Q2 2025 InvenTrust Properties Corp Earnings Call

Operator: Thank you for standing by and welcome to InvenTrust's second quarter 2025 earnings conference call. Before we begin, I would like to remind our listeners that today's presentation is being recorded and a replay will be available on the investors' section of the company's website at inventrustproperties.com. During the presentation, you can register a question by pressing * followed by 1 on your keypad. If you change your mind, please press * followed by 2. I would now like to hand the call over to Mr. Dan Lombardo, Vice President of Investor Relations. Please go ahead, sir.

Thank you for standing by and welcome to invent. Trust second quarter 2025 earnings conference call.

Before we begin, I would like to remind our listeners. That today's presentation is being recorded and a replay will be available on the investors section of the company's website at inventrust properties.com.

During the presentation, you can register a question by pressing star, followed by 1 on your keypad. If you change your mind, please press star followed by 2.

I would now like to hand the call over to Mr. Dan Lombardo, vice president of investor relations. Please go ahead sir.

Dan Lombardo: Thank you, operator. Good morning, everyone, and thank you for joining us today. On the call from the Inventrust team is DJ Busch, President and Chief Executive Officer; Mike Phillips, Chief Financial Officer; Christy David, Chief Operating Officer; and Dave Heimberger, Chief Investment Officer. Following the team's prepared remarks, the lines will be opened up for questions. As a reminder, some of today's comments may contain certain forward-looking statements about the company's views on the future of our business and financial performance, including forward-looking earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. Any forward-looking statements speak only as of today's date, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial supplemental or press release.

Thank you, operator. Good morning, everyone. And thank you for joining us today on the call from the inventors. Team is DJ Bush, president and chief executive officer, Mike Phillips, Chief Financial Officer, Christy David Chief Operating Officer and Dave, heimberger Chief investment officer. Following the team's prepared remarks, the lines will be opened up for questions.

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

These are based on Management's, current beliefs, and expectations in our subject of various risks and uncertainties.

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

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

In addition, we will also reference certain non-gaap Financial measures, the comparable. Gaap Financial measures are included in this quarterly, earnings materials which are posted on our investor relations website.

With that, I will turn the call over to DJ.

DJ Busch: Thanks, Dan, and good morning, everyone. We're pleased to report another quarter of solid operating results. For the first half of the year, same property NOI grew approximately 6%, and NARIEIT FFO per share rose nearly 5% year over year. Least occupancy of 97.3% remains near an all-time record, while small shop occupancy reached another high watermark of 93.8%, highlighting the ongoing success of our grocery-anchored necessity-based retail strategy. Despite a less confident consumer and stubborn inflationary pressures, our retailers have been resilient and continue to operate at healthy levels within the Inventrust portfolio. For this reason, we are raising our same property NOI growth expectations for the year to 4% to 5%. During the quarter, we also executed on a key initiative, completing the sale of a five-property California portfolio for approximately $306 million.

Thanks Dan and good morning everyone. Well, please report another quarter of solid operating results for the first half of the Year. Same property. I don't know why. I grew approximately 6% and narrated AFL per share Rose nearly 5% year-over-year.

So you have 97.3% remains near an all-time record while small shop occupancy reached, another high water, mark of 93.8% highlighting the ongoing success of our grocery. Anchored necessity based retail strategy.

Despite a less confident consumer and stubborn, inflationary pressures, our retailers have been resilient and continue to operate at a healthy levels within the inventor's portfolio.

For this reason, we are raising our same property and white growth expectations for the year to 4 to 5 percent.

DJ Busch: These prime assets commanded strong pricing, which speaks to the level of institutional interest across the open-air shopping center sector. Following this transaction, we have one remaining property in San Pedro, California, that we expect to sell by year-end, marking our full exit out of the state. This transaction was not a monetization event, but rather a tactical reallocation of capital that enhances our focus in our core markets that we expect will deliver long-term value. We have been methodical and disciplined in redeploying proceeds into high-growth Sunbelt markets, fully aligned with our strategic vision. As of today, we've successfully closed on six properties totaling approximately $230 million. In addition, we have either secured or under contract for another two properties, representing nearly $126 million in value.

During the quarter, we also executed on a key initiative. Completing the sale of a 5 property California portfolio for approximately 306 million

These Prime assets commanded strong pricing which speaks to the level of institutional interest across the Open Air Shopping Center sector.

Following this transaction. We have 1 remaining property in San Pedro, California, that we expect to sell by year. End marking, our full exit out of the state.

This transaction was not a monetization event, but rather a tactical reallocation of capital that enhances our focus in our core markets that we expect will deliver long-term value.

With Sunbelt markets, fully aligned with our strategic Vision. As of today, we've successfully closed on 6 properties, totaling approximately 230 million. In addition, we have either secured or under contract for another 2 properties representing. Nearly 126 million in value,

DJ Busch: We are actively targeting investment opportunities in Asheville, Charleston, Charlotte, Nashville, Phoenix, and Savannah, markets that share common themes such as healthy population and job growth, business and tax-friendly environments, and high quality of life driven by relatively favorable cost of living. Mike will touch on guidance in more detail, but given the positive outcome and speed at which California portfolio transacted, our net investment activity will be more back and loaded for the year than initially expected. That said, we remain extremely confident in our acquisition pipeline and expect to be active in the second half of 2025, both using proceeds from the aforementioned asset sales and utilizing the ample capacity provided by our low levered balance sheet. In summary, strip center fundamentals remain solid, supported by strong tenant demand, limited new supply, and the ongoing appeal of necessity-based retail.

We are actively targeting investment opportunities in Asheville Charleston, Charlotte Nashville, Phoenix, and Savannah markets, that share common themes, such as healthy population and job, growth business, and tax-friendly environments and high quality of life, driven by relatively favorable cost of living.

Michael will touch on guidance in more detail but given the positive outcome and speed at which California portfolio transacted, our net investment activity. Will be more back and loaded for the year than initially expected. That said we remain extremely confident in our acquisition pipeline expect to be active in the second half of 2025. Both using proceeds from the afro asset sales and utilizing the ample capacity provided by our low lever, balance sheet.

DJ Busch: Against this backdrop, Inventrust continues to deliver meaningful results while executing on our long-term strategy. We are scaling our enterprise efficiently with minimal increases to G&A and leveraging our well-capitalized balance sheet and proven platform to support sustained expansion. Operationally, we are driving rent growth through embedded lease escalations, optimizing small shop occupancy across the portfolio, and activating signed but not open leases. We remain hyper-focused on growing sustainable cash flow and delivering superior total returns for our shareholders over the long term. With that, I'll turn it over to Mike to discuss our financial results.

In summary strip center fundamentals remain solid supported by strong ten demand limited new Supply and the ongoing appeal of necessity based retail.

Against this backdrop, in Ventress continues to deliver meaningful results, while executing on our long-term strategy.

We are scaling our enterprise officially with minimal increases to GNA and leveraging our well-capitalized balance sheet and proven platform to support sustained expansion.

Operationally, we are driving rent growth through embedded lease. Escalations, optimizing small shop occupancy across the portfolio and activating signed but not open leases.

We remain hyper focused on growing sustainable, cash flow and delivering Superior total returns for our shareholders over the long term.

With that, I'll turn it over to Mike to discuss our financial results.

Mike Phillips: Thanks, DJ. The first half of the year demonstrates Inventrust's continued ability to execute on both strategic initiatives and operational performance. In addition to successfully completing our California portfolio rotation, we delivered solid results on the operational front. Same property NOI for the quarter was $42.6 million, representing a 4.8% increase compared to the same period last year. The growth was primarily driven by embedded rent escalations, which contributed 150 basis points. Occupancy gains added another 110 basis points, and positive rent spreads accounted for 80 basis points. Other positive drivers included redevelopment activity of 80 basis points, as well as percentage rents providing a 60 basis point tailwind. The increase was offset by net expense reimbursements, which reduced NOI growth by 20 basis points. Year to date, same property NOI totaled $85.1 million, a 5.6% increase over the first six months of 2024.

Thanks, DJ. The first half of the year demonstrates Adventure's continued ability to execute on both strategic initiatives and operational performance. In addition to successfully completing our California portfolio rotation, we delivered solid results on the operational front.

Same property. Noi for the quarter. Was 42.6. Million representing a 4.8% increase. Compared to the same period last year.

The growth was primarily driven by an escalations, which contributed 150 basis, points, occupancy, gains. Added another 110 basis points, and positive rent, spreads accounted for 80 basis points.

Other positive drivers included redevelopment, activity of 80 basis points, as well as percentage rents, providing a 60 basis point tailwind.

The increase was offset by net expense reimbursements, which reduced NOI growth by 20 basis points.

Mike Phillips: NARIET FFO for the second quarter was $35.5 million or $0.45 per diluted share, representing a 2.3% increase compared to the second quarter of last year. Core FFO also increased 2.3% to $0.44 per diluted share for the three months ending June 30th. Components of FFO growth for the quarter are primarily driven by same property NOI of $0.02, net acquisition activity of $0.02, interest expense of $0.02, interest income of a penny, and partially offset by the impact of increased share count of $0.06. For the first half of the year, NARIET FFO was $72.6 million or $0.93 per diluted share, reflecting a 4.5% year-over-year increase. Core FFO for the first six months of 2025 was $0.90 per diluted share, up 3.4% compared to the prior year. Inventrust continues to maintain a strong and flexible balance sheet, providing a foundation to execute our long-term goals.

Year to date, same property NOI totaled $85.1 million, representing a 5.6% increase over the first 6 months of 2024.

Needed ffo for the second quarter was 35.5 million or 45 cents per diluted, share representing a 2.3% increase compared to the second quarter of last year.

Corfo also increased 2.3% to 44 cents per diluted share for the 3 months. Ending June 30th components of ffo growth, for the quarter are primarily driven by same property in alive. 2 cents. Net acquisition activity of 2 cents interest expense of 2 cents, interest income of a penny in partially offset by the impact of increased share count of 6 cents.

for the first half of the Year neighborhood ffo was 72.6 million or 93 cents per diluted share reflecting a 4 and a half percent year-over-year increase

Corpo for the first 6 months of 2025 was 90 cents per diluted, share of 3.4% compared to the prior year.

Mike Phillips: We finished the quarter with $787 million of total liquidity, including a full $500 million in borrowing capacity available under our revolving line of credit. Our net leverage ratio stood at 17%, and net debt to adjusted EBITDA was 2.8 times on a trailing 12-month basis. We fully expect these ratios to normalize in the back half of the year as we continue to execute on our acquisition plans. We closed the quarter with a weighted average interest rate of 4% and a weighted average maturity of 2.9 years. As we evaluate our debt maturity profile, we are in active conversations reviewing options with our advisors to negotiate the terms of our $400 million term loans maturing in late 2026 and early 2027. Finally, we declared an annualized dividend of $0.95 per share, representing a 5% increase over the prior year.

Adventurous continues to maintain a strong and flexible balance sheet, providing a foundation to execute our long-term goals. We finished the quarter with 787 million of total liquidity, including a full 500 million in borrowing capacity, available under our revolving line of credit.

Our net leverage ratio stood at 17% and net debt to adjusted ibido. Was 2.8 times on a trailing 12-month basis. We fully expect these ratios to normalize in the back half of the year as we continue to execute on our acquisition.

We closed the quarter with a weighted average interest rate of 4% and a weighted average maturity of 2.9 years. As we evaluate our debt maturity profile. We are an active conversations, reviewing options with our advisors to negotiate. The terms of our 400 million term loans, maturing in late, 2026, and early 2027.

Finally, we declared an annualized dividend of 95 cents per share, representing a 5% increase over the prior year.

Mike Phillips: Turning to guidance, we're raising our full-year same property NOI growth guidance range to 4% to 5% and adjusting our bed debt reserve to 65% to 85 basis points of total revenue. This reserve accounts for recent tenant bankruptcies as well as an estimate for potential fallout for the remainder of the year. We are maintaining our NARIET and Core FFO guidance, and our net investment guidance remains at $100 million. Further details on our guidance assumptions are available in our supplemental disclosure. And with that, I'll turn the call over to Christy to discuss our portfolio activity. Christy?

Turning to guidance, we're raising our full year. Same property in AI growth. Guidance range to 4 to 5% and adjusting our bad debt Reserve to 65 to 85 basis points of total revenue.

$100 million.

Further details on our guidance assumptions are available in our supplemental disclosure.

And with that, I'll turn the call over to Christie to discuss our portfolio activity. Christie.

Christy David: Thanks, Mike. The leasing environment remains healthy and highly active. Retailers are strategically expanding and prioritizing centers that offer excellent visibility, easy accessibility, and a complementary tenant mix. Today's tenants want more than just space; they seek adjacent businesses that drive traffic throughout the day, like restaurants, wellness providers, fitness users, and essential services. These positive trends are clearly reflected in our leasing results and ongoing momentum. In the second quarter, we executed 73 leases for approximately 304,000 square feet. New leases were signed at a 44.1% spread, while renewals were 9.2%, resulting in blended leasing spread for the quarter of 16.4%, one of our strongest quarters since the company's listing in 2021. Our retention rate remained robust at 91%, and we successfully embedded annual rent escalators of 3% or higher in over 90% of our renewal leases, supporting sustained and predictable NOI growth over the long term.

Thanks Mike policing, environment remains healthy and highly active. Retailers are strategically expanding and prioritizing centers that offer, excellent, visibility easy accessibility and a complimentary tenant mix.

Today's tenants want more than just space; they seek adjacent businesses that drive traffic throughout the day, like restaurants, wellness providers, fitness users, and essential services.

These positive trends are clearly reflected in our leasing results and ongoing momentum.

In the second quarter, we executed 73 leases for approximately 304,000 square feet.

New leases were signed at a 44.1% spread. While renewals were 9.2%, resulting in Blended, leasing spread for the quarter of 16.4%, 1 of our strongest quarters since the company's listing in 2021.

Our retention rate remained robust at 91%, and we successfully embedded annual rent escalators of 3% or higher in over 90% of our, renewal, leases supporting sustained and predictable. Noi growth over the long term.

Christy David: At quarter end, total lease occupancy stood at 97.3%, with small shop lease occupancy reaching a new all-time high of 93.8%. Anchor space remained near full capacity at 99.5%, with 100% of our 2025 leasing complete and approximately 85% of new 2026 leasing already secured, providing excellent visibility into near-term cash flows and continued confidence in the durability of our income stream. Also on the leasing front, I'm pleased to announce a new Trader Joe's at the ShopTik Galleria in Austin, Texas. Trader Joe's's presence will further elevate the center's profile, increase traffic, and create meaningful synergies with our existing tenants. This opportunity originated from our proactive efforts to recapture space from an underperforming junior anchor tenant.

A quarter end, totally suksesi stood, at 97.3% with small shop, leak occupancy, reaching a new all-time high of 93.8%.

Anchor space remained near full capacity at 99.5%.

With 100% of our 2025 leasing complete and approximately 85% of new 2026 leasing already secured, we have excellent visibility into near-term cash flows and continued confidence in the durability of our income stream.

Also, on the leasing front, I'm pleased to announce a new Trader, Joe's at the Shoppes at Gallery in Austin. Texas Trader. Joe's is presents will further Elevate the center's profile, increase traffic and create meaningful synergies with our existing tenants.

Christy David: Securing Trader Joe's marks a significant enhancement to one of our premier properties in Austin, our largest market, and reflects the strength of our leasing strategy and our ability to attract top-tier tenants to high-performing locations. Health and wellness remains a key growth category, consistently driving daily foot traffic to our centers. Reflecting this momentum, we signed a notable lease this quarter with Crunch Fitness at our Scofield Crossing property, also in Austin. This addition enhances the center's overall appeal while also delivering an extraordinary rent spread of over 90%, underscoring the significant value created through the strategic repositioning. Leasing demand remains strong across a variety of categories. Quick service restaurants, off-price retailers, medical and wellness operators, and experiential users continue to be highly active. Brands like Chipotle, Kava, Starbucks, Burlington, and Five Below continue to seek space in high-quality locations.

This opportunity originated from our proactive efforts to recapture space from an underperforming junior anchor tenant.

Securing Trader Joe's marks a significant enhancement to one of our Premier Properties in Austin, our largest market. This reflects the strength of our leasing strategy and our ability to attract top-tier tenants to high-performing locations.

Health and wellness remains a key. Growth category, consistently driving daily foot traffic to our centers.

Reflecting this momentum. We signed a notable lease this quarter with Crunch Fitness at our school field. Crossing property. Also in Austin

This edition enhances the center's overall appeal, while also delivering an extraordinary rent spread of over 90%, underscoring the significant value created through the strategic repositioning.

Christy David: In closing, let me briefly highlight four recent acquisitions that reflect our strategic focus and redeployment of capital from our California portfolio sale. First, we purchased West Ashley Station, a fully leased Whole Foods anchored property in Charleston, South Carolina. This marks our third Charleston acquisition in the past six months. Next is 12 Oak Shopping Center in Savannah, Georgia. This property is anchored by Publix and features a strong mix of retailers, restaurants, and service tenants. This is our first asset in Savannah, a market with accelerating population and economic expansion. In July, we acquired the Marketplace at Encino Park in San Antonio, Texas. The property is 100% leased, neighborhood center, anchored by a top-performing Sprouts. San Antonio is one of the most affordable cities in Texas and is projected to become the sixth largest city in the US.

Leasing demand remains strong across a variety of categories. Quick Service restaurants, off-price retailers, medical and wellness, operators and experiential users continue to be highly, active Brands, like Chipotle cabba, Starbucks, Burlington, and 5 below. Continue to seek space. In high-quality locations. In closing, let me briefly highlight 4, recent acquisitions that reflect our strategic focus and redeployment of capital from our California, portfolio sale.

first, we purchased West Ashley Station, a fully leased, Whole Foods, anchored property in Charleston, South Carolina, this marks our third, Charleston acquisition, in the past, 6 months,

Next is 12 Oak Shopping Center in Savannah, Georgia.

This property is anchored by Publix and features a strong mix of retailers, restaurants, and service tenants. This is our first asset in Savannah, a market with accelerating population and economic expansion.

In July. We acquired the marketplace at, ensino Park in San Antonio, Texas.

The property is 100% leased Neighborhood Center anchored by a top performing Sprouts. San Antonio is 1 of the most affordable cities in Texas and is projected to become the sixth largest city in the US.

Christy David: Finally, we expanded our presence in Richmond, Virginia, with the acquisition of West Broad Marketplace. This center is anchored by Wegmans and Cabela's, with additional national retailers TJ Maxx, Burlington, and Michael's. We believe these acquisitions reflect our disciplined capital allocation strategy, and we are excited to have these properties as part of our growing portfolio. With that, I'll turn the call back to the operator for Q&A.

Finally, we expanded our presence in Richmond Virginia, with the acquisition of West Broad Marketplace. This Center is anchored by Wegman's and Cabellas. With additional National retailers, TJ Maxx, Burlington, and Michaels,

We believe these Acquisitions, reflect our disciplined Capital, allocation strategy, and we are excited to have these properties as part of our growing portfolio.

With that, I'll turn the call back to the operator for Q&A.

Operator: Thank you. If you wish to ask a question, please press * followed by 1 on your telephone keypad now. If for any reason you want to remove your question from the queue, please press * followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Linda Sy from Jefferies. Your line is now open. Please go ahead.

Thank you. If you wish to ask a question, please press star followed by them on your telephone keypad. Now, if for any reason you want to remove your question from the queue, please press star followed by 2.

When preparing to ask your question, please, ensure your device is unmuted locally.

Our first question comes from Linda, Tsai from Jeffrey's. Your line is now open. Please go ahead.

Linda Sy: Good morning. Thank you. Given acquisition activity is more back and loaded than you initially expected, does that mean you would have raised guidance if you had had the acquisition activity happen during the time period you initially expected?

Good morning, thank you. Um, you have an acquisition activity, is more back and loaded than you initially expected. Does that mean you would have raised guidance if you would had the acquisition activity happen during the time period? You initially expected?

DJ Busch: Hey, Linda. Good morning. It's a great question. I think the short answer is you would have seen probably a similar movement in our expectations relative to the internal operations. I think that's a fair assessment, especially when you're moving the amount of, I guess, proceeds that we are. I mean, if you think about our California portfolio, it's roughly 10%, maybe a little bit more of NOI. So to do that in one year and match fund it perfectly, nothing's really perfect in the transaction market. And the transaction market this year in the spring was a little bit slower than what we anticipated, so we were being a little bit more selective.

Thank the short answer is you would have seen probably a similar uh movement in our expectations relative to the internal operations. I think that's a fair assessment especially when you're moving the amount of uh

I guess proceeds that we that we are. I mean if you think about our California portfolio, it's roughly 10%, maybe a little bit more of noi. Um,

DJ Busch: And we are seeing that speed up, as I think as many of our peers have mentioned, in the back half of this year, which gives us a lot of optimism as we finish '25 strongly and then move into '26.

So to do that in 1 year um and match the fund, it perfectly, nothing's really perfect and the transaction market and the transaction Market this year in, in the spring, was a little bit slower than what we anticipated. So, we were being a little bit more selective and we have we are seeing that, uh, speed up. Um, I think as many of our peers have mentioned in the back half of this year, which gives us a lot of, uh, optimism

25.

And then move into 26.

Linda Sy: That makes a lot of sense. And then just the two-part question. What was the same store growth profile of the California assets you sold? Then I'll follow up with the next one.

That makes a lot of sense and then just the 2-part question, um what was the same store growth profile of the California assets you sold?

DJ Busch: Oh, it's a good question. Without getting into the underwriting of those assets, obviously what we were expecting, I think the way I would frame it is the growth profile that we were going to expect for the next couple of years in California was not going to be as favorable as what we've been seeing and experiencing in our portfolio in the Southeast. There's a lot of reasons for that, obviously. Demographic trends, migration, business-friendly environments, all those things have continued to draw us towards the Carolinas, towards Florida, towards, you know, in some select areas in Texas. And we see the unlevered risk-adjusted returns in those markets just to be more favorable than what we were experiencing in California.

And I'll follow up with the next 1. Oh, it's a good question. Um, with that without getting into the uh the underwriting of those assets obvious.

Obviously, what we were expecting. Um, I think I think the way I would frame it is the growth profile uh that we were going to expect for the next couple years in California. Um was not going to be as uh favorable as what we've been seeing and experiencing in our portfolio in the Southeast. Uh there's a lot of reasons for that. Obviously de demographic, Trends migration um business friendly environments, all those things uh

Have continued to draw us towards the Carolinas towards Florida to um you know in some in some select areas in Texas and we see the unlevered risk adjusted returns in those markets just to be more favorable than what the well.

Experiencing in California.

Linda Sy: And then given what you're saying, does that mean the 4% to 5% same store growth that you expect for this year becomes more sustainable as you look to next year, though I know you're not giving guidance?

And then given what you're saying does that mean the 4 to 5%? Same store growth that you expect for this year? Becomes more sustainable as you look to next year. So I know you're not giving guidance

DJ Busch: Oh, that's a good question. I think what I would say is what we used to think 3% to 4% is a very strong year on an internal growth basis. I mean, we've been surprised at how sticky it's been north of 4%. I think that's building in higher escalators. Obviously, our occupancy is near an all-time high, getting close to a frictional vacancy if we're not already there. I think we continue to surprise ourselves on hitting high watermarks. And we still do have some nice visibility as it relates to occupancy gains in our small shop for the next couple of years, notwithstanding any material change in the economy that would suggest any small shop fallout. But that, you know, that 4% does seem like a sustainable number, or it has been for the last couple of years.

Oh, that's a good, good question. I think what I think what I would say is what we used to think 3 to 4% is a is a very strong year on an internal growth basis. We do, I mean, we've been, we've been surprised to how sticky. It's been, uh, north of 4%. I think that's building in higher escalators obviously, our occupancy is, uh, near an all-time high, um, getting close to frictional, vacancy if we're not already there. I think we continue to surprise ourselves on getting high water marks and we still do have some nice visibility as it relates to documents and games.

that our small shop for the next couple years, notwithstanding any

Material change in the economy that would uh, suggest any small shop Fallout. Um, but that, uh, you know, that that 4% does seem like a sustainable number or it has been for the last couple years.

Linda Sy: Appreciate the color. Thank you.

Appreciate the color. Thank you.

Operator: Thank you. Our next question, that comes from Andrew Real from Bank of America. Your line is now open. Please go ahead.

Thank you. Our next question comes from Andrew real, from Bank of America.

Your line is now open. Please go ahead.

Andrew Reale: Hi. Good morning. Thanks for taking my questions. It seems like the level of competition for core grocery-anchored centers has just become so strong this year. Just curious if you're seeing any decline in the number of accretive core grocery opportunities available to you. And then I guess, could we maybe see you target more unanchored or shadow-anchored opportunities versus core?

Hi, good morning. Thanks for taking my questions. It seems like the level of competition for core grocery anchored centers has just become so strong this year. I'm just curious if you're seeing any decline in the number of accretive core grocery opportunities available to you. And then I guess, could we maybe see you target more on anchored or shadow-anchored opportunities versus core?

DJ Busch: Hey, hey, hey, Andrew. Good morning. All really good questions. So I'll walk you through. I do think on balance, and I think you've seen it from some of our peers' commentary as well and their transaction activity, that there is a lot of institutional interest, both public and private, to grow the grocery-anchored parts of their portfolio. So the competition is there. I think the reason that we were so excited about the opportunity to rotate out of Southern California, which is obviously a core market for almost everyone, certainly on the, it certainly gets a tremendous amount of private interest as well because of the financing options that you do have in such a liquid market. But our ability to take those proceeds and redeploy that cost of capital is probably as good as we can get, right?

Hey, hey, hey Andrew. Good morning, all really good questions. So I'll walk you through. I I do think on balance and I think you've seen it from some of our peers commentary as well and, and their transaction activity. That there is a lot of institutional interest both public and private to grow, uh, grocery the grocery maker parts of their portfolio. Um, so the the competition is there. I think the reason that we were so, uh, excited about the opportunity to rotate out of, you know, Southern California, which is obviously a core market for almost everyone. Certainly on the page.

DJ Busch: So we were able to be appropriately competitive on assets that we really, really liked at cap rates that would probably otherwise not be available to us. And you know, not only were we able to do it day one accretive, but the growth profiles on the on the assets that we're acquiring are more compelling.

Certainly, it gets a tremendous amount of private interest as well because of the financing options that you do have in such a liquid market. But our ability to take those proceeds and redeploy that cost of capital is probably as good as we can get, right? So, we were able to be appropriately competitive on assets that we really, really liked at cap rates that would probably otherwise not be available to us.

Not only were we able to do it day 1 and creative, but the growth profiles on on the 1 on the assets that were required, um, are are more compelling.

Andrew Reale: Okay. That makes a lot of sense. Thanks. And then now small shop, almost 94% leased, new high watermark there. What's a realistic ceiling in terms of where that can go from here?

Stealing in terms of where that can go from here.

DJ Busch: It's hard to say. You know, obviously, not every center was built to perfection when developed. There's always areas of the center that are a little bit more challenging to lease, and that's even in the A-plus types of centers. But we do have a process and an operational strategy to lease some of those areas that, you know, may perhaps the market rent in those locations is much material lower than in the center of the shopping center per se. But based on what we see today, we have direct visibility and call it another 100 basis points. Obviously, that could be offset by any tenant fallout or bad debt expense that we're taking.

It's hard to say, you know, obviously, never not every, uh, Center was built to Perfection when developed. And there's always areas of the center that are a little bit more challenging to lease and that's even in the A+, you know, types of, uh centers. Um but we do have a, you know, a process and an operational strategy to um lease some of those areas that you know may perhaps the market rent in those locations is much is material lower than uh in the center of of of the shopping center per se. Um but

DJ Busch: But based in our pipeline outside of executed leases, so you think of LOI and legal stages, there's another 100 basis points of runway, and we think that there could be a little bit more after that as well, so long as the small shop health stays as strong as it has.

Based on what we see today, we we have direct visibility and call it another 100 basis points. Um, obviously that could be offset by um, any any, any, any tenant, Fallout or bad debt expense that we're taking but based in in our pipeline outside of executed leases. So if you think of Loi and legal stages, there's another 100 basis points of Runway. And we think that there could be a little bit more off to that as well.

So long as the small shop Health stays as strong as it has.

Andrew Reale: Okay. Great. Thank you.

Okay, great. Thank you.

Operator: Thank you. As a reminder, to ask a question, please press * followed by 1 on your telephone keypads now. Our next question comes from Cooper Clark from Wells Fargo. Your line is now open. Please go ahead.

Thank you. As a reminder, to ask a question, please press star, followed by 1 on your telephone keypad now.

On the next question, we have Cooper Clarke from Wells Fargo. Your line is now open. Please go ahead.

Cooper Clark: Great. Thanks for taking the question. Could you provide some color on the current acquisition pipeline in terms of size and pricing and the confidence level on hitting the $100 million net acquisition guide from here?

Great, thanks for taking the question. Could you provide some color on the current acquisition pipeline in terms of size and pricing and the confidence level and hitting the 100 million net acquisition guide from here.

DJ Busch: Yeah. Yeah. No doubt. So what I would say is our acquisition pipeline, give or take, always has about $1 billion of real opportunities in it that will flex up and down a tad. But we tend to try and be canvassing that amount. Obviously, our level of success on closing on everything has been pretty good. We have, you know, we've had, we have looked at opportunities this year that we weren't successful in acquiring, which is fine. We just couldn't get to the final pricing. But you know, as we sit here today, and obviously, as we, you know, reiterate our core FFO guidance, we feel very confident that we're going to get to that $100 million.

DJ Busch: And if there are more opportunities, which it feels like a lot more opportunities are going to unlock and have already unlocked, you know, following the holiday, we think we could, you know, surpass that if those opportunities do come to fruition. And we have obviously plenty of capacity to do that.

Yeah, uh, yeah, no doubt. So what I would say is we've our acquisition pipeline give or take, always has about a billion dollars of real opportunity in it that will Flex up, uh, up and down a tad, but we tend to try and be canvasing that amount. Um, obviously our level of success on closing on everything is, um, you know, has been pretty good. Uh, we have, you know, we've had, we have looked at opportunities this year with that, we weren't successful in acquiring, which is, which is fine. We just couldn't get to uh, the final pricing. Um but you know as we sit here today and obviously as we, you know, reiterate our uh our core of the Void items, we feel very confident that we're going to get to uh that 100 million. And if there are more opportunities which it feels like a lot more opportunities are going to unlock um and have already unlocked, you know, following the holiday uh

We think we can, you know, uh, surpass that if, if those opportunities uh, do come to fruition and we have obviously plenty of capacity to do that.

Cooper Clark: Great. And then as a follow-up there, just trying to figure out kind of what assumptions you need to get to the low end of the FFO range and if the low end assumes any farther transaction activity throughout the rest of the year.

Great. And then as a follow-up there just trying to figure out kind of what assumptions you need to get to the low end of the ffo range and if the low end assumes any farther transaction activity throughout the rest of the year,

DJ Busch: It's a good question. And I think you're thinking about it the right way. If activity kind of froze as we sit here today, you know, that would put us probably closer to the low end of guidance. And then on the flip side, if we're able to bring a couple of deals forward or timing is a little bit better or a little bit more on our side, you could see us look to maybe the higher end of our range. So it really, at this year, at this point in the year, it really is mostly dependent on finding of those net of that net transaction activity.

Uh, it's a good question and uh, I think you're thinking about it the the right way. Um, if if activity kind of froze, as we said here today, um, you know, that put us probably closer to the low end of guidance. And then on the flip side, if we were able to uh, bring a couple deals um forward or a timing is a little bit better or a little bit more on our side, you can see this float to maybe the the higher end of our range. So it really at this year, at this point in the year, it really is uh mostly dependent on timing of those net uh of that. Net transaction activity.

Cooper Clark: Great. Thank you.

Great. Thank you.

Operator: Thank you. We currently have no further questions, so I'll hand back to DJ for closing remarks.

Thank you. We currently have no further questions so I'll hand back to to DJ for closing remarks.

DJ Busch: Thank you all for joining us. We look forward to seeing you guys in the coming months throughout the conference schedule. Enjoy the rest of your summer.

Uh, thank you all for joining us. Um, we look forward to seeing you guys, uh, in the coming months, um, throughout the conference schedule. Uh, enjoy the rest of your summer.

Operator: This concludes today's call. Thank you for joining us. You may now disconnect your line.

This concludes today's call, thank you for joining us. You may now disconnect your line.