity to maybe get some premium spreads on what's leasing and then you get the benefit of the commencement of some of these leases. So just trying to get a sense.

Speaker Change: As we look into 25 for all the strips where growth could reaccelerate a little bit without trying to get guidance out of you, but just sort of the pieces to maybe build up to what kind of same store could look like next year.

Stuart Tanz: here. Sure. Well, currently in terms of what we have left with the anchor vacancies, the mark to market on the leases that we currently are working on are quite large because starting rents on these leases were in the mid-signal digits. So, assuming that these leases do get executed, which we are anticipating in over the next 30 days, the mark to market is extremely strong. Going forward on anchor spaces, as you look at what Richard articulated over the next year, looking into 25. Again, a number of these leases are well below market, but on a blended basis, I would tell you that trend is probably going to be higher as we move into 25 on the anchor side.

Stuart A. Tanz: Sure. Well, currently, in terms of what we have left with the anchor vacancies, the mark-to-market on the leases that we currently are working on is quite large because starting rents on these leases were in the mid-single digits. So assuming that these leases do get executed, which we are anticipating over the next 30 days, the mark-to-market is extremely strong. Going forward on Anchor Space.

Speaker Change: The mark-to-market on the leases that we currently are working on are quite large because starting rents on these leases were in

Speaker Change: the mid-single digits. So, assuming that these leases do get executed, which we are anticipating over the next 30 days, the mark-to-market is extremely strong. Going forward on anchor spaces.

Stuart A. Tanz: As you look at what Rich articulated over the next year, looking into 2025, again, a number of these leases are well below market, but on a blended basis. I would tell you that trend is probably going to be higher as we move into 2025 on the anchor side. Inline space will vary depending on what is expiring and where, but in general, I'm anticipating that trend to also move higher as we get through the balance of this year and into 2025.

Speaker Change: As you look at what Rich articulated over the next year, looking into 2025, again, a number of these leases are well below market, but on a blended basis.

Richard K. Schoebel: I would tell you that trend is probably going to be higher as we move into 25 on the anchor side.

Stuart Tanz: Inline space will vary depending on what is expiring and where, but in general, I'm anticipating that trend to also move higher as we get through the balance of this year and into 25. As Richard articulated, the strength, the underlying strength and demand that we're seen on the ground on the West Coast continues to be extremely strong. So as we look to the balance of the year and into 25, we're expecting a pretty strong growth on both sides of that equation. So I mean, if you guys did a blended spread to about 7% so far this year, could that blend up into the low teams next year on maybe 10% of your total GLA?

Richard K. Schoebel: Inline space will vary depending on what is expiring and where, but in general,

Speaker Change: I'm anticipating that trend to also move higher as we get through the balance of this year and into 2025. As Rich articulated, the strength, the underlying strength and demand

Stuart A. Tanz: As Rich articulated, the underlying strength and demand that we're seeing on the ground on the West Coast continues to be extremely strong, so as we look to the balance of the year and into 2025, we're expecting pretty strong growth on both sides of that equation.

Richard K. Schoebel: that we're seeing on the ground on the West Coast continues to be extremely strong. So, as we look to the balance of the year and into 2025, we're expecting pretty strong growth on both sides of that equation.

Stuart A. Tanz: So, I mean, if you guys had, you know, blended spreads of about 7% so far this year, could that blend up into, you know, the low teens next year on, you know, maybe 10% of your total GLA? Is that sort of a decent way to think about it, then, as the drag burns off this year, which, Mike, I don't know if you want to give a sense of, you know, what the 1% to 2% same store would have been or what the drag on that is by the, you know, commencement timing? I mean, are we talking about same store potentially above 4% next year, assuming everything hits, or are there other kinds of puts and takes that we should think about as we're looking into the 25?

Speaker Change: So, I mean, if you guys did, you know, blended spreads of about 7% so far this year.

Richard K. Schoebel: [inaudible]

Richard K. Schoebel: Could that blend up into, you know, the low teens next year on, you know, maybe 10% of...

Stuart Tanz: Is that sort of a decent way to say, could that have been as the drag burns off this year? Which might, I don't know if you want to give a sense of what the 1% to 2% states don't would have been, or what the drag on that is by the commencement timing. I mean, are we talking about the same store potentially above 4% next year, assuming everything hits? Or are there other kinds of puts and takes that we should think about as we're looking into 25? Yeah, again, we're anticipating that those spreads will continue to move higher.

Mike: Your total GLA. Is that sort of a decent way to think about it? And then as the drag burns off this year, which Mike, I don't know if you want to give a sense of.

Mike: You know, what the 1% to 2% save store would have been, or what the drag on that is by the, you know, the commencement timing. I mean, are we talking about save store potentially above 4% next year? Assuming everything hits, or are there other kind of...

Stuart A. Tanz: Yeah, again, we're anticipating that those spreads will continue to move higher. In terms of Same Store, the benefit of what we're now leasing or have leased this year really comes into focus, Mike. I'd say mid-25. So you'll get some benefit next year from what we're doing now from a Same Store perspective. The real punch, though, will come in 26, obviously, because you're going to get a full year of a run rate in terms of the NOI, but Same Store in 25 should be stronger than 24, given the fact that, you know, given the fact that these spaces that we're finally leasing, that did come pretty quickly after these anchors vac We're anticipating the same store moving back up to the 3-4% range next year, maybe a bit higher, depending on how fast we can get these tenants open.

Speaker Change: Puts and Takes that we should think about as we're looking into 25.

Stuart Tanz: In terms of same store, that will the benefit of what we're now leasing or have leased this year really comes into focus, Mike, I'd say mid 25. So you'll get some benefit next year from what we're doing now, from same store perspective. The real punch, though, will come in 26 obviously, because you're going to get a full year of a run rate in terms of the NOI. But same store in 25 should be stronger than 24, given the fact that these spaces that were finally leasing that did come pretty quickly after these acres vacated, that will benefit hits late next year and certainly into 26 at this point.

Speaker Change: Yeah, again, we're anticipating that those spreads will continue to move higher.

Speaker Change: In terms of same store, the benefit of what we're now leasing, or have leased this year, really comes into focus.

Speaker Change: Mike I'd say mid-25 so you'll get some benefit next year from what we're doing now from the same store perspective.

Mike: The real punch though will come in 26 obviously because you're going to get a full year of a run rate

Speaker Change: in terms of the NOI, but...

Speaker Change: Same store in 25 should be stronger than 24, given the fact that

Speaker Change: You know, given the fact that these spaces that we're finally leasing...

Speaker Change: That did come pretty quickly after the...

Stuart Tanz: We're anticipating same store moving back up to the 3% to 4% range. Next year, maybe a bit higher depending on how fast we can get these tenants open.

Speaker Change: These anchors vacated, that real benefit hits late next year and certainly into 26 at this point. We're anticipating the same store moving back up to the 3-4% range next year. Maybe a bit higher depending on how fast we can get these tenants open.

Michael B. Haines: And one last one for Mike. On the debt refinances, kind of where do you think spreads are today on a term loan and on secured debt? And then also, as we think about the swaps that mature in August, should we just assume, kind of in the back half of the year, about 150, you revert back to kind of the mid-sixes where the term loan is, just from a modeling perspective?

Michael Haines: One last one for Mike, on the debt refinances, where do you think spreads are today on a term loan and on secured debt? Then also, as we think about the swap set mature in August, we just assume kind of back half of the year, about 150 you revert back to kind of the mid-sixes where the term loan is, just from a modeling perspective. Well, first of all, on the swap side, our goal is to refinance the term loan, possibly at the same time we refinance the December bond, so we're not intending to replace the swaps.

Speaker Change: And one last one for Mike.

Mike: On the debt refinances, kind of where do you think spreads are today on a term loan and on secured debt? And then also, as we think about the swaps that mature in August , should we just assume kind of back half of the year, about $150, you revert back to kind of the mid-sixes where the term loan is, just from a modeling perspective?

Michael B. Haines: Well, first of all, on the swap side, our goal is to refinance the term loan, possibly at the same time we refinance the December bonds, so we're not intending to replace the swaps. So when those revert to floating rates on the term loan, you're going to be in the lowest, like, say, 6364. But looking at where the 10-year is today, and with the credit spreads for us, we'd probably price the deal around 6, so you're going to get some pickup there.

Speaker Change: Well, first of all, on the swap side, our goal is to refinance the term loan, possibly at the same time we refinance the December bond, so we're not intending to replace the swaps.

Michael Haines: So when those are worked to floating right on the term loan, you're going to be in the lowest, like say, 6364. But we're looking at where the ten years today, and with the credit spreads for us, we probably priced a deal around 6, so you're going to get some pick up there. So we're just kind of keeping an overall market to refinance. And that's obviously the 24 bonds and the term loan, potentially at the same time, and bring that down to about high fives to a 6% range. And if we do finance that, if I'm correct, we would then have nothing do our balance sheet for several years.

Speaker Change: So when those revert to floating rate on the term line, you're going to be in the lowest, like say 6364. But looking at more of the 10 years today, and with the credit spreads for us, we probably price the deal around 6, so you're going to get some pickup there.

Michael B. Haines: So we're just kind of keeping an eye on the overall market to refinance at least the 24 bonds and the term loan, potentially at the same time, and bring that down to about a high 5 to 6% range. And if we do finance that, if I'm correct, Mike, we then have nothing due on our balance sheet for several years. Correct. Just that one mortgage next year, which is, you know, not meaningful. Yeah. Great. Thank you.

Speaker Change: So we're just kind of keeping an eye on the overall market to refinance all these 24 bonds and the term loan potentially at the same time and bring that down to about high fives to the 6% range.

Speaker Change: And if we do finance that, if I'm correct, Mike, we then have nothing due on our balance sheet for several years after that. Correct. Just that one mortgage next year, which is not meaningful.

Operator: Just that one more year, next year, we're just, you know, not meaningful. Yeah. Great. Thank you. Yeah. Sure. Thank you. One moment for the next question, please.

Operator: Thank you. One moment for the next question, and our next question will be coming from Juan Sanabria of BMO Capital Markets. Your line is open.

Mike: Great. Thank you. Yeah, sure.

Speaker Change: Thank you. One moment for the next question, please.

Juan Sanabria: And our next question will be coming from Juan, Senate Brea of BMO Capital Markets. Your line is open. Good morning, Juan. Good morning. Just following up on the line of question from earlier, any color you can give on one of the big, a lot of stores. I think in Lacey that was on the closure list. Any potential. Any potential curve feeds that you'd expect or any insights on to when that may close and potential backfills. Sure. Yeah. You know, we only have one big lots in the portfolio. And, you know, as of now, we've not heard officially from Big Lots directly, but we do understand that the location we have up in Lacey, Washington, is a potential closure.

Speaker Change: And our next question will be coming from Juan Sanabria of BMO Capital Markets. Your line is open.

Operator: Good morning, everyone.

Operator: Good morning. Just following up on the line of questioning from earlier, any color you can give on one of the big lot stores, I think in Lacey, that was on the closure list, any potential term feeds that you'd expect or any insights on when that may close and potential backfills?

Juan Carlos Sanabria: Good morning, everyone. Good morning.

Juan Carlos Sanabria: Just following up on the line of questioning from earlier, any color you can give on one of the big lot stores, I think in Lacey that was on the closure list, any potential term feeds?

Speaker Change: that you'd expect or any insights on to when that may close and potential backfills?

Richard K. Schoebel: Sure, yeah, as you know, we only have one Big Lots in the portfolio, and, you know, as of now, we've not heard officially from Big Lots directly, but we do understand that the location we have up in Lacey, Washington, is a potential closure. You know, that center has been 100% leased for the past 7 years, and we already have offers on the space, you know, and the rent is substantially below market. So, you know, between any termination fee and the uptick in the rent, we don't see this as a big risk.

Speaker Change: Sure, yeah, you know, as you know, we only have one Big Lots in the portfolio, and, you know, as of now, we've not heard officially from Big Lots directly, but we do understand that the location we have up in Lacey, Washington, is a potential closure.

Stuart Tanz: You know, that center has been 100% leased for the past seven years. And we already have offers on the space; you know, and the rent is substantially below market. So, you know, between any termination fee and the uptick in the rent, you know, we don't see this as a big risk.

Speaker Change: You know, that center has been 100% leased for the past seven years.

Speaker Change: And we already have offers on the space, you know, and the rent is substantially below market. So, you know, between any termination fee and the uptick in the rent, you know, we don't see this as a big risk.

Stuart Tanz: And how much term is left on that just to get a sense as a quantum of the potential curve feed. There's about they just exercise an option. I think about a year ago. So I think there's about four years remaining. You know, the store has been renovated. It's in good shape. We expect we can turn this over with limited ti dollars and very little downtime.

Richard K. Schoebel: And how much term is left on that, just to get a sense of the quantum of the potential term fee?

Speaker Change: And how much term is left on that, just to get a sense of the quantum of the potential term fee?

Richard K. Schoebel: They just exercised an option, I think, about a year ago, so I think there's about four years remaining. The store has just been renovated. It's in good shape. We expect we can turn this over with limited TI dollars and very little downtime.

Speaker Change: They just exercised an option, I think, about a year ago, so I think there's about four years remaining. You know, the store has just been renovated, it's in good shape. We expect we can turn this over with limited TI dollars and very little downtime.

Stuart Tanz: Okay, great. And then just on the restaurants just in general with the increase in minimum wage and in California. I guess what you are seeing, probably with regards to demand or health of the tenants. I mean, there was seven news about a potential bankruptcy on Mod Pizza that subsequently was bought after that kind of news broke. So just curious on what you're hearing from tenants, and particularly. Just the health with higher costs running through their income statements. Sure, I mean, you know, clearly it's something that the tenant base brings up, but, you know, they'll use any angle to negotiate on, right?

Operator: Okay, great. And then just on restaurants, just in general, with the increase in minimum wage in California, I guess, where do you...

Speaker Change: Okay, great.

Speaker Change: And then just on the restaurants just in general with the increase in minimum wage in California, I guess, what are you seeing?

Robby: Broadly, with regards to demand or health of the tenants, there was some news about a potential bankruptcy on Mod Pizza that subsequently was bought after that kind of news broke, so just curious on what you're hearing from tenants and particularly

Speaker Change: Just the health with higher costs running through there.

Operator: Sure. I mean, you know, clearly it's something that Teneface brings up, but, you know, they'll use any angle to negotiate on, right? So it definitely comes up, obviously.

Speaker Change: Account Statements.

Speaker Change: Sure. I mean, you know, clearly it's something that the tenant base brings up, but, you know, they'll use any angle to negotiate on, right? So it definitely comes up. Obviously, you know, ModPizza, you know, highlighted that, you know, we only have six ModPizzas in our portfolio that account for less than 0.3% of our total base rent. They're all very modern spaces.

Stuart Tanz: So it definitely comes up, obviously, you know, Mod Pizza, you know, highlighted that, you know, we only have six Mod pizzas in our portfolio that account for less than 0.3% of our total base rent. They're all very modern spaces. As you said, it looks like that one's going to get resolved. But, you know, from our perspective, the prices have to go up in order to cover this, but it's really not having a huge impact on the rent because, you know, our properties are highly leased in very dense markets that, you know, people buying for restaurant spaces.

Speaker Change: As you said, it looks like that one's going to get resolved. But from our perspective, the prices have to go up in order to cover this, but it's really not having a huge impact on the rent.

Speaker Change: You know, our properties are highly leased in very dense markets that, you know, people buying for restaurant spaces, you know, we normally would have, you know, multiple LOIs on anything that came available.

Stuart Tanz: You know, we normally would have, you know, multiple otherwise, and anything that came available.

Operator: Thank you very much. Thank you. Thanks. I'm moving for the next question.

Operator: Thanks for one moment for the next question. And our next question will be coming from Jeffrey Spector of Bank of America Securities. Your line is open.

Speaker Change: Thank you very much.

Speaker Change: Thank you.

Jeffrey Spector: And our next question will be coming from Jeffrey Spector, a Bank of America security. Your line is open. Good morning, gentlemen. Jeff.

Speaker Change: Thanks. We'll hold one moment for the next question.

Speaker Change: And our next question will be coming from Jeffrey Spector of Bank of America Securities. Your line is open.

Operator: Good morning, gentlemen.

Operator: Hey guys, you got Andrew Riehl on for Jeff this morning. Thanks for taking our questions. Just one. Last quarter, I believe you had 68 million dollars of dispositions under agreement. In July, you sold one property for 57 million. Is that 11 million dollar Delta still under agreement to be disposed of, or has something changed there?

Michael Haines: Hey, guys, you got Andrew Real on for Jeff this morning. Thanks for taking our questions. Just one last quarter, believe you had $68 million of dispositions under agreement in July; you sold the one property for $57 million. Is that $11 million Delta still under agreement to be disposed of, or has something changed there? Yes, we still have a couple of assets under contract. We do expect potentially one to close in August, the month we're in as of yesterday. But the answer is yes, we do still have a couple of dispositions on tap, and we expect at least one, maybe both, to close certainly by year end, and about another $25 million of proceeds, which we'll use just to pay down debt on the balance sheet.

Jeffrey Alan Spector: Good morning, gentlemen.

Andrew Riehl: Hey guys, you got Andrew Riehl on for Jeff this morning. Thanks for taking our questions. Just just one. Last quarter, I believe you had 68 million dollars of dispositions under agreement. In July , you sold the one property.

Speaker Change: for $57 million. Is that $11 million Delta still under agreement to be disposed or something changed there?

Stuart A. Tanz: Yes, we still have a couple of assets under contract. We do expect potentially one to close in August, the month we're in, as of yesterday, but the answer is yes. We do still have a couple of dispositions on tap, and we expect at least one, maybe both, to close certainly by year-end. About another $25 million of proceeds which we'll use just to pay down debt on the balance sheet.

Speaker Change: Yes, we still have a couple of assets under contract. We do expect potentially one to close in August , the month we're in.

Speaker Change: as of yesterday. But the answer is yes. We do still have a couple of dispositions on tap and we expect at least one, maybe both, to close.

Speaker Change: Certainly by year-end, about another $25 million of proceeds which we'll use just to pay down debt on the balance sheet with.

Michael Haines: Okay, thanks. And what's that July disposition still at a low six cap rate? The one that we just saw. Yeah, low sixes are Jeff. All right, thank you. Thank you. One moment, okay?

Operator: Okay, thanks. And was July's disposition still at a low?

Speaker Change: Okay, thanks. And was that July disposition still at a low six cap rate?

Operator: The one that we just saw. Yeah, low sixes, Jeff. All right, thank you.

Speaker Change: The one that we just saw, low sixes, yeah, low sixes, Jeff.

Operator: Thank you. One moment, please, for the next question. And the next question is coming from Wes Golladay of Beard. Your line is open.

Jeff: All right, thank you.

Speaker Change: Thank you. One moment please for the next question.

Operator: Oh, beard. Your line is open. Good morning. Good morning, everyone.

Operator: Good morning. Good morning. Hey, good morning, everyone. I just want to open that last question. Can you tell us what asset was sold?

Speaker Change: And the next question is coming from Wes Golladay of Beard. Your line is open.

Stuart Tanz: I just want to open that last question. Can you tell us what asset was sold? Yes, it was that was sold. The center with that was sold was located here in the San Diego market. And again, the exit cap rate was in the low sixes. It was on the outside. Okay, okay, that that helps.

Wesley Keith Golladay: Good morning. Good morning. Hey, good morning, everyone. I just want to open that last question. Can you tell us what asset was sold?

Stuart A. Tanz: The answer to that was sold. The center that we sold was located here in the San Diego market, and again, the exit cap rate was in the low sixes.

Speaker Change: The center that we sold was located here in the San Diego market, and again, the exit cap rate was in the low sixes.

Operator: It was a no from the side. Okay, okay, that helps. Going back to the eight potential CNS properties, do you have any rights as a landlord? They may be like a termination fee or, okay, can you elaborate on that?

Stuart Tanz: Going back to the eight potential CNS properties, do you have any rights as a landlord? Maybe a term you can see or you'll elaborate on that. Sure. Yes, we do have a number of leases that we do have the right to terminate. If this transaction were to go through, we're discussions with Kroger and Albertsons in terms of what we may want to do with these leases, and currently those discussions continue to take place. And we are making some headway in terms of where what we might do with these leases long term. The good news is a number of these leases are in the best properties that we own.

Speaker Change: It was an oceanside.

Speaker Change: Okay, okay, that helps. Going back to the eight potential CNS properties, do you have any rights as a landlord?

Stuart A. Tanz: Yes, we do have a number of leases that we do have the right to To terminate, if this transaction were to go through, we're currently... You know, in discussions with Kroger and Albertsons in terms of what we may want to do with these leases and, Currently, those discussions continue to take place and we are making some headway in terms of [inaudible] But the situation is still very fluid, so we'll continue to monitor things and sort of go from there in terms of where all this might end up.

Speaker Change: Yes, we do have a number of leases that we do have the right to terminate if this transaction were to go through.

Speaker Change: in discussions with Kroger and Albertsons in terms of what we may want to do with these leases.

Speaker Change: Currently, those discussions continue to take place and we are making some headway in terms of

Speaker Change: in terms of what we might do with these leases long-term. The good news is a number of these leases are in the best properties that we own, very high-quality assets, and the rents are quite low.

Stuart Tanz: Very high quality assets and the rents are quite low. But the situation is still very fluid.

Stuart Tanz: So we'll continue to monitor things and sort of go from there in terms of where all this might end up.

Speaker Change: But the situation is still very fluid, so we'll continue to monitor things and sort of go from there in terms of where all this might end up.

Stuart Tanz: Okay, and then hopefully the multi-family industry continues to bottom out here and hopefully goes upward. Just curious if you can give us an update if you've seen any more interest in your potential out partial sales. And then, more specifically, is there an update at the Crossroads? I believe they were contemplating an expansion, but not sure where that went. Yeah, I mean, at the Crossroads, we continue to, you know, in terms of the Crossroads, we've completed all the work in terms of pulling the construction permits. However, we're waiting to do so until the market conditions get a bit more favorable.

Operator: Okay, and then, you know, hopefully the multifamily industry continues to bottom out here and hopefully goes upward. I'm just curious if you can give us an update, if you've seen any more interest in your potential out-parcel sales. And then, more specifically, is there an update at the crossroads? I believe they were contemplating an expansion, but not sure where that went.

Speaker Change: Okay, and then, you know, hopefully the multifamily industry continues to bottom out here and hopefully goes upward. I'm just curious if you can give us an update, if you've seen any more interest in your potential out-parcel sales. And then more specifically, is there an update at the crossroads? I believe they were contemplating an expansion, but not sure where that went.

Stuart A. Tanz: Yeah, I mean, at the crossroads, we continue to, you know, in terms of the crossroads, we've completed all the work in terms of pulling the construction permits. However, we're waiting to do so until the market conditions get a bit more favorable.

Speaker Change: Yeah, I mean, at the crossroads, we continue to, you know, in terms of the crossroads, we've completed all the work in terms of pulling the construction permits.

Stuart Tanz: In light of our discussions, the city who's a big supporter of the project granted us a two-year window for pulling the permits. In addition, the city has been proactively engaged about increasing the development density at the Crossroads by a lot, specifically for additional multi-family in the future. And, you know, they're feeling the interest in the Crossroads given the center's prime location within the city of Bellevue. But what's really happened at the Crossroads in terms of densification over the last couple of months, as we look forward, you know, in the next five to 10 years, is going to really create a lot of value long-term as it relates to the fact that the property is going to be designated subject to City Council.

Stuart A. Tanz: In light of our discussions, the city, who's a big supporter of the project, granted us a two-year window for pulling the permit. In addition, the city has been proactively engaged in increasing the development density at the crossroads by a lot, specifically for additional multi-family housing in the future. They're keenly interested in the crossroads given the center's prime location within the city of Bellevue, but what's really happened at the crossroads in terms of densification over the last couple of months, as we look forward to the next 5 to 10 years, is going to really create a lot of value long-term as it relates to the fact that the property is going to be designated, subject to City Council approval, a So we're very excited about that in terms of what's happened here over the last several months.

Speaker Change: However, we're waiting to do so until the market conditions get a bit more favorable. In light of our discussions, the city, who's a big supporter of the project, granted us a two-year window for pulling the permits.

Speaker Change: In addition, the City has been proactively engaged about increasing the development density at the crossroads.

Speaker Change: buy a lot specifically for additional multifamily in the future and you know they're keenly interested in the Crossroads given the center's prime location within the city of Bellevue but

Speaker Change: What's really happened at the crossroads in terms of densification over the last couple of months, as we look forward in the next five to ten years, is going to really create a lot of value long term as it relates to

Stuart Tanz: It's going to be a real approval, a high density now for the whole property. So, we're very excited about that in terms of what's happened there over the last several months.

Speaker Change: The fact that the property is going to be designated, subject to City Council approval, a high density now for the whole property. So, we're very excited about that in terms of what's happened there over the last several months.

Stuart Tanz: And then, you did make the point about the anchor leases having no renewals and big market markets there. Just curious if you're going to also get better terms on reimbursements. Yeah, I mean, we look at the entire lease when we have the opportunity to, to, you know, plug any leakage as it relates to the triple nets to address any restrictions or co-tenancies that may be in those leases. We look at the lease wholesale when we have the opportunity. Absolutely.

Stuart A. Tanz: Got it. And then you did make the point about the anchor leases having no renewals and big mark-to-markets there. Just curious if you're going to also get better terms on reimbursement.

Speaker Change #100: Got it. And then you did make the point about the anchor leases having no renewals and big mark-to-markets there. Just curious if you're going to also get better terms on reimbursements.

Operator: Yeah, I mean, we look at the entire lease when we have the opportunity to, to, you know, plug any leakage as it relates to the triple nets to address any restrictions or co tendencies that may be in those leases. We look at the lease wholesale when we have the opportunity. Absolutely. Thanks, everyone.

Speaker Change #101: Yeah, I mean, we look at the entire lease when we have the opportunity to plug any leakage as it relates to the triple nets, to address any restrictions or co-tenancies that may be in those leases. We look at the lease wholesale when we have the opportunity, absolutely.

Operator: Okay, thanks everyone. Thank you.

Operator: Thank you. One moment for the next question. Our next question will be from Hongliang Zhang of J.P. Morgan. Your line is open. Good morning, guys.

Hongliang Wang: One more for the next question.

Speaker Change #102: Okay. Thanks, everyone.

Speaker Change #103: Thank you.

Hongliang Wang: Our next question will be coming from Hongliang Wang of JP Morgan. Your line is open. Good morning, guys.

Speaker Change #104: Our next question will be coming from Hongliang Zhang of J.P. Morgan. Your line is open.

Stuart Tanz: I guess I have a question on the digital kitchens that you mentioned on the call. Do you have any studies or any data around the possibility of those customers cross-shopping in your, in the other source and your shopping center? No specific data about cross-shopping that I can give you on this call, you know, but these digital kitchens are not just commissary kitchens. These, you know, really are just mostly to-go type kitchens where people are ordering on the app and coming to pick them up. Obviously, they also do, you know, DoorDash and all the other delivery services, but it is bringing customers to the shopping centers when they're picking up their orders.

Hongliang Zhang: Good morning, guys.

Hongliang Zhang: Hey, I guess I have a question on the digital kitchens that you mentioned on the call. Do you have any studies or any data around the possibility of those customers cross-shopping in the other stores in your shopping center?

Richard K. Schoebel: No specific data about cross-shopping that I can give you on this call, but these digital kitchens are not just commissary kitchens. These are really just mostly to-go type kitchens where people are ordering on the app and coming to pick them up. Obviously, they also do door-to-door delivery, like all the other delivery services, but it is bringing customers to the shopping centers when they're picking up their orders. We expect that someone will pick up their groceries at the same time that they're picking up their dinner.

Speaker Change #106: No specific data about cross-shopping that I can give you on this call, but these digital kitchens are not just commissary kitchens. These really are just mostly to-go type kitchens where people are ordering on the app and coming to pick them up. Obviously, they also do DoorDash and all the other delivery services, but it is bringing customers to the shopping centers.

Stuart Tanz: And, you know, we expect that, you know, someone will pick up their groceries at the same time that they're picking up their dinner. That makes sense.

Speaker Change #106: when they're picking up their orders. And, you know, we expect that, you know, someone will pick up their groceries at the same time that they're picking up their dinner.

Operator: Thank you.

Operator: Thank you. And as a reminder, if you would like to ask a question, please call 1-1-1 on your telephone. Our next question will be from Linda Tsai of Jeffries.

Operator: And, as a reminder, if you would like to ask a question, one on your telephone.

Speaker Change #107: Yeah, that makes sense. Thank you.

Speaker Change #107: Yep.

Speaker Change #107: Bye.

Speaker Change #108: Thank you. And as a reminder, if you would like to ask a question...

Linda Tsai: Our next question will be coming from Linda Tsai of Jeffrey.

Speaker Change #109: 1-1-1 on your telephone.

Linda Tsai: Good morning, Linda. Good morning. Just to follow up to some of the other questions. So for the signed L.O.I. for cold, the 115,000 square feet, and then I know you're working on the remaining space, which you would split. What's the earliest? If Brent could commence based on the info you have today. Right now, it's an extensive T.I. Pretty extensive T.I. package, which is why it's taken a touch longer to get to the executed lease. But we want to make sure we cross all the eyes and teeth as it relates to the construction. We're anticipating if the lease gets executed in the next 30 days that we're about, I would tell you late next year, 4Q of 26.

Operator: Good morning, Linda. Good morning.

Speaker Change #110: Our next question will be coming from Linda Tsai of Jeffries.

Linda Tsai: Good morning, Linda. Good morning. Just to follow up to some of the other questions, so for the signed LOI for coals, the

Linda Tsai: I know you're working on the remaining space which you would split, what's the earliest rent could commence based on the info you have today?

Speaker Change #112: Right now it's a pretty extensive TI package, which is why it's taking a touch longer to get to the executed lease, but we want to make sure we cross all the I's and T's.

Richard K. Schoebel: Just to follow up to some of the other questions, so for the signed LOI for coal, it's 115,000 square feet. And then I know you're working on the remaining space, which you would split. What's the earliest rent could commence based on the info you have today?

Speaker Change #113: As it relates to the construction, we're anticipating, if the lease gets executed in the next 30 days, that we're about, I would tell you, late.

Richard K. Schoebel: Right now, it's a pretty extensive TI package, which is why it's taking a touch longer to get to the executed lease, but we want to make sure we cross all the I's and T's, as it relates to the construction. We're anticipating that if the lease gets executed in the next 30 days that we're about, I would tell you late next year, 4Q of 26, it looks like when the rent would Sorry, it was 25, not 26.

Stuart Tanz: It looks like when red would commence. Sorry, at 25, not 26. Got it.

Speaker Change #113: Next year, 4Q of 26, it looks like when rent would commence. Sorry, of 25, not 26.

Operator: Got it. And then for the big lots in Lacey, what would be a good potential backfill, and is a lease term fee incorporated in your current guidance?

Stuart Tanz: And then for the big loss in Lacey, what would be a good potential backfill? And then is a lease term fee incorporated in your current guidance? Can you repeat the first part of the question? Oh, sure. Just like a good potential backfill for that big loss. And then do you have a lease term fee in your guidance? No, we don't have the termination fee in our guidance. No. No termination fee. And again, as Rich said, we haven't had a formal rejection of the lease either. But yeah, the minute it hit the news, our leasing team went to work.

Speaker Change #114: Got it. And then for the big lots in Lacey, what would be a good potential backfill and then is a lease term fee incorporated in your current guidance?

Operator: I'm sorry, can you repeat the first part of the question? Oh, sure.

Operator: Oh, sure. Just like a good potential backfill for those big lots. And then do you have...

Speaker Change #115: I didn't get the answer. I'm sorry. Can you repeat the first part of the question? Oh, sure. Just like a good potential backfill for that big lots and then do you have a lease term fee in your guidance?

Richard K. Schoebel: No, we don't have the termination fee in our guidance, no, no, no termination fee, and again, as Rich said, we haven't had a formal rejection of the lease either. So, yeah, the minute it hit the news, our leasing team went to work, so, you know, when they were excited to hear that there was a potential to get it back, they'd already received good interest in the space, long ahead of anyone talking And I think our bad debt... the guidance range crew would cover that kind of a downtime anyway.

Speaker Change #116: No, we don't have the termination fee in our guidance, no. No.

Speaker Change #116: No termination fee, and again, as Rich said...

Speaker Change #117: We haven't had a formal rejection of the lease either, so... But yeah, the minute it hit the news, our leasing team went to work. So, you know, when they were excited to hear that it's a potential to get it back, because they've already received good interest on the space, long ahead of anyone talking about us getting the space back. Right. And I think our bad debt...

Stuart Tanz: So, you know, when they were excited to hear that the potential to get it back is, they've already received good interest on the space long ahead of anyone talking about it's getting the space back, right? And I think our bad that guidance range crew would cover that kind of a downtime anyway. Got it.

Operator: Got it. And then, you know, Rite Aid announced more closures last month. Could you just give us an update on anything that might be impacting your portfolio?

Speaker Change #118: Guidance Range Crew would cover that kind of a downtime anyway.

Stuart Tanz: And then, you know, Rite Aid announced more closures last month. Could you just give us an update on anything that might be impacting your portfolio? Sure. Yeah. No impact in terms of the closings. All right. It's continued to operate. Sales continue to gain some traction coming out of bankruptcy. And we're hopeful that we should hear any day that things are done. But right now, no update in terms of our right aids as it relates to where we were last quarter.

Speaker Change #119: Got it. And then, you know, Rite Aid announced some more closures last month. Could you just give us an update on anything that might be impacting your portfolio?

Richard K. Schoebel: Sure, yeah, no impact in terms of the closings. Our Rite-Aids continue to operate, and sales continue to gain some traction coming out of bankruptcy. And we're hopeful that we should hear any day that things are done. But right now, there is no update in terms of our Rite-Aids as it relates to where we were last quarter. The only other thing to talk about is Kroger. We're getting close to signing the very small Rite Aid we got back, and Kroger's the one who's taking that space.

Speaker Change #122: Sure, yeah, no impact in terms of the closings. Our Rite Aids continue to operate. Sales continue to gain some traction coming out of bankruptcy.

Speaker Change #119: and we're hopeful that we should hear any day that things are done, but right now no update in terms of our Rite Aids as it relates to where we were last quarter.

Stuart Tanz: The only other thing to talk about is prober has we're getting close to signing the very small right aid we got back. And crowbers, the one who's taking that space, and we're very excited about the fact that crowber has stepped up to again continue to build on this location. But more importantly, the downtime and rent. No TIs, and the downtime and rent will be very short given the fact that Crowers is just expanding next to their current store.

Speaker Change #119: The only other thing to talk about is Kroger has...

Speaker Change #119: We're getting close to signing the very small Rite Aid we got back, and Kroger's the one who's taking that space, and we're very excited about that.

Richard K. Schoebel: We're very excited about the fact that Kroger has stepped up to, again, continue to build on this location. But more importantly, the downtime and rent will be very short given the fact that Kroger is just expanding next to their current store.

Speaker Change #119: The fact that Kroger has stepped up to again

Speaker Change #119: continue to build on this location, but more importantly, the downtime in rent.

Speaker Change #119: No TIs in the downtime and rent will be very short given the fact that Kroger is just expanding next to their current store.

Stuart Tanz: Thanks.

Operator: And then just one last one on Walgreens announced: potential store closure. Any news or impact on your portfolio? Yeah, I mean, we have very little exposure to Walgreens.

Stuart Tanz: And then just one last one on Walgreens announcing potential store closures. Any news or impact here? portfolio. Yeah, I mean, we have very little exposure to Walgreens. In fact, the center we just sold had one of our Walgreens in it. So that's come out of our portfolio over the last quarter. But rich, yeah, we have four Walgreens in the portfolio. Stuart, at the end of the quarter, Stuart touched on: we sold one of those locations. Another one of those locations had been previously sublet by Walgreens to Dollar Tree. We were anticipating doing a direct lease with Dollar Tree on that location, which will leave us with two Walgreens up in the Pacific Northwest.

Speaker Change #120: Thanks. And then just one last one on Walgreens announcing potential store closures.

Richard K. Schoebel: Yeah, I mean, we have very little exposure to Walgreens. In fact, the center we just sold had one of our Walgreens in it. So that's come out of our portfolio over the last quarter. But Rich? Yeah, we have four Walgreens in the portfolio. Stuart, at the end of the quarter, as you touched on, we sold one of those locations. Another one of those locations had been previously sublet by Walgreens to Dollar Tree. We're anticipating doing a direct lease with Dollar Tree on that location, which will leave us with two Walgreens in the Pacific Northwest.

Speaker Change #121: Any news or impact to your portfolio?

Richard K. Schoebel: Yeah, I mean, we have very little exposure to Walgreens. In fact, the center we just sold had one of our Walgreens in it, so that's come out of our portfolio over the last quarter, but Rich? Yeah, we have four Walgreens in the portfolio. Stuart, at the end of the quarter, as Stuart touched on, we sold one of those locations. Another one of those locations had been previously sublet by Walgreens, the Dollar Tree.

Speaker Change #123: We're anticipating doing a direct lease with Dollar Tree on that location, which will leave us with two Walgreens up in the Pacific Northwest.

Operator: Thank you.

Operator: Thank you. One moment for the next question. And our next question is coming from Paulina Rojas-Schmidt of Green Street, Ireland.

Paulina Rojas: One moment for the next question.

Speaker Change #124: Thank you.

Speaker Change #125: Thank you. One moment for the next question.

Paulina Rojas: And our next point is coming from Paulina Rojas of Green Street. Your line is open. Hi, Paulina. Good morning. Good early morning for you, by the way. Yes, same as for you. So we're we're all in the same boat here. My question is, I'm looking at your disclosure new leases for anchor space. And I know you only found a few leases. It's not representative really of your portfolio, but I'm still intrigued by the low ABR per square foot around $10.

Speaker Change #126: And our next question is coming from Paulina Rojas-Schmidt of Green Street. Your line is open.

Operator: Good morning. Good morning. Early morning for you, by the way. Yes.

Speaker Change #130: Bye Paulina.

Operator: Yes, same as for you, so we're all in the same boat. My question is, I'm looking at your disclosure for new leases for anchors. And I know you only sign a few leases. It's not representative, really, of your portfolio. But I'm still intrigued by the low ABR per square foot, around $10. So can you provide some color on the space, markets, location, or type of tenant? To better understand the lower, certainly lower than average, place rent.

Paulina Alejandra Rojas: Good morning. Good early morning for you, by the way. Yes.

Speaker Change #128: Same as for you, so we're owing the same boat here.

Paulina Alejandra Rojas: My question is, I'm looking at your disclosure of new leases for Anchor Space.

Paulina Alejandra Rojas: And I know you only find a few leases, it's not representative really of your portfolio, but I'm still intrigued by the low ABR per square foot, around $10.

Stuart Tanz: So can you provide some color on the space market location or type of tenant to better understand that the lower and certainly lower than you play average in place rent and here. Well, you were referring to the anchor renewals during the quarter? Both really, because let me see if I have them in front of me. If I remember well both, yeah, the one new leaf anchor space has an initial rent of $10 per square foot and for renewals, it's also around $10, $11 per square foot. So what type of tenants are paying such low rent today?

Speaker Change #130: So, can you provide some color on the space, markets, location, or type of tenant to better understand the lower, certainly lower than average in place rent.

Operator: Are you referring to the anchor renewals during the quarter?

Speaker Change #130: here.

Operator: Both really because, let me see if I have them in front of me, if I remember well, both Yeah, the one new lease, Anchor Space, has an initial rent of $10 per square foot, and for renewal, it's also around $10, or $11 per square foot. So what type of tenants are paying such low rent today?

Speaker Change #131: Well, are you referring to the anchor renewals during the quarter?

Speaker Change #132: Both really because, let me see if I have them in front of me, if I remember well, both...

Speaker Change #133: The one new lease, Anchor Space, has an initial rent of $10 per square foot and for renewal it's also around $10-$11 per square foot. So what type of tenants are paying such low rent today?

Stuart Tanz: Well, it relates to the anchor renewals. In many cases, the anchor tenants are exercising options. In some cases, those options are flat. And in some cases, those leases were initially structured as ground leases where the anchor tenant actually built the space, which gave them the very low rent. And that's the rent we underwrote when we bought the property. And so there is some drag on the renewal as it relates to options that may already be in place that are below market for what we could get for the space if we could actually get it back.

Richard K. Schoebel: Well, it relates to anchor renewals. In many cases, anchor tenants are exercising options. In some cases, those options are flat.

Speaker Change #134: Well, it relates to the anchor renewals, in many cases the anchor tenants are exercising options.

Richard K. Schoebel: In some cases, those leases were initially structured as ground leases, where the anchor tenant actually built the space, which gave them a very low rent. That's the rent we underwrote when we bought the property. There is some drag on the renewals as it relates to options that may already be in place that are below market for what we could get for the space if we could actually get it back. And then, in terms of new leasing, I mean, it really just depends on, you know, the whole package of what the deal is structured, whether, you know, how much TI we're putting into it, how much, you know, the tenant is able You know, the anchor spaces, if you were to look at them in total throughout the portfolio, are below market, on average.

Speaker Change #134: In some cases, those options are flat, and in some cases, those leases were initially structured as ground leases, where the anchor tenant actually built the space, which gave them the very low rent.

Speaker Change #134: And, you know, that's the rent we underwrote when we bought the property. And, you know, so there is some drag on the renewals as it relates to options that may already be in place that are, you know, below market for what we could get for the space if we could actually get it back.

Stuart Tanz: And then in terms of new leasing, it really just depends on the whole package of what the deal is structured, whether how much Ti we're putting into it, how much the tenant is able to pay. But, on average, we're getting more than what we were previously for the spaces. The anchor spaces, if you were to look at them in total throughout the portfolio, are below market on average.

Speaker Change #134: And then in terms of new leasing, I mean, it really just depends on, you know, the whole package of what the deal is structured, whether, you know, how much TI we're putting into it, how much...

Speaker Change #134: You know, the tenant is able to pay, but on average, you know, we're getting more than what we were previously for the spaces. You know, the anchor spaces, if you were to look at them in total throughout the portfolio, are below market on average.

Stuart Tanz: Okay, and then big picture, how do you compare demand or the market rent that you have observed in market rent growth that you have observed in the last few years for anchor and shelf space? If it's fair to say that the strength of market rent growth has been more strongest for shelf space? Well, yeah, typically, shelf space is going to be, you know, we're going to capture a lot of that higher rent just because a lot more leases, and if you have more leases that are expiring without any options, then you can capture that space, that rent increase quite quickly.

Operator: Okay, and then big picture, how do you compare demand or the market rent that you have observed in market rent growth that you have observed in the last few years? And for anchor and shop space. Is it fair to say that the strength of market rent growth has been strongest for ShopSafe? Well, yeah.

Speaker Change #135: Okay and then big picture how do you compare demand or the market rent that you have observed in market rent growth that you have observed in the last few years

Speaker Change #136: And for anchor and shop space, is it fair to say that the strength of market rent growth has been more?

Richard K. Schoebel: Well, yeah, typically, shop space is going to be, you know, where you're going to capture a lot of that higher rent just because there are a lot more leases. And if you have more leases that are expiring without any options, and you can capture that space quite quickly, that rent increases quite quite quickly. [inaudible] I don't know if you want to add anything to that, Rick.

Speaker Change #136: strongest for shop space.

Speaker Change #137: Well, yeah, typically, shop space is going to be, you know, where you're going to capture a lot of that higher rent just because a lot more leases, and if you have more leases that are expiring without any options, then you can capture that space quite quick, that rent increase quite quickly.

Stuart Tanz: I don't know if you want to add anything to that, Rich. No, I don't think so. And I follow up about the rights that you mentioned, or consent, right, and for the diversity of some leases, some anchor leases, and how does that work? So how does it apply, for example, to sub-leases? You also have, in those cases, the right to reject a proger and sub-leasing the space? Yeah, I mean, I think as I articulated, a number of these leases are very old leases. So when an anchor tenant goes into a transaction, depending on the lease, of course, it gives the land or the ability to recapture the space if the net worth of that tenant doesn't meet a certain threshold, or we have the right to recapture the space, if a merger is done, if there's a big transaction done, there's a different variables, but correct me wrong, I don't think any of the eight identifiers are actually sub-lead, they're actually being operated by Albertsons and Kruger, right?

Speaker Change #137: I don't know if you want to add anything to that, Rich.

Operator: And a follow-up about the...uh, the rights that you mentioned or the consent right and for the divestiture of some leases, some anchor leases.

Richard K. Schoebel: I don't know. I don't think so.

Richard K. Schoebel: And a follow-up about the rights that you mentioned, or consent, right, for the divestiture of some leases, some anchor leases.

Speaker Change #138: How does that work? So how does it apply to, for example, subleases? You also have, in those cases, the right to reject Kroger subleasing the space?

Stuart A. Tanz: Yeah, I mean, as I articulated, a number of these leases are very old leases. So when an anchor tenant goes into a transaction, depending on the lease, of course, it gives the landlord the ability to recapture the space if the net worth of that tenant doesn't meet a certain threshold, or we have the right to recapture the space. If a merger is done, if there's a big transaction done, there are different variables. But, correct me if I'm wrong, I don't think any of the eight identified are actually sublet. They're actually being operated by Alvarez.

Speaker Change #139: Yeah, I mean I think as I articulated, a number of these leases are very old leases, so when

Speaker Change #139: Bye-bye.

Speaker Change #140: An anchor tenant goes into a transaction.

Speaker Change #141: The one of the, depending on the lease, of course.

Speaker Change #142: It gives the landlord the ability to...

Speaker Change #142: reCAPTCHA

Speaker Change #142: the space is the net worth of that tenant.

Speaker Change #143: It doesn't meet a certain threshold.

Speaker Change #143: Or, we have the right to recapture the space if...

Speaker Change #144: If a merger is done, if there's a big transaction done It is different variables, but correct me if I'm wrong, I don't think any of the eight identified are actually sublet. They're actually being operated by Alverson's Law

Stuart A. Tanz: We're in the midst now of having a conversation around the ability to either amend the lease or maybe do more than just that. So again, the situation is still very fluid. So this could be a moot conversation if the transaction on August 26th gets voted down by the appellate court. So I think we'll have more clarity next quarter as it relates to what's going on with these leases. But the good news is that, from our perspective, when you look at the total amount of exposure, there are not a lot of leases.

Stuart Tanz: Correct, correct. And Lohmer have been sub-lead? No, nothing's been sub-lead; they're either operated by Kruger, three, or Kruger, and the balance are Albertsons, so the direct leases. Right. So again, every circumstance never leases going to be different, and we're in the midst now of having a conversation around the ability to either amend the lease or maybe do more than just that. So again, the situation is still very fluid, so this could be a move conversation if the transaction on August 26 gets voted down by the appellate court. So I think we'll have more clarity next quarter as it relates to what's going on on these leases.

Speaker Change #144: And Kroger, right? Correct. Currently. And none of them have been sublet. No, no, no. Nothing's been sublet. They're either operated by Kroger, three are Kroger, and the balance are Albertsons, so

Speaker Change #144: [inaudible]

Speaker Change #145: We're in the midst now of having a conversation around...

Speaker Change #145: you know, around the ability to

Speaker Change #146: either amend the lease or maybe do more than just that.

Speaker Change #146: Again, the situation is still very fluid.

Speaker Change #146: This could be a moot conversation if the transaction on August 26th gets voted down by the appellate court. So, I think we'll have more clarity next quarter as it relates to...

Stuart Tanz: But the good news is not a lot of leases from our perspective when you look at the total amount of exposure.

Speaker Change #147: What's going on on these leases, but the good news is not a lot of leases from our perspective when you look at the total amount of exposure.

Stuart Tanz: Thank you. So, California in general used to command lower capitalists at premium markets. Do you think that's the only case today? Yes, when I look at capital and where capital wants to be in terms of the product that we own and operate. Again, you know, dominant grocery drug anchor assets and very affluent dense markets. Demand from that capital is as strong in California or the whole West Coast as it is anywhere else in the country. And in some cases, even stronger depending on the circumstances of the real estate and the attributes of the real estate.

Operator: Thank you. And then I have one last one.

Stuart A. Tanz: So California, in general, used to, uh, command lower cap rates, a premium market. Do you think that's still the case today?

Speaker Change #148: Thank you. And then a last one.

Speaker Change #149: to command lower cap rates, a premium market.

Stuart A. Tanz: Yes, when I look at capital and where capital wants to be in terms of the product that we own and operate, again, you know, dominant grocery drug-anchored assets and very affluent dense markets, demand for that capital is as strong in California or the whole West Coast as it is anywhere else in the country, and in some cases, even stronger, depending on the circumstances of the real estate and the attributes of the real estate. So yes, California is still on a lot of people's radar screens.

Speaker Change #150: Do you think that's still the case today?

Speaker Change #151: Yes, when I look at capital and where capital wants to be in terms of the product that we own and operate, again, dominant grocery drug-anchored assets in very affluent, dense markets.

Speaker Change #151: Demand from that capital is as strong in California or the whole West Coast as it is anywhere else in the country.

Speaker Change #151: And in some cases, even stronger, depending on the circumstances of the real estate and the attributes of the real estate. So yes, California is still on a lot of people's radar screen.

Stuart Tanz: So yes, California is still on a lot of people's radar screen.

Stuart Tanz: And if you compare your markets with perhaps an Austin or some Florida markets that are very hot today, do you think the cap rate compared there for similar products? Well, I'm not as familiar as Austin or Florida as I am with the West Coast. I certainly track those markets, but I would tell you that cap rates historically have been lower on the West Coast. I believe as we continue to see some transactions in the market, we're certainly seen as much demand and cap rates that are as low on the West Coast as they are anywhere else.

Operator: And if you compare your markets with perhaps Austin or some Florida markets that are very hot today, how do you think the cap rate compares there for similar products?

Speaker Change #152: And if you compare your markets with perhaps Austin or some Florida markets that are very hot today, how do you think the cap rate compares there for similar products?

Stuart A. Tanz: Well, I'm not as familiar with Austin or Florida as I am with the West Coast, but I certainly track those markets. But I would tell you that cap rates historically have been lower on the West Coast, and I believe as we continue to see some transactions in the market, we're certainly seeing as much demand and cap rates that are as low on the West Coast as they are anywhere else.

Speaker Change #153: Well, I'm not as familiar as Austin or Florida as I am with the West Coast. I certainly trust those markets.

Speaker Change #153: But I would tell you that...

Speaker Change #153: Cap rates historically have been lower on the West Coast and

Speaker Change #154: I believe as we continue to see some transactions in the market, we're certainly seeing as much demand and cap rates that are as low on the West Coast as they are anywhere else.

Stuart Tanz: Okay, thank you very much. Thank you.

Operator: Okay, thank you very much. Yeah.

Stuart A. Tanz: Thank you. This does conclude today's Q&A session, and I will now like to turn the call back over to Stuart for his closing remarks. Please go ahead.

Stuart Tanz: This does conclude today's Q&A session, and I will now like to turn the call back over to Stuart for closing remarks.

Speaker Change #155: Okay, thank you very much. Yeah.

Speaker Change #156: Thank you. This does conclude today's Q&A session and I would now like to turn the call back over to Stuart for closing remarks. Please go ahead.

Stuart Tanz: Please go ahead.

Operator: In closing, thanks to all of you for joining us today. As always, we appreciate your interest in ROIC. If you have any additional questions, please contact Lauren, Mike, Rich, or me directly. Also, you can find additional information in the company's quarterly supplemental package, which is posted on our website, as well as in our 10-Q. Thanks again, and have a great day, everyone.

Stuart Tanz: In closing, thanks to all of you for joining us today. As always, we appreciate your interest in ROIC. If you have any additional questions, please contact Lauren, Mike, Richard, me, directly. Also, you can find additional information in the company's quarterly supplemental package, which is posted on our website, as well as our 10-Q.

Stuart A. Tanz: In closing, thanks to all of you for joining us today. As always, we appreciate your interest in ROIC.

Speaker Change #157: If you have any additional questions, please contact Lauren, Mike, Rich, or me directly. Also, you can find additional information in the company's quarterly supplemental package, which is posted on our website, as well as our 10-Q.

Operator: Thanks again, and have a great day, everyone.

Operator: Thank you, everyone, for joining us.

Operator: Thank you, everyone, for joining me. You may now disconnect.

Operator: You may now disconnect.

Speaker Change #157: Thanks again, and have a great day, everyone.

Speaker Change #157: Thank you, everyone, for joining. You may now disconnect.