Q2 2025 Kite Realty Group Trust Earnings Call
1.
Good day and welcome to the second quarter, 2025 kite, realy group, trust earnings conference. Call at this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session to ask a question during the session. You will need to press star 1, 1 on your telephone. You will then hear an automated message. Advising. Your hand is raised to withdraw your question. Press star 1 1 again, please be advised that today's
Conference is being recorded, I would now like to hand the conference over to your speaker, Mr. Brian McCarthy, senior vice president of corporate Communications. Please go ahead.
And good morning everyone. Welcome to kite realy group's second quarter earnings call.
Some of today's comments contain forward-looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties actual results. May differ materially from these statements, for more information about the factors that can adversely affect the company's results. Please see our SEC filings including our most recent form 10K. Today's remarks also includes certain non-gaap Financial measures. Please refer to yesterday's earnings press release available on our website for reconciliation of these non-gaap performance measures to our gaap financial results.
On the call with me today from Kite Realty Group Trust are our Chairman and Chief Executive Officer, John Kite, and President and Chief Operating Officer, Tom McGowan.
Executive Vice President and Chief Financial Officer, Keith fear and Senior vice president, Capital markets and investor relations Tyler Henshaw.
Given the number of participants on the call. We kindly ask that you limit yourself to 1 question and 1 follow-up.
If you have additional questions, we ask that you please rejoin the queue.
Now, turn the call over to John.
Thanks, Brian. And thanks, everyone, for joining today.
Uh, the krg team delivered, another strong quarter highlighted by our sound operational, performance, and excellent execution on the transactional front.
Demand for space and our high quality centers remains healthy evidenced by our consistently solid leasing results.
Blended cash. Leasing spreads in the second quarter were 17% which is our highest quarterly blend Blended spread in the past 5 years.
Our ability to grow rents, organically demonstrates, the mark-to-market potential embedded within our portfolio.
Ing spreads for non-option renewals were almost 20% in the second quarter and 16% over the last 12 months.
New leasing volume more than doubled sequentially. Largely driven by 11 new anchor, leases executed in the second quarter.
Our anchor, leasing activity, included 2, new grocery leases with Whole Foods and Trader, Joe's.
Alongside new leases with apparel Home Furnishing and fitness tenants.
While our lease rate declined sequentially due to the impact from recent bankruptcies based on the depth of demand in our leasing pipeline, we will gladly trade the short-term earnings disruption for the opportunity to upgrade our tendency and bolster the durability of our cash flows.
Continue to make great progress and backfilling space with well capitalized retailers.
And to date over 80% of the boxes that we recaptured, as a result of the recent bankruptcies are least, or in active negotiations.
Our small shop, lease rate, increased 30 basis points sequentially and 80 basis points year-over-year.
In addition to pushing occupancy, we continue to have success elevating our long-term growth profile.
Embedded escalators on our new and non-option renewal small shop leases, or 3.4% for the first half of 2025.
Activity this quarter included. Leases with aloe yoga Lily, Pulitzer Buck Mason sweet green and Shake Shack.
The consistent gains in our small shop. Lease rate are result of our teams disciplined approach that prioritizes credit quality, strong starting rents and higher embedded escalators and most importantly a compelling merchandising mix.
At the midpoint, we are increasing our nay and core ffo per share guidance by a penny and our same store. Noi assumption by 25 basis points
Our core FFO per share guidance now implies a 2.5% year-over-year growth despite the temporary disruption from anchor bankruptcies.
At the midpoint of our 2025 guidance, our post merger core ffo kegger since 2022 stands at 4.1%.
Our business is strong and will continue to improve as we lease space at attractive returns and enhance our long-term embedded growth profile.
In recent quarters, we've alluded to an uptick in our Capital recycling, efforts to reshape the composition of our portfolio and reduce exposure to at risk tenants.
Through the first half of 2025, we've taken significant steps in executing our long-term portfolio vision.
In a joint venture with GIC, we acquired Legacy West, an iconic asset. The further, solidifies our position as a prominent owner of Lifestyle in mixed-use assets, and expands our relationship with High Caliber retail brands.
Subsequently we expanded our strategic partnership with GIC by contributing 3 assets to a second joint venture which includes 3, larger format community and power centers in Port St. Lucie Florida and the Dallas MSA.
Our strategic partnerships with GIC now comprise over $1 billion of gross asset value.
Would the potential to grow the relationship as additional opportunities arise?
In addition, to the JVS, we've sold 3 non-core assets year to date.
Stony Creek, Commons in the Indianapolis MSA and LA Fitness anchored Center.
Fullerton, Metro Center in the Los Angeles, MSA an asset that presented an opportunity to monetize our limited exposure, to California at attractive pricing and really and relocate. The proceeds into Target markets.
And humblewood shopping center in the Houston, MSA where the adjacent owner made an unsolicited offer and the sale reduced our exposure to at risk tenants.
These transactions immediately improved the quality of our portfolio.
Our accredited to earnings and have a modest impact on our net debt Ava.
As we move forward, we will remain active in refining, our portfolio by reducing exposure, to at risk tenants while, increasing our focus on smaller format, grocery anchored centers and select lifestyle and mixed use assets.
Our second quarter results, inclusive of the highest blended spreads in five years, are growing. Our strategic partnership with GIC is now over $1 billion.
Product of a dedicated team focused on executing our strategic initiatives.
as always, we, we strive to produce strong results and deliver long-term value for all our stakeholders
Before returning, the call to Heath, I wanted to thank our tenants and team members at Eastgate Crossing in Chapel Hill, North Carolina for their continued partnership. As we work toward quickly, reopening the shopping center
Eastgate suffered flooding as a result of historic amount of rainfall caused by tropical storm Champs tall.
Fortunately, the company has comprehensive flood insurance with coverage as well in excess of estimated damages.
So now I'll turn the call over to Heath to discuss Q2 results. Thank you and good morning. I want to commend the krg team on an incredibly productive quarter. I'm encouraged by the significant leasing momentum against the backdrop of a portfolio that has tremendous occupancy upside.
I'm equally encouraged by the sheer velocity of transaction activity.
That showcases our allocation Acumen and ability to seamlessly execute across our Capital stack.
Turning to our results care to earn 51 cents of nearly FFL per share and 50 cents of core. If a poll for share, same property in AI grew 3.3%, driven by a 250 basis. Point contribution from higher minimum rents,
50 basis, point Improvement in net, recoveries and a 30 based Improvement in overdraft.
We are increasing the midpoints of our 2025 Navy and core fso for share guidance. By a 1 Penny each. This 1 cent increase is primarily a tributable to lower than anticipated that debt and higher than anticipated overage rent. Accordingly we are increasing the midpoint of our same property. Noi assumption by 25 basis points and lowering our full year credit disruption to 185 basis points of total revenues with 95 basis points. Reserved for the general bad debt, bucket and 90 basis points, a year marked for the credit disruption associated with the recent tenant bankruptcies.
The 95 basis, point General, Reserve is a function of combining the 84 basis points of actual bad debt. We experience with the first half of the year with a continuing bed that Assumption of 100 basis points for the balance of this year.
As for the 90 basis point backup. Anchor Reserve, it's important to note that we realize 30 basis points in the first half of the year and expect to experience the remaining 60 basis points in the back half of 2025.
This backs halfway to disruption, together with the extremely strong same-store results in the third and fourth quarters of 2024. Our results are responsible for the same-store deceleration in the back half of 2025.
Finally, the sequential increase in our net interest. Expense assumption is driven by transactional timing causing the balances on a revolver to remain longer than anticipated.
Our investments in capital markets teams have been tireless. We sold 3 non-core assets and completed 2 joint ventures involving 4 assets with a world-class institutional partner that represents over 1 billion dollars of gross transactional activity.
With investment grade credit spreads and historic flows. We opportunistically return to the public debt Market by issuing their 7-year, $300 million Bond at a coupon of 5.2%. We also reduced the credit spread on our 1.1 billion revolver and 2 terminals representing. 550 million. When all the dust settles, our net debt to even the stands of 5.1 times, which is about the lowest in our peer set. As John mentioned, we have consistently telegraphed, our desire to accelerate the transformation of the portfolio, within the confines of prudent balance sheet management. This past quarter is an excellent blueprint for what lies ahead.
We are laser focused on delivering strong results. Exceeding expectations, and creating long-term value again. Thank you to our team and we look forward to seeing many of you over the next couple of weeks. Operator, this concludes our prepared remarks, please open the line,
Thank you as a reminder, to ask a question. Please press star 1, 1 on your telephone and wait for your name to be announced to withdraw your question. Please, press star 1 1 again, due to time restraints, we ask that you, please limit yourself to 1 question and 1. Follow-up question, please. Stand by while we compile the Q&A roster,
And our first question will come from the line of Craig mailman with City. Your line is open
Thanks, it's just a period, Craig. Um, I guess just on the leasing side. Have you seen any any changes at least gestation periods? It's been an increase in willingness from tenants to sign leases, just as we get more clarity around tariffs.
perhaps in the beginning of the year, maybe there was a little more indecisiveness, but at this point in time,
Um, it feels as though there are significant demand and it's really all across the board, you know, we mentioned how much we did in the in the anchor business but we also improved our shop occupancy and with a very diverse high quality group of tenants. So, you know, from my personal perspective, it's quite strong right now. Tom, you want to add anything? Yeah, I think, I think both sides are really trying to work together, to find ways to improve scheduling. You know, how to get drawings done earlier, how to how, to sort out permits, uh, collectively to make sure they're done properly. So I'm, I'm actually seeing more cooperation between the 2 sides to open source as quickly as possible.
That's very helpful and then just on the um on the actual negotiations. And what's the take for higher embedded escalators. Um you know what do you what are you hearing from prospective tenants as as you look to do that?
Well, I think, you know the the proofs in the pudding when you look at our results it's it's clearly uh been successful in our ability to generate higher growth. Um certainly it's um you know it's it's still a challenge at times with the anchor tenants. But we're we're we're we're we're quite a bit better than we were a few years ago. When you look at our anchor tenants I think the average is like 1 and a half percent and it used to be like like right around 1.
A couple years ago. So we we've made strong strides there and and you know with 3.4% embedded growth in the overall portfolio and the first half of the year, I'd say we're we're leading the pack in that regard.
Thank you.
1 moment for our next question.
And that will come from the line of Todd Thomas with keybanc capital markets your line is open.
Hi. Yes. Um, I just wanted to stick with Leasing and new lease volume in particular, which, which John you highlighted, uh, Heath too. Um, you know, I wanted to ask about the forward leasing pipeline if you can comment on July activity and your visibility to get additional anchor, lease deals signed in the near term, with some of the inventory that you recaptured. And and also, if you have any insight on on retent, anding spreads As you move ahead. Sure. Relative to to this quarter. Sure
Yeah, Todd. I think I mean we we we feel very good about the um the way it's picked up in the last couple months.
and I would say that, you know, where we sit here today, that, that if anything is continuing to accelerate, um, we have a very good portfolio of opportunities for
You know, retailers and there's a limited number of those spaces, you know, uh, in good locations. So generally speaking, when we're looking at 1 of these deals, um, we have a couple different opportunities per Avail, you know, available space.
And and that was part of the point. We wanted to make is that we're very, we're very focused on, not how fast it happens but rather how good the outcome is. And and it's probably why the first quarter we only did a couple deals and the second quarter we did 11, right? And the anchor side so I think I think the demand is strong, it's really more about us making smart decisions about what's the right merchandising mix who has the best credit, um, in in terms of the tenants that we're looking at and then also, you know, the growth that we talked about, we're very focused on that. But overall it's strong time. You want to add some color? Yeah, I would. I would Todd. I just look at the, uh, look at the 11 boxes, that we've executed in the quarter.
Cast spreads or 36.6% you have returns close to the 25%. So with you when you include the first and second quarter say you're at 13 we're going to see that volume of new box, inventory, getting signed increase significantly and we're in the process of making sure that happens. But we know we have the inventory out there to to transact on. Now, we just got to hit our
Our key points that John talked about, you know, making sure that you know, the credits there, the quality, the merchandising, and I think we're going to be successful with that.
That's helpful. Um, you you mentioned John that you would gladly trade the the short-term disruption, for the, the mark to Market and and all the, you know, tenant merchandising um
over shortening that rank commencement time frame and and that disruption um you know, seems to be a little bit of a challenge I you know in in in how the cash flow and and noi growth Trend, you know, is there anything that
Is is under consideration or anything that you can do to sort of shorten that rank commencement period in general.
Yeah I mean I I think Todd the biggest thing we can do is work with the tenant get their layouts done and then get drawing start. And we're we're not as we're not afraid to get drawings started early. We'll work out in a a a reasonable arrangement in terms of a reimbursement of the deal doesn't move forward but if we can get those drawings started, we can get the permitting started early. You start putting yourself in a in a positive 90-day position in terms of the normal delivery. And then we're also putting tremendous pressure on the tenants saying look, if you want this deal, here are the terms and the parameters you need to work with us in to get open as quickly as possible and that then gives you a leg up on other tenants that we're talking to. So we're trying to pull as many levers as possible to
All right. Thank you.
Thanks 1 moment for our next question.
And that will come from the line of Andrew Reel with Bank of America. Your line is open.
Hi, good morning. Thanks for taking my questions. Um, first, what's the latest on the sale of City Center?
Um, City Center. You know, we we still are marketing the property for sale in the last quarter. Um well in the, in recently, we were we had a buyer that was identified. That is no longer, you know, capable of moving forward. So we're, you know, continuing to market the property. Meanwhile, you know, the good news is that the property? We have some good new leasing activity. So probably just helps us quite frankly but we continue to market for sale.
Okay. Does the humblewood sale satisfy the asset sale proceeds to fund Legacy westers? There's still more dispositions if um City centers delayed.
Yeah, let me listen to all cache is funable, right? So to the extent, that humblewood is a replacement for City Center and tell you the humble the trade. It is traded at a center cap rate than we anticipate City Center will trade. So to the extent we're using Hubble would and potential other sale to sort of complete that Circle we had last last quarter. It's only going to make the accretion more.
Okay. Thanks and I guess uh just 1 more. Um if I can just think, long term, what's a realistic ceiling for small? Shop occupancy.
well, I mean, um,
Hard hard to say. We don't put a cap on it, right? I mean we were our, I think our occupancy in 2019 was
Uh, 92 and a half percent. Um,
And so we're obviously getting closer to that. I would think we could exceed that, and I mean I know we can exceed it. I wouldn't think we can; I know we can exceed that. So the goal is to continue to push it, but again, no different than any of our strategies, we're always looking for the best outcome, not the fastest outcome.
Um, so, but it happens to have a lot of momentum right now, so we feel very good about continuing to grow it.
Okay, thank you.
1 moment for our next question.
And that will come from the line of Paulina Rojas with Green Street. Your line is open.
Good morning and you mentioned the efforts to reduce exposure to at risk tenants. And
Front already but more broadly. How are you seeing investor interest in these larger? I assume community centers or more power center like type of assets.
And um, are there any?
Particular retailers that the market is showing more hesitation to absorb sharing your concerns.
Um, to the first part of the question in terms of how, how I think the demand is quite strong in that category Paulina in the larger format. Um, obviously when you look at the yield dispersion between the different property types,
Um it can be very attractive to an investor and there's leverage available as well. So and in fact you know, when we transacted in our second joint venture with GIC that was that was that's a good indication of, you know, very sophisticated investor with um an interest in the product type.
In terms of I think this the second part of that about Investors, I believe having issues with certain retailers. I mean, generally speaking, you know, when you're buying a center especially when we're talking about the larger format centers, they're large enough that not 1 or 2, tenants is really going to change the view of the value.
Um it's really more important to us on the back side of that, just to, you know, over time, change the makeup of our cash flow. So it's it's really more about us and less about what some other investor would think about a particular property.
Um, and then
My other question is so you're starting from a lower occupancy than your peers impacted by these recent bankruptcies.
And to, to what degree do you believe that since the stage for above?
Peer group growth in 26 and 27.
and,
Is it dynamic something we should expect this whole performance? And to what degree do you feel comfortable being held accountable for an expectation like that?
Well, that's a that's a multi-part question you got there. But I'll I'll say this. That um yeah you know, when you look at where we are from a lease percentage and an occupancy percentage
And where we've been um and you look at the activity that is is brewing and that we just delivered in the second quarter. I would say we feel very optimistic that the lease percentage will gain you know significantly in the next 3 4 quarters. Um obviously as Tom pointed out you know when a big part of this disruption is obviously in the anchor space.
And the anchor space turning on rent takes time. So to and we've always said that, if you look at, um, the deliveries that we've had and the rent commencement dates that we've had over the last few years that generally is somewhere between 12 and 18 months to turn on rent after lease execution. So, um, you know, pick the pick the middle say, it's 14.15 months, obviously, leases that we sign in Q3, you know, would be, uh, lucky to begin. You know, we'd probably begin turning on rent in late 26th.
And then Lisa's we sign in Q4 would obviously be turning on, in 27 based on those timelines. Now the flip side of that is, we're doing everything possible to accelerate that. In fact, if you look at some of the leases that we signed this year, um, we are having we have 3 or 4 tenants that are opening within the calendar year, anchor tenants, so it can be done and that's what Tom and his team are very focused on this. This can be done.
So that's, I would say that when you look at the next couple years of growth, um, you know, you look at it over the next 2 or 3 years, we are positioned, extremely well. And I think, you know, it's not reflected in the stock and um, I think whether you own the stock today or you're thinking about investing in it, I guarantee you you won't be able to buy it for this price over the, you know, in the next couple of years. So I think we have a, a tremendous upside in front of us and we're, we're totally comfortable with pressure. That was the third part of your question. That's what we're, you know, that's what we're here for. Uh, is to deliver. Obviously we took a hit uh, on these bankruptcies. We were we were more exposed. When you look at the last, you know, major bankruptcies, we were more exposed. And uh that's part of our strategy to move away from some of that and and, you know, boost our cash growth. So I actually think this is a great time for us and a great time to get into the stuff.
Thank you for answering my multi-question, always.
We appreciate it. Thank you.
1 moment for our next question.
And that will come from the line of Alexander Goldfarb with Piper Sandler. Your line is open.
You know, the stock market turmoil, the talking head turmoil, but it doesn't sound like from a retailer perspective. There was any slowdown at all.
Well, I think obviously there's a big difference between.
Um, the stock market which, you know, which is trading. Uh, you know, all day long, consistently headline headlines, are moving around. The retailers are looking out over a much longer periods of time. Alex, obviously, when, especially the national retailers, who signed ten year leases?
um, a lot of the as we've all said, a lot of the retailers pivoted during Co to diversify their distribution channels, and their supply channels,
Now to say it's irrelevant, it's not irrelevant. Um, you know, it's it's still a factor in the sense of stability uh, and we've just gotten a lot more stable as these deals have been announced over the last few weeks. There's there's obviously still a few major trading partners that need to be buttoned up. But I would think that it's pretty clear that we're moving to a place of stability. Um, and that's been a big part of it, but bottom line is that it kind of goes back to the supply demand equation that we always talk about. There is very limited Supply in our space and, you know, so when you have an opportunity to get a new space and you're a retailer looking to grow you, you want to move on that?
Um you know we we've obviously taken A disruption in the last few months in this kind of really uh strange set of events with bankruptcies and then how people felt about all this but now it's seems to be very uh and we're in a much better place today.
Yeah, it's interesting. I mean it just shows the resilience of their supply chains that they can pivot adjust, you know, to price accordingly. Second question. Uh,
He can you just remind us on? RPI, I know you're not 26 guidance but still on RPI specifically what is the non-cash burnoff that we should be thinking about as we're updating our 26?
Sure. So, going into from 24 to 25, you will call it was about 5 cents. Uh, good news is it's about half of that going in from 25 to 26 and that'll be split between Marx and the debt and marks and the leases.
Okay. So about 2 and a half cents.
About 2 and a half cents, correct?
Okay, thank you.
Thank you.
1 moment for our next question.
And that will come from the line of Michael Goldsmith with UBS. Your line is open.
Good morning. Thanks a lot for taking my questions. You've given your stream.
Strategic transformation and capital recycling. You probably have some of the most unique insight into the raised by our interest in the retail, real estate space. So, what have you learned about the buyers? What are they looking for specifically in the centers and how are they thinking about cap rates? And then just, uh, you know, I know this is a lot, but right, like, give given that you had to buy our back out of City Center. Do you think that is is going to be more frequent? It just given the raised interest in the buyer pool going forward. Thanks,
um,
to take the last part. Uh, know I I I think that's kind of an aberration with 1 particular group and those things happen.
Um, and that's, and that's why you, you know, you have a pool and a a you go back to the pool. But as it relates to overall, I just think that there is very strong institutional demand for um you know, open are retail. It was a, a kind of a product type that, you know, some investors did not invest in for the last 5 5 5 plus years.
And as the as the ground has got a lot firmer and the and returns have improved. You've seen a lot of people move into the space, uh, I just think it's a great kind of risk. Adjusted return for investors when you compare it to other product types. Um, certainly from a going-in cap rate perspective, but more importantly, from an irr perspective.
Um, and so I I think that you're just seeing a catch up there. There's people that weren't in the space that now are very actively trying to rebalance their portfolios. Obviously, if you look at the typical Institutional Investor, they were probably overweighted to office and now they're, you know, probably pivoting to other things including retail. Uh, and when you look at the irrs, they can be generated, this is, if you ask me, it's still still undervalued. I mean, I would say that's going to change.
Demand for larger format that's a lot due to the just the capital formation is happening in the return hurdles that these guys need to make so you're seeing again a better bid for larger format because of the ongoing yield, and you're also seeing sort of the lifestyle mixed use also increase in in the buyer Bulls. Also, the sellers as well. Legacy West, for example, or Scottsdale Quarter, Birkdale Village, you're starting to see more of these sort of generational, lifestyle assets, uh, a trading and pricing accordingly. So it's been really interesting. We're seeing raw demand across the entire spectrum of the asset class.
Thanks for that super helpful. And as a follow-up, you noted earlier over 80% of the boxes that you recaptured as a result of the recent bankruptcies or leased or inactive negotiations, you know, for the remaining 20% or so, are are those in lesser locations and maybe more difficult to lease or is that just kind of the result of timing and competition and whatnot? Just trying to get a sense of, you know, the the first 80% came pretty quickly, you know, does the next 20% take a little bit longer to get done just due to like they're just they're not as in demand, thanks. Yeah. No. I I don't I don't think it's necessarily um about that. I I don't think you can paint a broad brush when you're talking about 20% of these vacant boxes. I mean, if you go back in time, I think we peaked at like 98% occupancy in our in our box inventory. So I mean you're you're always going to have some
Some, that are more difficult than others, and for various reasons. But also, I think it goes to the way that we negotiate and, and the objectives that we have. We we I I can't overemphasize. The fact that this is not a, you know, a race to fill space. This is this is more about creating value for our stakeholders over the long term, not the short term. And frankly, if we wanted to fill space and erase, we would have done some deals that we don't want to do that. Just aren't good for the long term, you know, value of the shopping center. So I think it's it's it's all going to come together over time and we're just not counting quarters, you know, we're thinking about the next 2, 3 4, 5 years.
Thank you very much. Good luck at the back, App.
Thank you.
1 moment for our next question.
And that will come from the line of Cooper Clarke with Wells. Fargo, your line is open
Hey, thank you for taking the question. I wanted to ask about the JVS the GIC and comments earlier on continuing to grow the relationship. Um, could you provide any color on the current pipeline of deals, you're underwriting with them on the acquisition side and how we should think about the JV portfolio at GIC growing longer term as you execute on some of the Strategic goals.
Yeah, I mean look in terms of uh our our our relationship with Jac. Of course we couldn't be more happy to uh, partner with 1 of the world's most.
Active and sophisticated investors.
Um, you know, I I don't think we want to comment on specifics on underwriting, uh, with them but bottom line is, as, as Heath mentioned, there are more and more opportunities for larger scale deals that we could look to JV, um, you know, we we both have an understanding of what each other is interested in. So, you know, we will go about that 1 at a time.
Um, but yeah, we're we're super happy with the relationship and, you know, we we want to go do a great job for them. Uh, as a partner. Keith. Do you want to come? Yeah, I I would just mentioned that neither party has a specific mandate. We don't have to or exclusively with each other. You know, to the extent that we're looking at something that they find. Interesting. That's where the opportunities will arise. So we don't have to partner with them on the future, and neither did it with us. So, again, it's been a great partnership over a billion dollars in value. And certainly, it's repeatable,
Let's just say it went from zero to a billion pretty quickly.
Great. Thank you. Thank you.
1 moment for our next question.
And that will come from the line of florist Van dickem with Latin Berg. Your line is open.
Hey guys. Uh, thanks, thanks for taking my question. So um
Market, uh, retail rents to market. If you can give some more details, please.
Sure. So, I'll first start with the yields Flores and, and you're, you're correct, and you're remembering correctly, which I think is a really elegant part of this. This joint venture transaction is our effective yield taking into account the management fees on Legacy West is right around 6 and a half percent, uh, conversely to, you know, the 48% that we contributed into the partnership uh the cell yield on. That is also 6 and a half percent. So would you in essence, what we're doing is we we took portions from our power centers and we used it to buy a portion of Legacy West at the same exact yield which we think again is extremely elegant in terms of the purchase price accounting floors. It is going to be on a non-cash basis minimally accretive. So basically, we're saying is that the, um, the mark to Market on the below Market. Leases is greater than the mark to Market on the below Market debt. So again, slightly accretive nothing material, but
Net, net positive.
Great. And and then I guess my my follow-up uh
More, I guess maybe for Tom or or John, but, um, your recovery ratio. I, I believe it's, uh, the highest in the in the sector around 92% and it. And, and it went up even though your occupancy went down this past quarter. Um, I'm curious, what are the initiatives that you are doing to keep improving that recovery ratio?
And and how much higher can that go? Is there a sealing? Their
Well, I I I don't, I mean, first of all, as you said, we are, we are, if not the highest 1 of the highest recovery. Ratios, I think, I think the first thing to look at is that we have probably the most fixed cam, um, in our portfolio as computer as compared to peers and you know that that that's taken years to develop. So you can't just start it and think that it's going to make a big impact in a year. We've been working on this probably for 7 years uh converting to fixed Camp. 94% of the deals. I think or maybe 95% of the deals we've done so far this year have been fixed camp.
Um, you know, so we know what we're doing. Yeah. And, and that space, and it's and again, it's not just a simple transition. You have to kind of understand how do you run these portfolios, when you set a budget and, you know, you need to hit that budget. I think we're very, very aggressive about how we operate you, you know, how we do that, you've seen how we do that florist on the ground? Um, and, and that, that flows through the whole organization that everyone is very laser focused on efficiency, but yet presenting a Class A Product, um, which obviously we have and you've seen that too. So I think it's it's that I would, I would turn to that and then just overall expense control, you know, how we control expenses at the property, how we control expenses in terms of pass through. So it's it's not just 1, silver
Silver Bullet it. It's it's a it's a way of way of living. It's a way of operating Tom you want. Yeah. I mean this this is really where the team earns their keep and this is where the grinding occurs in terms of making sure we're bidding out. These contracts every year, getting efficiencies, doing the things that we need to do. While keeping the balance that John said of delivering a first class Center. But I think we're even more proud of not just the, the components of fixed camps but that below the belt just really digging into the numbers, and we'll continue to do that.
Thanks guys.
Thank you, Flores Flores. Congratulations on your new shop.
Great news.
Thank you.
1 moment for our next question.
And that will come from the line of Hong, Liang, Zhang with JP Morgan. Your line is open.
Yeah. Hey guys, um, 2 questions, I guess the first question with the with the fact that you're at 2 JBS with the with GIC could you provide some guide posts to how we should think about how the equity and JB line should trend for the rest of the year?
You mean from an accounting perspective? Yeah, for sure. Within the income statement.
Okay, so um geography wise, you know, on the balance sheet, you're going to see it, um, you know, all netted out and under Consolidated subsidiaries. And then you also see, you'll see the noi, the depreciation and the interest, expense all netted out again. Um, in the in the income statement under the unconsolidated line, however, we've done is in the new presentation in the supplemental, you'll see, we've Consolidated all. So it gives you all those pieces individually and and that's for all of our unconsolidated JVS. So take a look in the supplemental and you'll see the information in there.
Question. Um,
Your non-cash rents bounce around a little bit. So far this year, I was just wondering if there's anything one-time and the current quarter's numbers tied to the bankruptcies.
I don't think there's anything. You know, there's just natural lumpiness in that sometimes so there's nothing in there. That's um, you know, although we had a, you know, with the with the Big Lots bankruptcy, we did have a have a 1 time. Um, you know, acceleration so other than that, it shouldn't be too bouncy.
Thank you.
1 moment for.
Our question.
And that will come from the line of Alex Fagan with beard. Your line is open
Hey, thank you for taking our questions. Uh, I guess 1 for me is what is the appetite for sh share BuyBacks today?
I mean, I I think,
like, we always say, we we, you know, we we have, uh, we can currently have a
A buyback plan in place and an ATM plan in place, and, you know, we always want to be thinking about that from an opportunity. Opportunistic perspective.
Also, what we've been clear about is that we're spending a lot of capital right now and getting really high returns on the backfilling of the space.
And you know, we still are growing our dividend and we still generate free cash flow. So bottom line is I think we're always looking at that and always thinking about it certainly as we move forward.
Um, you know, over the next several quarters, and continue to backfill and continue to generate new cash flow that that probably comes more of a, uh, opportunity to look at, but you never know. I mean, we're always, we're always analyzing the best place to invest.
Got it. Uh, that's it for me. Thank you.
Thank you.
1 moment for our next question.
And that will come from the line of Ken Billingsley with compass point research. Your line is open,
Hi, good morning. I wanted to follow up just on the anchors. You you had discussed and it was in the press release about uh on the new anchor, cashley spread of 36%. And um just looking at the supplement that looks like that was about um 40% of anchor signing in the quarter, what was what were you getting on the uh on the other piece?
I'm not sure we understand. Can you comparable versus not comparable, but it can is that are you trying to ask, what, what's the comparable versus non-comparable anchors or what? What what's Yeah. Well, yeah, since she said the new anchor, leases looks like it was 207,000 feet, but it looks like you did 557. So, I was just curious. What, what you were getting on the other, uh, 350,000. What was the lease spread on on those anchors?
Yeah, I believe those are probably close to 25%.
And as as we look as we look into the remainder of the year, um the expiring AVR, I think it's like twenty dollars and 11 cents that jumped up. Uh it's a very small sample, it's a less than 200,000 uh square feet are are is there any reason that that significantly higher or something unique about this those tenants or are we likely to still see over 20% uh cash Leaf spreads through the remainder of this year? Even on that?
That group.
yeah, I I
that, that that
The composition of that pool is shocked; it's more shop-heavy, which is why you're seeing a higher number. So there's nothing really happening there, other than just the mix of leases that are left to get done.
So nothing unique about those anchor, tenants themselves that to be done, okay?
Thank you.
Thank you.
1 moment for our next question.
And that will come from the line of Zachary white with btig. Your line is open.
Hi, yes, this is Zach lighten from Mike.
I'm taking my question. Uh, can you expand more on the Strategic Gateway Market exposure, uh, specifically Seattle and the other non- Sunbelt markets in the wake of solutions sale? Uh, mainly asking, are you seeing any differentiation in performance and are there additional opportunities to maybe, rotate out of some of those markets and back into the Sun Belt? As the transaction Market starts to loosen,
Um, no, I think...
performance.
I think when we look at our markets, it's pretty broad-based in terms of, you know, I think it's pretty tightly. Uh, packed together in terms of how these markets are performing.
That our representation there. Just was not big enough for us to continue to want.
To, um, be there quite frankly and and look the reality is, there's some difficult difficult things about doing business there. Um, and but we only had, you know, 3 properties in in uh, California, uh, We've sold 1. 1 of them is going through a rezoning, which we will then sell. Um, and then the third 1 likely would be, uh, probably a candidate to sell as well, but as it relates to the rest of the um, you know, those markets, like Seattle and New York and Chicago.
Um, which we would consider Gateway markets. We feel very good about our positions in those markets. That being said, we're always thinking about it. We're always thinking about what's the best place for us to operate. Where do we generate the highest return? We compare margins. We look at demand in the pipeline, but right now that demand is pretty strong across the board. And I think if you look at where we're doing deals, we're doing deals across the board in all those markets that you mentioned. So,
We'll see how it evolves, we're very happy. But by the way, you know we have 40% of our Revenue comes from Texas and Florida. We still think that that's pretty smart. Um and then the balance in the Southeast has become is is strong too. So
Uh, we'll continue to always monitor it, but we're happy where we are right now.
Got it. Okay, great. Thanks for the time.
Thank you.
Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. John kite for any closing remarks
Well, I just want to say again, thank you all for taking the time, uh, to be on the call with us today. And we look forward to seeing you soon.
This concludes today's program. Thank you all for participating. You may now disconnect.