Q1 2025 Curbline Properties Corp Earnings Call

Thank you for standing by my name is Janice and I will be your conference operator today at this time I would like to welcome everyone to the curb wind properties.

Operator: Thank you for standing by.

Operator: My name is Janice, and I will be your conference operator today.

Operator: At this time, I would like to welcome everyone to the Curbline Properties first quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.

First quarter 2025 earnings conference call.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If he would like to ask question. During this time simply press star followed by the number one on your telephone keypad. If he would like to enjoy a question press star. One again. Thank you I would now like to turn the call over.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you.

Operator: I would now like to turn the call over to Stephanie.

Stephanie: Hey, Stephanie.

Stephanie Rice DePerez: Stephanie Rice DePerez, Vice President of Capital Markets, please go ahead. Thank you.

Stephanie right.

Stephanie: Rich Vice President of capital markets Pease go ahead.

Stephanie: Thank you good morning, and welcome to curb land properties first quarter 2025 earnings Conference call. Joining me today are Chief Executive Officer, David Lukes, Chief Financial Officer, Conor Saturday. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at <unk> Dot com.

Stephanie Rice DePerez: Good morning and welcome to Curbline Properties' first quarter 2025 earnings conference call. Joining me today are Chief Executive Officer David Lukes and Chief Financial Officer Conor Fennerty. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at Curbline.com, which are intended to support our prepared remarks during today's call. Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements.

Stephanie: They are intended to support our prepared remarks during today's call. Please be aware that certain of our statements. Today may contain forward looking statements within the meaning of federal Securities laws. These forward looking statements are subject to risks and uncertainties and actual results may differ materially from our forward looking statements additional information maybe found in our earnings press release.

Stephanie Rice DePerez: Additional information may be found in our earnings press release and in our filings at the SEC, including our annual report on Form 10-K. In addition, we'll be discussing non-GAAP financial measures on today's call, including FFO, operating FFO, and same-property net operating income. Descriptions and reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation.

Stephanie: And in our filings with the SEC, including our annual report on Form 10-K. In addition, we'll be discussing non-GAAP financial measures on today's call, including <unk> operating <unk> and.

Speaker Change: Same property net operating income descriptions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in todays quarterly financial supplement and investor presentation. At this time. It is my pleasure to introduce our Chief Executive Officer, David Lukes.

David Lukes: At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes. Good morning and welcome to Curbline Properties first quarter 2025 conference call. I want to start by thanking our incredible team for not only completing our successful spinoff almost seven months ago, but also for completing our second quarter as a standalone public company and achieving results that prove the merits of our unique investment strategy. To that point, we are producing an increasing number of data points that highlight the fact that Curbline is a differentiated growth company capable of generating double digits earnings and cash flow growth well above the REIT average for a number of years to come.

Stephanie: Yeah.

Stephanie: Good morning, and welcome to curb line properties first quarter 2025 conference call.

Stephanie: I want to start by thanking our incredible team for not only completing our successful spin off almost seven months ago, but also for completing our second quarter as a standalone public company and achieving results that prove the merits of our unique investment strategy.

Stephanie: To that point, we are producing an increasing number of data points that highlight the fact that curb line, it's a differentiated growth company.

Stephanie: Level of generating double digit earnings and cash flow growth well above the REIT average for a number of years to come.

David Lukes: This growth is underpinned by the economics of the convenience property type, which is our exclusive focus, the large opportunity set in front of us and our unmatched balance sheet that is aligned with the company's business plan. These ingredients clearly position Curbline to outperform in a variety of macro environments.

Stephanie: This growth is underpinned by the economics of the convenience property type, which is our exclusive focus the large opportunity set in front of us and our unmatched balance sheet that is aligned with the company's business plan. These.

Stephanie: These ingredients clearly positioned curb line to outperform in a variety of macro environments.

David Lukes: I'll start the call by walking through the organic and external driver of Curbline's growth profile and business plan and then conclude with some comments on operations and the balance sheet before turning it over to Conor to talk more specifically about the quarter and the increase in expectations for our 2025 outlook. We began investing in convenience assets now almost seven years ago, recognizing the strong financial performance of the small format asset class, both within the retail sector and the broader real estate industry. Tenant retention was high, credit was strong and diversified, and the CapEx load was extremely low on a relative and absolute basis.

Stephanie: I'll start the call by walking through the organic and external driver of curb lines growth profile and business plan.

Stephanie: And then conclude with some comments on operations and the balance sheet before turning it over to Conor to talk more specifically about the quarter and the increase in expectations for our 2020 outlook.

Stephanie: We began investing in convenience assets now almost seven years ago, recognizing the strong financial performance of the small format asset class.

Stephanie: Within the retail sector and the broader real estate industry.

Stephanie: Retention was high credit was strong and diversified and the Capex load was extremely low on a relative and absolute basis.

David Lukes: Retail and service tenants recognize that a significant portion of consumer spending is not only shopping, but running errands. These quick trips to a local convenience center are highly profitable for the tenants, but need to be, in fact, convenient. In other words, tenants are willing to pay a premium to secure a superior and convenient location that's more profitable. And that is driving demand for our simple and flexible spaces. Demand for the right locations in our property type has produced two noteworthy and differentiated outcomes. First, the capital efficiency of the business is superior to many other retail formats and is especially important as capital becomes more expensive and valuable.

Stephanie: Retail and service tenants recognize that a significant portion of consumer spending is not only shopping but running errands. These quick trips to our local convenience center are highly profitable for the tenants, but need to be in fact convenient.

Stephanie: Other words tenants are willing to pay a premium to secure a superior and convenient location, that's more profitable and that is driving demand for our simple and flexible spaces.

Stephanie: Demand for the right locations and our property type has produced two noteworthy and differentiated outcomes.

Stephanie: First the capital efficiency of the business is superior to many other retail formats and is especially important as capital becomes more expensive and valuable.

David Lukes: Desirable small format space not only has high tenant retention rates driving high renewal rates, but is also inexpensive to prepare for the next tenant in the event that there's vacancy. When compared to larger buildings that are generally purpose built with longer construction periods, the capital efficiency of our simple business is unique. In other words, less capital is needed to generate the same organic growth as the rest of the retail real estate industry and helps generate compounding cash flow growth for Curbline. To that point, in the first quarter, CapEx, as a percentage of NOI for Curbline, was under 5%, which led to almost $25 million of retained cash flow before distributions, despite the fact that NOI was just $28 million.

Stephanie: Desirable small format space not only has high tenant retention rates driving high renewal rates, but it's also inexpensive to prepare for the next tenant in the event that there's vacancy.

Stephanie: When compared to larger buildings that are generally purpose built with longer construction periods. The capital efficiency of our simple business is unique in other words less capital as needed to generate the same organic growth as the rest of the retail real estate industry and helps generate compounding cash flow growth for curb line.

Stephanie: To that point in the first quarter Capex as a percentage of NOI for curb line was under 5%.

Stephanie: Which led to almost $25 million of retained cash flow before distributions. Despite the fact that NOI was just $28 million.

David Lukes: As Curb scales, this retained cash flow will increase, providing a durable source of capital that is outsized relative to the company's asset base, boosting earnings and cash flow. The second outcome is that our space is highly liquid due to the fact that the number of tenants that are willing to take a one to two thousand square foot shop unit is significantly higher than for purpose built large format units. This liquidity allows the property type to keep up with inflation remarkably well, improves tenant diversification, reducing credit risk concentration and fallout, and provides an opportunity to drive rent growth as we seek to maximize rental income given the productivity of the unit size.

Stephanie: As Kurt scales. This retained cash flow will increase providing a durable source of capital that is outsized relative to the company's asset base.

Stephanie: <unk> earnings and cash flow.

Stephanie: The second outcome is that our space is highly liquid due to the fact that the number of tenants that are willing to take a 1% to 2000 square foot shop unit is significantly higher than for purpose built large format units.

Stephanie: This liquidity allows the property type to keep up with inflation remarkably well improves tenant diversification, reducing credit risk concentration in fallout and provides an opportunity to drive rent growth as we seek to maximize rental income given the productivity of the unit size.

David Lukes: The liquidity of our units was highlighted by the depth and the breadth of first quarter leasing volume, with almost 120,000 square feet of new leases and renewals signed, including deals with AT&T, Verizon, Orange Theory, Darden, Five Guys, First Watch, and Sherwin-Williams, among others. In other words, this is a business where we can recapture growing market rents with little landlord capital or downtime, since there is a shortage of high quality convenience real estate in suburban communities and steady demand from a wide range of tenants. All of these factors are evident in Curbline's operating metrics, with our leased rate up 50 basis points sequentially to 96%, among the highest in the sector.

But the liquidity of our units was highlighted by the depth and the breadth of first quarter leasing volume with almost a 120000 square feet of new leases and renewals signed.

Stephanie: Including deals with AT&T, Verizon Orange theory, Darden, five guys first watch and Sherwin Williams among others.

Stephanie: In other words this is a business, where we can recapture growing market rents with little landlord capital or downtime. Since there is a shortage of high quality convenience real estate and suburban communities and steady demand from a wide range of tenants.

Stephanie: All of these factors are evident and curved lines operating metrics with our leased rate up 50 basis points sequentially to 96%.

Stephanie: Among the highest in the sector.

David Lukes: 27% blended straight line leasing spreads, and our expectation that same property NOI growth will average greater than 3% for the three-year period ending in 2026.

Stephanie: 27% blended straight line leasing spreads and our expectation that same property NOI growth will average greater than 3% for the three year period ending in 2026.

David Lukes: Shifting to the investment side, which is the second driver of Curbline's growth. The positive attributes of capital efficiency and strong top line growth that I just described led us to explore the addressable market for convenience properties almost seven years ago. We now own the largest high-quality portfolio of convenience assets in the United States, with over 3.3 million square feet of inventory. Despite that fact, what we own today represents less than 1% of the 950 million square feet of total U.S. inventory, according to ICSC, providing a significant runway to scale and grow Curbline. In fact, the addressable market is so large that we see a long path of growth where we can stay focused on high quality convenience centers without the need to broaden our simple and focused strategy.

Stephanie: Shifting to the investment side, which is the second driver of <unk> growth.

Stephanie: The positive attributes of capital efficiency and strong top line growth that I've. Just described led us to explore the addressable market for convenience properties almost seven years ago.

Stephanie: We now own the largest high quality portfolio of convenience assets in the United States with over $3 3 million square feet of inventory.

Stephanie: Despite that fact, what we own today represents less than 1% of the 950 million square feet of total U S inventory according to ICSC, providing.

Stephanie: A significant runway to scale and grow <unk>.

Stephanie: In fact, the addressable market is so large that we see a long path of growth, where we can stay focused on high quality convenient centers without the need to broaden our simple and focused strategy not.

David Lukes: Not every asset we look at will be a fit for Curbline, but we believe there is a significant opportunity set of properties that share common characteristics with our existing portfolio, including excellent visibility, access, and compelling economics, highlighted by a broad available tenant universe and limited capital needs. And importantly, that deal flow is less reliant on the health or status of the financing or capital markets, given a significant percentage of volume is driven by life events with demonstrated availability and liquidity through past cycles. For context, each week our team is reviewing hundreds of millions of dollars worth of deals.

Stephanie: Not every asset we look at will be a fit for curb line.

Stephanie: But bill you believe there is a significant opportunity set of properties that share common characteristics with our existing portfolio, including excellent visibility access and compelling economics highlighted by a broad available tenant universe and limited capital needs.

Stephanie: And importantly that deal flow is less reliant on the health status of the financing or capital markets. Given a significant percentage of volume is driven by life events with demonstrated availability and liquidity through past cycles.

Stephanie: For context, each week, our team is reviewing hundreds of millions of dollars worth of deals.

David Lukes: While those weekly volumes may rise and fall, the sheer size of the addressable market gives us confidence that there will always be a steady subset of opportunities that do indeed fit our investment criteria. To that point, our original guidance included $500 million of convenience acquisitions for the year, which equates to around $125 million per quarter. We've significantly exceeded that pace with over $475 million of acquisitions in the last nine months, and based on our current pipeline, this momentum is likely to continue in the near term. Specifically, our pipeline today is just over $500 million. This is on top of assets we have closed year to date and includes properties under contract or awarded with an executed LOI.

Stephanie: While those weekly volumes may rise and fall the sheer size of the addressable market gives us confidence that there will always be a steady subset of opportunities that do indeed fit our investment criteria.

Stephanie: To that point, our original guidance included $500 million of convenience acquisitions for the year, which equates to around $125 million per quarter.

Stephanie: We have significantly exceeded that pace with over $475 million of acquisitions in the last nine months and based on our current pipeline. This momentum is likely to continue in the near term.

Stephanie: Specifically our pipeline today is just over $500 million.

Stephanie: This is on top of assets, we have closed year to date and includes properties under contract or awarded with an executed LOI.

David Lukes: The majority of these assets are expected to close late in the second quarter or early third quarter. The acceleration in activity is a function of our marketing efforts as we have seen a larger number of brokers and individual sellers proactively engage with us, a change from the pre-spend environment. This situation allows us to work directly with sellers on a timeline and a structure that works best for both parties and has increased the visibility of our future pipeline of investment.

Stephanie: The majority of these assets are expected to close late in the second quarter or early third quarter.

Stephanie: The acceleration in activity is a function of our marketing efforts as we have seen a larger number of brokers and individual sellers proactively engage with us.

Stephanie: A change from the pre spend environment.

Stephanie: The situation allows us to work directly with sellers on a timeline and a structure that works best for both parties and has increased the visibility of our future pipeline of investments.

David Lukes: That was a key driver of the first quarter, where we acquired 11 properties for just over $124 million, including our largest portfolio to date, a six-property portfolio in Jacksonville, Florida. Assets continue to be concentrated in the affluent markets that Curbline operates, and already including Phoenix, Houston, and Philadelphia. However, like Jacksonville, we continue to make acquisitions in new wealthy submarkets that share the key characteristics we seek, including our first property in Seattle, which we acquired subsequent to quarter end, and where we hope to scale long term. Average household incomes for the first quarter investments were nearly $110,000 and a weighted average lease rate of over 95%, highlighting our focus on acquiring properties where renewals and lease bumps drive growth without significant capex.

Stephanie: That was a key driver of the first quarter, where we acquired 11 properties for just over $124 million, including our largest portfolio to date, a six property portfolio in Jacksonville, Florida.

Stephanie: Assets continue to be concentrated in the affluent markets that <unk> operates in already including Phoenix Houston, Philadelphia, However, like Jacksonville, we continue to make acquisitions and new wealthy submarkets that share the key characteristics, we seek including our first property in Seattle, which were acquired subsequent to quarter end.

Stephanie: And where we hope to scale long term.

Stephanie: Average household incomes for the first quarter investments were nearly $110000 and a weighted average lease rate of over 95% highlighting our focus on acquiring properties were renewals and lease bumps drive growth without significant capex.

David Lukes: Moving to operations, as I previously mentioned, overall demand for available space remains very strong, driven by a mixture of existing retailers and service tenants, expanding into key suburban markets, along with new concepts competing for that same space. Activity remains wide in terms of tenants seeking to lease space and includes numerous, primarily national service tenants, banks, fitness operators, and quick service restaurants. We have not seen any changes since the start of April in terms of leasing appetite, but do recognize that changes in macroeconomic scenarios will likely have an impact on the type and the demand for space.

Stephanie: Moving to operations as I previously mentioned overall demand for available space remains very strong driven by a mixture of existing retailers and service tenants expanding into key suburban markets, along with new concepts competing for that same space.

Stephanie: Activity remains wide in terms of tenants seeking to lease space and includes numerous primarily national service tenants banks fitness operators and quick service restaurants.

Stephanie: We have not seen any changes since the start of April in terms of leasing appetite, but do recognize that changes in macroeconomic scenarios will likely have an impact on the tight and the demand for space.

David Lukes: However, the value proposition of small format retail with close proximity to wealthy suburban customers remains attractive to a very wide variety of tenants, especially when considering that those businesses pay a relatively small annual occupancy cost due to the small size of the retail suite to have convenient access to those valuable customers. The economics of our business, a high return on leasing capital and the widest pool of tenants to work with, along with significant national exposure, position Curbline for absolute and relative success throughout a cycle.

Stephanie: However, the value proposition of small format retail with close proximity to wealthy suburban customers remains attractive to a very wide variety of tenants, especially when considering that those businesses pay a relatively small annual occupancy cost due to the small size of the retail suite to have convenient access to those.

Stephanie: Valuable customers.

Stephanie: The economics of our business a high return on leasing capital and the widest pool of tenants to work with along with significant national exposure position curb line for absolute and relative success throughout a cycle.

David Lukes: Before turning the call over to Conor, I want to highlight one of the key differentiating aspects of the Curbline spinoff, which is our balance sheet. The net cash position at quarter end matches the business plan with almost $600 million of cash and $1 billion of liquidity at quarter end.

Stephanie: Before turning the call over to Conor I want to highlight one of the key differentiating aspects of the <unk> spin off which is our balance sheet.

Stephanie: Our net cash position at quarter end matches, the business plan with almost $600 million of cash and $1 billion of liquidity at quarter end.

David Lukes: I couldn't be more optimistic about the opportunity ahead for Curbline and our ability to generate compelling stakeholder value.

Stephanie: Couldn't be more optimistic about the opportunity ahead for <unk> and our ability to generate compelling stakeholder value.

Conor Fennerty: And with that, I'll turn it over to Conor. Thanks, David. I'll start with first quarter earnings and operations before shifting to the company's 2025 guidance raise and concluding with the balance sheet. First quarter results were ahead of budget due to higher than forecast occupancy, along with higher lease termination and other income. NOI was up almost 9% sequentially, driven by organic growth along with acquisition. Outside of the quarterly operational outperformance, there were no other material surprises or call-outs for the quarter, highlighting the simplicity of the Curbline Income Statement and Business Plan. In terms of operating metrics, as David called out, leasing volume in aggregate was extremely strong, even after adjusting to the growth in the portfolio.

Stephanie: And with that I'll turn it over to Conor. Thanks.

Conor Saturday: Thanks, David.

Conor Saturday: I'll start with first quarter earnings and operations before shifting to the company's 2025 guidance raise and concluding with the balance sheet.

Conor Saturday: First quarter results were ahead of budget due to higher than forecast occupancy along with higher lease termination and other income.

Conor Saturday: NOI was up almost 9% sequentially driven by organic growth along with acquisitions.

Conor Saturday: Outside of the quarterly operational outperformance there were no other material surprises or callouts for the quarter.

Conor Saturday: Highlighting the simplicity of the <unk> income statement and business plan.

Conor Saturday: In terms of operating metrics as David called out leasing volume in aggregate was extremely strong even after adjusting for the growth in the portfolio.

Conor Fennerty: And given the current pipeline, we expect another strong quarter in 2Q. However, as I noted last quarter, with this small but growing denominator, operating metrics will remain volatile and be heavily impacted by acquisition. That said, overall leasing activity remains elevated, and we remain encouraged by the depth of demand for space, which we expect to translate into trailing 12-month spreads over the course of the year, consistent with 2024. It is important to note that Curb's leasing spreads include all units, including those that have been vacant for more than 12 months, with the only exclusions related to first-generation space and units vacant at the time of acquisition.

Conor Saturday: And given the current pipeline, we expect another strong quarter in <unk>.

Conor Saturday: However, as I noted last quarter with a small but growing denominator.

Conor Saturday: Operating metrics will remain volatile and be heavily impacted by acquisitions.

Conor Saturday: That said overall leasing activity remains elevated and we remain encouraged by the depth of demand for space, which we expect to translate into trailing 12 month spreads over the course of the year consistent with 2024.

Conor Saturday: It is important to note. The curbs leasing spreads include all units, including those that had been vacant for more than 12 months with the only exclusions related to first generation space.

Conor Saturday: And units Bacon at the time of acquisition.

Same property NOI was up two 5% for the quarter driven in part by better than forecast occupancy.

Conor Fennerty: Same property NOI was up 2.5% for the quarter, driven in part by better than forecast. Importantly, this growth was generated by limited capital expenditures, with first quarter CapEx as a percentage of NOI of just under 5%.

Conor Saturday: <unk>. This growth was generated by limited capital expenditures with first quarter Capex as a percentage of NOI of just under 5%.

Conor Fennerty: Moving to our outlook for 2025, we are raising OFFO guidance to a range between $0.99 and $1.02 per share. The increase is driven by better-than-projected operations. along with the pacing and visibility on acquisitions that David mentioned, with the top end of the range assuming that deal volume exceeds our initial annual forecast, consistent with the pipeline that David outlined. Underpinning the midpoint of the range is approximately $500 million of four-year investments funded roughly 50-50 with debt and cash on hand. a 4% return on cash with interest income declining over the course of the year as cash is invested.

Conor Saturday: Moving to our outlook for 2025.

Conor Saturday: We are raising <unk> guidance to a range between 99.

Conor Saturday: And $1 two per share.

Conor Saturday: The increase is driven by better than projected operations, along with the pacing and visibility on acquisitions that David mentioned with the top end of the range assuming that deal volume exceeds our initial annual forecast consistent with the pipeline that David outlined.

Conor Saturday: Underpinning the midpoint of the range is approximately $500 million of full year investments funded roughly 50 50 with debt and cash on hand.

Conor Saturday: A 4% return on cash with interest income declining over the course of the year as cash is invested.

Conor Fennerty: and G&A of roughly $32 million, which includes fees paid to site centers as part of the Shared Services Agreement. You will note that in the first quarter of 2025, we recorded a gross up of $630,000 of additional non-cast G&A expense. which was offset by $630,000 of non-cash other income. This gross up, which is a function of the shared service agreement, nets to zero net income, will continue as long as the agreement is in place and is excluded from the aforementioned G&A target. In terms of same property NOI, we continue to forecast growth of approximately 2.8% at the midpoint in 2025, but there are a few important things to call out.

Conor Saturday: And G&A of roughly $32 million, which includes fees paid to site centers as part of the shared services agreement.

Conor Saturday: You will note that in the first quarter of 2025, we recorded a gross up of $630000 of additional noncash G&A expense.

Conor Saturday: Which was offset by $630000 of noncash other income.

Conor Saturday: This gross up which is a function of the shared services agreement nets to zero net income.

Conor Saturday: We will continue as long as the agreement is in place and is excluded from the aforementioned G&A target.

Conor Saturday: In terms of same property NOI.

Conor Saturday: We continue to forecast growth of approximately two 8% at the midpoint in 2025, but there are a few important things to call out.

Conor Fennerty: Similar to our leasing spreads, the pool is growing, but small, and is copping off of 2024's outperformance. Additionally, Curbline's property pool is set annually. So it includes only assets owned for at least 12 months as of December 31st, 2024. This results in a larger, non-same-property pool, which is roughly a third of first quarter NOI, and is growing at a faster rate. To highlight this point, the occupancy for the entire portfolio was 93.5% at quarter end versus the same property pool of 94.5%. We continue to expect this relative gap to compress in the first half of the year, delivering significant organic growth.

Conor Saturday: Similar to our leasing spreads the pool is growing but small and is comping off of 'twenty 'twenty four is outperformance.

Conor Saturday: Additionally, turbines RP pool to set annually.

So it includes only assets owned for at least 12 months as of December 31 2024.

Conor Saturday: This results in a larger non same property pool, which was roughly a third of first quarter NOI and is growing at a faster rate.

Conor Saturday: To highlight this point.

Conor Saturday: The occupancy for the entire portfolio was 93, 5% at quarter end.

Conor Saturday: Versus the same property pool of 94, 5%.

Conor Saturday: We continue to expect this relative gap to compress in the first half of the year delivering significant organic growth.

Conor Fennerty: Additional details on 2025 guidance and expectations can be found on page 9 of the earnings slide.

Additional details on 2025 guidance and expectations can be found on page nine of the earnings slides.

Conor Fennerty: In terms of moving pieces between the first and the second quarter. Interest expense is set to increase to about $2 million in the second quarter and termination fees are expected to decline to fourth quarter level. These two factors.

Conor Saturday: In terms of moving pieces between the first and the second quarter.

Conor Saturday: Interest expense is set to increase to about $2 million in second quarter and termination fees are expected to decline in the fourth quarter levels.

Conor Saturday: These two factors.

Conor Saturday: G <unk>.

Conor Fennerty: Curbline was spun off with a unique capital structure that positions the company to execute on its business plan and differentiates Curb from the largely private buyer universe acquiring communist properties. Specifically, at quarter end, the company had $594 million of cash on hand and full availability under its $400 million revolving credit facility. We did fund the $100 million term loan at the end of the first quarter, providing additional liquidity and remaining in net cash.

Conor Saturday: <unk> was spun off with a unique capital structure that positions the company to execute on its business plan and differentiates curve from a largely private buyer universe acquiring convenience properties.

Conor Saturday: Specifically our quarter end the company had $594 million of cash on hand.

And full availability under our $400 million revolving credit facility.

Conor Saturday: We did fund the $100 million term loan at the end of the first quarter, providing additional liquidity and remain in a net cash position.

Conor Fennerty: The execution of the company's business plan, to David's point, is expected to lead to significant earnings and cash flow growth for a number of years, well in excess of the readout rate.

Conor Saturday: The execution of the company's business plan to David's point is expected to lead to significant earnings and cash flow growth for a number of years well in excess of the REIT average.

David Lukes: With that, I'll turn it back to David. Thank you, Conor.

Speaker Change: That I will turn it back to David.

Conor Saturday: Thank you Connor operator, we're available for questions.

Operator: Operator, we're available for questions. At this time, I would like to remind everyone in order to ask questions, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.

Speaker Change: At this time I would like to remind everyone in order to ask question Press Star then the number one on your telephone keypad, we will pause for just a moment to compile the Q&A roster.

Craig Mailman: Your first question comes from Craig Mailman with Citi. Please go ahead.

Craig Mailman: Your first question comes from Craig Mailman, Woods City. Please go ahead. Hey, good morning. Just on the acquisitions, congrats on getting that big of a pipeline here. It sounds like it'll largely close by the end of the third quarter. You have clearly enough cash to do this in line capacity.

Speaker Change: Hey, good morning.

Craig Mailman: Just on the acquisitions.

Craig Mailman: Congrats on getting that big of a pipeline here and it sounds like.

Craig Mailman: It will.

Craig Mailman: Largely closed by the end of the third quarter.

Speaker Change: You have clearly enough cash to do this in line capacity how are you guys thinking though about.

Conor Fennerty: How are you guys thinking, though, about, you know, rebuilding the war chest here? I think in the past you said you couldn't put an ATM in place around October. Just kind of thoughts on kind of funding sources, that cost of capital versus what you're seeing from a yield perspective in the market. Hey, Craig.

Craig Mailman: Rebuilding.

Craig Mailman: The war chest here I think in the past you said you can put an ATM in place around October just kind of thoughts on.

Craig Mailman: Funding sources that cost of capital versus what Youre seeing from a yield perspective.

Craig Mailman: In the market.

Greg: Hey, Greg Koreans corner I'll start with avail.

Conor Fennerty: Good morning, it's Conor. I'll start with available liquidity. As I mentioned in my prepared remarks, we expect to fund investments over the course of the year 50-50 with cash and debt. And the good news is we're entering the year with a position of balance sheet strength, net cash position, completely unencumbered pool. So we're looking at a variety of sources, the bank market, the bond market, the insurance market. And it's fair to assume we've got advanced stages in all three kind of paths. And we'll pick the best approach as we get later in the year. But again, with that kind of balance sheet strength and the available cash on hand, we've got time, we've got optionality, and we'll take the best course of action.

Greg: Available liquidity as I mentioned in my prepared remarks, we expect to fund investments over the course of the year of 50, 50 with cash and debt.

Greg: And the good news is we're entering the year with a position of balance sheet strength right net cash position.

Greg: <unk> unencumbered pool, so we're looking at a variety of sources.

Greg: Hank market as the bond market the insurance market.

Greg: And it's fair to assume we've got advanced stages in all three kind of.

Greg: Paths and we'll pick the best of the <unk>.

Greg: Best approach as we get later in the year, but.

Greg: Again without that kind of balance sheet strength and the available cash on hand, we got time, we've got Optionality and we will take the best course of action.

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

Ronald Kamdem: Your next question comes from the line of Ronald Kamdem, Morgan Stanley. Please go ahead. Back to sort of the acquisition pipeline, you know, obviously this quarter there was a larger deal in there, maybe a little bit more call on the pipeline. Is it granular? Are there some big deals in there? And just sort of what kind of cap rates are we thinking?

Ronald Camden: Ronald Camden Morgan Stanley. Please go ahead.

Speaker Change: Active sort of the acquisition pipeline. Obviously this quarter there was a larger deal and there may be a little bit more color on the pipeline as it granular or are there some big deals in there and just what kind of cap rates are we thinking.

David Lukes: Hey Ron, it's David. Would you mind repeating that? We just lost the first couple of seconds. Sorry about that.

Speaker Change: Hey, Ron its David would you mind repeating that we just lost the first couple of seconds.

Speaker Change: Sorry about that.

Ronald Kamdem: So the question was on the acquisition pipeline. You had a larger deal than 1Q25. So just wondering if there are other larger deals in the pipeline and any thoughts on the cap rates that you're thinking.

Speaker Change: So the question was on the acquisition pipeline.

Speaker Change: <unk> had a larger deal and <unk> 25. So just wondering if there are other larger deals in the pipeline had any thoughts on the cap rate that youre thinking.

David Lukes: Yeah, sure, Ron. And good morning. The, the amount of deal flow we look at is, you know, as we mentioned in our remarks, pretty substantial, and the vast majority of it are single asset sellers. There are, you know, typically regional owners that may own, you know, two, three, four, five, six assets at a time. But in general, I would say our pipeline is usually going to be made up mostly of single asset purchases and a handful of, you know, two or three packs that that seems to be the case. It may be over time that we find a portfolio, you know, that's a little bit larger, but this asset class tends to be very, very granular.

Speaker Change: Yes, sure Ron and good morning.

Speaker Change: The amount of deal flow, we look at is as.

Speaker Change: We mentioned in our remarks pretty substantial and the vast majority of it are single asset sellers.

Speaker Change: There are.

Speaker Change: Typically a regional owners that may 123456 assets at a time.

Speaker Change: But in general I would say our pipeline is usually going to be made up mostly of single asset purchases.

Speaker Change: Handful of two or three packs that seems to be the cadence.

Speaker Change: It may be and over time that we find the portfolio.

Speaker Change: It's a little bit larger, but this asset class tends to be very very granular.

David Lukes: In terms of cap rates, we're still blending to around a six and a quarter. If you look at the past trailing couple of quarters, that can get pretty lumpy. When you get into individual assets, it can be in the mid fives and it can be upwards of seven, depending on whether there's vacancy and what the lease duration looks like on the rent roll, the amount of credit. But in general, we're still blending to a low six.

Speaker Change: In terms of cap rates.

Speaker Change: We're still blending to around a six in the quarter. If you look at the past trailing couple of quarters.

Speaker Change: That can get pretty lumpy when you get into beta individual assets. It can be in the mid fives and it can be upwards of seven depending on whether there is vacancy in what the what.

Speaker Change: What the lease duration looks like on a rent roll of the amount of credit.

Speaker Change: But in general we're still blending to a low sex.

David Lukes: And then if I could just follow up just quickly on just a tariff question, you know, obviously things have changed since April 2nd. Just curious if that changes your thinking on underwriting, you know, what sectors you want more exposure to, less exposure to, just how does that business plan change, you know, since April 2nd? Thanks. Yeah. I would say that one of the non-changes is the fact that the vast majority of our tenants don't carry inventory. And so if you go back to what we've mentioned in our prepared remarks where shopping centers are for shopping, and that usually involves stores that have inventory, large discounters or large map merchants, this business is more of a running errands business.

Speaker Change: And then if I could just follow up just quickly just a tariff question.

Speaker Change: Obviously things have changed since April <unk>, just curious if that changes your thinking on underwriting what sectors you want more exposure to less exposure to just how does that business plan change since April 2nd Bank.

Speaker Change: Yes.

Speaker Change: I would say that the one of the non changes is the fact that the vast majority of our tenants don't carry inventory.

Speaker Change: And so if you go back to what we've mentioned in our prepared remarks were.

Speaker Change: Shopping centers are for shopping and that usually involves stores that have inventory large discounters or large mass merchants. This business is more of a running aaron's business and there are some tenants that have inventory, but the vast majority of service tenants.

David Lukes: And there are some tenants that have inventory, but the vast majority are service tenants. Some of the ones we mentioned include banks and business operators, salons, UPS stores, Verizon, wireless. Those are the types of tenants that occupy these spaces because they want to have that quick access to convenience for running errands for the customer. So in general, I would say that the idea that tariffs are causing an increase in inventory costs probably has a lesser impact.

Speaker Change: Some of the ones. We mentioned include banks in the fitness operators.

Speaker Change: One is the EPS stores Verizon wireless those are the types of tenants that occupy the space because they want to have that quick access to convenient for running errands for the customer.

Speaker Change: In general I would say that.

Speaker Change: The idea that tariffs are causing an increase in inventory cost probably has a lesser impact.

David Lukes: I think a prescient question is your other one, which is, does it change our underwriting? And I would say that we recognize that both debt and equity seem to be more expensive. And therefore we ought to respond by making sure that the investments we do make exceed that and make up for that cost of capital. That can show up in cap rates where in some cases we might be less willing to pay a lower cap rate. On the other hand, market rents are still growing and the suburban customer is still running errands. And so in many cases we're seeing larger market markets on the in-place versus market rent, and that factors into the IRR as well.

Speaker Change: I think our oppression question as your other one which is does it change our underwriting.

Speaker Change: I would say that.

Speaker Change: We recognize that both debt and equity seem to be more expensive.

Speaker Change: And therefore, we ought to respond by making sure that the investments we do make.

Speaker Change: Exceed that.

Speaker Change: Makeup for that cost of capital.

That can show up and cap rates, where in some cases, we might be less willing to pay a lower cap rate on the other hand market rents are still growing and the suburban customer is still running errands and so in many cases, we're seeing.

Speaker Change: Larger mark to market on the in place versus market rent.

Speaker Change: And that factors into the IRR as well.

Speaker Change: Sure.

David Lukes: Thanks so much.

Speaker Change: Thanks, so much.

Speaker Change: Ron.

Speaker Change: Your next question comes from the line of Todd Thomas with Keybanc Capital markets. Please go ahead.

Todd Thomas: Your next question comes from the line of Todd Thomas with KeyBank Capital Markets. Please go ahead. Hi, good morning. I just wanted to follow up a little bit on the deal flow and the $500 million under contract and LOI pipeline. Are you able to break out the pipeline between what's under agreement versus LOI?

Todd Thomas: Hi, good morning.

Todd Thomas: I just wanted to follow up a little bit on the deal flow in the $500 million under contract and LOI pipeline are you able to break out.

Todd Thomas: The pipeline between what's under agreement versus LOI and can you share how the deal environment.

Todd Thomas: And can you share how the deal environment, you know, just in general has changed, if at all, since the start of April, whether you're seeing any change at all in conversations with sellers in terms of pricing or willingness to transact, just given the market volatility more recently? Sure, Todd. I'll refrain from kind of breaking out the under contract versus LOI. And that's primarily for one reason, that is, even if a property is under contract, there's usually an out for diligence. And in this business, because a lot of the assets are owned by smaller individual families, diligence is a real, it's a real workflow for us.

Todd Thomas: Just in general has changed if at all since the start of April whether youre seeing any change at all in conversations with suppliers.

Todd Thomas: In terms of pricing or willingness to transact just given the market volatility more recently.

Speaker Change: Sure Todd.

Todd Thomas: I'll refrain from kind of breaking out the under contract versus LOI and Thats, primarily for one reason and that is even if a property is under contract. There is usually an out for diligence.

Todd Thomas: And in this business because a lot of the assets are owned by smaller individual families.

Todd Thomas: Diligence is a real.

Todd Thomas: It's a real workflow for us there is.

David Lukes: There's a lot to make sure that what we're buying is institutional quality. And so I think that, you know, as we said on our last earnings call, a pipeline is always going to be fairly high. And there are some properties, you know, during that time that just don't make it through the diligence process. But in general, I would say our closing rate is extremely high.

Todd Thomas: A lot to make sure that what we're buying is institutional quality.

Todd Thomas: And so I think that as we said on our last earnings call a pipeline is always going to be.

Todd Thomas: Fairly high and there are some properties.

Todd Thomas: That time that just don't make it through the diligence process.

Todd Thomas: But in general I would say our closing rate is extremely high.

David Lukes: The second half of your question, Ben, just lost. Just whether or not, you know, there's any sort of change at all in sellers, you know, willingness to transact or, you know, any pricing talk, you know, as you're kind of working through additional deals moving forward. Yeah. Willingness to sell, it's been a pretty firm no, and that is because almost everything we look at as a life event. Someone is at that point in life or beyond where they need to sell or would like to sell, and therefore, they're not really timing the market as much as they are timing their point in life as to when they want to sell.

Todd Thomas: The second half of your question then just loss.

Just whether or not there.

Todd Thomas: <unk> sort of change at all in and sellers' willingness to transact or any pricing.

Todd Thomas: Talk as Youre kind of working through additional deals moving forward.

Speaker Change: Yeah willingness to sell its been a pretty firm no and that is because.

Todd Thomas: Almost everything we look at it a life event.

Todd Thomas: Someone is at that point in life or beyond.

Todd Thomas: They need to sell or would like to sell and therefore, theyre not really timing the market as much as they are timing there a point in life is to whether they want to sell.

Todd Thomas: So the inventory seems to be fairly.

David Lukes: So the inventory seems to be fairly consistent. The pricing conversations have everything to do with who else is in the bidding tent. And if bidding tents stay large, then I think some of those pricing conversations may not change. There has been a lot more institutional interest in the asset class. We have seen more folks getting involved in the asset class, and so competition is still there. So there have been recent conversations in the last month about what is the right valuation, but I wouldn't say it's been long enough to make any change.

Todd Thomas: Consistent.

Todd Thomas: Pricing conversations have everything to do with who else is in the bidding tent.

Todd Thomas: Bidding tents stay large then.

Todd Thomas: I think some of those pricing conversations may not changed.

Todd Thomas: There has been a lot more institutional interest in the asset class, we have seen more folks getting involved in the asset class and so competition is still there. So there have been recent conversations in the last month.

Todd Thomas: About what is the right valuation, but I wouldn't say, it's been long enough to make any changes.

Todd Thomas: Okay, that's helpful.

Speaker Change: Okay. That's helpful. If I could just ask a quick clarification.

Conor Fennerty: Conor, if I could just ask a quick clarification. You mentioned, I think, that same-store growth in the quarter was driven primarily by better-than-expected occupancy, but same-store occupancy was down sequentially 60 basis points for the commenced rate, 80 basis points for the lease rate. Was that due to seasonality and still just better than what you had anticipated, or was that attributable to the change in the same-store pool or something else?

Speaker Change: You mentioned I think that same store growth in the quarter was driven primarily by better than expected occupancy but.

Speaker Change: Same store occupancy was down sequentially 60 basis points for the commence rate 80 basis points from a lease rate was that due to seasonality and installed just better than than what you had anticipated or was that attributable to the change in the same store pool or something else.

Conor Fennerty: No, it's a good question. So higher than expected occupancy, meaning we renewed a couple of tenants over the course of the quarter that we did not expect to or had budgeted to renew. So the problem is it's a small pool. A couple of tenants renewing is a big deal in terms of percentages. And so it was probably, you know, 10, 20 base point pickup over the course of the year in that regard. In terms of the change quarter over quarter, you are correct. We did have a couple of tenants we did not renew. We had a couple of terminations, obviously higher termination income this quarter as well.

Speaker Change: No it's not it's a good question so high.

Speaker Change: A higher than expected occupancy, meaning we renewed a couple of tenants over the course of the quarter that we did not expect to or AD budget to renew so the problem is it's a small pool a couple of tenants renewing is a big deal in terms of percentages and so it was probably 10 20 basis point pickup over.

Speaker Change: Over the course of the year in that regard in terms of the change quarter over quarter. You are correct. We did have a couple of tenants. We did not renew we had a couple of terminations, obviously higher termination income this quarter as well so I would attribute to a lot of little things, but no.

Conor Fennerty: So I would attribute to a lot of little things, but no, no kind of one answer, I could say that that was driving the quarter over quarter change. Okay, got it. Thank you.

Speaker Change: No kind of one answer I can say that that was driving the quarter over quarter change.

Speaker Change: Okay got it thank you.

Speaker Change: Youre welcome.

Speaker Change: Your next question comes from the line of Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander Goldfarb: Your next question comes from the line of Alexander Goldfarb with Piper Sandler. Please go ahead. Hey, good morning down there. Just a few questions. First, David, just going back to the acquisitions, I know it's been asked, but if we think about volatile capital markets, there's a bid-ask spread that in normal times is always an art to arrive to, and certainly in a disrupted time, especially with increased capital costs or for sellers, their reinvestment options, everything's up in the air. You guys seem pretty confident that your ability to close the existing pipeline and find new deals to put under contract remains pretty much unchanged, and I'm just sort of curious, just given all the disruption we've seen, how you guys are still that confident?

Speaker Change: Okay.

Alexander Goldfarb: Good morning, Good morning down there just a few questions first David just going back to the acquisitions.

Alexander Goldfarb: I know this has been asked but if we think about volatile capital markets. There's a bid ask spread that in normal times as always.

Alexander Goldfarb: And art to arrive to and certainly in a disruptive time, especially with increased capital cost or for sellers. Their reinvestment options everything is up in the air you guys seem pretty confident that your ability to close the existing pipeline and find new deals to put under contract remains pretty much unchanged.

Alexander Goldfarb: And I'm just sort of curious just given all the disruption we've seen how you guys are that are still that confident.

David Lukes: Yeah.

Alexander Goldfarb: Yes.

David Lukes: Well, I guess two points, and good morning, Alex. Two points on the deal flow. One I already mentioned. it's not like elephant hunting where, you know, you're waiting and waiting for some very large property to come to market and a sophisticated institution is deciding when they list that. And as you know, we've sold a lot in the last couple of years. We're pretty knowledgeable that there are times to sell a large asset and there are times not to sell a large asset. But if you look, you know, if we look on our supplemental on page 16 and you kind of look at the volume of what we've been buying the past couple of quarters, the average ticket size is in the 10 to $15 million range.

Alexander Goldfarb: I guess two points and good morning.

Alexander Goldfarb: Two points on the deal flow.

Alexander Goldfarb: Already mentioned that.

Alexander Goldfarb: Not like elephant hunting, where youre waiting and waiting for some very large property to come to market in this.

Alexander Goldfarb: As stated institution is deciding when they list that.

Alexander Goldfarb: And as you know we've sold a lot in the last couple of years, we're pretty knowledgeable that there are times to sell a large asset and there are times not to sell a large asset, but if you look.

Alexander Goldfarb: If you look on our supplemental.

Alexander Goldfarb: On page 16, and you kind of look at the volume that we've been buying in the past couple of quarters. The average ticket size of somewhere in the $10 million to $15 million range. So the smaller properties owned by local investors.

David Lukes: And so these smaller properties owned by local investors, you know, given the fact that there's often a change in, you know, a death in the family, there's a change in the allocation of their resources, generational changes in desire for ownership. There seems to be much less focus on when is the right time to sell relative to capital markets and more to do with personal decisions. So, I do think the inventory is going to continue to be there. I think the important question you ask is about price discovery and whether the bid-ask spread is widening or not.

Alexander Goldfarb: Given the fact that Theres, often a change and death in the family. There is a change in the allocation of the resources Jenny.

Alexander Goldfarb: Generation all changes in desire for ownership and there seems to be much less focus on when is the right time to sell relative to the capital markets and more to do with personal decisions.

Alexander Goldfarb: So I do think the inventory is going to continue to be there.

Alexander Goldfarb: I think the important question you asked is about price discovery and and whether the bid ask spread is widening or not I would certainly assume that if the economy starts to go.

David Lukes: I would certainly assume that if the economy starts to go into a negative position, you would see fundamentals change on occupancy levels or demand for space, and that would certainly help cause a widening of the bid-ask spread, but right now, the operations and the fundamentals are fantastic, and leasing volumes are high, renewal rates are high, and so I think sellers and buyers don't see quite as much risk in the asset class, and so that bid-ask spread is just not that wide yet. That doesn't mean it won't change over the coming months, but I think in our business, we tend to focus on how fast information is getting out there about the economy, but when you're buying hard assets, that information doesn't necessarily flow into negotiations within a month.

Alexander Goldfarb: Go into a negative.

Alexander Goldfarb: Physician, you would see fundamentals change on.

Alexander Goldfarb: Occupancy levels or demand for space and that would certainly help cause a widening of the bid ask spread but right now the operations and the fundamentals are fantastic and leasing volumes are high renewal rates are high.

Alexander Goldfarb: So I think sellers and buyers don't see quite as much risk in the asset classes. So that that bid ask spread is not that wide yet that doesn't mean, it won't change over the coming months, but.

Alexander Goldfarb: I think in our business, we tend to focus on how fast information is getting out there about the economy, but when youre buying hard assets that information doesn't necessarily flow into negotiations within a month and Alex expanding on the first part of Davids response as it relates to financing activity to Craig's question. It feels like a very different playbook or scenario or outcome versus.

Conor Fennerty: And Alex, expanding on the first part of Dave's response, as it relates to financing activity to Christ's question, it feels like a very different playbook or scenario or outcome versus whether it's COVID or the GFC in terms of bank availability or liquidity in the sense that banks are open for business today. That could obviously change tomorrow, but I would say the IG market is a great indicator of the general health to date. Again, that could change next minute, next hour, whatever it might be, but again, it feels like maybe the GFC playbook is not appropriate in this scenario, and we'll see how it plays out.

Alexander Goldfarb: Whether it's COVID-19 or the GMC in terms of bank availability or liquidity in the sense that banks are open for business today that could obviously change tomorrow, but I would say the market is a great.

Alexander Goldfarb: Great indicator of the general health to date again that could change next minute XL or whatever it might be but again it feels like maybe the GSC playbook is not it's.

Alexander Goldfarb: It is not appropriate in this scenario and we'll see how it plays out.

Alexander Goldfarb: Okay.

Conor Fennerty: Okay.

David Lukes: So, David, forgive me, but it does sound like death and divorces are probably pretty good for your business to drum up transaction volume. At the risk of saying yes. Yes. So, the second question is, you know, you and some of your peers highlight high average household income, the portfolio you bought in Jacksonville, you know, just over $110,000 in average household income. At the same time, you know, some of the restaurants are reporting, you know, slowdown in traffic and you see anecdotal evidence in, you know, from different data points about people pulling back on shopping at all, you know, levels, you know, absent, I guess, the Uber crowd.

Speaker Change: David Forgive me, but it does sound like death, and divorces are probably pretty good for your business to drum up.

Alexander Goldfarb: Yes.

Alexander Goldfarb: At the risk the risk of saying, yes, yes.

Alexander Goldfarb: Second question is.

Alexander Goldfarb: You and some of your peers highlight high average household income of the portfolio you bought in Jacksonville.

Alexander Goldfarb: Just over 110000 and average household income at the same time some of the restaurants are reporting slowdown in traffic.

Speaker Change: And you see anecdotal evidence in India from different data points about people pulling back on shopping at all levels absent I guess Uber crowd.

David Lukes: So, even $110,000 is still, you know, being impacted. How do you guys feel confident that when you say, hey, we have an affluent portfolio and yet we still see nationally that there is an impact in the consumer, they are pulling back on, you know, transactions that, you know, we thought were, you know, used to be sort of for certain as people are trying to save money. How do you still feel confident in saying, hey, we have an affluent portfolio and, you know, it's pretty bulletproof regardless? Yeah, it's a it's a really good point. I think that comes up a lot because we do highlight average household income.

Alexander Goldfarb: So even a 110 is still being impacted.

Alexander Goldfarb: You guys feel confident that when you say, hey, we have an affluent portfolio and yet we still see nationally that there is an impact in the consumer they are pulling back on transactions that we thought were used to be sort of for certain as people were trying to save money. How do you still feel confident in saying Hey, we have an app.

Alexander Goldfarb: Affluent portfolio than it is.

Alexander Goldfarb: Pretty bulletproof regardless.

Alexander Goldfarb: Yes. It is.

Alexander Goldfarb: Really good point I think that comes up a lot because we do highlight average household income and I guess the real question is why.

David Lukes: And I guess the real question is why? It's not because consumer spending is higher and high household incomes, and therefore the tenants, you know, pay higher rent or a portion of profits, as you know, ours are fixed rent leases, we really don't have, you know, much in terms of percentage rent. So the sales volume of the retailers isn't really what we're for. The reason I personally am very focused on household income is more to do with zoning. When you get into wealthy suburban communities, and remember that zoning is local, you know, not national or even by the state level, those local zoning boards are not very wild about entitling additional strip center retail.

Alexander Goldfarb: It's not because consumer spending is higher and high household incomes and therefore the tenants.

Alexander Goldfarb: I pay a higher <unk> as a portion of profits as you know.

Alexander Goldfarb: <unk> is a fixed rent leases, we really don't have.

Alexander Goldfarb: Much in terms of percentage rent so the sales volume of the retailers isn't really what we're handling for the reason I personally am very focused on household income has more to do with zoning when you get into wealthy suburban communities and remember that Sony is local not national or even by the state level those locals.

Alexander Goldfarb: <unk> are not very wild about.

Alexander Goldfarb: Entitling additional strip center retail.

David Lukes: And so it tends to be the higher household suburbs, higher income suburbs tend to have less square footage per capita. And that generally means that there's a scarcity value. And part of the thesis of this asset class is when you lose tenants, because you do lose tenants, when you lose them, it is less expensive and faster to backfill them. And that gets compounded in these higher income suburbs, because there is a scarcity value of real estate. So to me, it's less about the gross sales volume of that specific retailer, it's much more about the scarcity value of how much real estate is available.

Alexander Goldfarb: And so it tends to be the <unk>.

Alexander Goldfarb: Higher household suburbs higher income suburb tend to have less square footage per capita.

Alexander Goldfarb: And that generally means that there is a scarcity value and part of the thesis of this asset class is when you lose tenants because you do lose tenants when you lose them it is less expensive and faster to backfill them.

Alexander Goldfarb: That gets compounded in these higher income suburbs, because there was a scarcity value of real estate. So to me, it's less about the gross sales volume of that specific retailer, it's much more about the scarcity value of.

Alexander Goldfarb: How much real estate is available.

David Lukes: And Alex, at the risk of stealing David's normal joke, I mean, our restaurant, our fine dining is five guys. It's a different restaurant exposure than white tablecloth fine dining. Yeah, I'm not I'm not talking fine dining. I'm talking like QSR, just some of the traffic trends here today from some of the different operators. Yeah, I think we're dealing with the same thing, but the zoning point is an interesting one, so thank you.

Speaker Change: At the risk of stealing David's normal joke, I mean, our restaurants are fine dining as five guys.

Alexander Goldfarb: It's a different restaurant exposure than white tablecloth fine dining.

Alexander Goldfarb: Yes, im not im not talking to fine dining I'm talking about <unk>.

Alexander Goldfarb: Just some of the traffic trends year to date from some of the different operators. So yes, I think we're doing the same thing, but the zoning point is is an interesting one so thank you.

Michael Mueller: Your next question comes from the line of Michael Mueller, JP Morgan, please go ahead. Yeah, hi. Just a quick one, sticking with acquisitions for a second. Just wondering, have you been thinking at all about changing, I guess, the guidance for the acquisition pace, just because it seems like you are seeing a lot of transactions, a lot of closing near term, or are you just really planning on sticking with the about $500 million a year for the next few years?

Michael Mueller: Your next question comes from the line of Michael Mueller J P. Morgan. Please go ahead.

Michael Mueller: Yes, Hi, just a quick one sticking with acquisitions for a second just wondering are you have you been thinking at all about changing I guess the guidance for the.

Michael Mueller: The acquisition pace, just because it seems like you are seeing.

Michael Mueller: A lot of transactions you have a lot closing near term or.

Michael Mueller: Or are you just really planning on sticking with the about $500 million a year for the next few years.

Conor Fennerty: Hey Mike, good morning, it's Conor. So in 2025, and I'll let David speak to out years, in 2025, the midpoint of the range still assumes $500 million for the full year, so that's an additional $360 million closing. The top end of the range assumes the pipeline that David alluded to, which is about a half billion dollars, closes over the course of the year, so that would be an aggregate about $640 million. You are correct, we've seen or we've demonstrated over the last two years that we can do, you know, north of a half billion dollars a year.

Conor Saturday: Hey, Mike Good morning, Conor so so in 2025 and I'll, let David speak to the out years in 2025, the midpoint of the range still assumes $500 million for the full year. So that's an additional $360 million closing the top end of the range assumes that pipeline that David alluded to which is about <unk> billion dollars.

Speaker Change: Closes over the course of the year, so that would be in aggregate about $640 million.

Speaker Change: You are correct, we've seen or we've demonstrated over the last two years that we can do north of $5 billion a year I think given this is our second quarter.

Conor Fennerty: I think given this is our second quarter, as a public company, we feel comfortable maintaining that current range, but you're right, we're seeing enough deal flow and we're demonstrating quarter after quarter that there's enough of an opportunity set for us to potentially exceed that over the longer term. I would just say for now, Mike, it feels like $500 million is a good base case to use, and David, I don't know if you'd expand on that.

Speaker Change: Public company, we feel comfortable maintaining our current range, but youre right were seeing enough deal flow, we're demonstrating quarter after quarter that there is enough of an opportunity set for us to potentially see that over the longer term I would just say for now Mike It feels like.

Speaker Change: Like $500 is a good base case to use and David have you expand on that.

David Lukes: No, I agree. I think in two quarters into the business, it's probably prudent to stick with what our original targets were.

Speaker Change: I agree I think two quarters into the business that's probably.

Speaker Change: Prudent to stick with what our original targets were.

Conor Fennerty: Okay, thank you. Thanks a lot.

Speaker Change: Okay. Thank you.

Speaker Change: Thanks, guys Youre welcome.

Speaker Change: Your next question comes from the line of Galena Rojas with Dean Street. Please go ahead.

Paulina Rojas: Your next question comes from the line of Paulina Rojas with Green Street. Please go ahead. Good morning.

Galena Rojas: Good morning.

Paulina Rojas: You mentioned previously that your business would have or has quicker and less expensive re-tenanting, which is by itself a great advantage, but could you elaborate on how you believe your portfolio would perform in a recession or a period of slow growth relative to other search center formats? Chair Paulina, good morning. So if you if you look on page 13 of our supplemental, I think that's probably a pretty good example. And you look to the bottom row. If you look at the trailing four quarters, our total leasing volume, which is new leases and renewals, and if you take the first year's base rent and then you look at it as a ratio with the total leasing capex, our business is about five and a half months to pay back the cost of leasing.

Galena Rojas: You mentioned previously and that your business would have perhaps quicker and less expensive we penalties.

Galena Rojas: And which is by itself a great advantage.

Galena Rojas: And could you elaborate on how you believe your portfolio with performing a recession or a period of slow growth relative to other strip center formats.

Galena Rojas: Strip Helena and good morning.

So if you look on page 13 of our supplemental I think thats, probably a pretty good example, and you looked at the bottom row.

Galena Rojas: If you look at the trailing four quarters, our total leasing volume such as new leases and renewals and if you take the first year's base rent and then you look at it as a ratio with total leasing capex our business is about five five months.

Galena Rojas: <unk>.

Galena Rojas: To pay back the cost of leasing and that includes both the renewables and the new leases now Youll also notice that renewals is about two five times the amount of new leases.

Conor Fennerty: That includes both the renewals and the new leases. Now, you'll also notice that renewals is about two and a half times the amount of new leases. So my thought is that during a recessionary environment, you would start to see that shift. Maybe you have more vacancy and therefore your renewals are a little lower and your new deals are a little higher. But if the baseline is a ratio of two and a half to one and a five and a half month payback, you're going to end up with something that's still call it eight, nine, 10, 12, 14 months.

Galena Rojas: So my thought is that during a recessionary environment you would start to see that shift may be you have more vacancy and therefore your renewals are a little lower and your new deals are a little higher but if the baseline as a ratio of two five to one.

Galena Rojas: And a $5 five month payback youre going to end up with something that still call. It eight 910 12 14 months.

Conor Fennerty: That's probably one-fifth or one-sixth of the payback period that we were experiencing in previous portfolios that had large format boxes that needed a tremendous amount of reconfiguring. So I do think that these small fungible spaces that can change user types quickly and cheaply is a lot different than a business where you're buying credit in a purpose-built building. And Paulina, from a credit perspective, that we started to have more credit events or bankruptcies, which we've had none in the last year plus. If you look on page 15 of the supplement, we only have nine tenants with 1% ABR exposure.

Galena Rojas: That's probably 151 sixth of the payback period that we were experiencing in previous portfolios that had large format boxes that needed a tremendous amount of reconfiguring. So I do think that these small fungible spaces. They can change user types quickly and cheaply is a lot different than a business where you buy.

Galena Rojas: <unk> credit in a purpose built building.

Galena Rojas: Paul I know from a credit.

Galena Rojas: Respective but we started to have more credit adventure bankruptcies, which we've had none in the last year plus if you look on page 15 of the supplement we only have nine tenants with greater than 1% ADR exposure.

Conor Fennerty: My guess is a year from now, we'll have two or three. And two or three years from now, we'll have one, our largest tenant, which is tough to avoid because they have great real estate. So from a risk perspective, the odds of one tenant impairing or impacting FFO growth over the course of the year is also much lower for us versus other retail companies.

Galena Rojas: I guess is a year from now we'll have two or three and two or three years from now we will have one our largest tenant which is which is tough to avoid excess great real estate.

Galena Rojas: So from a risk perspective.

Galena Rojas: <unk> of one tenant.

Galena Rojas: Impairing or impacting <unk> growth over the course of the year is also materially lower for us versus other.

Galena Rojas: Retail company, so to David's point, if the economics of the business plus the diversification by tenant perspective that really makes us feel a lot better.

Conor Fennerty: So to David's point, it's the economics of the business plus the diversification by tenant perspective that really makes us feel a lot better about the ability to grow the portfolio and grow cash flow over the course of the cycle. Thank you.

Galena Rojas: The ability to.

Galena Rojas: Grow the portfolio and grow cash flow over the course of the cycle.

Galena Rojas: Okay.

Speaker Change: Thank you and then my second question and you have mentioned in the strong leasing activity.

Paulina Rojas: And then my second question, you have mentioned the strong leasing activity, but have you seen any early signs of tenants experiencing a deterioration in their business or adopting a more cautious stance toward growth? And if so, where are those news coming from?

Speaker Change: But have you seen any early signs of tenants experiencing deterioration in their business, we're adopting a more cautious stance toward growth and if so where are those news coming.

Speaker Change: Okay.

Conor Fennerty: Yeah, Paulina, I would love to be very transparent. It's honestly been a matter of weeks. So we just we just really haven't seen. anecdotal information that's really worth talking about. You know, there are a couple of conversations that I can see. You know, we've had a couple of tenants that, you know, did have inventory and their business relied on gaining inventory. Those conversations seem to slow, but they're just offset by service tenants that are looking to access the same small unit. So I guess the amount of anecdotal information we have is pretty limited right now.

Speaker Change: Yes, I would love to be very transparent, it's honestly been a matter of weeks.

Speaker Change: So we just we just really haven't seen.

Speaker Change: Anecdotal information, that's really worth talking about.

Speaker Change: There are a couple of conversations that I can see you know we've had a couple of tenants that.

Speaker Change: Did have inventory and their business relied on gaining inventory those conversations seem to slow, but they just offset by service tenants that are looking to access the same small units though.

Speaker Change: I guess the amount of anecdotal information we have.

Speaker Change: Pretty limited right now.

Operator: Thank.

Speaker Change: Thank you.

Speaker Change: Thanks Helane.

Speaker Change: Okay.

Craig Mailman: of Craig Mailman, Woods City, please go ahead. Hey guys, thanks for getting me back on. I was going to follow up and just ask, Conor, the pricing differences between those three sources of debt that you were talking about, kind of what's the – is there anything meaningful or are they kind of all on top of each other?

Speaker Change: As Craig Manley with Citi. Please go ahead.

Speaker Change: Hey, guys. Thanks for getting me back on.

Speaker Change: I was going to follow up and just ask counter the.

Speaker Change: The pricing differences between those three sources of debt that you were talking about kind of what's the is there anything meaningful or they are kind of well on top of each other.

Conor Fennerty: Hey, Greg, good morning. Apologies for cutting you off there earlier. The pricing range, I mean, again, at the risk of You know, reiterating my answer, it's changing by the minute, by the day. I think it's fair to assume, and this is dependent on tenor or attachment point, depending on leverage for the secured route, is pretty wide in a sense. It's probably low fives to high fives. And there have been points in time over the last two weeks where it's been north of six. So, again, I would just come back to my original answer. We're coming into this with a position of strength or from a position of strength, excuse me.

Speaker Change: Hey, Greg good morning apologize for cutting off earlier.

Speaker Change: The pricing range I mean again at the risk of.

Speaker Change: Reiterating my answer it's changing by the minute by the day.

Speaker Change: I think it's fair to assume and this is going to end on tenor attachment points, depending on leverage so unsecured route is pretty wide incentives, probably a low fives to high fives and there have been points in time over the last two weeks, where it's been north of six.

Speaker Change: So again I would just come back to my original answer where coming into this with a position of strength from a position of shrank excuse me, we've got a completely unencumbered asset base and we're in a net cash position. So we can be patient.

Conor Fennerty: We've got a completely unencumbered asset base, and we're in a net cash position. So we can be patient. But I would just tell you, we do still expect to fund half of the 2025 investment volume with debt. And then from there, to your point, we do have access to the ATM and other sources of equity capital starting in October. So, again, we're not reliant on equity capital. We've got a great balance sheet. We can be patient. But the kind of pricing or pricing quotes is all over the place in the last month, which is going to make us be patient and make sure we get the right deal done.

Speaker Change: But I would just tell you we do still expect to fund half of the.

Speaker Change: 2000, 2025 investment volume with with that and then from there to your to your point, we do have access to the AGM another source of equity capital starting in October so.

Speaker Change: Again, we don't we're not reliance on equity capital, we've got a great balance sheet, we can be patient, but the kind of pricing our pricing quotes is all over the place in the last months and which.

Speaker Change: Just going to make us be patient and make sure we got.

Speaker Change: The right deal done.

Conor Fennerty: I don't know if that answers your question. I apologize. No, no, it does. I know it's tough to get into the basis point differences between the three is that everything shifts. I guess if pricing was the same. What capital source would you guys be most interested in, right? Are you guys wanting to do private placements and then be, you know, an unsecured borrower longer term, or do you like the insurance market? Kind of what's the preference? Yeah, it's a great question. Look, just as David mentioned, if our average ticket size is about $15 million, we are well suited for the unsecured market, which means likely a private placement start, and then you naturally graduate over time to potentially the public bond market.

Speaker Change: I don't know if that answers your question I apologize.

Speaker Change: It does I know its tough to get into the basis point differences between the three as everything shifts.

Speaker Change: I guess if pricing was the same.

Speaker Change: What capital source.

Speaker Change: Would you guys be most interested in are you guys wanted to do private placements.

Speaker Change: An unsecured borrower longer term or do you like the insurance market kind of what's the what's the preference.

Speaker Change: It's a great question look just as David mentioned, if our average ticket size is about $50 million, we are well suited for the unsecured market, which means likely a private placement and start and then naturally gravitate to graduate over time too.

Speaker Change: In terms of the public bond market.

Conor Fennerty: We have been a little unique in the sense that we have always liked to have some secured exposure on the balance sheet. Now, that's usually less than 5%. But there are periods in time where the secured market is more efficient than the unsecured market, and vice versa. And so we've always tried to maintain relationships with the life coach for that very reason. All that said, your question is, again, most likely it's private placement and with a natural kind of graduation over time or shift over time. But don't be surprised if we have some mortgage debt in the cap structure, just because there are times of inefficiency between the two markets.

Speaker Change: We have been a little unique in the sense that we are always like to have some secured exposure on the balance sheet now that's usually less than 5%, but there are periods of time, where the secured market is more efficient than the unsecured market and vice versa, and so we've always tried to maintain relationships with the life coast for that very reason.

Speaker Change: All that said your question is again, most likely it's private placement and with the natural kind of graduation over time or <unk>.

Speaker Change: <unk> overtime, but don't be surprised if we have some mortgage debt in the cap structure, just because there are times of inefficiency between the two markets.

Speaker Change: Okay. That's helpful. And then I apologize I don't think anyone asked this but did you can just tell me.

Conor Fennerty: Okay, that's helpful.

Craig Mailman: And then, apologies, I don't think anyone asked this, but if they did, you can just tell me. You guys are getting good cash run spreads. What kind of bumps are you guys pushing through and has there been any kind of pushback on that side of the leasing equation? I would say, Craig, in general, the bump question when you're dealing with tenants is always combined with what is the starting base rent and how much capital is being put in. So net net all those conversations in general, when we deal with small shop tenants, we're looking for 3% bump.

Speaker Change: You guys are getting good cash rent spreads.

Speaker Change: What kind of bumps are you guys pushing through and has there been any kind of pushback on that side of the police the equations.

Speaker Change: I would say Craig in general.

Speaker Change: The bump question when youre dealing with tenants.

Speaker Change: As always combined with what is the starting base rent and how much capital has been put in.

Speaker Change: So net net all of those conversations in general when we deal with small shop tenants, we're looking for 3% bumps.

Conor Fennerty: There are some new deals that are done with large national tenants that are still 10% every five. And there might be reasons why that is acceptable to us. But in general, the shop leases are done with 3% annual. Are you guys trying to push to get closer to four? Is that possible? I'm just trying to think of, you know, part of the benefit of this asset class, the low capex, but also the potential for, you know, same store you guys have said above three, but like, is there a way to differentiate yourself where you guys could put up four to 5% same store by changing the structure because you don't have to worry about, obviously, the low bumps of anchors?

Speaker Change: There are some new deals that are done with large national tenants that are still 10% of refis.

Speaker Change: And there might be reasons, while that while that is acceptable to us but in general the shop leases are done with 3% annual bumps.

Speaker Change: Are you guys trying to push to get closer to four is that possible I'm just trying to think of.

Speaker Change: Part of the benefit of this asset class the low capex, but also.

Speaker Change: The potential for.

Speaker Change: Same store you guys have said above three but like is there a way to differentiate yourself, where you guys could put up 4% to 5% same store by changing the structure because you don't have to worry about obviously be the low bumps of anchors.

Conor Fennerty: Yeah, I'll go back to the same comments before that, you know, the tenants Even local tenants have Microsoft Excel. So when they do a net present value calculation and the bumps and the starting rent both calculate into that. Sometimes if you're looking at a tenant that you think will grow over time in their sales, you might want to start with a lower rent and have a 5% annual bump. And there have been situations like that. But generally, the higher credit sophisticated tenants, the purpose of that rent is to be a little bit higher than inflation, but start at a market rent that you think is achievable for them.

Speaker Change: Yes, well I'll go back to the same comments before that the tenants.

Speaker Change: Even local tenants have Microsoft excel, so when they do a net present value calculation and the bumps and the starting rent both calculate into that.

Speaker Change: Sometimes if youre looking at tenants that you think will grow over time and their sales you might want to start with a lower rent and have a 5% annual pump and there have been situations like that but generally the higher credits sophisticated tenants.

Speaker Change: The purpose of that rent has to be a little bit higher than inflation, but start at a market rent that you think is.

Speaker Change: Is achievable for them I would say that.

Conor Fennerty: I would say that when we're talking about rent bumps, it's a relatively small number of leases relative to the entire portfolio. A lot of our growth over time is simply mark to market. And one of the benefits of this business is that the weighted average lease term is lower, is smaller than in a large anchored portfolio. So when you have a mark to market and a lower wall, you're more likely to capture that mark to market. And that's a big piece of what's going to drive the same store. And Craig, to that point, I mean, our 2024 number was 5.8%.

When we're talking about rent bumps is a relatively small number of leases relative to the entire portfolio a lot of our growth over time is simply mark to market.

Speaker Change: And one of the benefits of this business is that the weighted average lease term is is lower.

Speaker Change: Mahler than in a large anchored portfolio. So when you have a mark to market.

Speaker Change: And a lower walls youre more likely to capture that mark to market and Thats, a big piece of what's going to drive the same store numbers.

Craig Mailman: Yes, and Craig to that point our.

Craig Mailman: 2024 number was five 8% this portfolio to the Genesis of your question is very capable of doing north of 3% and the biggest piece that intrigues us to David's point in multiple responses, though is the capital needed to generate that so even if we're doing a similar same store number to the peer group the capital needed to generate at that and our view is less than a third.

Conor Fennerty: This portfolio, to the genesis of your question, is very capable of doing north of 3%. And the biggest piece that intrigues us, to David's point and multiple responses, though, is the capital needed to generate that. So even if we're doing a similar same store number to the peer group, the capital needed to generate that, in our view, is less than a third. That's the biggest differentiator. So, yes, we can do north of 3%. Yes, we've proven that in 2024. But that capital piece, I would just reiterate or flag for you, is a critical kind of differentiator for us versus the peers.

Craig Mailman: That's the biggest differentiator. So yes, we can do north of 3%, yes, we've proven that in 'twenty 'twenty four but that capital piece I would just reiterate or flag for you as a critical differentiator for us versus the peers.

Craig Mailman: That makes sense one last housekeeping did you guys change the bad debt reserve embedded in guidance I think it was 55 basis points last quarter.

Conor Fennerty: That makes sense.

Conor Fennerty: This one, last housekeeping. Did you guys change the bad debt reserve and better than guys, I think it was 55 basis points last quarter? No, we did not, so unchanged. And to my earlier response, I think it's the following, we've had zero credit events year-to-date or last year either.

Craig Mailman: No we did not so unchanged and to my earlier response.

Craig Mailman: I think it's following we've had zero credit events year to date or last year either.

Conor Fennerty: Great, thank you. You're welcome.

Craig Mailman: Great. Thank you.

Conor Fennerty: Sorry to cut you off earlier, Craig. I won't take offense, appreciate it.

Craig Mailman: Youre welcome sorry to cut you off rotorcraft.

Craig Mailman: I won't take offense I appreciate it.

Craig Mailman: It wasn't personal.

Craig Mailman: Okay.

Floris Dijkum: Your next question comes from the line of Floris van Dijkum. with Compass Point Research, please go ahead. Thanks. Morning, guys. I know it's probably too early to talk about the tenant's impact regarding tariffs, as you've indicated. I think that's on everybody's minds, and recession fears, et cetera. Presumably there will be a slowdown at some point, but it's too early to say that at this point.

Speaker Change: Your next question comes from the line of Floris Van <unk>.

Speaker Change: With Compass point research. Please go ahead.

Speaker Change: Thanks, Good morning, guys.

Speaker Change: I know, it's probably too early to talk about the tenants impact for the.

Speaker Change: Regarding tariffs as you've indicated I think that's on everybody's mind and recession fears et cetera.

Speaker Change: Presumably there will be a slow down at some point, but it's too early to say that at this point I'm actually more curious on the the competition that you're seeing for your acquisitions and I know we spoke a couple of your peers. Most of them have a portion of their portfolio in these kinds of assets one of them.

David Lukes: I'm actually more curious on the competition that you're seeing for your acquisitions. And I know we've spoken to a couple of your peers. Most of them have a portion of their portfolio on these kinds of assets. One of your peers has actually been acquiring about 100 million of these assets last year and is continuing to push that. Are you running into other well-capitalized REITs, or is this such a big market that it doesn't really impact your ability, or you're not really competing with those players?

Speaker Change: Your peers has actually been acquiring about $100 million of these assets last year is continuing to push that are you running into.

Speaker Change: Other well capitalized REIT towards this such a big market that it doesn't really impact your your ability or youre not really competing with those with those players.

David Lukes: So good morning, Floris, this is David. So far, the competition in the bidding tent is still primarily local private investors. There has been an increase in, I would say, institutional capital that has moved into, you know, private funds that are that are kind of looking at a similar strategy. We have not run into, you know, direct large institutions or direct competition against any public restaurant, if you will, in the market right now.

Speaker Change: Good morning, Floris, it's David so far the competition in the bidding tent is still primarily local private investors.

Speaker Change: There has been an increase.

Speaker Change: I would say institutional capital that has moved into.

Speaker Change: Private funds.

Speaker Change: <unk> that are kind of looking at a similar strategy.

Speaker Change: We have not run into direct large institutions or direct.

Speaker Change: Competition against any public rates.

Speaker Change: Great and maybe.

David Lukes: Great. And maybe a follow-up question. I know the Crowe portfolio appears to be on the market again. I don't think it's going to be of interest to any REITs with the management contracts in place, but maybe can you comment? Is that... What do you think that's going to mean in terms of a marker for value, potentially? And what do you think the appetite is there? And maybe also talk about, because I think you mentioned your portfolio is now the largest. How does that portfolio compare in size relative to what you now have assembled? Yeah, they're great questions, Floris.

Speaker Change: Follow up question I know the CRO portfolio appears to be on the market again.

Speaker Change: I don't think it's going to be of interest to any rights with the management contract in place, but maybe can you comment on is that right.

Speaker Change: What do you think that's going to mean in terms of a marker for for value potentially and what do you think the appetite is there.

Speaker Change: And maybe also talk about because I think you mentioned your portfolio is now the largest how does that portfolio compare in size relative to what you have assembled.

Speaker Change: Yes, Great question Floris I mean, the reality is it is a private portfolio. It does not have published information.

David Lukes: I mean, the reality is it is a private portfolio. It does not have published information. And so I hate to even speculate on size, quality, or outcome. I will say that, you know, what we're interested in is the simplicity of our business, which is we buy each building that we want to, and we ignore those that we don't. We want them to be simple. We prefer not to have a joint venture. We want to, you know, manage our own portfolio over time that we're really happy with. And that is one of the huge benefits of being able to handpick, you know, assets one or two or three at a time.

So I hate to even speculate on size quality or outcome.

Speaker Change: I will say that what we're interested in is the simplicity of our business which is.

Speaker Change: We buy each building that we want to and we ignore those that we don't we want them fee simple, we prefer not to have a joint venture.

Speaker Change: We want to.

Speaker Change: And manage our own destiny and build a portfolio construct a portfolio over time, and we're really happy with and that is one of the huge benefits of being able to handpick assets, one or two or three at a time.

David Lukes: But there are other great portfolios out there in the country. You know, they may or may not be targets for us. But, you know, with 950 million square feet of inventory in the U.S., it's a pretty deep pool to be shopping in. So I don't think we're forced into looking at things that may not be a target.

But there are other great portfolios out there in the country.

Speaker Change: It may or not be may or may not be targets for us, but with $950 million of square feet of inventory in the U S. It's a pretty deep pool to be shopping and so I don't think were forced into.

Speaker Change: Looking at things that may not be a threat.

David Lukes: Thanks, David. Thanks, Boris.

Speaker Change: Thanks, David.

Speaker Change: Thanks Laurence.

Speaker Change: I will now turn the call back over to David Lukes CEO for closing remarks.

David Lukes: I will now turn the call back over to David Lukes, CEO, for closing remarks. Thank you all for taking the time to join our call, and we will speak to you next quarter.

Speaker Change: Thank you all for taking the time to join our call and we will speak to you next quarter.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Speaker Change: Okay.

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Speaker Change: Yeah.

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Speaker Change: Okay.

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