Q3 2024 CTO Realty Growth Inc Earnings Call

Unknown Executive: Good day and thank you for standing by. Welcome to CTO Realty Growth third quarter 2024. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is ready. To withdraw your question, please press star one, one.

Good day, and thank you for standing by.

Welcome to CTO Realty Trust's third quarter 2024 earnings call.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised.

To withdraw your question. Please press star one again.

John Albright: Please be advised today's conference is being I would now like to hand the conference over to your host today, John Albright, President and CEO. Please go ahead. Good morning, everyone. And thank you for joining us today for the CTO Realty Growth third quarter 2024 operating results conference call. I'm joined today by Phil Mays, our Chief Financial Officer.

Please be advised today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to your host today, John Albright President and CEO. Please go ahead.

John Albright: Good morning, everyone and thank you for joining us today for the CTO royalty growth third quarter 2024 operating results conference call I'm joined today by Phil Mays, Our Chief Financial Officer before we begin I'll turn it over to Phil to provide a customary disclosure regarding today's call.

Philip Mays: Before we begin, I'll turn it over to Phil to provide a customary disclosure regarding today's call.

Philip Mays: Phil. Thanks, John.

Philip Mays: I would like to remind everyone that many of our comments today are considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from our expectations are disclosed from time to time in greater detail in the company's Form 10-K, Form 10-Q, and other SEC filings. You can find our SEC reports, earnings release, supplemental, and most recent investor presentation on our website at ctore.com.

Thanks, John I would like to remind everyone that many of our comments today are considered forward looking statements under federal Securities laws. The company's actual future results may differ significantly from the matters discussed in these forward looking statements and we undertake no duty to update these statements.

John Albright: Factors and risks that could cause actual results to differ materially from our expectations are disclosed from time to time in greater detail in the company's Form 10-K Form 10-Q, and other SEC filings.

John Albright: You can find our SEC reports earnings release supplemental and most recent investor presentation on our website at <unk> Dot com with that I will turn the call over to John.

John Albright: With that, I will turn the call over to John. Thanks, Phil. I'm pleased to report on another strong quarter with significant accomplishments across all areas of our business. In the quarter, we invested $191.3 million in a weighted average yield of 9.5%, including $137.5 million for a three-property portfolio of shopping centers located in North Carolina and Florida. On the leasing front, we signed more than 200,000 square feet of new leases, renewals, and extensions at an average rent of $21.17 per square foot, bringing our year-to-date leasing activity to 385,000 square feet at an average rent of $23.74 per square foot.

John Albright: Thanks, Bill I am pleased to report on another strong quarter with significant accomplishments across all areas of our business in the quarter, we invested $191.3 million and a weighted average yield of nine 5%, including a $137 5 million for a three property portfolio of shopping centers located in North Carolina and Florida.

On the leasing front, we signed more than 200000 square feet of new leases renewals and extensions and average rent of $21 17 per square foot, bringing our year to date leasing activity at 385000 square feet at an average rent of $23 74 per square foot.

John Albright: Our comparable lease spreads were 12% in the third quarter and 26% in the first nine months of 2024. Notable new leases included approximately 24,000 square feet lease to the Pickler, a pickleball facility replacing the former Earth Bear at the collection of Foresight and 20,000 square feet of the former WeWork space to the Legacy Club, a high end membership only social club at the shops at Legacy. Anchor renewals included Ross at Price Plaza, Barnes & Noble at the collection. and Michael's at Astor Lane. With this leasing activity, we ended the third quarter with lease occupancy of 95.8% and increase of 120 basis points from the previous quarter.

John Albright: Our comparable lease spreads were 12% in the third quarter and 26% in the first nine months of 2024.

John Albright: Notable new leases included approximately 24000 square feet leased to the Pickler I pick a ball facility, replacing a former earth fare at the collection of foresight and 20000 square feet of the former we work space to the legacy club a high end membership only social club at the shops at legacy anchor renewals include.

Speaker Change: As Ross said price Plaza Barnes <unk> noble the collection.

Speaker Change: And Michael's at Ashford Lane.

Speaker Change: This leasing activity, we ended the third quarter with leased occupancy of 95, 8% an increase of 120 basis points from the previous quarter.

John Albright: Before leaving the topic of leasing, I want to note that our signed, not open pipeline continues to grow and now stands at six and a half million in future rents, just over 7% of our current in place cash based rent.

Speaker Change: Before leaving the topic of leasing I wanted to note that our signed not open pipeline continues to grow and now stands at $6 5 million in future rats Jets up about 7% of our current in place cash base rent now.

John Albright: Now turning to investments, as mentioned earlier, we acquired three open-air shopping centers for $137.5 million, including Carolina Pavilion, Millennia Crossing, and Lake Brandon Village. These properties are all aligned with our investment strategy as they expand our geographic reach and strengthen our presence in key growth markets. Carolina Pavilion as the Charlotte, North Carolina market and Brandon Village as Tampa, Florida market to our portfolio while Millennium Crossing grows our existing Orlando, Florida presence. Combined these centers added almost 900,000 square feet to our portfolio, growing our GLA by over 20%.

Speaker Change: Now turning to investment as mentioned earlier, we acquired three open air shopping centers for $137 $5 million, including Carolina Pavilion millennia crossing in late Brandon village <unk>.

Speaker Change: These properties are all aligned with our investment strategy as they expand our geographic reach and strengthen our presence in key growth markets.

Speaker Change: Carolina Pavilion, as the Charlotte, North Carolina market, and Brandon village as Tampa, Florida market to our portfolio, while millennium crossing grows our existing Orlando, Florida presence combined these centers added almost 900000 square feet to our portfolio growing our GLA by over 20%.

John Albright: In addition to growing our property portfolio this quarter, we also grew our structured investment portfolio, adding a first mortgage and a preferred equity investment. In September, we originated a $43.8 million first mortgage loan with an initial term of two years and initial interest rate of 11%. This loan is secured by over 100 acres entitled for over 2 million square feet for a mixed-use development located in Herndon, Virginia near Dulles Airport and adjacent to the Metrorail Silver Line station. In August, we also completed a $10 million preferred equity investment as the subsidiary of a publicly listed hospitality entertainment company with a dividend rate of 14%.

Speaker Change: In addition to growing our property portfolio. This quarter. We also grew our structured investment portfolio, adding our first mortgage and a preferred equity investment.

Speaker Change: In September we originated a $43 $8 million first mortgage loan with an initial term of two years and initial interest rate of 11%. This loan is secured by over 100 acres of entitled for over 2 million square feet for a mixed use development located in Herndon, Virginia near Dulles Airport and adjacent to the Metro rail Silver line.

Speaker Change: Station.

Speaker Change: We also completed a $10 million preferred equity investment is subsidiary of publicly listed hospitality Entertainment company with a dividend rate of 14%.

John Albright: Inclusive of both property acquisition and structured investments, our year-to-date investment activity now totals almost $275 million and a weighted average yield of 9.1%. With this amount of investment activity, we were pleased that we were able to efficiently raise capital that Phil will discuss in a few moments.

Speaker Change: Inclusive of both property acquisition in structured investments our year to date investment activity now totals almost $275 million at a weighted average yield of nine 1%.

Speaker Change: This amount of investment activity. We were pleased that we were able to efficiently raise capital that Phil will discuss in a few moments.

John Albright: On the disposition front, we sold Jordan Landing located in West Jordan, Utah, resulting in 100% of our portfolio now being in the Southeast and Southwest.

Speaker Change: On the disposition front, we sold Jordan landing located in West Jordan, Utah, resulting in 100% of our portfolio now being in the southeast and southwest with that I will now hand, the call over to Phil.

Philip Mays: With that, I will now hand the call over to Phil. Thanks, John. On this call, I will briefly discuss our strength and balance sheet, strong earnings and revised full year 2024 guide. Starting with the balance sheet, during the quarter, we issued approximately 6.9 million shares at a weighted average share price of $18.63 per share under our Common Stock ATM program, generating net proceeds of $125.7 million. These equity proceeds, along with $18 million of proceeds from our disposition of Jordan Landing, provided over 75% of the capital needed to fund our 191 million of investment activity announced this quarter.

Phil Mays: Thanks Donna.

Phil Mays: On this call I will briefly discuss our strengthened balance sheet with strong earnings and revised full year 2020 for guidance.

Starting with the balance sheet.

During the quarter, we issued approximately $6 9 million shares at a weighted average share price of $18 63 per share.

Phil Mays: Our common stock ATM program.

Phil Mays: Net proceeds of $125 $7 million. These equity proceeds along with $18 million of proceeds from our disposition of Jordan landing provided over 75% of the capital needed to fund our $191 million.

Phil Mays: That's an activity announced this quarter.

Philip Mays: Additionally, we closed a $100 million five-year term loan. The funds from this new loan were used to term out $100 million that was outstanding on a revolving credit facility for which the company had already entered into SOFR swaps. Utilizing these existing SOFR swaps, the initial fixed rate of this $100 million five-year term loan was 4.68%. Notably, our equity issues and term loan combined permitted us to incrementally improve both leverage and liquidity. We ended the quarter with net debt to EBITDA of 6.4 times, a full turn lower than last quarter, net debt to total enterprise value of 43% and over $200 million of liquidity, thereby providing a strengthened balance sheet to support continued growth.

Phil Mays: Additionally, we closed a $100 million five year term loan.

From this new loan were used to term out $100 million that was outstanding on our revolving credit facility for which the company had already entered into its over swaps.

Phil Mays: Leave existing so for swaps the initial fixed rate of $100 million five year term loan was 468%.

Phil Mays: Notably our equity issuance and term loan combined permitted us to incrementally improve our leverage and liquidity.

Phil Mays: We ended the quarter with net debt to EBITDA of $6 four times, a full turn lower than last quarter.

Phil Mays: Net debt to total enterprise value of 43% and over $200 million of liquidity, thereby providing a strengthened balance sheet to support continued growth.

Philip Mays: Moving to financial results, Core FFO was 50 cents per diluted share for the quarter compared to 47 cents reported in the third quarter of 2023. AFFO was 51 cents per diluted share for the quarter compared to 48 cents reported in the third quarter of 2023. This represents approximately 6% growth in both Core FFO and AFFO. As John discussed, the company continued to have positive leasing momentum, and the result of this momentum is evident in our same property NOI growth of 6.3% for the quarter. This growth is spread among our same property portfolio, but primarily driven by growth at Ashford Lane, the collection at Foresight, the shops at Legacy, and Price Plaza.

Phil Mays: The financial results core <unk> was 50 cents per diluted share for the quarter compared to <unk> 47 reported in the third quarter of 2023.

Phil Mays: Oh, it's 51 cents per diluted share for the quarter compared to <unk> 48 reported in the third quarter of 2023. This represents approximately 6% growth in both <unk> and <unk>.

As John discussed the company continued to have positive leasing momentum and the results of this momentum is evident in our same property NOI growth of six 3% for the quarter.

This growth was spread among our same property portfolio, but primarily driven by growth at Astro Lane the collection at foresight the shops at legacy and price Plaza. Moreover, our signed not open pipeline of $6 $5 million will continue to add NOI growth at the new tenants take possession and commence paying rent.

Philip Mays: Moreover, our signed not open pipeline of $6.5 million will continue to add NOI growth as the new tenants take possession and commence paying rent.

Philip Mays: Regarding our common dividend, as we announced in August, we distributed a third quarter regular cash dividend of $0.38 per share, resulting in a Q3 ASFO payout ratio of approximately 75%. Consistent with past practice, towards the end of November, we will announce our quarterly dividend for the fourth quarter. Lastly, with regard to guidance, we are pleased that our increase in investment activity at attractive yields, same property NOI growth, and attractive term loan pricing enables us to raise our guidance while at the same time growing our common equity market capitalization and strengthening our balance sheet. Accordingly, we are raising our full year 2024 outlook to a new core FFO range of $1.83 to $1.87 per diluted share from $1.81 to $1.86 per diluted share and raising the low end of our AFFO range to a new range of $1.96 to $2 per diluted share from $1.95 to $2 per diluted share.

Phil Mays: Regarding our common dividend as we announced in August we distributed third quarter regular cash dividend of <unk> 38 per share, resulting in a Q3 <unk> payout ratio of approximately 75%.

Phil Mays: Consistent with past practice towards the end of November we will announce our quarterly dividend for the fourth quarter.

Phil Mays: Lastly, with regard to guidance, we are pleased that our increase in investment activity at attractive yields.

Phil Mays: Same property NOI growth and attractive term loan pricing enabled us to raise our guidance while at the same time growing our common equity market capitalization and strengthening our balance sheet.

Phil Mays: Accordingly, we are raising our full year 2024 outlook to a new core <unk> range of $1 83 to $1 87 per diluted share from $1 81.

Phil Mays: To $1 86 per diluted share and raising the low end of our <unk> range to a new range of $1 96 to $2 per diluted share from $1 95 to $2 per diluted share.

Philip Mays: The assumptions that underlie our guidance are detailed in our earnings press release. However, I do want to note our increased investment guidance. With $274 million of investments closed year to date, we are again increasing our investment guidance to a new range of $300 million to $350 million. As a reminder, our investment outlook includes both property acquisitions and structured investment.

Phil Mays: The assumptions that underlie our guidance are detailed in our earnings press release, However, I do want to note our increased investment guidance with $274 million of investments closed year to date, we are again, increasing our investment guidance to a new range of $300 million to $350 million.

Phil Mays: As a reminder, our investment outlook includes both property acquisitions and structured investments.

Unknown Executive: With that, operator, please open the line for questions. As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your telephone and wait for your name to be entered. To withdraw your question, please press star 1. Please stand by while we compile the Q&A roster.

Phil Mays: Operator, please open the line for questions.

Speaker Change: As a reminder, if you'd like to ask a question at this time. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

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

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Rob Stevenson: Our first question will come from the line of Rob Stevenson with Jenny Montgomery Scott. Good morning, guys. John, other than the 14% dividend, what's the attractive thing about the $10 million hospitality investment? And what's the collateral if they wind up not being able to pay over the next five years?

Speaker Change: Our first question will come from the line of Rob Stevenson with Janney Montgomery Scott.

Rob Stevenson: Hi, Good morning, guys John.

Speaker Change: On Panther.

Rob Stevenson: John other than the 14% dividend, what's the attractive thing about the $10 million hospitality investment and what's the collateral if they wind up not being able to pay over the next five years.

Rob Stevenson: Rob, can you repeat that? We lost temporary connection. Okay. Can you hear me now? Yes, I can. Okay.

Speaker Change: Rob can you repeat that we launched temporary protection.

Speaker Change: Okay can you hear me now.

Yes, I can.

Rob Stevenson: So other than the 14% dividend, what's the attractive thing about the $10 million hospitality investment?

Speaker Change: So other than a 14% dividend, what's the attractive thing about $10 million hospitality investment.

Rob Stevenson: And what is the collateral if they can't pay over the next five years at some point?

Speaker Change: And what is the collateral if they can't pay over the next five years at some point.

John Albright: Well, you had me at 14%.

Speaker Change: You had me at 14%.

John Albright: But basically, you know, it's a publicly traded company that just raised quite a bit of capital on a rights offering and might have had the previous CFO at CTO as a CFO there. Okay. And, you know, Phil talked about the raised acquisition guidance.

Speaker Change: Basically.

Speaker Change: It's a publicly traded company that just raised quite a bit of capital on a rights offering.

Speaker Change: And might I add the previous CFO.

Speaker Change: CTO is a CFO there.

Speaker Change: Okay.

Speaker Change: And.

Speaker Change: Phil talked about the acquisition the Reis acquisition guidance. How are you thinking about funding that is that going to be fun through ATM issuance or are there more dispositions that you're teeing up and just won't close until early 'twenty five how are you thinking about the funding of the equity portion of.

John Albright: How are you thinking about funding that? Is that going to be funded through ATM issuance or are there more dispositions that you're teeing up and just won't close until early 2025? How are you thinking about the funding of the equity portion of, you know, deals over the next six months? Well, now that we have our leverage down to a level that, you know, we haven't seen in quite a while, and as Phil mentioned, the liquidity that we have, you know, we'll probably use the line, but, you know, we obviously exceeded our investments here this year.

Speaker Change: Deals over the next six months.

Speaker Change: Now that we have our leverage down to a level.

Speaker Change: Haven't seen in quite a while and as Bill mentioned the liquidity that we have.

Speaker Change: We will probably use the line.

Speaker Change: But.

Obviously exceeded.

Speaker Change: Our investments here. This year there are a few smaller deals that were out to <unk>.

John Albright: There are a few smaller deals that we hope to close this year, but we feel like we're in a great spot to, you know, monitor the capital markets and obviously it's dependent on finding acquisition, but you won't see us recycling as much as we have in the past years.

Speaker Change: Closed this year, but we will I would feel like we're in a great spot to.

Monitor the capital markets.

Speaker Change: And obviously, it's dependent on finding an acquisition, but you won't see us recycling as much as we have in the.

Speaker Change: The past years.

John Albright: And how are you thinking about the remaining office asset versus selling today versus holding into the future? How is that sort of math looking like to you in terms of the optimization there? Yeah, I mean, we're monitoring it. The tenant is, you know, utilizing it and they're, you know, thinking about their future plans at the same time that that asset is experiencing an incredible market environment in Albuquerque. It's near the missile range. It's near the Netflix movie studios that are nearing completion. There's an incredible amount of housing and the state needs office space. The university needs office space and there's no one building offices, as you know.

Speaker Change: And how are you thinking about the remaining office asset versus selling today versus holding into the future. How is that sort of math looking like to you in terms of the optimization there.

Speaker Change: We're monitoring it.

Speaker Change: China is.

Speaker Change: Utilizing ed.

Speaker Change: And they're thinking about their future plans at the same time.

Speaker Change: That asset is experiencing an incredible.

Speaker Change: Market environment in Albuquerque.

Speaker Change: Near the.

The missile range is near a Netflix movie studios that are nearing completion, there is incredible amount of housing and the state needs office space. The University need office space and there is no one building offices as you know.

John Albright: So we're actually getting in a better and better situation. But to answer your question, we're waiting to find out how Fidelity wants to utilize this for the long term. And we're just kind of waiting on them. But everything's been going the right direction.

Speaker Change: We're actually getting a better a better situation.

Speaker Change: Answer your question waiting to find out alpha.

Speaker Change: <unk> wanted to utilize it for the long term and where it is kind of waiting on them, but everything has been going the right direction, but at some point, yes, we will exit it.

John Albright: But at some point, yes, we will exit it.

Philip Mays: Okay. And then, Phil, you guys have talked about the six and a half million of signed but not open leasing.

Speaker Change: And then Phil you guys have talked about the $6 5 million of signed but not opened.

Philip Mays: When does that start to hit FFO and when are the, is it chunky or is it evenly sort of spread throughout when that comes online in 2025? Yeah, so just for modeling purposes, if you wanted to kind of radically ramp it up over the next nine to 12 months, somewhere in that time period, kind of ramping it up radically, we'll approximate how that'll come online. All right, that's helpful.

Speaker Change: Leasing when does that start to hit a foe and when are the is it chunky or is it.

Speaker Change: Evenly sort of spread throughout when that comes online in 2025.

Yes, so just for modeling purposes, if you wanted to kind of Ratably ramp it up over the next nine to 12 months somewhere in that time period kind of wrapping it up ratably.

Speaker Change: Approximate how that'll come online.

John Albright: And then last one for me, any known move outs of note at this point in 2025 in the portfolio? No, I mean, the the only one that you really can think of are that is is strategic and that they don't have a renewal right and we already have two tenants that wanted a higher rents and better quality tenants. So nothing that's a problem. Everything's more of an opportunity. All right.

Speaker Change: Alright, that's helpful. And then last one for me any known move outs of note at this point in 2025 and the portfolio.

Speaker Change: No I mean the.

Speaker Change: The only one that really you can think of our debt is is strategic and that they don't have.

Speaker Change: Renewal right and we already have two tenants that wanted it at higher rents and better quality tenant.

Speaker Change: Nothing that's a problem everything is more of an opportunity.

Unknown Executive: Thank you. Thanks, guys, for the time and have a great weekend. All right. Thanks, Rob. You as well.

Speaker Change: Alright. Thank you thanks, guys for the time and have a great weekend alright. Thanks Ravi.

Speaker Change: Okay.

Craig Kucera: Our next question will come from the line of Craig Kucera with Lucid Capital Markets. Hey, good morning, guys. Obviously, a pretty aggressive acquisition quarter, and based on guidance, it looks like you could do another $25 to $75 million roughly for the rest of the year. Based on the yield assumptions, it looks like that would all be properties, but are you looking at any other additional structured finance investments? We are looking at one is smaller, but it's very high quality. And it actually it's very close to one of our assets. And so it'd be a nice loan to own, we'd love to own it, we just don't think we'll have an opportunity to because it's still it's such high quality that it will go for much lower cap rates and kind of what, what we're targeting, but it's more strategic than just an investment.

Speaker Change: Our next question will come from the line of Greg <unk> with lucid capital markets.

Speaker Change: Hey, good morning, guys.

Speaker Change: Obviously, a pretty aggressive acquisition quarter and based on guidance. It looks like you could do another 25% to $75 million roughly for the rest of the year.

Speaker Change: Based on the yield assumptions it looks like that would all be properties, but are you looking at any other additional structured finance investments.

Speaker Change: We are looking at one is smaller.

Speaker Change: Very high quality.

Speaker Change: It actually it is very close to one of our assets.

Speaker Change: And so it would be a nice loan to own we'd love to own. It. We just don't think will have an opportunity to because it is such high quality that it will go for much lower cap rate than kind of what.

Speaker Change: What we're targeting but yes.

Speaker Change: It's more strategic than just an investment.

John Albright: And then, you know, on the acquisition side, we have, you know, something in our line of sight that's smaller, but, you know, high quality. Got it.

Speaker Change: And then on there.

Speaker Change: The acquisition side, we have something in our line of sight smaller.

Speaker Change: But high quality.

Craig Kucera: And with the sale of the medication credits this quarter, should we expect to see any more remaining earnings from real estate operations or is that effectively ceased? That is in the rear view mirror. All right.

Speaker Change: Got it.

Speaker Change: And with the sale of the mitigation credits this quarter should we expect to see any more remaining earnings from real estate operations or is that effectively ceased that is in the rearview mirror.

Unknown Executive: I'll assume that's 120 years.

Speaker Change: Alright.

Speaker Change: The 120 years.

Craig Kucera: Changing gears, I want to talk about the $44 million mortgage investments. Looking at that project up by Dulles, it looks like there's at least at one point some potential hotel space, a lot of office. Is the collateral underlying alone all of the entire project, or is it carved out towards maybe retail and multifamily or something else? No, it's all the property. The vast majority of the value there is multifamily. As you can imagine, your top tier multifamily developers are lining up to buy sites from the developer. And they're in contracts, LOIs and contracts for, I would say, three to four right now.

Speaker Change: Yes.

Speaker Change: Changing gears I want to talk about the $44 million mortgage investments looking at that project up by Dallas.

Speaker Change: It looks like there is at least at one point some potential wholesale hotel space a lot of office.

Speaker Change: As the collateral underlying alone all of the entire project towards that carved out towards maybe.

Speaker Change: Retail multifamily or something else.

Speaker Change: As all of the property.

Speaker Change: <unk>.

Speaker Change: The vast majority of the value there is multifamily.

Speaker Change: As you can imagine your top tier multifamily developers are lining up to buy sites from the developer and they are in contracts.

Speaker Change: LOI and contract or.

John Albright: And on the hotel side, they are looking to maybe develop that themselves. There's 160,000 square feet designed and permitted for retail that we would love to be helpful in that investment with a developer. As you know, we're not a developer, but it's more like a rest in town center opportunity. And then part of the property is on top of the Fairfax. It's in Fairfax County on top of a metro station that's closest to Dulles. And as you can imagine, if this was a data center land, it would be worth $300 million. So it's an awesome development project.

Speaker Change: I'd say three to four right now.

Speaker Change: And on the hotel side, they are looking to maybe develop that themselves.

Speaker Change: There is a 160000 square feet designed and permitted for retail.

Speaker Change: We would love to be helpful in that.

Speaker Change: Investment where the developer as you know we don't we're not.

Speaker Change: Developer, but it's more like our Reston town center opportunity.

So and then and then part of the property is on top of the Fairfax. It's in Fairfax County on top of the Metro station, that's closest to Dulles and as you can imagine all of the data as if this was the data center land it would be worth $300 million.

John Albright: They've been working on it for 15 years. As you can imagine, the entitlements have taken that long, and now you're seeing dirt starting to move. Got it. So they so they have broken ground at this point. They've done more, basically, earthwork, horizontal development, as they're waiting for, you know, basically the the multifamily developers to do the next stage. Got it.

Speaker Change: So.

Speaker Change: And also on development project, they've been working on for 15 year, just imagine the entitlements are taken that long and now it's now youre seeing dirt starting to Cerner mode.

Speaker Change: Got it.

Speaker Change: Have broken ground at this point they've done more.

Speaker Change: Basically <unk> work horizontal development as they're waiting for basically the multifamily developers to do the next stage.

John Albright: And looking at the three property portfolio you acquired this quarter, you know, it looks like there's a lot of occupancy upside to where the assets have already been leased. Can you talk about maybe any sort of capex span that you're expecting at those properties? Yeah, so when we bought it, these leases were in place. And so they've already been addressed as far as the CapEx. So we're very excited about what the transformation of the Carolina Pavilion project is going to be because some of these boxes have been vacant for some time and now the tenants are just now getting to the build-out side of it.

Speaker Change: Got it and looking at the three property portfolio you acquired this quarter.

Speaker Change: It looks like Theres, a lot of occupancy upside to where the assets have already been leased can you talk about maybe any sort of capex spend that you're expecting at those properties.

Speaker Change: Yes, so when we when we bought it.

Speaker Change: Leases were in place and so they've already been addressed as far as the Capex.

Speaker Change: So we're very excited about.

Speaker Change: With the transformation of this.

Our lineup of $1 billion project is going to be because it has been some of these boxes have been vacant for some time and now the tenants are just now getting to the build outside side of it but we took credits for the landlord side of it when we actually acquired it.

John Albright: But we took credits for the landlord side of it when we actually acquired it. The interesting thing after the acquisition is cons and big lots were not part of the signed leases that are going to open. But now we've gotten those. We're in the process of trying to get those spaces back. We basically have multiple tenants that want those boxes at better, more favorable rents than we bought the project under. So this is looking as a fantastic investment. So knock on wood, I feel like the execution here is going to be fairly easy and fairly fast.

Speaker Change: And the interesting.

Speaker Change: After the acquisition is.

Speaker Change: <unk> and big loss were not part of the signed leases that are going to open but now we've gotten those are in the process of trying to get those spaces back.

Speaker Change: We basically have multiple tenants that want that those boxes at better more favorable rents then we bought the project Thunder. So this is looking.

Speaker Change: A fantastic investment so knock on wood.

Speaker Change: Feel like the execution here is going to be fairly easy and fairly fast.

Unknown Executive: All right, thanks, appreciate it. Thank you.

Speaker Change: Alright, Thanks I appreciate it thank you.

John Massocca: Our next question comes from the line of John Massocca with B Riley Securities. Good morning, everybody. Morning. Um, let me, uh...

Speaker Change: Our next question comes from the line of John Michel <unk> with B Riley Securities.

Speaker Change: Good morning, everybody.

Speaker Change: Good morning.

Speaker Change: Jamie.

John Albright: I'm curious on the disposition of Jordan Landing, kind of what's your over the cap rate there, just given it's fully occupied property in a pretty high growth market, just give me more color on that particular asset in that sale. Yeah, I mean, you're right. It's a vibrant market is smaller property is really is at home is it was the issue. So we looked at if we held on to it and at home something happened at home, you know, amount of time on demising that home space and so forth. We decided, you know, let's just sell it is small property.

Speaker Change: Yes.

John Michel: Just kind of curious on the disposition of Jordan landing kind of what drove the cap rate there.

When it's fully occupied property.

John Michel: And a pretty high growth market just to name a color on that particular asset in that sale.

John Michel: Yes.

John Michel: You are right is a vibrant market is smaller property is really at home is.

John Michel: The issue.

John Michel: So we looked at if we held onto it and a bad home something happened at home.

At a time optimizing that space and so forth.

John Michel: Let's itself is small property, so thats whats driving the higher cap rate.

John Albright: So that's what's driving the higher cap rate.

Unknown Executive: understood.

John Massocca: And then, in terms of Correct me if I miss her, but the lease up of the former WeWork space, was that a partial lease up, or was that all of the previously vacated space? Yeah, it's about a third of it. And we're pretty excited about it. It's almost like a kind of a Soho Club sort of tenant. And they've gotten great feedback and pre-membership investments. And so unfortunately, it's not going to open up until the latter part of 2025. So that income primarily from that space is going to hit 2026. And we're waiting a little longer to make an announcement in that market, you know, to help with the rest of the lease up of the WeWork space.

Speaker Change: Okay understood and then.

Speaker Change: In terms of.

Speaker Change: Correct me, if I misheard, but the lease up of the former <unk> space is that a partial lease up or was that all of our.

Speaker Change: Previously vacated space.

Speaker Change: It's about a third of it.

Speaker Change: And we're pretty excited about it its almost like.

Speaker Change: Kind of a Soho club sort of tenant and they.

Speaker Change: They've gotten great feedback and pre membership investments and so unfortunately, it was not going to open up until latter part of 'twenty.

Speaker Change: 25, so that income primarily from that space is going to hit 2026.

And we are waiting a little longer to make announcement in that market.

Speaker Change: With the the.

Speaker Change: The rest of the lease up that we work space.

John Albright: So it's taking longer. But yeah, this is going to be exciting, exciting tenant for the property, you know, bringing a lot, a lot of activity there. So we're excited about it.

Speaker Change: Taken longer but this is going to be exciting.

Speaker Change: Exciting tenants for the property.

Speaker Change: A lot a lot of activity there. So we're excited about it.

John Albright: And just because it sounds like you have some big close prospects for the remaining two-thirds of the space there. What we're looking at doing is demising it. So it's gonna be a lot of smaller tenants. Some of the larger tenants we've been talking to just taking longer. So we'd rather just kind of look, let's just kind of ground it out here and get a lease up.

Speaker Change: And just because it sounds like you have some great.

Speaker Change: Clothes prospects for the remaining two thirds of the space there.

Speaker Change: I mean, what we're going to what we're looking at doing in the Miocene that so it is going to be a lot of smaller tenants.

Some of the larger tenants, we've been talking to just taking longer so we'd rather do is kind of a look let's just kind of crowded out here and get it leased up.

John Albright: And then maybe a bigger picture, you know, have you seen any change, just given some of the macroeconomic uncertainty around retailer demand for either their existing space or to kind of take over, you know, move outs or reposition space, etc. Not really. I mean, really, the only the softness that we're seeing is some of the restaurants, sales are down. And, you know, we're definitely monitoring that. But you know, as a as a commentary on the economy, I would say on the restaurants, that's where you're seeing more of the challenges and the softness.

Speaker Change: Okay, and then maybe bigger picture.

Have you seen any change just given some of the macroeconomic uncertainty around retailer demand for either their existing space or to kind of take over move outs or.

Speaker Change: Reposition space et cetera.

Speaker Change: Not really I mean really the only softness that we're seeing is some of the restaurants sales are down.

Speaker Change: And.

Speaker Change: We are definitely monitoring that.

Speaker Change: As a as a commentary on the economy I would say on the restaurants ask what are you seeing more of it the challenges on the softness.

John Albright: Any change in demand for backfill for those types of assets? Well, yeah, so far, there's no one that's really kind of like, we're out sort of situations. I mean, we're in we're, we have, we're in lease negotiations for new ones, especially in legacy. So, to answer your question, you know, the space that's the easiest to lease and restaurant land is second generation. So if any of these tenants do succumb, we'll have backfields readily available.

Speaker Change: Any change in demand for backfill for those types of assets.

Speaker Change: So far there is no one that's really kind of like where Alan sort of situations I mean were and where we have we are in lease negotiations for new ones.

Speaker Change: And legacy.

Speaker Change: So.

Speaker Change: But to answer your question.

Speaker Change: The space is the easier to lease in restaurant land as second generation. So if any of these tenants do.

Speaker Change: Kam will have a backfill readily available.

John Albright: Okay, and then last one for me, I know you didn't provide 2025 guidance, but as we kind of think about same-strain LI growth for next year, any kind of notable puts and takes there that could impact. you know, the comparisons versus what you're going to do this year. You know, next year, we're doing a lot of work because we've been so active on on leasing side, the acquisition side, investment side, you know, you know, wait, wait till the end of the year to kind of give you better guidance. You know, there's a lot of moving moving parts.

Speaker Change: Okay, and then last one from me I know you didn't provide two.

Speaker Change: 2025 guidance, but as we kind of think about same store NOI growth for next year any kind of notable puts and takes there that could impact.

Speaker Change: The comparison is versus what you're going to do this year.

Speaker Change: Next year, there we're doing a lot of work together, we've been so active on the leasing side the acquisition side investment side.

Speaker Change: <unk>.

Speaker Change: Wait till later in the year to kind of give you a better guidance.

Speaker Change: A lot of moving moving parts.

Unknown Executive: And, you know, the good news is, it's all all good news. That's fair.

Speaker Change: The good news is it's all all good news.

Unknown Executive: And that's it for me. Thank you very much.

Speaker Change: Okay, Thats fair and Thats. It for me. Thank you very much. Thank you.

R.J. Milligan: Thank you. Our next question comes from R.J. Milligan with Raymond J. Hey, good morning, guys. Most of my questions have been asked, but I really want to focus on the leverage. And John, you mentioned and we saw in the release that leverage has come down pretty nice here. And it's at one of the lowest levels it's been.

Speaker Change: Our next question comes from RJ Milligan with Raymond James.

RJ Milligan: Hey, good morning, guys. Most of my questions have been asked but.

RJ Milligan: Really wanted to focus on the leverage and John you mentioned and we saw in the release that Leverages come down pretty nice here.

John Albright: And I'm just curious, how do you think about running leverage going forward, given historically, you've been more willing to run and hire leverage. But obviously, as the company gets bigger, I'm just curious how, how you're thinking about running the balance sheet over the Look, we love the leverage being down. That's the goal. And the capital markets were fantastic for us in the last couple months where we're able to do that. So we would run leverage up only for the short duration for an acquisition opportunity and then look to rebalance. So where we are is a very comfortable sort of level for our leverage.

RJ Milligan: One of the lowest levels. It's been I'm just curious how do you think about running leverage going forward given historically, you've been more willing to run at higher leverage.

RJ Milligan: As the company gets bigger I am just curious how youre thinking about running the balance sheet over the next two years.

RJ Milligan: Hello, Joe.

RJ Milligan: The leverage being down.

RJ Milligan: That's the goal.

RJ Milligan: The capital markets, where we're a fantastic for us in the last couple of months, where we're able to do that so so we would run leverage.

RJ Milligan: For the short duration for an acquisition opportunity.

RJ Milligan: And then look to to rebalance so.

Where we are is a very comfortable sort of level level or our leverage.

R.J. Milligan: But we don't mind taking it up a bit if there's a great opportunity, but then look for an opportunity to bring it back down. Okay, that makes sense. That's it for me. Thanks, guys.

RJ Milligan: But we don't mind.

RJ Milligan: Taking it up a bit if theres a great opportunity, but then look for an opportunity to bring it back down.

RJ Milligan: Okay.

Speaker Change: Okay that makes sense that's it from me thanks guys. Thank.

Unknown Executive: Thank you. As a reminder, if you'd like to ask a question at this time, that is star 1.

Thank you.

RJ Milligan: Okay.

Speaker Change: As a reminder, if you'd like to ask a question at this time that is star one one.

Gaurav Mehta: Our next question comes from the line of Gaurav Mehta with Alliance. Thanks, good morning. I wanted to ask you on your asset recycling. I think earlier in the call, you said that not expect as much recycling going forward as in the past. Just wondering, within your portfolio, are there any assets that may be sold in the future? You know, some of the smaller assets that we've talked about, you know, the Daytona assets, could be opportunities where we're just looking for scale now, and so we'll continue to look at that. Here at Winter Park, we have a mixed-use property that's small, and the market is very strong here.

Our next question comes from the line of Gaurav Mehta with Alliance Global partners.

Speaker Change: Yeah. Thanks, good morning.

Speaker Change: Wanted to ask you on your asset recycling I think earlier in the call you said that not expect as much recycling going forward.

Speaker Change: In the past just wondering within your portfolio are there any assets.

Speaker Change: But that may be sold in the future.

Speaker Change: Some of these smaller assets that we've talked about the Daytona assets.

Speaker Change: Could be opportunities, where we're just looking for first scale now.

Speaker Change: And so we'll continue to look at that here at Winter Park, we have a mixed use property that small.

John Albright: We're just waiting for it to get a little stronger. So just more cleanup on the side versus, you know, some sort of, you know, other opportunities. You know, look, if the pricing gets better and better, you know, there may be one that's, you know, doesn't have a lot of growth in it, and we may look to sell something if strategically it makes sense, but nothing on the horizon. Okay, thank you.

And the market is very strong here, we are just waiting for it to get a little stronger so just more cleanup on the side versus.

Speaker Change: Some sort of other opportunities there.

Speaker Change: If the pricing gets better and better.

Speaker Change: <unk>.

Speaker Change: There may be one that's.

Don't have a lot of growth there and we may look to sell something.

Speaker Change: But strategically it makes sense, but nothing on the horizon.

Gaurav Mehta: That's all I have.

Speaker Change: Okay. Thank you that's all I had.

Unknown Executive: Great, thank you.

Speaker Change: Great. Thank you.

Unknown Executive: Ladies and gentlemen, that concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: Ladies.

Speaker Change: Ladies and gentlemen that concludes today's conference call.

Speaker Change: Thank you for participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.