Q1 2025 CTO Realty Growth Inc Earnings Call
Okay.
Unknown Executive: Good day and thank you for standing by.
Speaker Change: Good day and thank you for standing by welcome to the G. T O T growth first quarter 2025 earnings call.
Unknown Executive: Welcome to the CTO Realty Growth first quarter 2025 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.
Speaker Change: 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 one on your telephone you will then hear an automated message advising your hand, just raised to withdraw your question. Please press star one again.
Unknown Executive: To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
Unknown Executive: Please be advised that today's conference is being recorded.
Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Gena Mckinney director of Finance. Please go ahead.
Jenna McKinney: I would now like to hand the conference over to your speaker today, Jenna McKinney, Director of Finance. Please go ahead.
Jenna McKinney: Good morning, everyone. And thank you for joining us today for the CTO Realty Growth first quarter 2025 operating results conference call. 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 expectations are disclosed from time to time in greater detail in the company's Form 10-K, Form 10-Q, and other SEC filings.
Speaker Change: Good morning, everyone and thank you for joining us today for the CTO Realty growth first quarter 2025 operating results conference call.
Speaker Change: I would like to remind everyone that many of our comments today are considered forward looking statements under federal Securities laws.
Speaker Change: 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.
Speaker Change: Actors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's Form 10-K Form 10-Q, and other SEC filings.
Jenna McKinney: You can find our SEC reports, earnings release, supplemental, and most recent investor presentation on our website at ctore.com.
Speaker Change: You can find our SEC reports earnings release supplemental and most recent investor presentation on our website at CTO Reed Dot com.
John: With that, I will turn the call over to John. Thanks, Jenna.
John: With that I will turn the call over to John.
John: I'm pleased to share that CTO produced another strong quarter across all areas of our business, once again, driven by investment volume and leasing activity. Beginning with investment activity during the quarter, we acquired Ashley Park for $79.8 million at the going in cash cap rate near the high end of our guidance range. Ashley Park is a 559,000-square-foot open-air lifestyle center located in Noonan Submarket of Atlanta, anchored by well-known national brands. Further, Ashley Park has many of the attributes we look for in acquisitions, including lease-up potential in place below market rents and a base that's significantly below replacement costs.
John: I am pleased to share that CTO produced another strong quarter across all areas of our business once again, driven by investment volume and leasing activity beginning with investment activity during the quarter, we acquired actually park for $79 $8 million at the going in cash cap rate near the high end.
John: End of our guidance range.
John: Park is a 559000 square foot open air lifestyle Center located in Newnan sub market of Atlanta anchored by well known National brands. Further Ashley Park has many of the attributes we look for in acquisitions, including lease up potential in place below market rents in a basis.
Significantly below replacement costs more specifically, we have active tenant interest for nearly half of the approximately 40000 square feet of vacancy.
John: More specifically, we have active tenant interest for nearly half of the approximately 40,000-square-feet of vacancy. Approximately 200,000-square-feet of the shop space pay in below-market rent, of which 100,000-square-feet have no contractual option. and our acquisition basis is approximately $140 per square foot.
John: Approximately 200000 square feet of shop space paying below market rent of which a 100000 square feet have no contractual options.
John: And our acquisition basis is approximately $140 per square foot.
John: Accordingly, we are encouraged by the opportunity that this center provides to grow NOI.
John: Accordingly, we are encouraged by the opportunity that this center provides to grow NOI. In addition, we continue to have a strong pipeline of potential acquisitions across our target growth markets in the southeast and southwest.
John: In addition, we continue to have a strong pipeline of potential acquisitions across our target growth markets in the southeast and southwest.
John: On the leasing front, we signed more than 112,000 square feet of new leases, renewals and extensions at an average rent of $24.14 per square foot, almost 25% higher than our in-place portfolio average of $19.41 per square foot. Our leasing results continue to demonstrate the strong tenant demand for high quality properties within our markets.
John: On the leasing front, we signed more than 112000 square feet of new leases renewals and extensions and an average rate of $24.14 per square foot almost 25% higher than our in place portfolio average of $19 41 per square foot.
John: Leasing results continue to demonstrate the strong tenant demand for high quality properties within our markets.
John: I would now like to provide an update on our anchor leasing activity.
John: I would now like to provide an update on our anchor leasing activity. As you may recall, we have a unique mark to market opportunity related to the 10 anchor spaces that were leased to several tenants that filed for bankruptcy near the end of 2024 and early 2025.
John: As you may recall, we have a unique market opportunity related to the 10 anchor spaces that were leased to several tenants that filed for bankruptcy near the end of 2024 and early 2025. One of these spaces, a former Joanne's at Price Plaza in Houston, is in line to be assumed by a national retailer pending court approval. With regards to the other nine spaces, we have executed leases for two, expect to have two more leases shortly, and are actively in discussions for the remaining five. Accordingly, our releasing outlook for these anchor spaces remains positive, and we still expect to achieve a positive cash leasing spread of 40 to 60% in total.
John: One of these spaces are former Joanne at price Plaza in Houston is in line to be assumed by a national retailer pending court approval.
John: With regards to the other nine spaces, we have executed leases for to expect to have two more leases shortly and are actively in discussions for the remaining five.
John: Accordingly.
John: <unk> released at outlet for these anchor spaces remains positive and we still expect to achieve a positive cash leasing spread of 40% to 60% in total.
John: We also continue to make progress with respect to our 10 acres of undeveloped land adjacent to our shopping center and collection at Foresight located in Atlanta. Lease negotiations continue to progress here in addition to anchor spaces and we look forward to providing more lease updates in the near term. At quarter end, our portfolio was 93.8% leased and 91% occupied. Our signed not open leasing pipeline now stands at $4 million of annual base rent, representing 4% of cash rents at the quarter end.
John: We also continue to make progress with respect to our 10 acres of undeveloped land adjacent to our shopping center a collection of foresight located in Atlanta.
John: Lease negotiations continue to progress here in addition to anchor spaces, and we look forward to providing more lease updates in the near term.
John: At quarter end, our portfolio was 93, 8% leased and 91% occupied our signed not open leasing pipeline now stands at $4 million of annual base rent, representing 4% of cash rents at the quarter end the rent commencement associated with this pipeline will be way.
John: The rent commencement associated with this pipeline will be weighted towards the second half of 2025, and along with our anchorary leasing will provide a strong tailwind going into 2026.
John: Towards the second half of 2025.
John: Along with our anchor re leasing will provide a strong tailwind going into 2026.
John: Finally, I want to provide some comments relating to the recent tariff uncertainty. While there is little visibility today on the ultimate resolution, CTO is positioned well with high-quality properties and growing markets in a well-diversified tenant base. We will continue to monitor the situation as it evolves across the tenant landscape and remain focused on executing our strategy to deliver growth for our shareholders.
John: Finally, I wanted to provide some comments relating to the recent tariff uncertainty.
John: While there is little visibility today on the ultimate resolution CTO is positioned well with high quality properties in growing markets and a well diversified tenant base. We will continue to monitor the situation as it evolves across the tenant landscape and remain focused on executing our strategy to deliver growth for our.
Phil: And with that, I will now hand the call over to Phil. Thanks, John.
Phil: Elders and with that I will now hand, the call over to Phil.
Phil: On this call, I will discuss our balance sheet, earnings results, and full year 2025 guidance. quarter end we had approximately $604 million of debt with $120 million or 20% subject to floating interest rates based on SOFR.
Phil: Thanks, John on this call I will discuss our balance sheet earnings results and full year 2025 guidance.
Phil: At quarter end, we had approximately $604 million of debt with $120 million or 20% subject to floating interest rates based on so far.
Phil: However, in April when interest rates temporarily dropped in connection with the initial tariff announcement, We executed two SOFR swaps, fixing SOFR for $100 million of principal at a weighted average rate of 3.32% for five years beginning April 30. These swaps are initially being applied to $100 million of borrowing currently outstanding on a revolving credit facility, reducing the applicable interest rate by nearly 100 basis points from approximately 5.8% at quarter end to approximately 4.8% based on our anticipated leverage and price .
Phil: However in April when interest rates temporarily dropped in connection with the initial tariff announcements.
Phil: We executed two super swaps fixing so far for $100 million of principal at a weighted average rate of 332% for five years beginning April 30th.
Phil: These swaps are initially being applied to a $100 million of borrowings currently outstanding on our revolving credit facility.
Phil: Reducing the applicable interest rate by nearly 100 basis points from approximately five 8% at quarter end to approximately four 8% based on our anticipated leverage and pricing tier.
Phil: Turning to our convertible notes, our 3.875% convertible notes, with an outstanding principal balance of approximately $51 million, matured on April 15. As previously discussed, due to our common stock price and dividends paid over the term of these notes, they require settlement at a premium. In early April, prior to maturity, we completed a series of privately negotiated transactions with several of the note holders to settle their holdings with a combination of cash and newly issued common shares. and Maturity, we paid off the remaining holders solely in cash. The strategic approach permitted us to generally settle the face amount of these notes in cash and the premium in shares.
Phil: Turning to our convertible notes at three 875% convertible notes with an outstanding principal balance of approximately $51 million matured on April 15th.
Phil: As previously discussed due to our common stock price and dividends paid over the term of these nodes.
Phil: They required settlement at a premium.
Phil: In early April prior to maturity, we completed a series of privately negotiated transactions with several of the noteholders to settle their holdings with a combination of cash and newly issued common shares.
Phil: At maturity, we paid off the remaining holders solely in cash.
Phil: The strategic approach permitted us to generally settle the face amount of these notes in cash and the premium in shares.
Phil: Ultimately, the convertible notes were retired in full for approximately $71.2 million. Consisting of $50.1 million of cash and $21.1 million of common equity. This repayment resulted in an extinguishment of debt charge of approximately $20.5 million that will be recorded in the second quarter. Consistent with past practice, charges related to the extinguishment of death are excluded from our computation of both Core FFO and AFFO.
Phil: Ultimately the convertible notes were retired in full for approximately $71 $2 million.
Phil: Consisting of $50 1 million of cash and $21 1 million of common equity.
Phil: This repayment resulted in an extinguishment of debt charge of approximately $25 million that will be recorded in the second quarter.
Phil: System with past practice charges related to the extinguishment of debt are excluded from our computation of both core <unk> and <unk> one last balance sheet note.
Phil: One last balance sheet. We ended the quarter with net net to even a 6.6. While this is slightly elevated from last quarter end as a result of the Ashley Park acquisition. It is still a full turn lower than one year ago. Furthermore, at the end of this quarter, we had almost $140 million of liquidity and with our convertible notes now extinguished, no debt maturing for the remainder of 2025.
Phil: We ended the quarter with net debt to EBITDA of $6 six times.
Phil: The slightly elevated from last quarter and as a result of the Ashley Park acquisition. It is still a full turn lower than one year ago.
Phil: Furthermore, at the end of this quarter, we had almost $140 million that liquidity and what our convertible notes now extinguished no debt maturing for the remainder of 2025.
Phil: Moving briefly to operating results for the Core FFO was $14.4 million for the first quarter, a $3.7 million increase compared to the $10.7 million reported in the first quarter of 2024.
Phil: Moving briefly to operating results for the quarter.
Phil: <unk> was $14 $4 million for the first quarter at $3 $7 million increase compared to the $10 $7 million.
Phil: In the first quarter of 2024.
Phil: On a per share basis, core FFO was 46 cents in the first quarter of 2025 compared to 48 cents in the first quarter of 2024. Change of $0.02 per share is primarily the result of our reduction in leverage and downtime associated with the release of of the Anchorage.
Phil: On a per share basis core <unk> was <unk> 46 in the first quarter of 2025 compared to <unk> 48 in the first quarter of 2024.
Phil: This change of two cents per share is primarily the result of a reduction in leverage and downtime associated with the re leasing.
Phil: Of the anchor spaces.
Phil: I would like to provide some additional context related to the releasing of our 10 anchor spaces that John mentioned earlier. Specifically, the timing of when they vacated that is impacting our 2025. First, as a reminder, four of the spaces were vacated towards the end of 2024. In 2025, our three party city locations paid rent through March before vacating, and our three Joanne's locations paid rent through April. We recently got back two of our Joannes, and at least for the third, as discussed, may be assumed by National Research. This timing is in line with what we expected and is reflected in our guidance.
Phil: I would like to provide some additional context related to the re leasing of our 10 anchor spaces that John mentioned earlier.
Phil: Typically the timing of when they vacated that is impacting our 2025 earnings.
Phil: First as a reminder for the spaces vacated towards the end of 2024.
Phil: In 2025, or three party city locations paid rent through March before vacating and our three Joanne locations paid rent through April.
Phil: We recently got back two of our Joanne and at least for the third at discuss may be assumed by national retailer.
Phil: This time it gets in line with what we expected and as reflected in our guidance.
Phil: Similar to last quarter, page eight of our investor presentation summarizes the status and leasing upside related to these angles. Now under guidance, we are reaffirming our full year 2025 per share outlook for Core FFO of $1.80 to $1.86. and AFFO of $1.93 to $1.98. Assumptions underlying this outlook remain consistent with those initially provided.
Phil: Similar to last quarter page eight of our investor presentation summarizes the status and leasing upside related to these anchor spaces.
Phil: Now onto guidance, we are reaffirming our full year 2025 per share outlook for core <unk> of $1 80 to $1 86, and <unk> of $1 93 to $1 98.
Phil: The assumptions underlying this outlook remain consistent but that was initially provided.
Unknown Executive: with that operator, please open the line for questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Phil: And with that operator, please open the line for questions.
Phil: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Okay.
R.J. Milligan: And our first question comes from R.J. Milligan of Raymond James. Your line is open.
RJ Milligan: And our first question comes from RJ Milligan of Raymond James Your line is open.
John: Hey, good morning, guys. John, I was wondering if you could give us a little bit more detail on the anchor space negotiations. I'm curious if any of the recent volatility has maybe put a pause in retailer discussions or if you're seeing any impact there as you're looking to re-tenant those boxes.
RJ Milligan: Hey, good morning, guys.
Speaker Change: John I was wondering if you could give us a little bit more detail on the anchor space negotiations.
Speaker Change: I'm curious if any of the recent volatility has maybe put a pause and retailer discussions or if youre seeing any impact there as you're looking to re tenant those boxes.
John: Yeah, thanks, R.J. Surprisingly, at least to me, the leasing activity has been, you know, very consistent and very strong. There had not been any sort of backup or pause, you know, whether they're public or private or, you know, moving forward. You probably saw the release that Burlington bought a bunch of Hardy City leases in bankruptcy. I'm sorry, Joann's. And so, you know, that's just kind of testament that, you know, those tenants are moving forward in this market. So, yeah, so anyway, everything's been very, very good, strong and robust. So I don't see any problems there.
RJ Milligan: Thanks RJ.
Speaker Change: Surprisingly well.
Speaker Change: We used to be the leasing activity has been.
Speaker Change: <unk>.
Speaker Change: Very consistent and very strong there.
Speaker Change: Any sort of in the bag.
Speaker Change: Yes.
Speaker Change: Whether they're public or private.
Speaker Change: We're moving forward.
Speaker Change: The release.
Speaker Change: Burlington and bought a bunch of party city leases in bankruptcy.
Speaker Change: I'm sorry, Joe.
Speaker Change: That's just kind of a test method.
Speaker Change: Moving forward.
Speaker Change: In those markets.
Speaker Change: So everything has been very very strong and robust.
Speaker Change: Any problems there.
Unknown Executive: Okay, that's helpful.
Phil: And then the new lease spread, it's obviously a big number in the quarter, and I'm assuming that it was just maybe one big lease that was driving that number higher, but maybe you could give some detail on that. Yeah, RJ, this is Phil. It was actually two leases, and they made up the bulk of the square footage in the new leases. One of them was replacing one of the anchors that had vacated, and another one was where we had a tenant who had no options and wanted to stay, but we could mark it up and had someone in waiting there and signed a new lease with them.
Speaker Change: Okay. That's helpful and then.
The new lease spreads, obviously, a big number in the quarter and I'm assuming that it was just maybe one one big lease that was driving that number higher but maybe you could give some detail on that.
Phil: Yes, Jay this is Phil there's actually two leases and they made up the bulk of the square footage and the new leases.
Phil: One of them was replacing one of the anchors vacated.
Phil: And another one with where we are.
Phil: The tenant who had no options and wanted to stay but we have a good market.
Phil: And the landscape there.
Phil: And those two leases were really like 54,000 square feet out of the 63,000 square feet of new leasing that we signed, and they drove the leasing spread over 80%. And so that sort of aligns to the expectation for the pretty healthy spreads on the return of the boxes. Is that the way to look at it? Yes, it was on the high end of that.
Phil: Signed a new lease with those two leases are really less 54000 square feet out of the 63000 square feet of new leasing that was done and he drove the leasing spread over 80%.
Phil: And so thats sort of aligns to the expectation for the pretty healthy spreads on the re tenant them in the boxes is that the way to look at it yes. It was on the high end.
Unknown Executive: Great.
Unknown Executive: Thanks, guys.
Phil: Great.
Unknown Executive: Thanks, everybody.
Speaker Change: Thanks, guys. Thanks.
Unknown Executive: Thank you.
Phil: Thanks Robert.
Phil: Thank you.
Rob Stevenson: Our next question comes from Rob Stevenson of Janney Montgomery Scott. Your line is open.
Phil: Okay.
Speaker Change: Our next question comes from Rob Stevenson of Janney Montgomery Scott Your line is open.
Rob: Good morning, guys. How much capex are you guys having to put into those bankrupt tenant spaces that you're in the process of releasing or have already signed deals on? Yeah, Rob, it's still, so we have, we included the same slide we did last quarter. It's on page 8 of our investor deck. And in addition, we say, you know, we're rolling those up 40% to 60%. And as I was just discussing with RJ, you know, we were on the high end of that, or actually exceeded the high end of that on the one anchor that we signed this quarter.
Rob Stevenson: Hi, good morning, guys.
Rob Stevenson: How much Capex are you guys, having to put into those bankrupt tenant spaces that you are in the process of releasing or have already signed deals aren't.
Rob Stevenson: Yes.
Rob Stevenson: So we have included the same slide we did last quarter on page eight of our investor deck.
Rob Stevenson: And this is the base we're.
Rob Stevenson: Rolled into about 40% to 60%.
RJ Milligan: I was just discussing with RJ.
Speaker Change: <unk> actually exceeded the high end of that on.
Phil: But we also, in that same slide, disclosed the CapEx, which we say is $9 to $12 million range. If we're on the high end of the CapEx, we expect to be on the high end of the spreads, obviously. And that includes everything landlord work, TIs, commissions, as you know, the full level when we say $9 to $12 on that slide.
RJ Milligan: This quarter all of them.
RJ Milligan: On the same slide disclose the Capex takes $9 million to $12 million range.
Speaker Change: Hey, Brian the high end of the Capex, we expect to be on the high end of the spreads obviously.
RJ Milligan: And that includes everything landlord work.
RJ Milligan: Commissions.
RJ Milligan: Obviously not as well.
Unknown Executive: Okay.
Phil: And then what is reasonable these days in terms of after you sign the lease, getting these guys to be rent paying? Is it a year? Is it nine months? Is it, you know, longer depending on the build out? How should we be thinking about the sort of time frame? If you announced that you signed somebody in one of these spaces today, how long would it generally be before you start seeing, you know, monthly rent? So basically, I would say a safe number is a year. But we are seeing some tenants that are aggressively trying to get into some of these markets, and they're willing to kind of take as is and start really, you know, fairly quick.
RJ Milligan: Okay, and then what is reasonable these days in terms of.
After you sign the lease getting these guys to be rent paying is it a year or is it nine months is it longer depending on the build out how should we be thinking about the sort of timeframe. If you announced that you signed somebody in one of these spaces today, how long would it generally be before you start seeing monthly rent.
RJ Milligan: So basically I would say the same number as in the year, but we are seeing some challenges.
RJ Milligan: Alright aggressively trying to get into some of these markets and they are willing to take.
RJ Milligan: Those are really really quick.
Phil: But you know, in those circumstances, you know, for us, it's better to get a higher rent, perhaps a better credit, and might take longer, more to the duration of a year. Okay.
RJ Milligan: But those are the circumstances for us, it's better to get a higher rent.
RJ Milligan: Perhaps the better credits.
RJ Milligan: It might take longer more to the duration of the year.
RJ Milligan: Okay.
Unknown Executive: Alright, that's helpful.
Rob: And then how are you guys thinking about, you know, you said that you're seeing deals out there. How do you guys think about sort of funding that, at the moment? Is that sale of existing assets? And what are your current thoughts on selling the remaining office property? Is there other sort of ways that you're thinking about funding stuff, you know, with the stock at call it 18 bucks or so? So, you know, that's something that's, you know, objective for us. But other than that, we are looking at perhaps recycling some assets into better opportunity properties that have been stabilized.
RJ Milligan: Alright Thats helpful. And then how are you guys thinking about you said that you are seeing deals out there.
RJ Milligan: How do you guys think about sort of funding that at the moment is that sale of existing assets and what are your current thoughts on selling the remaining office property.
RJ Milligan: Is there other sort of ways youre thinking about funding stuff with the stock at call. It 18 bucks or so yes.
RJ Milligan: It's not a large number so we can handle it.
RJ Milligan: And certainly with.
RJ Milligan: With our liquidity.
RJ Milligan: You touched on the office building.
RJ Milligan: So we have.
RJ Milligan: And that one we are going to look to sell closer to the end of the year, we're very close to finalizing.
RJ Milligan: Our lease there and so that will give us the runway we need to get the best price.
RJ Milligan: So thats something thats objective for us.
Other than that we are looking at perhaps.
RJ Milligan: I believe.
RJ Milligan: Some assets into.
RJ Milligan: Better opportunities properties that have been.
RJ Milligan: They realized.
RJ Milligan: Given that we're seeing capital coming back into the space that we've talked about in the previous quarters.
RJ Milligan: We're seeing pricing at.
RJ Milligan: You are getting very very sporty.
Phil: So there's maybe an opportunity for us to sell a lower cap rate property and recycle into more kind of a higher yielding and opportunistic sort of properties that we've been buying lately. So, so a little bit of combination of things.
RJ Milligan: So there is maybe an opportunity for us to sell a lower cap rate property and recycle it.
RJ Milligan: More.
RJ Milligan: Our yielding munis.
RJ Milligan: Six.
RJ Milligan: Properties that we've been.
RJ Milligan: By lately, so so a little bit of a combination of things.
Phil: Okay, and then last one for me, Phil, you said that the three party cities paid through March and the Joann's paid through April combined, what are those sort of what's a ballpark in terms of what they were paying you on a monthly basis that we need to start deducting, you know, on a relative basis as we finalize second quarter estimates here? So the three party cities combined, when you include... The recovery is close to $900,000 a year.
Speaker Change: Okay, and then last one for me Phil you said that the three party city's paid through March and Joanne is paid through April.
Speaker Change: Bind what are those sort of whats a ballpark in terms of what they were paying on a monthly basis that we need to start deducting on a relative basis as we finalized second quarter estimates here.
Speaker Change: Yes.
Speaker Change: Three party city's combined.
Speaker Change: When you're in Blue.
Speaker Change: The recoveries in all places.
Speaker Change: Places closer to $900 a year.
Phil: and the three Joannes, I'll just give you the two because we, you know, it looks like one is going to be assumed. So out of the two, you know, they were paying actually. about 600,000 a year. Okay, that's helpful.
Speaker Change: Okay.
Speaker Change: Retail and others.
Speaker Change: Because it.
Speaker Change: It looks like one of them.
Speaker Change: Yes.
Speaker Change: So.
Speaker Change: They were paying actually.
Speaker Change: 600000, a year.
Speaker Change: Okay.
Speaker Change: We believe we're there for the full first quarter will be dropping off.
Unknown Executive: Thanks guys and have a good weekend. Thank you.
Speaker Change: All three Joanne paid for April then it will drop off.
Speaker Change: Thank you.
Speaker Change: On the other one.
Speaker Change: Okay.
Speaker Change: Okay. That's helpful. Thanks, guys have a good weekend.
Speaker Change: Thank you.
Speaker Change: Thank you.
Matthew Erdner: And our next question comes from Matthew Erdner of Jones Trading. Your line is open.
Speaker Change: And our next question comes from Matthew <unk> of Jones trading your line is open.
Phil: Good morning, guys. Thanks for taking the question. You know, as we look at the investment guidance, you know, what's going to kind of drive it to that high range, you know, we expect to see some dispositions, if we're going to see about 200 million in investments are kind of up at that higher end. Well, I think that, you know, given that we're seeing strong leasing activity, that that certainly is one component. But as we talked about that, that there is a lag there. And we are seeing starting to see a lot more properties coming to market.
Matthew: Hey, good morning, guys. Thanks for taking the question.
Matthew: As we look at the investment guidance whats going to kind of drive it to that high range, we expect to see some dispositions, if we're going to see about $200 million in investments sorry.
Matthew: At that higher end.
Matthew: Well I think that.
Matthew: Given that we're seeing strong leasing activity.
Matthew: Certainly the one component.
Matthew: We're talking about the data.
Matthew: Lag there.
Matthew: And we are starting to see a lot more properties coming to market.
Phil: And so that's good news is there's more opportunities out there. Bad news is there's a lot more competitors, but we think we're going to find the opportunities where we can connect with something here. So there's a little bit of a combination of things.
Matthew: So there's good news is there's more opportunities out there.
Matthew: Theres a lot more competitors, but.
Matthew: We think we're going to buy.
Matthew: The opportunities, where we can connect with a year or so.
Matthew: It's a little bit of a combination of things.
Phil: And then obviously the recycling would be something that would be more for next year, given the timing. But, you know, certainly that's sort of an easy put, if you will, to have that sort of calculation done to enhance our earnings growth. Yeah, got it. That's helpful. And then, you know, I'm guessing a majority of this would kind of go on the credit facility and you guys don't really have a problem with with taking that up and using the liquidity that you guys have available. Yeah, so we would initially place it on the credit facility. Our bank group is very supportive.
Matthew: Recycling would be something that.
Matthew: It would be more for next year given the timing.
Matthew: Certainly that's sort of.
Matthew: If you will too.
Matthew: To have that sort of.
Matthew: Calculation done too.
Matthew: Our growth earnings growth.
Matthew: Yeah got it that's helpful and then.
Speaker Change: I am guessing a majority of this would kind of go on the credit facility and you guys don't really have a problem with what's taken that up and using the liquidity that you guys have available.
Matthew: So we would initially planned it on the credit facility.
Speaker Change: Our bankers are very supportive.
Phil: And you know, we did $100 million term loan in September, we've had conversations with the bank group, and you know, they're all eager to put more money out to work. And so we could easily turn out a significant portion of our credit facility very quickly, we needed to, to get that liquidity right back. Got it. That's helpful.
Matthew: Did $100 million term loan in September.
Matthew: Conversations with our bank group and they're all eager to put more money out the door and so we could easily turn out a significant portion of our credit facility very quickly if we need to do to get that liquidity right.
Unknown Executive: I appreciate it.
Matthew: Got it that's helpful. I appreciate it.
Unknown Executive: Thank you.
Matthew: Great. Thanks, David.
Matthew: Thank you.
John Massocca: And our next question comes from John Massocca of B Reilly Securities. Your line is open.
Speaker Change: And our next question comes from John Masako of B Riley Securities. Your line is open.
Unknown Executive: Good morning. Thank you all very much.
John Masako: Good morning.
Speaker Change: Good morning.
John: So understanding that you left the investment yield guidance unchanged, have you seen anything since, you know, the tariff announcement change in terms of cap rates, or I was thinking particularly the yields on structured investments, just given some of the widening we've seen in credit spreads and kind of bond markets. Yeah, so it's a little bit of a disconnect between sort of the credit spreads in the bond market, as you mentioned, and where we're seeing sort of traditional core assets and really down the fairway sort of retail shopping centers. That market has not seen a bump whatsoever as far as a higher cap rate.
Speaker Change: So understanding that you left the investment yield guidance unchanged have you seen anything since the tariff announced may change in terms of cap rates or I was thinking particularly.
Speaker Change: The yield on structured investments just given some of the widening we've seen in credit spreads and kind of bond markets.
Speaker Change: Yes, so there's a little bit of a disconnect between sort of the credit spreads in the bond market as you mentioned.
Speaker Change: And where we're seeing sort of.
Traditional.
Speaker Change: Core assets.
Speaker Change: Down the fairway sort of retail shopping centers is that market is not seeing a bump whatsoever as far as a higher cap rate embraces.
John: Cap rates have stayed consistent or have gone lower. It used to be, you know, last year where a property would come to market, brokers would sort of guide to a number, and the pricing of the asset would end up being at a lower number than where the brokers were guiding. Now we're seeing almost an opposite where the brokers are guiding to a number, and the assets are trading for higher than their guidance. And so, you know, the market, the backdrop for the shopping center space is very strong on the investment side, even with everything that's going on in the capital market.
Speaker Change: Good or bad.
Speaker Change: Lower used to be last year were a property would come to market brokers would sort of guide to a number.
Speaker Change: And the pricing.
Speaker Change: The asset would end up being at a lower number than where the brokers are.
Speaker Change: Now we're seeing almost enough said, we're in the broker and youre guiding to a number.
Speaker Change: The assets are trading or higher than our guidance and so.
Speaker Change: So the market backdrop or.
Speaker Change: The shopping center space is very strong and the investment.
Speaker Change: Hi.
Speaker Change: Even with everything going on in the capital markets. So.
John: So, you know, what we're hearing from the debt side as well is that, you know, the debt, property debt has been very supportive from all the credit funds and banks and even CVS. So it's, you know, nothing's been really disrupted in the capital markets on the shopping center side yet. Okay, understood.
Speaker Change: What we're hearing from the debt side as well as that.
Speaker Change: That property has been there.
Speaker Change: Sure.
Speaker Change: From all of our credit bonds and banks.
Speaker Change: Agency MBS so so.
Speaker Change: Very good so nothing has been really disruptive.
Speaker Change: Capital markets on the <unk> side, yes.
John: And then, you know, just because you're pretty active on the acquisition front last year, I mean, how is the kind of non-STEMs or portfolio trending in terms of NOI growth? I mean, it's positive. So, you know, we're not seeing any sort of situations where tenants are rolling down their rents. They're still we're still able to roll them up. So, you know, given especially given where we're buying assets, right? I mean, like for actually, actually, the town center that we just mentioned that in our earnings that you find that, you know, for tenants, it's still a bargain for the rental rent levels that we purchased that on.
Speaker Change: Okay understood and then just because you were pretty active on the acquisition front last year I mean, how is the kind of non same store portfolio trending in <unk>.
Speaker Change: In terms of NOI growth.
Speaker Change: I mean, there is positive so.
Speaker Change: We're not seeing any sort of situations, where tenants are rolling down the arise theres still were still able to roll them up.
Speaker Change: So.
Speaker Change: Given especially given where we are buying assets, Brian domain led correctly.
Speaker Change: Italy sooner how it goes.
Speaker Change: As mentioned in our.
Speaker Change: Our earnings that you're buying that.
Speaker Change: Less than half of our replacement cost.
Speaker Change: <unk> is still a bargain or the rental rent levels that we purchased that on so theyre seeing some really some rent shock.
John: So they're seeing some really some rent shock at other locations. So there's no resistance to pushing those rents up. Given that, you know, they really got a bargain, you know, five years ago, whenever they did their leases. So it's really catching up to, you know, today's markets. Obviously, the macro being that there's not any additional inventory being delivered, and tenants are doing well. And, you know, traffic's up, sales are up. So, you know, that's, that's causing the kind of a good backdrop to raising rent.
Speaker Change: Other locations so.
Speaker Change: No resistance to pushing those rents.
Speaker Change: Given that they are really going to market five years ago. After they did their leases.
Speaker Change: So it's really catching up to state markets.
Speaker Change: And the macro being that there is not.
Speaker Change: Inventory being delivered.
Speaker Change: As soon as they're doing well.
Speaker Change: Traffic is up.
Speaker Change: So they're out so.
Speaker Change: They are kind of getting.
Speaker Change: A good backdrop to raise rents.
John: Okay, if I think of like the acquisitions you did, I believe it was in 3Q of last year. I mean, what's kind of the timeline to mark the market on those? I know it was kind of potentially accelerated by some of these bankruptcies that occurred late last year, but is that kind of something that could happen this year still?
Okay.
Speaker Change: The acquisitions you did I believe it in <unk> of last year, I mean, what's kind of the timeline to mark to market on those I know, there's kind of potentially accelerated by some of these bankruptcies that occurred late last year, but.
Speaker Change: Is that kind of something that could happen. This year still or is that something that's kind of two three years out just kind of broad strokes.
John: Is that something that's kind of, you know, two, three years out, just kind of broad strokes? Yeah, I wouldn't say two or three years out. I would say, you know, I think you're gonna start seeing, especially as we work through these tenants that went through bankruptcy last year and early this year. You know, as we talked about, there's kind of a year lag. So if we're doing leases now, you know, you're talking about early part of next year through the middle part of next year. You know, I think you can kind of see some real movement middle part of next year, for sure.
Speaker Change: Yes, it will take two or three years out I would say I think youre going to start seeing.
Speaker Change: Especially as we work through these tenants that went through bankruptcy last year and early this year.
Speaker Change: Talked about there's kind of a year lag. So if we're doing leases now.
Speaker Change: You talked about early part of next year through the middle part of next year.
Speaker Change: Thank you.
Speaker Change: Obviously, the real movement.
Speaker Change: Our next year for sure.
Unknown Executive: Okay, I appreciate that color.
Unknown Executive: That's it for me. Thank you.
Speaker Change: Okay I appreciate the color that's it for me. Thank you. Thanks. Thank you.
Speaker Change: Okay.
Gaurav Mehta: Our next question comes from Gaurav Mehta of Alliance Global Partners. Your line is open.
Speaker Change: Our next question comes from Gaurav Mehta of Alliance Global Partners. Your line is open.
Gaurav: Thank you. Good morning.
John: I wanted to ask you on the Ashley Plaza acquisition. I think in the prepared remarks, you talked about some opportunity for leasing potential and then mark to market as well. Can you provide some numbers around how much mark to market upside is for that acquisition? Yeah, I would say, you know, basically, we're seeing opportunities that are, you know, call it 10 to 20%, at least, could be north of that. But, you know, given that we bought that, you know, such a kind of high cap rate, and we have a fair amount of vacancy to work with.
Gaurav Mehta: Thank you good morning, I wanted to ask you on the Asti acquisition I think in the prepared remarks, you talked about.
Gaurav Mehta: Some opportunity, where liza Prudential in Denmark to market as well can you provide some some numbers around how much mark to market upside for that acquisition.
Gaurav Mehta: Yes, I would say.
So we're seeing opportunities.
Gaurav Mehta: Call it 10% to 20% at least.
Gaurav Mehta: It could be north of that.
Gaurav Mehta: Given that we bought that such a kind of a high cap rate and we have.
Gaurav Mehta: A fair amount of vacancy to work when we're not even we're not even in light.
John: We're not even, we're not even like, you know, that's not really kind of where we're, you know, concerned about like a mark to market, there's so much, you know, low hanging fruit, just leasing up vacant space and creating more activity at the at the property. I mean, there's there's plenty to do with this property, without worrying about mark to market leasing.
Gaurav Mehta: Okay.
Gaurav Mehta: That's not really kind of where we are.
Gaurav Mehta: Concerned about like the Mark to market. There is so much low hanging fruit.
Gaurav Mehta: Megan space and creating more activity at the property.
Gaurav Mehta: I mean, there's there's plenty to do into the property without worrying about mark to market leasing. So we're really happy with this acquisition actually.
John: So we're, we're really happy with this acquisition actually had some out parcels and some unanchored out parcels that we can sell after 18 months. And so, you know, those, that part of the property would, you know, kind of trade in the low sixes. And so, you know, you can see some recycling there to even enhance the acquisition yield even further getting, you know, pushing that closer to the double digits. So this one is going to keep us well occupied as far as, you know, value enhancing this acquisition in the next 12-24 months.
Gaurav Mehta: Our parcels.
Gaurav Mehta: Third our parcel that we do sell out there.
Gaurav Mehta: And so those that part of the property would trade in the low sixes.
Gaurav Mehta: No.
Gaurav Mehta: You can see some recycling there too.
Gaurav Mehta: Hence the.
Gaurav Mehta: The acquisition yield even further.
Gaurav Mehta: Pushing that closer to the double digits.
Gaurav Mehta: So.
Gaurav Mehta: One is going to bode well.
Gaurav Mehta: Well occupied as far as.
Gaurav Mehta: Value enhancing acquisition.
Gaurav Mehta: Next 12 24 months.
Phil: Okay, second question on the on the releasing CapEx of nine to 12 million. How much of that is already spent and how much do you expect to spend this year? Yeah, good. Yeah, very little that's been spent so far. You know, the tenants generally have to get open and do their work before we start reimbursing them that. So very little that's been spent at this point in time. Okay.
Gaurav Mehta: Okay second question on the on the re leasing capex of $9 million to $12 million how.
Gaurav Mehta: How much of that is already spent and how much.
Gaurav Mehta: Do you expect to spend this year.
Gaurav Mehta: Yes.
Gaurav Mehta: Very little of that has been so far.
Gaurav Mehta: Generally.
Gaurav Mehta: And do their work before we start reimbursing on that.
Gaurav Mehta: So very little of that has been at this point in time.
Unknown Executive: Thank you.
Unknown Executive: That's all I had. Thank you.
Gaurav Mehta: Okay. Thank you that's all I had.
Gaurav Mehta: Thank you.
Craig Kucera: Our next question comes from Craig Kucera of Lucid Capital Markets. Your line is open.
Speaker Change: Our next question comes from Craig Kucera of Lucid capital markets. Your line is open.
John: Yeah, hey, good morning, guys. John, last quarter, I think you mentioned that the pipeline was almost entirely sort of core property investments, and you really weren't seeing much in the way of structured investment opportunities. Is that still the case here heading into midyear? We're starting to see some interesting other opportunities. So, so it has changed a little bit as far as the character of the investment opportunity.
Craig Kucera: Yeah, Hey, good morning, guys.
Craig Kucera: John last quarter, I think you mentioned that the pipeline was almost entirely sort of core property investments and you really werent seeing much in the way it's structured investment opportunities is that still the case here heading into mid year.
Craig Kucera: We're starting to see some interesting other opportunities. So so it has changed a little bit as far as the character of the investment opportunity. So.
John: So we're, we're excited again, on, you know, perhaps being being active in the next kind of three months. Got it. And I think last quarter you sort of handicapped that you thought you might add anywhere from maybe 40 to 50 million for the year. Is that still kind of your thinking? It could be if things go correctly, or our way could be higher than that.
Craig Kucera: Sure.
Speaker Change: Are they excited again.
Speaker Change: And perhaps being being act over the next kind of three months.
Speaker Change: Got it and I think last quarter, you sort of handicap that you thought.
Speaker Change: You might add anywhere from maybe $40 million to $50 million for the year is that still kind of your thinking.
Speaker Change: It could be if things go correctly, our way it could be higher than that.
John: Okay, great. Following up on some of your comments on Ashley Park, are you expecting any meaningful CapEx at the property to achieve some of that low-hanging fruit or is it just You know, a little simpler than that. Yes. No, there's no heavy lift on any kind of renovation there. So it'd be light, light touch, capex. Got it. And you had some shifting assumptions in your sign that open ABR recognition timing, should we expect, you know, kind of a quiet second, maybe even third quarter? Or how should we think about the cadence there? of the Sinado's and coming online, Craig?
Speaker Change: Great.
Speaker Change: Following up on some of your comments on Ashley Park are you expecting any meaningful capex at the property to achieve some of that low hanging fruit or is it just.
Speaker Change: Little simpler than that yes, no there's no heavy lift on.
Speaker Change: Any kind of a renovation there so it'd be like light touch on Capex.
Speaker Change: Capex.
Speaker Change: Got it.
Speaker Change: And you had some shifting assumptions in your sign that open.
Speaker Change: Recognition timing should we expect kind.
Speaker Change: Kind of a quiet second maybe even third quarter.
How should we think about the cadence there.
Speaker Change: That's coming online.
John: Yes. Yeah, so it'll be the second half, and it'll build, so, you know, more so in the third quarter, and then fourth quarter.
Speaker Change: Yes, yes.
Speaker Change: Yes.
Speaker Change: That didn't happen.
Speaker Change: Bill.
So.
Speaker Change: Third quarter.
Speaker Change: The fourth quarter.
Unknown Executive: Okay, great.
Unknown Executive: Appreciate the time, Pat. Thank you.
Speaker Change: Okay, Great appreciate the time guys. Thank.
David: Thank you David.
Unknown Executive: This concludes the question and answer session and today's conference call. Thank you for participating and you may now disconnect.
Speaker Change: Thank you. This concludes the question and answer session and today's conference call. Thank you for participating and you may now disconnect.
David: Okay.
David: Okay.
David: [music].
David: Okay.
David: Okay.
David: [music].