Q2 2024 InvenTrust Properties Corp Earnings Call

Good morning or good afternoon. Thank you for standing by and welcome to Inventrust's second quarter 2024 earnings conference call.

Operator: 24 Arvings Conference School. My name is Adam, and I will be your conference school operator today. Before we begin, I would like to remind our listeners that today's presentation is being recorded, and a replay will be available on the investor's section at the company's website at Inventrustproperties.com.

Operator: Before we begin, I would like to remind our listeners that today's presentation is being recorded and a replay will be available on the investors section of the company's website at inventrustproperties.com. If you'd like to ask a question during today's call, please press star followed by 1 on your telephone keypad to enter the queue. To withdraw, please press star followed by 2. I would now like to turn the call over to Mr. Dan Lombardo, Vice President of Investor Relations. Please go ahead.

Adam: My name is Adam and I will be your conference call operator today. Before we begin, I would like to remind our listeners that today's presentation is being recorded and a replay will be available on the Investors section of the company's website at inventrustproperties.com.

Operator: If you'd like to ask a question on today's school, please press Starflow 1 on your telephone keypad to enter the queue. To withdraw, please press Starflow 2.

If you'd like to ask a question on today's call, please press star followed by 1 on your telephone keypad to enter the queue. To withdraw, please press star followed by 2. I would now like to turn the call over to Mr Dan Lombardo, Vice President of Investor Relations. Please go ahead, sir.

Dan Lombardo: I would now like to turn to Mr. Daniel Lombardo, Vice President of Invest Relations. Please go ahead.

Dan Lombardo: Thank you, operator.

Dan Lombardo: Thank you, Operator. Good morning, everyone, and thank you for attending our call today. Joining me from the Inventrust team are D.J. Bush, President and Chief Executive Officer, Mike Phillips, Chief Financial Officer, Christy David, Chief Operating Officer, and Dave Heimberger, Chief Investment Officer.

Dan Lombardo: Good morning, everyone, and thank you for attending our call today. Joining me from the Inventrust team is DJ Bush, President and Chief Executive Officer; Mike Phillips, Chief Financial Officer; Christy David, Chief Operating Officer; and Dave Heimberger, Chief Investment Officer.

Dan Lombardo: Thank you, operator. Good morning, everyone, and thank you for attending our call today.

Dan Lombardo: Joining me from the Inventrust team is D.J. Bush, President and Chief Executive Officer, Mike Phillips, Chief Financial Officer, Christy David, Chief Operating Officer, and Dave Heimberger, Chief Investment Officer. Following the team's prepared remarks, we will open up the lines for questions.

Dan Lombardo: Following the team's prepared remarks, we will open up the lines for questions. As a reminder, some of today's comments may contain forward-looking statements about the company's views on the future of our business and financial performance, including forward-looking earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. Any forward-looking statements speak only as of today, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial supplemental or press release.

Dan Lombardo: Following the team's favorite marks, we will remind us some of today's comments may contain four-looking statements about the company's views on the future of our business and financial performance, including four-looking earnings guidance and future market conditions. These are based on management's current beliefs and expectations in our subject to various risks and uncertainties. Any forward-looking statements speak only as of today's date, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial supplemental or press release.

Speaker Change: As a reminder, some of today's comments may contain forward-looking statements about the company's views on the future of our business and financial performance, including forward-looking earnings guidance and future market conditions.

These are based on management's current beliefs and expectations and are subject to various risks and uncertainties.

Any forward-looking statements speak only as of today's date, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial supplemental or press release.

Dan Lombardo: In addition, we will also reference certain non-GAAP financial measures that comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our investor relations website.

Dan Lombardo: In addition, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our investor relations website. With that, I'll turn the call over to DJ.

DJ: In addition, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our investor relations website. With that, I'll turn the call over to DJ.

Dan Lombardo: With that, I'll turn the call over to DJ.

DJ Bush: Thank you, Dan, and good morning, everyone joining us today. I'm going to touch briefly on our second quarter results. Provide some high-level thoughts regarding retail real estate fundamentals and adventurous opportunity to grow cash flow over the near and medium and long term.

Daniel Busch: Thank you, Dan, and good morning to everyone joining us today. I'm going to touch briefly on our second quarter results, provide some high-level thoughts regarding retail real estate fundamentals, and Inventro's opportunity to grow cash flow over the near, medium, and long term. Mike will discuss our financial results and provide some color regarding the increase to our 2024 guidance, and Christy will end our prepared remarks with additional commentary regarding our leasing efforts.

DJ: Thank you, Dan, and good morning to everyone joining us today.

DJ: I'm going to touch briefly on our second quarter results, provide some high-level thoughts regarding retail real estate fundamentals.

DJ Bush: Michael discussed our financial results and provide some color regarding the increase to our 2024 guidance, and Christie will end our preferred remarks with additional commentary regarding our leasing efforts. I'm going to start with this. The retail real estate environment is more the same. The last several quarters from an operating perspective have been very consistent, which inventors continues to benefit from the momentum supporting open-air retail operating fundamentals, and the sumboat where 95 percent of our net operating income is generated. Necessity-based retail remains the cornerstone of the communities in which we serve, and frequency of visits continues to structurally change due to the shift to the hybrid work model that allows consumers to be at our centers more often.

Ventro: and in Ventro's opportunity to grow cash flow over the near, medium and long term. Mike will discuss our financial results and provide some color regarding the increase to our 2024 guidance and Christy will end our prepared remarks with additional commentary regarding our leasing efforts.

Daniel Busch: I'm going to start with this: the retail real estate environment is more of the same. The last several quarters from an operating perspective have been very consistent, which Inventrust continues to benefit from the momentum supporting open-air retail operating fundamentals in the Sunbelt, where 95% of our net operating income is generated. Necessity-based retail remains the cornerstone of the communities in which we serve, and frequency of visits continues to structurally change due to the shift to the hybrid work model that allows consumers to be at our centers more often.

Mike: I'm going to start with this.

Speaker Change: The retail real estate environment is more of the same. The last several quarters, from an operating perspective, have been very consistent, which Inventrust continues to benefit from the momentum supporting open-air retail operating fundamentals in the Sunbelt, where 95% of our net operating income is generated.

Speaker Change: Necessity-based retail remains the cornerstone of the communities in which we serve, and frequency of visits continues to structurally change due to the shift to the hybrid work model that allows consumers to be at our centers more often.

DJ Bush: The good news is that many of the trends in which we are seeing are not cyclical, but rather more permanent demand tailwinds. Inventor a simple and focused strategy of owning and operating essential open-air retail centers, exclusively in the sumboat region of the US is working. Equally as important, our low-lovered capital structure gives us the ability to accelerate our cash flow growth when the opportunity arises. Least occupancy finished the quarter at 96.4 percent, both sequentially and under a year-over-year basis. This is a new high watermark for the portfolio, and remarkably, was achieved only a year after experiencing 140 basis point occupancy loss due to tenant closures and bankruptcies in 2023.

Daniel Busch: The good news is that many of the trends that we are seeing are not cyclical but rather more permanent demand tailwinds. The Simple and Focused Strategy of Owning and Operating Essential Open-Air Retail Centers exclusively in the Sunbelt Region of the U.S. is working. Equally important, our low-levered capital structure gives us the ability to accelerate our cash flow growth when the opportunity arises. Leased Occupancy finished the quarter at 96.4%, up both sequentially and on a year-over-year basis.

DJ: The good news is that many of the trends in which we are seeing are not cyclical, but rather more permanent demand tailwinds.

DJ: Simple and Focused Strategy of Owning and Operating Essential Open-Air Retail Centers exclusively in the Sunbelt region of the U.S. is working. Equally as important, our low-levered capital structure gives us the ability to accelerate our cash flow growth when the opportunity arises.

DJ: Leased occupancy finished the quarter at 96.4%, up both sequentially and on a year-over-year basis.

Daniel Busch: This is a new high watermark for the portfolio and remarkably was achieved only a year after experiencing 140 basis points of occupancy loss due to tenant closures and bankruptcies in 2023. Blended spreads remained in the low double digits, and our retention ratio stayed above 90 percent, 92 percent to be precise.

DJ Bush: Blended spreads remained in the low-double digits, and our retention ratio stayed above 90 percent. 92 percent to be precise. This means our team is achieving higher initial rents, while pushing annual rent bulbs higher, but also keeping tenants that remain additive to the merchandise mix of our centers, which in turn preserves tenant-related capital in an environment where construction and build-out costs remain elevated. More simply put, our leasing strategy is one that is centered around driving sustainable free cash flow year in and year out, and the team continues to put building blocks in place to deliver on this strategy.

Daniel Busch: This means our team is achieving higher initial rents while pushing annual rent bumps higher, but also keeping tenants that remain additive to the merchandise mix of our centers, which in turn preserves tenant-related capital in an environment where construction and build-out costs remain elevated. More simply put, our leasing strategy is one that is centered around driving sustainable free cash flow year in and year out, and the team continues to put building blocks in place to deliver on this strategy.

DJ: This means our team is achieving higher initial rents while pushing annual rent bumps higher, but also keeping tenants that remain additive to the merchandise mix of our centers, which in turn preserves tenant-related capital in an environment where construction and buildout costs remain elevated.

DJ: More simply put, our leasing strategy is one that is centered around driving sustainable, free cash flow year in and year out, and the team continues to put building blocks in place to deliver on this strategy.

DJ Bush: Small shop tenant health continues to surprise to the upside, with less tenant fallout and predicted at the beginning of the year. Mike will talk about our guidance in greater detail shortly, but lower tenant fallout and quicker-than-expected rent commencing dates are the primary drivers of our guidance raise. Our watch list of trouble tenants is short, and the demand for space at our centers continues to be extremely robust.

Daniel Busch: Small shop tenant health continues to surprise to the upside, with less tenant fallout than predicted at the beginning of the year. Mike will talk about our guidance in greater detail shortly, but lower tenant fallout and quicker than expected rent commencement dates were the primary drivers of our guidance. Our watch list of troubled tenants is short, and the demand for space at our centers continues to be extremely robust.

DJ Bush: 2024 leasing activity is effectively complete, and 2025 deal activity is well underway. Christy will provide more color on our leasing efforts in her remarks. We have been appropriately conservative this year regarding our net investment activity, but have certainly found deals that have been added to the portfolio. We added one such property in the second quarter. We acquired McGuire Groves, a small 33,000 square foot center in the Orlando MSA, which is directly adjacent to Plantation Growth, a fantastic public anchored center that we already own. The transaction allows us to add small shop GLA to a center that has tremendous prospects and significant tenant demand.

Michael Phillips: 2024 leasing activity is effectively complete, and 2025 deal activity is well underway. Christy will provide more color on our leasing efforts in her remarks. We have been appropriately conservative this year regarding our net investment activity but have certainly found deals that have been added to the portfolio. We added one such property in the second quarter. We acquired McGuire Groves, a small 33,000-square-foot center in the Orlando MSA, which is directly adjacent to Plantation Grove, a fantastic public-anchored center that we already own.

DJ: We have been appropriately conservative this year regarding our net investment activity, but have certainly found deals that have been added to the portfolio.

DJ: We added one such property in the second quarter. We acquired McGuire Groves, a small 33,000 square foot center in the Orlando MSA, which is directly adjacent to Plantation Grove, a fantastic public anchored center that we already own.

Michael Phillips: The transaction allows us to add Small Shop GLA to a center that has tremendous prospects and significant tenant demand. The additional GLA will allow us to better merchandise our center and to control one of the best retail nodes in the fast-growing suburb of Orlando. Our balance sheet remains one of the most conservative in the sector. With a healthy transaction environment in our markets, external growth opportunities are enticing. But our team is still patient and ready to accelerate growth when the time is right. With that, I'm going to turn the call over to Mike to discuss our financial results.

DJ: The transaction allows us to add Small Shop GLA to a center that has tremendous prospects and significant tenant demand.

DJ Bush: The additional GLA will allow us to better merchandise our center and to control one of the best retail nodes in the fast growing suburb of Orlando. Our balance sheet remains one of the most conservative in the sector, with a healthy transaction environment in our markets; external growth opportunities are enticing. But our team is still being patient and at the ready to accelerate growth when the time is right.

Michael Phillips: With that, I'm going to turn the call over to Mike to discuss our financial results.

Michael Phillips: Mike? Thank you, DJ. This morning I will review our strong results for the quarter, as well as year-to-date, that I will discuss our investment grade balance sheet position and end by review and increase to our 2024 full year guidance range. Our same property in Hawaii for the quarter was $44.8 million, growing 2.6% over the second quarter of last year. The quarter-to-date increases were primarily driven by embedded rent bumps of 150 basis points, rent spreads of 70 basis points, as well as net expense reimbursement of 120 basis points. This was offset by slightly lower collections from revenues deemed uncollectable and percentage rents compared to the second quarter of 2023.

DJ: With that, I'm going to turn the call over to Mike to discuss our financial results.

Michael Phillips: Thank you, DJ. This morning, I will review our strong results for the quarter as well as year to date. Then, I will discuss our investment grade balance sheet position and end by reviewing the increase to our 2024 full-year guidance range. Our same property NOI for the quarter was $44.8 million, growing 2.6% over the second quarter of last year. The quarter-to-date increases were primarily driven by embedded rent bumps of 150 basis points, rent spreads of 70 basis points, as well as net expense reimbursement of 120 basis points. This was offset by slightly lower collections from revenues deemed uncollectible and percentage rents compared to the second quarter of 2023.

DJ: Mike.

Michael Phillips: Year-to-date same property in Hawaii was $82.6 million, growing 3.3% over the first six months of 2023. Knee read FFO for the first half of the year was $60.9 million or 89 cents per diluted share and an increase of 6% over last year. Core of FFO grew 4.8% to 87 cents per share for the six months ending June 30th compared to the same time period in 2023. Components of FFO growth for the quarter are primarily driven by same property in Hawaii and NOI from acquisitions, as well as income from a one-time termination fee of approximately one penny.

Michael Phillips: Year-to-date same property NOI was $82.6 million, growing 3.3% over the first six months of 2023. Knee-Root FFO for the first half of the year was $60.9 million, or 89 cents per diluted share, an increase of 6% over last year. Core FFO grew 4.8% to 87 cents per share for the six months ending June 30th, compared to the same time period in 2023. Components of FFO growth for the quarter are primarily driven by same-property NOI and NOI from acquisitions, as well as income from a one-time termination fee of approximately one penny. And this was slightly offset by interest expense on our variable rate debt. Inventrust continues to maintain a strong and flexible balance sheet, providing a foundation to execute our long-term strategy.

Michael Phillips: And this was slightly offset by interest expense on our variable rate debt. Image Trust continues to maintain a strong and flexible balance sheet, providing a foundation to execute our long-term strategy. We finished the second quarter with $384 million of total liquidity, including a full $350 million of borrowing capacity available on our revolving line of credit. Our net leverage ratio was 20.5% and net debt to adjusted EBITDA is 5.2 times on a trailing 12 month. Our weighted average interest rate into the quarter at 4.3% with the weighted average maturity of 3.5 years. Over the next 18 months, our debt maturity is remain minimal, and we anticipate exercising our remaining one-year extension option on the debt maturing in 2024.

Michael Phillips: We finished the second quarter with $384 million of total liquidity, including a full $350 million of borrowing capacity available on our revolving line of credit. Our net leverage ratio is 28.5%, and net debt to adjusted EBITDA is 5.2 times on a trailing 12-month basis. Our weighted average interest rate into the quarter was 4.3% with a weighted average maturity of three and a half years. Over the next 18 months, our debt maturities remain minimal, and we anticipate exercising our remaining one-year extension option on the debt maturing in 2024.

Michael Phillips: Finally, we declared an annualized dividend payment of $0.91 per share, a 5% increase over last year. Moving to guidance, with our results for the six months of the year, as well as our outlook for the remainder of the year, we are raising our 2024 full-year same property NOI growth guidance by 75 basis points at the midpoint. Same property NOI growth is now expected to be in the range of 3.5% to 4.5%.

Michael Phillips: Finally, we declared an annualized dividend payment of 91 cents per share, a 5% increase over last year.

Michael Phillips: Moving to guidance with our results for the six months of the year as well as our outlook for the remainder of the year, we are raising our 2020 full year same property NOI growth guidance by 75 basis points at the midpoint. Same property NOI growth is now expected to be in the range of 3.5% to 4.5%. We are also increasing the rate of FFO guidance to $1.73 to $1.77 per share. Finally, we are moving core FFO guidance up to $1.69 to $1.73 per share. As implied in our new same property NOI guidance, our bad debt reserve assumption has been lowered to 25 to 75 basis points of total revenue.

Michael Phillips: We are also increasing NARED FFO guidance to $1.73 to $1.77 per share. Finally, we are moving core FFO guidance up to $1.69 to $1.73 per share. As implied in our new same property NOI guidance, our bad debt reserve assumption has been lowered to 25 to 75 basis points of total revenue. Finally, as D.J.

Michael Phillips: Finally, as DJ mentioned, we are maintaining our net investment activity guidance of $75 million. Full details on our guidance assumptions are provided in our supplemental disclosure filed yesterday.

Christy David: As mentioned, we are maintaining our net investment activity guidance of $75 million. Full details on our guidance assumptions are provided in our supplemental disclosure filed yesterday. And with that, I'm going to turn the call over to Christy to discuss our portfolio activities.

Mike: Finally, as DJ mentioned, we are maintaining our Net Investment Activity Guidance of $75 million.

Mike: Full details on our guidance assumptions are provided in our Supplemental Disclosure filed yesterday. And with that, I'm going to turn the call over to Christy to discuss our portfolio activity.

Christy David: And with that, I'm going to turn the call over to Christy to discuss our portfolio activity.

Christy David: Thanks Mike. The Inventrust team continues to convert significant retailer leasing demand for space into higher portfolio occupancy and increased rents for our centers. Demand is broad-based and coming equally from local, regional, and national tenants looking to expand their footprint. Categories include quick service restaurants, health and wellness, and discount tenants.

Christy David: Thanks, Mike. The event rest team continues to convert significant retailer leasing demand for space into higher portfolio occupancy and increased rents for our centers. Demand is broad based and coming equally from local, regional, and national tenants looking to expand their footprint. Categories include quick service restaurants, health and wellness, and discount tenants. Our total portfolio lease occupancy ended the first half of the year at 96.4%, up to 10 basis points from last quarter. Our anchor space lease occupancy finished at 99.1%. It increased at 50 basis points from last quarter, and our small shop lease occupancy ended the quarter at 91.7%.

Christy David: Our Total Portfolio Lease Occupancy ended the first half of the year at 96.4%, up 10 basis points from last quarter. Our Anchor Space Lease Occupancy finished at 99.1%, an increase of 50 basis points from last quarter. And our Small Shop Lease Occupancy ended the quarter at 91.7%. Our sign-not-open pipeline decreased to 270 basis points as the team continues to focus on getting our new tenants open and paying rent. As of June 30, Inventrust's total portfolio ABR was $19.71, an increase of 2.8% compared to 2023.

Christy David: Our sign net open pipeline decreased to 270 basis points as the team continues to focus on getting our new tenants open and paying rent. As of June 30th, event rest total portfolio ABR was $19.71, an increase of 2.8% compared to 2023. For the first six months of the year, we posted blended comparable leasing spread of 10.7%. Spreads for new leases were 16.2%, and our retention rate was 92%. Renewals are a win-win for both the tenant and event rest. Enables tenants to maintain the continuity of their business in a successful location and eliminates their relocation costs.

Christy: As of June 30, Inventrust's total portfolio ABR was $19.71, an increase of 2.8% compared to 2023.

Christy David: For the first six months of the year, we posted blended comparable leasing spreads of 10.7 percent, spreads for new leases were 16.2 percent, and our retention rate was 92 percent. Renewals are a win-win for both the tenant and the inventor. Enables tenants to maintain the continuity of their business in a successful location and eliminates their relocation costs. Furthermore, Inventrust is able to achieve a higher rental rate with limited capital expenditure as compared to leasing the space to a new tenant. Furthermore, 90% of our renewables have embedded rent escalators of 3% or higher.

Christy: For the first six months of the year, we posted blended comparable leasing spreads of 10.7 percent. Spreads for new leases were 16.2 percent, and our retention rate was 92 percent.

Christy David: While event rest is able to achieve a higher rental rate with limited capital spend as compared to leasing the space to a new tenant. Furthermore, 90% of our renewals have embedded rent escalators of 3% or higher. Year-to-date, we signed 101 leases for over 625,000 square feet, with additional leases in our pipeline at various stages of negotiation. Tenets signed during the quarter include Crunch Fitness, Blue Mango, Jets Pizza, and Duck Donuts. Currently, our portfolio is nearly 100% occupancy for anchor tenants, with only three spaces available left to lease.

Christy David: Year-to-date, we signed 101 leases for over 625,000 square feet with additional leases in our pipeline at various stages of negotiation. Tenants signed during the quarter include Crunch Fitness, Blue Mango, Jets Pizza, and Duck Donuts. Currently, our portfolio is nearly 100% occupancy for anchor tenants with only 3 spaces available left to lease. As D.J.

Christy: Tenants signed during the quarter include Crunch Fitness, Blue Mango, Jets Pizza, and Duck Donuts.

Christy David: As DDA mentioned, at this point, all leasing activity related to 2024 is completed. As we have mentioned previously, the lack of new supply is a tailwind for the sector and will be for the next several years. In our discussions with some retailers, the reduced supply may cause a true challenge to their own growth plans and retail space needs in 2025 and 2020. 66. This is leading to additional flexibility as it relates to their store size and opening schedule to match the conditions of the space available. This flexibility was rare just a few short years ago, and in many cases reduces the capital expenditures needed by landlords to open the space.

Christy David: mentioned above, at this point, all leasing activity related to 2024 is completed. As we have mentioned previously, the lack of new supply is a tailwind for the sector and will continue to be for the next several years. In our discussions with some retailers, the reduced supply may cause a true challenge to their own growth plans and retail space needs in 2025 and 2026. This is leading to additional flexibility as it relates to their store size and opening schedule to match the conditions of the space available.

Speaker Change: This is leading to additional flexibility as it relates to their store size and opening schedule to match the conditions of the space available. This flexibility was rare just a few short years ago and in many cases reduces the capital expenditures needed by landlords to open the space.

Christy David: This flexibility was rare just a few short years ago and, in many cases, reduces the capital expenditures needed by landlords to open the space. According to the health of our tenants, the financial condition of our retailers is good. Inventrust's watch list is diminished when compared to prior years. Furthermore, rent delinquencies remain reduced despite consumers' more conservative spending on certain categories.

Christy David: Moving to the health of our tenants, the financial condition of our retailers is good. Inventrust Watchlist is diminished when compared to prior years. Furthermore, rent delinquencies remain reduced despite consumers' more conservative spending on certain categories. Store openings still outpace closures as retail bankruptcy announcements this year have been minimal.

Speaker Change: Moving to the health of our tenants, the financial condition of our retailers is good. Inventrust's watch list is diminished when compared to prior years. Furthermore, rent delinquencies remain reduced despite consumers' more conservative spending on certain categories. Store openings still outpace closures, as retail bankruptcy announcements this year have been minimal.

Christy David: Store openings still outpace closures as retail bankruptcy announcements this year have been minimal. In closing, I do want to briefly discuss the recent news about the Kroger-Albertson merger. The company has released a list of stores that will be divested to CNS if the merger is approved. Three of Inventrust's properties were included on that list, all in the Dallas MSA. These assets are strong performing properties, and the closure risk at these centers is very small.

Christy David: In closing, I didn't want to briefly discuss the recent news on the Kroger Albertson merger. The company's released a list of stores that will be divested to CNS if the merger is approved. Three of Inventrust Properties were included on that list, all in the Dallas MSA. These assets are strong performing properties, and closure risk at these centers is very small. With that said, we will continue to monitor the transaction as additional news comes out in information changes. The final approval of the merger by the federal government is still uncertain.

Speaker Change: In closing, I do want to briefly discuss the recent news on the Kroger-Albertson merger. The company has released a list of stores that will be divested to CNS if the merger is approved. Three of the Ventra's properties were included on that list, all in the Dallas MSA.

Christy David: With that said, we will continue to monitor the transaction as additional news comes out and information changes. The final approval of the merger by the federal government is still uncertain. Operator, that concludes our prepared remarks, and you can open the line for questions.

Christy David: Operator that concludes our prepared remarks, and you can open the line for questions. Thank you.

Operator: Thank you. As a reminder, if you'd like to ask a question today, please press star followed by 1 on your telephone keypad now to enter the queue. When preparing to ask your question, please ensure you are unmuted locally. And our first question comes from Dori Kesten from Wells Fargo. Dori, your line is open, please go ahead.

Operator: As a reminder, if you'd like to ask a question today, please press star followed by one on your telephone keypad now. Turn to the queue. If you're preparing to ask a question, please ensure you are unmuted locally.

Speaker Change: Thank you. As a reminder, if you'd like to ask a question today, please press star followed by one on your telephone keypad now to enter the queue. When preparing to ask your question, please ensure you are unmuted locally.

Dory Kesten: And have a first question comes from Dory Keston from Wells Fargo. Dory, your line is open. Please go ahead.

Jack Armstrong: Hey, thanks.

Jack Armstrong: Hey, thanks. Good morning. This is Jack Armstrong on for Dori. With the acquisitions you've completed to date, you're in line with your net acquisition guide for the year. Can you talk about what

Jack Armstrong: Good morning. This is Jack Armstrong.

Jack Armstrong: I'm for Dory.

Jack Armstrong: With the acquisition, he's completed a date. You're in line with your net acquisition guide for the year.

Jack Armstrong: Can you talk about what you're seeing on both the acquisitions and the distance in front and the likelihood of you exceeding your 24 guide? Yeah, thanks for the question. As you mentioned, we're right near our goal of net investment activity. I think I've mentioned in the past couple calls. Really, that's $75 million of net investment is a guide post to what we were our expectations are on the outset of the year. Based on our pipeline, our cost of capital current market conditions to get to our cash flow expectations for the year. Now we reserve the right, obviously, with market conditions changing, to either increase or decrease that if the opportunity arises.

Michael Phillips: Yeah, thanks for the question. You know, as you mentioned, we're right near our goal of net investment activity. I think I've mentioned in the past couple of calls that $75 million of net investment is a guidepost to what our expectations are at the outset of the year, based on our pipeline, our cost of capital, current market conditions, to get to our, you know, our cash flow expectations for the year. Now, we reserve the right, obviously, with market conditions changing, to either increase or decrease that if the opportunity arises. I will tell you right now that the pipeline still remains quite strong.

Speaker Change: Thanks for the question. As you mentioned, we're right near our goal of net investment activity. I think I've mentioned in the past couple of calls, really that $75 million of net investment

Speaker Change: to get to our cash flow expectations for the year. Now, we reserve the right, obviously, with marketing conditions changing to either increase or decrease that if the opportunity arises. I will tell you right now, the pipeline still remains quite strong.

DJ Bush: I will tell you right now, the pipeline still remains quite strong. So and obviously, cost of capital has improved, you know, since over the last, you know, certainly the last couple of weeks and since last quarter. So if we do see opportunities where we can add incredibly add to the portfolio, we'll do so. And we'll adjust our net investment activity guidance accordingly.

Michael Phillips: So, and obviously, the cost of capital has improved, you know, over the last couple of weeks and since last quarter. So, if we do see opportunities where we can agreeably add to the portfolio, we'll do so, and we'll adjust our net investment activity guidance accordingly. On the disposition side, we're always looking at opportunities where we think we've either, you know, gotten to our growth expectations or we can rotate out of some of those assets with better opportunities in our markets. We've talked about the assets in the mid-Atlantic region, we've talked a little bit about assets on the West Coast as potential sources of capital, and those things are always fluid and ongoing.

Speaker Change: So, and obviously cost of capital has improved, you know, since, since over the last, you know, certainly in the last couple weeks and since last quarter.

DJ Bush: On the disposition side, we're always looking at opportunities where we think we've either, you know, gotten to our growth expectations, or we can rotate out of some of those assets with better opportunities in our markets. We've talked about the assets in the Mid-Atlantic region. We talked a little bit about assets on the West Coast as potential sources of capital. And those things are always fluid and ongoing.

Speaker Change: and we can rotate out of some of those assets with better opportunities in our markets.

Jack Armstrong: Thanks.

Michael Phillips: Thanks. And if I can just ask one quick follow-up question, you funded Q2's acquisitions with cash on hand. Can you remind us how you're thinking about your equity today, around $28 a share, as a means of further

Jack Armstrong: And if I can just ask one quick follow-up, you funded Q2's acquisitions with cash on hand.

DJ Bush: And you remind us that you're thinking about your equity today around $28 a share as a means of further equity. Yeah, it's a good question. Obviously, there's been a nice run in this sector. In general, obviously, there's been some news recently. And then obviously, the backdrop on potential movements and interest rates has probably helped a little bit. Equity is something that we always consider as one of the sources of capital that we look at the same way as we do across our capital structure.

Michael Phillips: Yeah, it's a good question. Obviously, there's been a nice run across in the sector in general, and obviously, there's been some news recently. And then obviously, the backdrop of, you know, potential movements and interest rates has probably helped a little bit.

Jack Armstrong: It's more attractive than it was, but we're going to make sure when we do, if and when we do decide to use equity, it needs to be on an accrued basis and value added to our shareholders. Great. Thank you.

Speaker Change: Great, thank you.

Jeff Specter: The next question comes from Jeff Specter from Bank of America.

Operator: The next question comes from Jeff Spector from Bank of America. Jeff, your line is open, please go ahead.

Speaker Change: Bye. Bye.

Andrew Real: Jeff Fulon is open. Please go ahead.

Andrew Real: Hi, this is Andrew Real on for Jeff.

Andrew Real: Hi, this is Andrew Real on behalf of Jeff. Thanks so much for taking our questions today. First, you raised SSNOI guidance to 3.5% to 4.5%. The new range implies we'll see some acceleration of growth into the back half of the year. Can you just discuss what's behind that acceleration?

Andrew Real: Thanks so much for taking our questions today. Just first, you raised SSNOI guidance to three and a half to four and a half percent. The new range implies we'll see some acceleration of growth into the back half of the year. Can you just discuss what's behind that acceleration? Yeah, Chris, do you want to take that? Sure. I think that the back half of the acceleration is really for our additional current coming online. That you're going to see based on some of the bad back and beyond that we have been able to open and other leasing activities that we have been able to complete this year and bring that right online, as well as we've been able to continue to reduce expenses.

Christy David: Yeah, Christy, you want to take that? Um, sure.

Christy David: Sure, I think that the back half of the acceleration is really for additional rent coming online that you're going to see based on some of the Bed Bath & Beyond that we have been able to open and other leasing activities that we have been able to complete this year and bring that rent online as well as continue to reduce expenses, and we will continue to do that across the portfolio for the rest of the year.

Speaker Change: Yeah, Christy, do you want to take that?

Speaker Change: We've been able to continue to reduce expenses, and we will continue to do that across the portfolio for the rest of the year.

Christy David: And we will continue to see that across the portfolio for the rest of the year. Okay, thanks.

Michael Phillips: Okay, thanks. And maybe just to follow up a bit on the sign not open commencement, is there any way you can kind of quantify the timing of when some of that is going to come online through the rest of the year and maybe into the next? And then, on that note, just how much room does shop occupancy have to run from these current events?

Michael Phillips: And maybe just to follow up a bit on the sign-out open commencement. Is there any way you can quantify the timing of when some of that is going to come online through the rest of the year and maybe into 25? And then I guess on that note, just how much room does shop occupancy have to run from these current levels? Yeah, I can take that as a mic. So the sign-out open pipeline, the way we're kind of seen in our forecast right now, is about 60% of that will come online through the end of this year.

Speaker Change: Okay, thanks. And maybe just to follow up a bit on the SignNotOpen commencement, is there any way you can kind of quantify the timing of when some of that is going to come online through the rest of the year and maybe into 2025? And then I guess on that note, just how much room does shop occupancy have to run from these current levels?

Michael Phillips: Yeah, I can take that. This is Mike.

Michael Phillips: And then 100% should be by the end of next year. As far as shop occupancy, the way we kind of look at in our forecast right now is we think we can get back to an all-time high of the years, and we think we have about 100 basis points or so to run on that. And then Andrew, the only thing I would follow up on is obviously the sign-out open pipeline that he represents right around 4% of total revenue. And the exciting thing and the disability that gets us confidence even moving in the next year beyond is we have an additional 4% in active negotiations well underway.

Speaker Change: The way we kind of look at it in our forecast right now is we think we can get back to an all-time high by the end of the year, so we think we have about 100 basis points or so to run on that.

Michael Phillips: So the sign-out open pipeline, the way we're kind of seeing in our forecast right now is that about 60% of that will come online through the end of this year, and then 100% should be online by the end of next year. As far as shop occupancy goes, the way we kind of look at it in our forecast right now is that we think we can get back to an all-time high by the end of the year.

Speaker Change: of Total Revenue, and the exciting thing, and the visibility that, or that gets us confidence even moving into next year and beyond, is we have an additional 4%.

Michael Phillips: So we think we have about 100 basis points or so to run on that. And then Andrew, the only thing I would follow up on is obviously, you know, the sign-but-not-open pipeline represents right around 4% of total revenue. And the exciting thing and the visibility that gives us confidence even moving into next year beyond is that we have an additional 4% in active negotiations well underway. So, like we've talked about, really robust opportunities that continue to move occupancy higher, notwithstanding, and certainly enough to withstand any kind of normalized tenant turnover that we would see in the portfolio.

Michael Phillips: So, like we've talked about, really robust opportunities that continue to move occupancy higher, notwithstanding, and certainly enough to withstand any kind of normalized tenant turnover that we would see in the portfolio.

Speaker Change: Inactive Negotiations well underway. So, like we've talked about, really robust, you know, opportunities that continue to move occupancy higher, notwithstanding, and certainly enough to withstand

Speaker Change: Any kind of normalized tenant turnover that we would see in the portfolio.

Operator: Okay, great. Thanks for the time.

Andrew Real: Okay, great. Thanks for the time.

Speaker Change: Okay, great, thanks for the time.

Paulina Rojas: The next question comes from Paulina Rojas from Green Street. Paulina, please go ahead. Your line is open.

Operator: The next question comes from Paulina Rojas from Green Street. Paulina, please go ahead; your line is open.

Paulina Rojas: Good morning. So some of your peers have many more coverage compressors. Hi, some of your peers, sorry, have mentioned coverage compressing at the margins. Another is to have the current environmental environment more as a continuation of what they have been seen. And we're not much changing.

Paulina Rojas: Good morning. So some of your peers have many corporate contracts. Hi.

Speaker Change: Good morning.

Paulina Rojas: Some of your peers have mentioned cap rates compressing at the margin, and others have described the environment more as a continuation of what they have been seeing, with not much changing. So, what would you say has happened to cap rates in the last couple of months, based on your experience?

Speaker Change: Bye!

Speaker Change: Some of your peers have mentioned cap rates compressing at the margins. And others have described the environment more as a continuation of what they have been seeing, with not much changing.

Paulina Rojas: And so what would you say has happened to cooperate in the last couple of months, say, from your experience? Yeah, I think we can end Paulina. It's a great question. I would say there's certainly much more activity on the buy side on as really I think, you know, and I'm only speaking to the markets where we're actively looking to invest, you know, in the Southeast and in Texas and Arizona. I wouldn't say that we've seen meaningful compression, but we also didn't see a whole lot of movement the other way as well. I mean, they've been extremely sticky as it relates to the cap rates in the markets in which we've been active.

Daniel Busch: Hey Paulina, it's a great question. I would say there certainly is much more activity on the buy side, and I'm only speaking to the markets where we're actively looking to invest, in the southeast, in Texas and Arizona. You know, I wouldn't say that I would expect it to continue to be an aggressive environment, so we're going to have to really pick our spots as we look for new opportunities and be prudent and disciplined as we underwrite those opportunities, as we have been.

Speaker Change: I think we can hear Paulina. It's a great question. I would say...

Speaker Change: There certainly is much more activity on the buy side, and I'm only speaking to the markets where we're actively looking to invest in the southeast.

DJ Bush: You know, I wouldn't say that I would expect it to continue to be an aggressive environment. So we're going to have to really pick our spots as we look for new opportunities and be prudent and disciplined as we underwrite those opportunities, as we have been. But, you know, I wouldn't say we've seen a meaningful movement one way or the other because it's remained competitive even in the last 12 to 18 months when financing costs kind of move against us. I do think that they're the end. This is an off. This is a, you know, we're not in the secure mortgage business, but I do think that market getting more open has certainly made it even that much more competitive, and if pricing follows as well, you could imagine that there could be some compression.

Speaker Change: You know

Speaker Change: I would say that I would expect it to continue to be an aggressive environment, so we're going to have to really pick our spots as we look for new opportunities and be prudent and disciplined as we underwrite those opportunities, as we have been. But, you know, I wouldn't say we've seen a meaningful movement one way or the other because it's remained competitive even in the last, call it 12 to 18 months when financing costs kind of moved against us. I do think that there, and this is, you know, we're not in the secured mortgage business, but I do think that market getting more open has certainly made it more profitable.

Daniel Busch: But, you know, I wouldn't say we've seen a meaningful movement one way or the other because it's remained competitive even in the last, call it 12 to 18 months when financing costs kind of moved against us.

Speaker Change: Even that much more competitive and if pricing follows as well, you can imagine that there could be some compression.

DJ Bush: Thank you.

Daniel Busch: Thank you. And then, a very big picture question. How committed are you to your Sunbelt story? And so if you found a portfolio that was good, that offered you the opportunity to scale up your business, but had material exposure outside of the sunboat, and you had the cost of capital to acquire it, would you go through the process of considering such an acquisition, or would you not?

DJ Bush: And then it's a very big picture question.

DJ Bush: And how committed are you to your son's story? And so if you found a portfolio that was good that offered you the opportunity to scale up your business. And but had a material exposure outside of the sun, both. And you have the cost of capital to acquire it. Will you go through the route of considering such acquisition, or you wouldn't? So it's a it's a it's a good question. And look, this business obviously there is meaningful benefits on scale and size in certainly in retail real estate and across all other sectors certainly. I will say we're very committed to our strategy, our exclusivity in the somehow that I think is one of the one of the one of their few things that makes us unique.

Speaker Change: How committed are you to your Sunbelt story?

Speaker Change: If you found a portfolio that was good, that offered you the opportunity to scale up your business, but had a material exposure outside of the sandbox,

Speaker Change: and you have the cost of capital to acquire it. Would you go through the route of considering such acquisition or you wouldn't?

Daniel Busch: So, it's a good question, and look, this business, obviously, there are meaningful benefits to scale and size, certainly in retail real estate and across all other sectors. But I will say we're very committed to our strategy. Our exclusivity in the Sunbelt, I think, is one of the very few things that makes us unique. I think most open-air shopping center operators in our sector are phenomenal operators and have institutional-quality portfolios. So, the differentiating factor for Inventrust to compete for investors' capital is its exclusivity and focused portfolio from a market perspective.

Speaker Change: So, it's a good question, and look, this business, obviously, there is meaningful benefits

Speaker Change: I will say we're very committed to our strategy, our exclusivity in the Sunbelt, I think, is one of the very few things that makes us unique, I think, of most.

DJ Bush: I think a most most open air shopping center reach in our sector are phenomenal operators, institutional quality portfolios. So the differentiating factor for adventurous to compete for investors' capital is that exclusivity at focused portfolio from a market perspective.

Speaker Change: Most open-air shopping center REITs in our sector are phenomenal operators.

DJ Bush: Having said that, if we were able to scale his business on an accretive, in a value accretive way, we would hope that it would not take our scope from our strategy away from the Sunbalk, because otherwise we start to look like other companies, in which case you lose that differentiating factor. So I'll say never say never, but it has to be a very compelling case and resonate with shareholders as much as the current strategy does, which we do believe is well received.

Daniel Busch: Having said that, if we were able to scale this business in a value-aggrieved way, we would hope that it would not take our scope of our strategy away from the Sunbelt, because otherwise, we start to look like other companies, and in that case, you lose that differentiating factor. So, I'll say never say never, but it has to be a very compelling case and resonate with shareholders as much as the current strategy does, which we do believe is well-received.

DJ Bush: We have no further questions, so I'd like to go back to the management team for any concluding remarks. Thank you, everyone, for joining us today. We look forward to seeing many of you at conferences once we get into the fall.

Operator: We have no further questions, so I hand the call back to the management team for any concluding remarks.

Speaker Change: We have no further questions so I'll hand the call back to the management team for any concluding remarks.

Daniel Busch: Thank you everyone for joining us today. We look forward to seeing many of you at conferences once we get into the fall. Thanks, and have a great day!

Speaker Change: Thank you everyone for joining us today. We look forward to seeing many of you at conferences once we get into the fall. Thanks and have a great day. This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

Operator: Thanks and have a great day. This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.