Phillips Edison Q4 2025 Phillips Edison & Co Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Phillips Edison & Co Inc Earnings Call
Speaker #1: Good afternoon, and welcome to Phillips Edison & Company's fourth quarter 2025 earnings call. Please note that this call is being recorded. I will now turn the call over to Kimberly Green.
Operator: Good afternoon, and welcome to Phillips Edison & Company's Q4 2025 Earnings Call. Please note that this call is being recorded. I will now turn the call over to Kimberly Green, Head of Investor Relations. Kimberly, you may begin.
Speaker #1: Head of Investor Relations. Kimberly, you may begin.
Speaker #1: begin. Thank
Kim Green: Thank you. I'm joined today by our Chairman and CEO, Jeff Edison; President, Bob Myers; and CFO, John Caulfield. Following our prepared remarks, we will open the call to Q&A. After today's call, an archived version will be published on our investor relations website. As a reminder, today's discussion may contain forward-looking statements about the company's view of future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings. In our discussion today, we'll reference certain non-GAAP financial measures. Information regarding our use of these measures, and reconciliations of these measures to our GAAP results, are available in our earnings press release and supplemental information packet, both of which have been posted on our website.
Kimberly Green: Thank you. I'm joined today by our Chairman and CEO, Jeff Edison; President, Bob Myers; and CFO, John Caulfield. Following our prepared remarks, we will open the call to Q&A. After today's call, an archived version will be published on our investor relations website. As a reminder, today's discussion may contain forward-looking statements about the company's view of future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings.
Speaker #2: I'm joined today by our Chairman and CEO, Jeff Edison; President, Bob Myers; and CFO, John Caulfield. Following our prepared remarks, we will open the call to Q&A.
Speaker #2: After today's call, an archived version will be published on our Investor Relations website. As a reminder, today's discussion may contain forward-looking statements about the company's view of future business and financial performance, including forward earnings guidance and future market conditions.
Speaker #2: These are based on management's current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings. In our discussion today, we'll reference certain non-GAAP financial measures. Information regarding our use of these measures, and reconciliations of these measures to our GAAP results, are available in our earnings press release and supplemental information packet.
Kimberly Green: In our discussion today, we'll reference certain non-GAAP financial measures. Information regarding our use of these measures, and reconciliations of these measures to our GAAP results, are available in our earnings press release and supplemental information packet, both of which have been posted on our website. Please note that we have also posted a presentation with additional information. Our caution on forward-looking statements also applies to these materials. Now I'd like to turn the call over to Jeff Edison. Jeff?
Speaker #2: Both of which have been posted on our website. Please note that we have also posted a presentation with additional information. Our caution on forward-looking statements also applies to these materials.
Kim Green: Please note that we have also posted a presentation with additional information. Our caution on forward-looking statements also applies to these materials. Now I'd like to turn the call over to Jeff Edison. Jeff?
Speaker #2: Now I'd like to turn the call over to Jeff Edison.
Speaker #2: Jeff? Thank you,
Jeff Edison: Thank you, Kim, and thank you, everyone, for joining us today. We are pleased to report strong 2025 results, which reflect Nareit FFO per share growth of 7.2%, core FFO per share growth of 7%, and same-center NOI growth of 3.8%. In addition, our strong 2026 guidance growth rates for Nareit FFO and core FFO per share are in the mid-single digits. While the market may continue to be nervous about the health of the consumer and the impact of tariffs on retailers, our outlook remains unchanged. As it relates to PECO's neighbors and grocers, we continue to feel very good about our portfolio. We are seeing a resilient consumer, and our top grocers and necessity-based retailers continue to drive solid foot traffic to our centers.
Jeff Edison: Thank you, Kim, and thank you, everyone, for joining us today. We are pleased to report strong 2025 results, which reflect Nareit FFO per share growth of 7.2%, core FFO per share growth of 7%, and same-center NOI growth of 3.8%. In addition, our strong 2026 guidance growth rates for Nareit FFO and core FFO per share are in the mid-single digits. While the market may continue to be nervous about the health of the consumer and the impact of tariffs on retailers, our outlook remains unchanged. As it relates to PECO's neighbors and grocers, we continue to feel very good about our portfolio. We are seeing a resilient consumer, and our top grocers and necessity-based retailers continue to drive solid foot traffic to our centers.
Speaker #3: Kim: And thank you, everyone, for joining us today. We are pleased to report strong 2025 results, which reflect NAV FFO per share growth of 7.2%, core FFO per share growth of 7%, and same-center NOI growth of 3.8%.
Speaker #3: In addition, our strong 2026 guidance growth rates for NAV FFO and core FFO per share are in the mid-single digits. While the market may continue to be nervous about the health of the consumer and the impact of tariffs on retailers, our outlook remains unchanged.
Speaker #3: As it relates to PECO's neighbors and grocers, we continue to feel very good about our portfolio. We are seeing a resilient consumer, and our top grocers and necessity-based retailers continue to drive solid foot traffic to our centers.
Speaker #3: As it relates to the transactions market, it's no surprise that the strong fundamentals of grocery-anchored shopping centers continue to attract increased attention in the market. We remain confident in our ability to deliver on our gross acquisitions guidance of $400 to $500 million in 2026 at PICO share.
Jeff Edison: As it relates to the transactions market, it's no surprise that the strong fundamentals of grocery-anchored shopping centers continue to attract increased attention in the market. We remain confident in our ability to deliver on our gross acquisitions guidance of $400 to $500 million in 2026 at PECO Share. We acquired approximately $400 million in acquisitions at PECO Share in 2025. We have demonstrated consistent success in finding core grocery-anchored opportunities as well as under-managed and under-occupied everyday retail centers. Additionally, we have the joint venture expertise and partnerships to continue to acquire across the investment spectrum of grocery-anchored retail. We continue to be disciplined buyers, investing in acquisitions above our cost of capital. We continue to target an unlevered IRR of 9% for our grocery-anchored acquisitions and above 10% for our everyday retail centers. In summary, we are pleased with our results for 2025 and our outlook for 2026.
Jeff Edison: As it relates to the transactions market, it's no surprise that the strong fundamentals of grocery-anchored shopping centers continue to attract increased attention in the market. We remain confident in our ability to deliver on our gross acquisitions guidance of $400 to $500 million in 2026 at PECO Share. We acquired approximately $400 million in acquisitions at PECO Share in 2025. We have demonstrated consistent success in finding core grocery-anchored opportunities as well as under-managed and under-occupied everyday retail centers. Additionally, we have the joint venture expertise and partnerships to continue to acquire across the investment spectrum of grocery-anchored retail.
Speaker #3: We acquired approximately $400 million in acquisitions at PICO share in 2025. We have demonstrated consistent success in finding core, grocery-anchored opportunities as well as under-managed and under-occupied everyday retail centers.
Speaker #3: Additionally, we have the joint venture expertise and partnerships to continue to acquire across the investment spectrum of grocery-anchored retail. We continue to be disciplined buyers, investing in acquisitions above our cost of capital.
Jeff Edison: We continue to be disciplined buyers, investing in acquisitions above our cost of capital. We continue to target an unlevered IRR of 9% for our grocery-anchored acquisitions and above 10% for our everyday retail centers. In summary, we are pleased with our results for 2025 and our outlook for 2026. PECO's core business is our grocery-anchored shopping center business. We are the leader in owning right-sized neighborhood shopping centers focused on necessity-based retail. Our locally smart operating platform is driving strong rent and NOI growth. We remain confident in our ability to execute our plans and deliver solid growth in 2026 and beyond.
Speaker #3: We continue to target an unlevered IRR of 9% for our grocery-anchored acquisitions and above 10% for our everyday retail centers. In summary, we are pleased with our results for 2025 and our outlook for 2026.
Speaker #3: PICO's core business is our grocery-anchored shopping center business. We are the leader in owning right-sized neighborhood shopping centers focused on necessity-based retail. Our locally smart operating platform is driving strong rent and NOI growth.
Jeff Edison: PECO's core business is our grocery-anchored shopping center business. We are the leader in owning right-sized neighborhood shopping centers focused on necessity-based retail. Our locally smart operating platform is driving strong rent and NOI growth. We remain confident in our ability to execute our plans and deliver solid growth in 2026 and beyond. We believe the quality of our portfolio and the strength of our operating platform give PECO the best opportunity in our space to produce sector-leading FFO per share growth and AFFO growth. We believe an investment in PECO provides significant upside opportunity backed by high-quality cash flows, strong fundamentals, and sustained long-term growth. With our shares trading at a discount to our long-term growth profile, we believe PECO represents an attractive opportunity to invest in a leading operator that can deliver mid to high single-digit annual earnings growth.
Speaker #3: We remain confident in our ability to execute our plans and deliver solid growth in 2026 and beyond. We believe the quality of our portfolio and the strength of our operating platform give PICO the best opportunity in our space to produce sector-leading FFO per share growth and AFFO growth.
Jeff Edison: We believe the quality of our portfolio and the strength of our operating platform give PECO the best opportunity in our space to produce sector-leading FFO per share growth and AFFO growth. We believe an investment in PECO provides significant upside opportunity backed by high-quality cash flows, strong fundamentals, and sustained long-term growth. With our shares trading at a discount to our long-term growth profile, we believe PECO represents an attractive opportunity to invest in a leading operator that can deliver mid to high single-digit annual earnings growth. We will continue to drive more alpha with less beta. With that, I'll now turn it over to Bob. Bob?
Speaker #3: We believe an investment in PECO provides significant upside opportunity, backed by high-quality cash flows, strong fundamentals, and sustained long-term growth. With our shares trading at a discount to our long-term growth profile, we believe PECO represents an attractive opportunity to invest in a leading operator that can deliver mid- to high-single-digit annual earnings growth.
Speaker #3: We will continue to drive more alpha with less beta. With that, I'll now turn it over to Bob.
Jeff Edison: We will continue to drive more alpha with less beta. With that, I'll now turn it over to Bob. Bob?
Speaker #3: Bob? Thank you,
Bob Myers: Thank you, Jeff, and thank you for joining us, everyone. We continue to see high demand for necessity-based retail with no current signs of slowing. PICO's leasing team remains focused on capturing this demand, driving our inline occupancy to tie for a record high while pushing very impressive comparable rent spreads. Retailers want to be located at our centers where top grocers drive consistent and recurring foot traffic. PICO continues to deliver strong internal growth. Our leasing activity and occupancy remain at very high levels. The PICO team executed 1,026 leases, totaling approximately 6 million sq ft in 2025. We believe this activity represents a substantial increase in value at the property level. Portfolio occupancy remained high and ended the year at 97.3% leased. Anchor occupancy remained strong at 98.7%, and inline leased occupancy ended the year at a record high 95.1%, a sequential increase of 30 basis points.
Rob Myers: Thank you, Jeff, and thank you for joining us, everyone. We continue to see high demand for necessity-based retail with no current signs of slowing. PICO's leasing team remains focused on capturing this demand, driving our inline occupancy to tie for a record high while pushing very impressive comparable rent spreads. Retailers want to be located at our centers where top grocers drive consistent and recurring foot traffic. PICO continues to deliver strong internal growth. Our leasing activity and occupancy remain at very high levels. The PICO team executed 1,026 leases, totaling approximately 6 million sq ft in 2025. We believe this activity represents a substantial increase in value at the property level.
Speaker #4: Jeff: And thank you for joining us, everyone. We continue to see high demand for necessity-based retail, with no current signs of slowing. PICO's leasing team remains focused on capturing this demand.
Speaker #4: Driving our inline occupancy to tie for a record high, while pushing very impressive comparable rent spreads. Retailers want to be located at our centers, where top grocers drive consistent and recurring foot traffic.
Speaker #4: PICO continues to deliver strong internal growth. Our leasing activity and occupancy remain at very high levels. The PICO team executed 1,026 leases totaling approximately 6 million square feet in 2025.
Speaker #4: We believe this activity represents a substantial increase in value at the property level. Portfolio occupancy remained high and ended the year at 97.3% leased.
Rob Myers: Portfolio occupancy remained high and ended the year at 97.3% leased. Anchor occupancy remained strong at 98.7%, and inline leased occupancy ended the year at a record high 95.1%, a sequential increase of 30 basis points. Our portfolio retention rate remained high at 93% at year-end. High retention means less downtime and lower tenant improvement costs, which translates to better economics for PECO. We expect to see consistent retention in the future. PECO delivered comparable renewal rent spreads of 20% in Q4. Comparable new leasing rent spreads for the quarter remained strong at 34.3%. Our leasing spreads reflect a retail environment which continues to be extremely positive.
Speaker #4: Anchor occupancy remained strong at 98.7%, and inline leased occupancy ended the year at a record high of 95.1%, a sequential increase of 30 basis points.
Speaker #4: Our portfolio retention rate remained high at 93% at year-end. High retention means less downtime and lower tenant improvement costs, which translates to better economics for PECO.
Bob Myers: Our portfolio retention rate remained high at 93% at year-end. High retention means less downtime and lower tenant improvement costs, which translates to better economics for PECO. We expect to see consistent retention in the future. PECO delivered comparable renewal rent spreads of 20% in Q4. Comparable new leasing rent spreads for the quarter remained strong at 34.3%. Our leasing spreads reflect a retail environment which continues to be extremely positive. We are leveraging PECO's pricing power resulting from the demand of our high-quality portfolio, strong leasing spreads, and embedded rent escalators. Leasing deals we executed during 2025, both new and renewal, achieved average annual inline rent bumps of 2.7%. This is another important contributor to our long-term growth. As it relates to bad debt, we actively monitor the health of our neighbors.
Speaker #4: We expect to see consistent retention in the future. PICO delivered comparable renewal rent spreads of 20%. Comparable new leasing rent spreads for the quarter remained strong at 34.3%.
Speaker #4: Our leasing spreads reflect a retail environment which continues to be extremely positive. We are leveraging PECO's pricing power resulting from the demand for our high-quality portfolio, strong leasing spreads, and embedded rent escalators.
Rob Myers: We are leveraging PECO's pricing power resulting from the demand of our high-quality portfolio, strong leasing spreads, and embedded rent escalators. Leasing deals we executed during 2025, both new and renewal, achieved average annual inline rent bumps of 2.7%. This is another important contributor to our long-term growth. As it relates to bad debt, we actively monitor the health of our neighbors.
Speaker #4: Leasing deals we executed during 2025, both new and renewal, achieved average annual inline rent bumps of 2.7%. This is another important contributor to our long-term growth.
Speaker #4: As it relates to bad debt, we actively monitor the health of our neighbors. We expect bad debt in 2026 to be in line with 2025, which came in at approximately 78 basis points of revenue for the year.
Bob Myers: We expect bad debt in 2026 to be in line with 2025, which came in at approximately 78 basis points of revenue for the year. Given our current pipeline and visibility, along with strong retailer demand and the lack of new supply, we are comfortable with our guidance range for bad debt. We have a highly diversified neighbor mix with no meaningful rent concentration outside of our grocers. Turning to development and redevelopment, PECO has 20 projects under active construction. Our total investment in these projects is estimated to be approximately $70 million, with average estimated yields between 9% and 12%. Twenty-three projects were stabilized in 2025. This represents over 400,000 sq ft of space delivered to our neighbors and incremental NOI of approximately $6.8 million annually. We are focused on growing our pipeline of development and redevelopment projects. This activity remains an important driver of growth.
Rob Myers: We expect bad debt in 2026 to be in line with 2025, which came in at approximately 78 basis points of revenue for the year. Given our current pipeline and visibility, along with strong retailer demand and the lack of new supply, we are comfortable with our guidance range for bad debt. We have a highly diversified neighbor mix with no meaningful rent concentration outside of our grocers. Turning to development and redevelopment, PECO has 20 projects under active construction. Our total investment in these projects is estimated to be approximately $70 million, with average estimated yields between 9% and 12%.
Speaker #4: Given our current pipeline and visibility, along with strong retailer demand and the lack of new supply, we are comfortable with our guidance range for bad debt.
Speaker #4: We have a highly diversified neighbor mix, with no meaningful rent concentration outside of our grocers. Turning to development and redevelopment, PICO has 20 projects under active construction.
Speaker #4: Our total investment in these projects is estimated to be approximately $70 million, with average estimated yields between 9% and 12%. Twenty-three projects were stabilized in 2025.
Rob Myers: Twenty-three projects were stabilized in 2025. This represents over 400,000 sq ft of space delivered to our neighbors and incremental NOI of approximately $6.8 million annually. We are focused on growing our pipeline of development and redevelopment projects. This activity remains an important driver of growth.
Speaker #4: This represents over 400,000 square feet of space delivered to our neighbors and incremental NOI of approximately $6.8 million annually. We are focused on growing our pipeline of development and redevelopment projects.
Speaker #4: This activity remains an important driver of growth. In addition, the PICO team continues to find creative acquisitions that add long-term value to our portfolio.
Bob Myers: In addition, the PECO team continues to find accretive acquisitions that add long-term value to our portfolio. Our year-to-date activity reflects $77 million, including two core grocery-anchored shopping centers. Currently, in our pipeline, we have visibility into approximately $150 million in assets that we've been awarded or under contract that we expect to close either by the end of Q1 or early in Q2. Given the strength of the market, the pipeline we are targeting, and the team we have at PECO, we believe we can achieve our targets for gross acquisitions in 2026. Our current pipeline reflects a combination of core grocery-anchored neighborhood shopping centers, everyday retail centers, and joint venture opportunities. I will now turn the call over to John. John?
Rob Myers: In addition, the PECO team continues to find accretive acquisitions that add long-term value to our portfolio. Our year-to-date activity reflects $77 million, including two core grocery-anchored shopping centers. Currently, in our pipeline, we have visibility into approximately $150 million in assets that we've been awarded or under contract that we expect to close either by the end of Q1 or early in Q2. Given the strength of the market, the pipeline we are targeting, and the team we have at PECO, we believe we can achieve our targets for gross acquisitions in 2026. Our current pipeline reflects a combination of core grocery-anchored neighborhood shopping centers, everyday retail centers, and joint venture opportunities. I will now turn the call over to John. John?
Speaker #4: Our year-to-date activity reflects $77 million, including two core grocery-anchored shopping centers. Currently, in our pipeline, we have visibility into approximately $150 million in assets that we've been awarded or are under contract, which we expect to close either by the end of the first quarter or early in the second quarter.
Speaker #4: Given the strength of the market, the pipeline we are targeting, and the team we have at PICO, we believe we can achieve our targets for gross acquisitions in 2026.
Speaker #4: Our current pipeline reflects a combination of core, grocery-anchored neighborhood shopping centers, everyday retail centers, and joint venture opportunities. I will now turn the call over to John.
Speaker #4: John?
Speaker #5: Thank you, Bob, and good morning and good afternoon, everyone. Our fourth quarter results demonstrate what we've built at PECO: a high-performing, grocery-anchored, and necessity-based portfolio that generates reliable, high-quality cash flows.
John Caulfield: Thank you, Bob, and good morning and good afternoon, everyone. Our fourth quarter results demonstrate what we've built at PECO: a high-performing grocery-anchored and necessity-based portfolio that generates reliable, high-quality cash flows. The PECO team continues to operate from a position of strength and stability. Fourth quarter Nareit FFO increased to $88.8 million or $0.64 per diluted share. Fourth quarter core FFO increased to $91.1 million or $0.66 per diluted share. Turning to our balance sheet, we have a strong liquidity position. Combined with our proven access to the equity and debt markets, we have the ability to execute our growth plans. As a reminder, PECO can acquire $300 million of acquisitions annually and remain within our target leverage range. As of 31 December 2025, we have approximately $925 million of liquidity to support our acquisition plans.
John Caulfield: Thank you, Bob, and good morning and good afternoon, everyone. Our fourth quarter results demonstrate what we've built at PECO: a high-performing grocery-anchored and necessity-based portfolio that generates reliable, high-quality cash flows. The PECO team continues to operate from a position of strength and stability. Fourth quarter Nareit FFO increased to $88.8 million or $0.64 per diluted share. Fourth quarter core FFO increased to $91.1 million or $0.66 per diluted share. Turning to our balance sheet, we have a strong liquidity position. Combined with our proven access to the equity and debt markets, we have the ability to execute our growth plans. As a reminder, PECO can acquire $300 million of acquisitions annually and remain within our target leverage range. As of 31 December 2025, we have approximately $925 million of liquidity to support our acquisition plans.
Speaker #5: The PICO team continues to operate from a position of strength and stability. Fourth quarter NAIREIT FFO increased to $88.8 million, or $0.64 per diluted share.
Speaker #5: Fourth quarter Core FFO increased to $91.1 million, or $0.66 per diluted share. Turning to our balance sheet, we have a strong liquidity position.
Speaker #5: Combined with our proven access to the equity and debt markets, we have the ability to execute our growth plans. As a reminder, PICO can acquire $300 million of acquisitions annually and remain within our target leverage range.
Speaker #5: As of December 31, 2025, we have approximately $925 million of liquidity to support our acquisition plans. Our net debt-to-trailing 12-month annualized adjusted EBITDA was 5.2 times at year-end and was 5.1 times on a last quarter annualized basis.
John Caulfield: Our net debt to trailing 12-month annualized adjusted EBITDA was 5.2 times at year-end and was 5.1 times on a last quarter annualized basis. As a reminder, our fixed-rate debt target is approximately 90%, and we finished the year at 85%. We anticipate addressing our floating-rate debt through financing activity in 2026, where we will look to access the debt market opportunistically. We believe fixed-income investors appreciate the high-quality cash flows and stability of grocery-anchored necessity-based retail, and we continue to believe we are an underrated credit relative to our higher-rated shopping center peers. Moving on to guidance. We provided strong guidance for 2026 in December. Our outlook reflects continued solid earnings growth. Net income guidance for 2026 is in a range of 74 to 77 cents per share. Our Same-Center NOI growth for 2026 is projected to be in a range of 3% to 4%.
John Caulfield: Our net debt to trailing 12-month annualized adjusted EBITDA was 5.2 times at year-end and was 5.1 times on a last quarter annualized basis. As a reminder, our fixed-rate debt target is approximately 90%, and we finished the year at 85%. We anticipate addressing our floating-rate debt through financing activity in 2026, where we will look to access the debt market opportunistically. We believe fixed-income investors appreciate the high-quality cash flows and stability of grocery-anchored necessity-based retail, and we continue to believe we are an underrated credit relative to our higher-rated shopping center peers. Moving on to guidance. We provided strong guidance for 2026 in December.
Speaker #5: As a reminder, our fixed-rate debt target is approximately 90%, and we finished the year at 85%. We anticipate addressing our floating-rate debt through financing activity in 2026, where we will look to access the debt market opportunistically.
Speaker #5: We believe fixed-income investors appreciate the high-quality cash flows and stability of grocery-anchored, necessity-based retail. And we continue to believe we are an underrated credit relative to our higher-rated shopping center peers.
Speaker #5: Moving on to guidance. We provided strong guidance for 2026 in December. Our outlook reflects continued solid earnings growth. Net income guidance for 2026 is in a range of $0.74 to $0.77 per share.
John Caulfield: Our outlook reflects continued solid earnings growth. Net income guidance for 2026 is in a range of 74 to 77 cents per share. Our Same-Center NOI growth for 2026 is projected to be in a range of 3% to 4%. Our guidance for Nareit FFO per share for 2026 reflects a 5.5% increase over 2025 at the midpoint, and our guidance for core FFO per share for 2026 represents 5.4% year-over-year growth at the midpoint. Our guidance for 2026 does not assume any equity issuance. Our growth and investment plans are not dependent on access to the equity capital markets. The PECO team continues to have significant financial capacity to support our long-term growth plans.
Speaker #5: Our same-center NOI growth for 2026 is projected to be in a range of 3% to 4%. Our guidance for NAIREIT FFO per share for 2026 reflects a 5.5% increase over 2025 at the midpoint.
John Caulfield: Our guidance for Nareit FFO per share for 2026 reflects a 5.5% increase over 2025 at the midpoint, and our guidance for core FFO per share for 2026 represents 5.4% year-over-year growth at the midpoint. Our guidance for 2026 does not assume any equity issuance. Our growth and investment plans are not dependent on access to the equity capital markets. The PECO team continues to have significant financial capacity to support our long-term growth plans. We have diverse sources of capital that we can use to grow and match fund our investment activity. These sources include additional debt issuance, dispositions, joint ventures, and equity issuance when the markets are more favorable. We sold approximately $145 million of assets in 2025 at PECO Share, and we plan to sell between $100 and $200 million in 2026.
Speaker #5: And our guidance for Core FFO per share for 2026 represents 5.4% year-over-year growth at the midpoint. Our guidance for 2026 does not assume any equity issuance.
Speaker #5: Our growth and investment plans are not dependent on access to the equity capital markets. The PICO team continues to have significant financial capacity to support our long-term growth plans.
John Caulfield: We have diverse sources of capital that we can use to grow and match fund our investment activity. These sources include additional debt issuance, dispositions, joint ventures, and equity issuance when the markets are more favorable. We sold approximately $145 million of assets in 2025 at PECO Share, and we plan to sell between $100 and $200 million in 2026.
Speaker #5: We have diverse sources of capital that we can use to grow and match-fund our investment activity. These sources include additional debt issuance, dispositions, joint ventures, and equity issuance when the markets are more favorable.
Speaker #5: We sold approximately $145 million of assets in 2025 at PECO share, and we plan to sell between $100 million and $200 million in 2026.
Speaker #5: Similar to our acquisitions, we evaluate our portfolio on an IRR basis and are reinvesting proceeds from these dispositions into assets with higher long-term IRRs.
John Caulfield: Similar to our acquisitions, we evaluate our portfolio on an IRR basis and are reinvesting proceeds from these dispositions into assets with higher long-term IRRs. We are focused on maintaining our high-quality portfolio while improving PECO's long-term growth profile. This activity provides PECO the opportunity to realize the gains we've achieved while investing in future growth. We believe this approach helps drive solid NOI growth long-term. In summary, PECO delivered outstanding results in 2025, and we are positioned very well to continue that growth for 2026. Looking beyond 2026, we continue to believe that PECO can consistently deliver 3% to 4% same center NOI growth and achieve mid to high single-digit core FFO per share growth on a long-term basis. We also believe that our long-term AFFO growth can be higher as more of our leasing mix is weighted towards renewal activity.
John Caulfield: Similar to our acquisitions, we evaluate our portfolio on an IRR basis and are reinvesting proceeds from these dispositions into assets with higher long-term IRRs. We are focused on maintaining our high-quality portfolio while improving PECO's long-term growth profile. This activity provides PECO the opportunity to realize the gains we've achieved while investing in future growth. We believe this approach helps drive solid NOI growth long-term. In summary, PECO delivered outstanding results in 2025, and we are positioned very well to continue that growth for 2026.
Speaker #5: We are focused on maintaining our high-quality portfolio while improving PICO's long-term growth profile. This activity provides PICO the opportunity to realize the gains we've achieved while investing in future growth.
Speaker #5: We believe this approach helps drive solid NOI growth long term. In summary, PICO delivered outstanding results in 2025, and we are positioned very well to continue that growth for 2026.
John Caulfield: Looking beyond 2026, we continue to believe that PECO can consistently deliver 3% to 4% same center NOI growth and achieve mid to high single-digit core FFO per share growth on a long-term basis. We also believe that our long-term AFFO growth can be higher as more of our leasing mix is weighted towards renewal activity.We believe our targets for core FFO per share and AFFO growth will allow PECO to outperform the growth of our shopping center peers on a long-term basis. With that, we will open the line for questions. Operator?
Speaker #5: Looking beyond 2026, we continue to believe that PICO can consistently deliver 3% to 4% same-center NOI growth and achieve mid- to high-single-digit Core FFO per share growth on a long-term basis.
Speaker #5: We also believe that our long-term AFFO growth can be higher as more of our leasing mix is weighted towards renewal activity. We believe our targets for Core FFO per share and AFFO growth will allow PECO to outperform the growth of our shopping center peers on a long-term basis.
John Caulfield: We believe our targets for core FFO per share and AFFO growth will allow PECO to outperform the growth of our shopping center peers on a long-term basis. With that, we will open the line for questions. Operator?
Speaker #5: With that, we will open the line for questions. Operator?
Speaker #6: Thank you. To ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star one.
Operator: Thank you. To ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star 1. Thank you. Our first question will come from the line of Andrew Reale with Bank of America. Please go ahead.
Operator: Thank you. To ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star 1. Thank you. Our first question will come from the line of Andrew Reale with Bank of America. Please go ahead.
Speaker #6: Thank you. Our first question will come from the line of Andrew Riel with Bank of America. Please go ahead.
Speaker #6: ahead. Good afternoon.
[Analyst] (Bank of America): Good afternoon. Thanks for taking my questions. You're expecting to do even more volume externally this year. So, you know, as we think about this level of competition for high-quality grocery-anchored assets and how that's sort of, you know, intensified over the last year, could you just speak to the diversity of opportunities within your pipeline and what looks most attractive to you externally right now?
Andrew Reale: Good afternoon. Thanks for taking my questions. You're expecting to do even more volume externally this year. So, you know, as we think about this level of competition for high-quality grocery-anchored assets and how that's sort of, you know, intensified over the last year, could you just speak to the diversity of opportunities within your pipeline and what looks most attractive to you externally right now?
Speaker #7: Thanks for taking my questions. you're expecting to do even more volume externally this year. So, you know, as we think about this level of competition for high-quality grocery anchored assets and how that's sort of, you know, intensified over the last year, could you just speak to the diversity of opportunities within your pipeline and what looks most attractive to you externally right now?
Speaker #8: Sure. thanks for the question, the, acquisition side, what we're Andrew. so, on seeing is, as, as you point out, there's, there are, there are more there's more competition there.
Jeff Edison: Sure. Thanks for the question, Andrew. So, on the acquisition side, what we're seeing is, as you point out, there is more competition there. But we're also seeing a lot of product on the market, and we think that is probably going to balance itself out in a way that creates enough opportunities. And I think that's why we have a high level of confidence that we can reach our targets that we've laid out for the acquisition pace. Bob, any of your thoughts on that?
Jeff Edison: Sure. Thanks for the question, Andrew. So, on the acquisition side, what we're seeing is, as you point out, there is more competition there. But we're also seeing a lot of product on the market, and we think that is probably going to balance itself out in a way that creates enough opportunities. And I think that's why we have a high level of confidence that we can reach our targets that we've laid out for the acquisition pace. Bob, any of your thoughts on that?
Speaker #8: But we're also seeing a lot of product on the market, and we think that that is probably going to balance itself out in a way that creates enough opportunities, and I think that's why we have a high level of confidence that we can reach our targets that we've laid out for the acquisition pace.
Speaker #8: Bob, any—any of your thoughts on that?
Speaker #3: Yeah, Jeff, I'll just add that, you know, as a comparison to 2025, we saw really over 200% of new potential opportunities. We underwrote about 50% more than the year previous.
Bob Myers: Yeah, Jeff, I'll just add that, you know, as a comparison to 2025, we saw really over 200% of new potential opportunities. We underwrote about 50% more than the year previous and double the amount of deals we presented to investment committees. So that was in 2025, you know, compared to 2024. In 2026, and I know it's early in the year, but we've already seen about a 70% increase in the opportunities that we're looking at and about a 67% increase in the deals that we've underwritten and 10% of what we presented to investment committee. You will continue to see us stay disciplined on our unlevered return targets of 9% and 10%. We're going to be very focused on continuing our core strategy of grocery-anchored shopping centers. We will complement it at a very small percentage with our everyday retail category.
Rob Myers: Yeah, Jeff, I'll just add that, you know, as a comparison to 2025, we saw really over 200% of new potential opportunities. We underwrote about 50% more than the year previous and double the amount of deals we presented to investment committees. So that was in 2025, you know, compared to 2024. In 2026, and I know it's early in the year, but we've already seen about a 70% increase in the opportunities that we're looking at and about a 67% increase in the deals that we've underwritten and 10% of what we presented to investment committee. You will continue to see us stay disciplined on our unlevered return targets of 9% and 10%. We're going to be very focused on continuing our core strategy of grocery-anchored shopping centers.
Speaker #3: And doubled the amount of deals we presented to investment committees. So that was in 2000, and, you know, '25 compared to '24. In '26—and I know it's still early in the year—but we've already seen about a 70% increase in the opportunities that we're looking at and about a 67% increase in the deals that we've underwritten.
Speaker #3: And 10 percent is what we presented to the investment committee. You will continue to see us stay disciplined on our unlevered return targets — 9 and 10 percent. We're going to be very focused on continuing our core strategy of grocery-anchored shopping centers.
Rob Myers: We will complement it at a very small percentage with our everyday retail category. So both areas are going to be very active for us this year. We feel real good about our acquisitions that we completed year to date and our pipeline going forward.
Speaker #3: We will complement it at a very small percentage with our everyday retail category. So, both areas are going to be very active for us this year.
Bob Myers: So both areas are going to be very active for us this year. We feel real good about our acquisitions that we completed year to date and our pipeline going forward.
Speaker #3: We feel really good about our acquisitions that we completed year to date, and our pipeline going forward.
Speaker #7: Okay. That's very helpful, thanks. And then, just any update on the Ocala development parcel, especially as it relates to the timing of that project?
[Analyst] (Bank of America): Okay. That's very helpful. Thanks. Then, just any update on the Ocala development parcel, especially as it relates to the timing of that project? Are there any other large-scale strategic land acquisitions currently in your pipeline?
Andrew Reale: Okay. That's very helpful. Thanks. Then, just any update on the Ocala development parcel, especially as it relates to the timing of that project? Are there any other large-scale strategic land acquisitions currently in your pipeline?
Speaker #7: And are there any other large-scale strategic land acquisitions currently in your pipeline?
Speaker #8: Bob, you wanna take
Jeff Edison: Bob, you want to take that?
Jeff Edison: Bob, you want to take that?
Speaker #8: that? Yeah.
Bob Myers: Yeah. Another great question. We're excited about the Ocala market and the growth that we're seeing, given it's one of the nation's fastest-growing communities and areas, 10,000 new homes being built within a five-mile radius. Again, you know, we acquired the land for grocer that we expect to spin off mid-year, and then we'll be left with seven out parcels that we're currently marketing for, ground lease opportunities. So we're in a good spot. And I believe, as of, you know, a couple of weeks ago, we're looking at hitting targets of unlevered returns above 9.5, 10% on that project. So we feel real good about leaning into that market. Obviously, that's a reflection of our grocery relationships that we've established over 30 years.
Rob Myers: Yeah. Another great question. We're excited about the Ocala market and the growth that we're seeing, given it's one of the nation's fastest-growing communities and areas, 10,000 new homes being built within a five-mile radius. Again, you know, we acquired the land for grocer that we expect to spin off mid-year, and then we'll be left with seven out parcels that we're currently marketing for, ground lease opportunities. So we're in a good spot. And I believe, as of, you know, a couple of weeks ago, we're looking at hitting targets of unlevered returns above 9.5, 10% on that project.
Speaker #3: Another great—we're excited about the Ocala market and the growth that we're seeing, given it's one of the nation's fastest-growing communities and areas, with 10,000 new homes being built within a five-mile radius.
Speaker #3: Again, you know, we acquired the land for grocer that we expect to spin off mid-year. And then we'll be left with seven outparcels that we're currently marketing for ground lease opportunities.
Speaker #3: So we're in a good spot in, I believe, as of, you know, a couple weeks ago, our we're, we're looking at hitting targets of unlevered returns, above a nine and a half, 10% on that project.
Speaker #3: So we feel real good about leaning into that market. Obviously, that's a reflection of our grocery relationships that we've established over 30 years.
Rob Myers: So we feel real good about leaning into that market. Obviously, that's a reflection of our grocery relationships that we've established over 30 years. In terms of any new larger grocery-scale development projects, we have a pipeline, and we're discussing that with our grocers. We have a couple of deals under contract that we're working on, but nothing real close that I would say would strike this year as a thought.
Speaker #3: In terms of any new, larger grocery-scale development projects, we have a pipeline, and we're discussing that with our grocers. We have a couple of deals under contract that we're working on.
Bob Myers: In terms of any new larger grocery-scale development projects, we have a pipeline, and we're discussing that with our grocers. We have a couple of deals under contract that we're working on, but nothing real close that I would say would strike this year as a thought.
Speaker #3: But nothing real close that I would say would strike this year as a—
Speaker #3: thought. Thank
[Analyst] (Bank of America): Thank you.
Andrew Reale: Thank you.
Speaker #7: you.
Speaker #6: Our next question is going to come from the line of Michael Griffin with Evercore. Please go ahead. Michael, your line.
Operator: Our next question is going to come from the line of Michael Griffin with Evercore. Please go ahead. Michael, your line is open.
Operator: Our next question is going to come from the line of Michael Griffin with Evercore. Please go ahead. Michael, your line is open.
Speaker #6: is open. Sorry about
[Analyst] (Bank of America): Sorry about that. I was on mute. Apologies. Thank you for taking the question. I was, I wanted to start off and ask just about occupancy in the portfolio. You know, both leased and economic is, you know, pretty meaningfully above the peer set. I guess, number one, do you feel like we're reaching almost a terminal occupancy level, probably more so on the anchors than the inline neighbors? But number two, just given where your occupancy is, do you think that gives you more leverage when it comes for these renewal negotiations, you know, maybe being able to push more on rent escalators or, you know, with an anchor lease, potentially, you know, shortening options or building in some kind of internal growth into those?
Michael Griffin: Sorry about that. I was on mute. Apologies. Thank you for taking the question. I was, I wanted to start off and ask just about occupancy in the portfolio. You know, both leased and economic is, you know, pretty meaningfully above the peer set. I guess, number one, do you feel like we're reaching almost a terminal occupancy level, probably more so on the anchors than the inline neighbors? But number two, just given where your occupancy is, do you think that gives you more leverage when it comes for these renewal negotiations, you know, maybe being able to push more on rent escalators or, you know, with an anchor lease, potentially, you know, shortening options or building in some kind of internal growth into those?
Speaker #7: Sorry about that—I was on mute. Apologies. Thank you for taking my question.
Speaker #7: The question—I was, okay. I wanted to start off and ask just about occupancy in the portfolio. You know, both leased and economic is, you know, pretty meaningfully above the peer set.
Speaker #7: I guess, number one, do you feel like we're reaching almost a terminal occupancy level—probably more so on the anchors than the in-line neighbors?
Speaker #7: But number two, just given where your occupancy is, do you think that gives you more leverage when it comes to these escalators, or, you know, with an anchor, able to push more on rent renewal negotiations? You know, maybe being able to potentially shorten options or build in some kind of internal growth into those?
Speaker #3: Yeah. Before—Bob, before I turn it over to you, I—Grip, thanks for the question. I—I—our belief is that the reason our occupancy is higher is because more retailers want to be in our grocery-anchored locations.
Jeff Edison: Yeah. Before, Bob, before I turn it over to you, I just, thanks for the question. Our belief is that the reason our occupancy is higher is because more retailers want to be in our grocery-anchored locations. And, the necessity-based retailers see us as where they want to be, which is giving us a higher level of stabilized occupancy, than anyone else in the space. And we think that will continue, and we believe that there is upside from where we are today. Obviously, not a ton on the anchor side as we are in the, you know, in the very high 90s on that. But, we still think there's a, you know, one or two points that we can get of additional growth in the inline stores. So we're excited about that.
Jeff Edison: Yeah. Before, Bob, before I turn it over to you, I just, thanks for the question. Our belief is that the reason our occupancy is higher is because more retailers want to be in our grocery-anchored locations. And, the necessity-based retailers see us as where they want to be, which is giving us a higher level of stabilized occupancy, than anyone else in the space. And we think that will continue, and we believe that there is upside from where we are today. Obviously, not a ton on the anchor side as we are in the, you know, in the very high 90s on that.
Speaker #3: And the necessity-based retailers see us as where they want to be, which is giving us a higher level of stabilized occupancy than anyone else in the space.
Speaker #3: And we, we think that will continue, and we believe that there is upside from where we are today. Obviously, not a ton on the anchor side, as we are in the, you know, in the very high 90s on that.
Jeff Edison: But, we still think there's a, you know, one or two points that we can get of additional growth in the inline stores. So we're excited about that. We believe very strongly that the retailers are voting with their leases, and they're leasing a lot of our space. And that's why we are at the highest level of our peers. Bob, you want to talk a little more about the, you know, tenant demand and what we're seeing there in the tenant side?
Speaker #3: But we still think there's, you know, one or two points that we can get of additional growth in the in-line stores. So we're excited about that.
Speaker #3: We, we, we're, we believe very strongly that the, the, the retailers are boating with their leases, and they're leasing a lot of our space.
Jeff Edison: We believe very strongly that the retailers are voting with their leases, and they're leasing a lot of our space. And that's why we are at the highest level of our peers. Bob, you want to talk a little more about the, you know, tenant demand and what we're seeing there in the tenant side?
Speaker #3: And that's why we are at the highest level of, the, of our peers. Bob, you wanna talk a little more about the, you know, tenant demand and, and what we're seeing there on the tenant side?
Speaker #3: Yeah, I'll continue to give a little bit more color in terms of occupancy. We're currently at 97.3%. And as I look at our anchor occupancy, we're at 98.7%.
Bob Myers: Yeah. I'll continue to give a little bit more color in terms of occupancy. We're currently at 97.3%. As I look at our anchor occupancy, we're at 98.7%. I do believe that there's anchor demand. We're seeing it with our spaces that are over 10,000 sq ft and the amount of leases that we have out for signature and letters of intent. I believe that we still have room to move that number to 99.1% to 99.3% this year. I would also tell you that our inline lease occupancy is a record high, 95.1%. I don't see it slowing down. Given the visibility I have in the pipeline, it's very active. There's no new supply. Retailer demand and our necessity-based focus has been very positive.
Rob Myers: Yeah. I'll continue to give a little bit more color in terms of occupancy. We're currently at 97.3%. As I look at our anchor occupancy, we're at 98.7%. I do believe that there's anchor demand. We're seeing it with our spaces that are over 10,000 sq ft and the amount of leases that we have out for signature and letters of intent. I believe that we still have room to move that number to 99.1% to 99.3% this year. I would also tell you that our inline lease occupancy is a record high, 95.1%. I don't see it slowing down. Given the visibility I have in the pipeline, it's very active. There's no new supply. Retailer demand and our necessity-based focus has been very positive.
Speaker #3: I do believe that there's anchor demand. We're seeing it with our spaces that are over 10,000 feet and the amount of leases that we have out for signature and letters of intent.
Speaker #3: I believe that we still have room to move that number to 99.1% to 99.3% this year. I would also tell you that our in-line leased occupancy is at a record high, and given the visibility I have in the 95.1%.
Speaker #3: I don't see it slowing down. Pipeline—it's very active. There's no new supply. Retailer demand and our necessity-based focus have been very positive. I would say that we believe we have 100 to 150 basis points of continued in-line upside as well.
Bob Myers: I would say that we believe that we have 100 to 150 basis points of continued inline upside as well. I feel real good about that. In terms of leverage, that was a great question. 93% is our current retention of our occupancy. That's strong. And if you look at our Q4 numbers at 93%, we only spent $0.24 a foot in terms of TIs to renew that with over 20% renewal spreads with over a 3% CAGR. So we are driving the CAGR. We're getting exceptional first-year increases. And the pipeline I have on that, I probably have 150 renewals out for signature currently. And the numbers are even more accelerated than what I just shared with you.
Rob Myers: I would say that we believe that we have 100 to 150 basis points of continued inline upside as well. I feel real good about that. In terms of leverage, that was a great question. 93% is our current retention of our occupancy. That's strong. And if you look at our Q4 numbers at 93%, we only spent $0.24 a foot in terms of TIs to renew that with over 20% renewal spreads with over a 3% CAGR. So we are driving the CAGR. We're getting exceptional first-year increases. And the pipeline I have on that, I probably have 150 renewals out for signature currently. And the numbers are even more accelerated than what I just shared with you.
Speaker #3: Feel real good about that. In terms of leverage, that was a great question. Ninety-three percent is our current retention—of our occupancy. That's strong.
Speaker #3: And if you look at our fourth quarter numbers at 93%, we only spent $0.24 a foot in terms of TIs to renew that, with over 20% renewal spreads and over a 3% CAGR.
Speaker #3: So, we are driving the CAGR. We're getting exceptional first-year increases. And the pipeline I have on that—I probably have 150 renewals out for signature currently.
Speaker #3: And the numbers are even more accelerated than what I just shared with you. So again, you know, a good spot, given the retailer, I think we're in a very demand.
Bob Myers: So again, you know, I think I think we're in a very good spot given the retailer demand, our focus on having the number 1, number 2 grocer. We just don't see anything slowing down. The other thing that we're working on as part of the renewal process is renegotiating some of the non-monetary clauses. You think about caps, restrictions, and no-build area. You know, we do have the leverage to negotiate that to give us more flexibility in our pipeline and our existing portfolio to continue to create NOI growth.
Rob Myers: So again, you know, I think I think we're in a very good spot given the retailer demand, our focus on having the number 1, number 2 grocer. We just don't see anything slowing down. The other thing that we're working on as part of the renewal process is renegotiating some of the non-monetary clauses. You think about caps, restrictions, and no-build area. You know, we do have the leverage to negotiate that to give us more flexibility in our pipeline and our existing portfolio to continue to create NOI growth.
Speaker #3: Our focus on having the number one, number two grocer—we just don't see anything slowing down. The other thing that we're working on as part of the renewal process is renegotiating some of the non-monetary clauses.
Speaker #3: You think about caps and restrictions and no-build area, you know. We, we do have the leverage to negotiate that to give us more flexibility in our pipeline.
Speaker #3: And our existing portfolio to continue to create NOI.
Speaker #3: growth. Guys, thank you
[Analyst] (Bank of America): Guys, thank you so much for that color. And then maybe just circling back on, you know, the everyday retail portion of the acquisition pipeline. It seems like, you know, in addition to the core grocery anchor, you could get some real kind of kicker on earnings accretion and external growth through these properties. But I'm curious, you know, maybe, maybe Jeff or Bob, if you could comment how you kind of weigh the, you know, potential differences in credit and sort of maybe some tenant health, not concerns, but just the different tenant makeup of these kind of unanchored strips that you might be targeting for everyday retail relative to your core grocery-anchored tenant base.
Michael Griffin: Guys, thank you so much for that color. And then maybe just circling back on, you know, the everyday retail portion of the acquisition pipeline. It seems like, you know, in addition to the core grocery anchor, you could get some real kind of kicker on earnings accretion and external growth through these properties. But I'm curious, you know, maybe, maybe Jeff or Bob, if you could comment how you kind of weigh the, you know, potential differences in credit and sort of maybe some tenant health, not concerns, but just the different tenant makeup of these kind of unanchored strips that you might be targeting for everyday retail relative to your core grocery-anchored tenant base.
Speaker #7: So, much for that color. And then, maybe just circling back on, you know, the everyday retail portion of the acquisition pipeline. It seems like, you know, in addition to the core grocery anchor, you could get some real kind of kicker on earnings accretion and external growth through these properties.
Speaker #7: But I'm curious, you know, maybe—maybe Jeff or Bob, if you could comment—how you kind of weigh the, you know, potential differences in credit, and sort of maybe some tenant health—not concerns, but just the different tenant makeup of these kind of unanchored strips that you might be targeting for everyday retail relative to your core grocery-anchored tenant base?
Speaker #3: It's a great question. I'll take a little bit and then Bob, why don't you jump in too. As we look at everyday retail, we see it as, you know, hopefully over the next three years we get that to be a billion dollars of assets.
Jeff Edison: It's a great question. I'll, I'll take a little bit, and then, Bob, why don't you, you jump in too. As we look at everyday retail, we see it as, you know, hopefully, over the next three years, we get that to be $1 billion of assets. So it's always going to be a piece of our company, not our main focus, which is going to be on the grocery-anchored side. But there is, we believe, a unique opportunity to take advantage of certain places where we can find properties that we can use the PECO machine that knows where every neighbor wants to be in that market, and we can bring them to locations that they can't when they can't get into one of our existing centers.
Jeff Edison: It's a great question. I'll, I'll take a little bit, and then, Bob, why don't you, you jump in too. As we look at everyday retail, we see it as, you know, hopefully, over the next three years, we get that to be $1 billion of assets. So it's always going to be a piece of our company, not our main focus, which is going to be on the grocery-anchored side. But there is, we believe, a unique opportunity to take advantage of certain places where we can find properties that we can use the PECO machine that knows where every neighbor wants to be in that market, and we can bring them to locations that they can't when they can't get into one of our existing centers.
Speaker #3: So it's always going to be a piece of our company, not our main focus, which is going to be on the grocery-anchored side.
Speaker #3: But there is, we believe, a unique opportunity to take advantage of certain places where we can find properties that we can use the Pico machine that knows where every neighbor wants to be in that market.
Speaker #3: And we can bring them to, to locations that they can't wh-when they can't get into one of our existing centers. And that, that's a very powerful tool that we think will be able to drive outsized results in that particular niche of, of the market.
Jeff Edison: And that, that's a very powerful tool that we think will be able to drive outsized results in that particular niche of the market. And we're excited about it. And we think it's going to create some great opportunities for us to get, you know, outsized growth where, from what we're getting in our traditional grocery-anchored centers. Bob, any other?
Jeff Edison: And that, that's a very powerful tool that we think will be able to drive outsized results in that particular niche of the market. And we're excited about it. And we think it's going to create some great opportunities for us to get, you know, outsized growth where, from what we're getting in our traditional grocery-anchored centers. Bob, any other?
Speaker #3: And we're excited about it, and we think it's going to create some great opportunities for us to get outsized growth compared to what we're getting in our traditional grocery-anchored centers.
Speaker #3: Bob, any other?
Speaker #7: Bob, thanks so much.
[Analyst] (Bank of America): Great. Thanks so much.
Michael Griffin: Great. Thanks so much.
Speaker #7: Go ahead. Awesome.
Jeff Edison: Awesome. Go ahead.
Jeff Edison: Awesome. Go ahead.
Speaker #3: Yeah. Okay. Great. Thanks, Jeff.
Bob Myers: Yeah. Okay. Great. Thanks, Grip.
Rob Myers: Yeah. Okay. Great. Thanks, Grip.
Speaker #1: Oh, our next question is going to come from the line of Handel St. Juste with Mizuho. Please go ahead.
Operator: Our next question is going to come from the line of Haendel St. Juste with Mizuho. Please go ahead.
Operator: Our next question is going to come from the line of Haendel St. Juste with Mizuho. Please go ahead.
Speaker #8: Hey, guys. Thanks for taking the—
[Analyst] (Mizuho): Hey, guys. Thanks for taking the question.
Haendel St. Juste: Hey, guys. Thanks for taking the question.
Speaker #8: Question. Hey, hey, yeah. Jeff, first question on capital deployment. Appreciate your comments on the acquisition strategy. I guess I'm curious also about the other capital allocation alternatives that you're considering.
[Analyst] (Bank of America): Hey, Andrew.
Jeff Edison: Hey, Andrew.
[Analyst] (Mizuho): Hey, hey, Jeff. First question on capital deployment. Appreciate your comments on the acquisition strategy. I guess I'm curious also on the other capital allocation alternatives that you're considering. So maybe some comments on how you think about either ramping up redev, ground-up development, and also potentially buying back the stock here, which looks like it's trading somewhere in the low to mid-sixes on applied cap rate, which isn't that much different, a little higher than acquisition cap rates, but it's an immediate return. So just curious on how you're thinking about capital deployment beyond acquisitions. Thanks.
Haendel St. Juste: Hey, hey, Jeff. First question on capital deployment. Appreciate your comments on the acquisition strategy. I guess I'm curious also on the other capital allocation alternatives that you're considering. So maybe some comments on how you think about either ramping up redev, ground-up development, and also potentially buying back the stock here, which looks like it's trading somewhere in the low to mid-sixes on applied cap rate, which isn't that much different, a little higher than acquisition cap rates, but it's an immediate return. So just curious on how you're thinking about capital deployment beyond acquisitions. Thanks.
Speaker #8: So maybe some comments on how you're re-thinking about either ramping up REDEV, ground-up development, and also potentially buying back the stock here, which looks like it's trading somewhere in the low, low to mid-60s on applied cap rate, which isn't that much different.
Speaker #8: A little higher than acquisition cap rates, but it's an immediate return. So, just curious on how you're thinking about capital deployment beyond acquisitions.
Speaker #8: Thanks.
Speaker #3: great, great question, Handel. And, and one that we obviously think about a lot. And a-a-all of the pieces that you're talking about are part of our com our, our regular conversational where on, on our allocation of capital.
Jeff Edison: Great, great question, Adele. And one that we obviously think about a lot. And all of the pieces that you're talking about are part of our our regular conversation on where on our allocation of capital. The ground-up development is a very strong part of where we think there is opportunity. It's small. It's not going to be a major piece. It's going to be, you know, we hope we can get it to the size that we're talking about with everyday retail. That because we think we can get, you know, outsized returns there. So that will continue to be a part of our property. We, you know, we'll put up, we think, $70 million of sort of redev and capital that we will put into the ground-up this year.
Jeff Edison: Great, great question, Adele. And one that we obviously think about a lot. And all of the pieces that you're talking about are part of our our regular conversation on where on our allocation of capital. The ground-up development is a very strong part of where we think there is opportunity. It's small. It's not going to be a major piece. It's going to be, you know, we hope we can get it to the size that we're talking about with everyday retail. That because we think we can get, you know, outsized returns there. So that will continue to be a part of our property. We, you know, we'll put up, we think, $70 million of sort of redev and capital that we will put into the ground-up this year.
Speaker #3: The ground-up development is a very strong part of where we think there is opportunity. It's small. It's not going to be a major piece.
Speaker #3: It's gonna be, you know, we hope we can get it to the size that we're talking about with everyday retail. That's because we think we can get, you know, outsized returns there.
Speaker #3: So that, that will, will continue to be a part of our, our property. We, we, you know, we, we will put up, we think, 70 million of, of sort of REDEV and, and, and capital that we will put into the ground-up this year.
Speaker #3: Yeah, we kind of are in that $50 to $70 million range—$70 million last year, $70 million this year. Probably, you know, more like $50 million going forward.
Jeff Edison: We kind of are in that $50 to 70 million range, $70 million last year, $70 million this year, probably, you know, more like $50 million going forward. But we hope we can get that to $70 million. So we like, we love that part of our business. Obviously, the allocation to the acquisition side between our traditional grocery-anchored stuff and our everyday retail, again, a big piece where we think there's opportunity to where if we can find it and get to the unlevered IRRs that we are targeting, we think there's opportunity to allocate capital there as well.
Jeff Edison: We kind of are in that $50 to 70 million range, $70 million last year, $70 million this year, probably, you know, more like $50 million going forward. But we hope we can get that to $70 million. So we like, we love that part of our business. Obviously, the allocation to the acquisition side between our traditional grocery-anchored stuff and our everyday retail, again, a big piece where we think there's opportunity to where if we can find it and get to the unlevered IRRs that we are targeting, we think there's opportunity to allocate capital there as well.
Speaker #3: But, but we hope we can get that to 70. So we li we love that part of our business. obviously, the the, the allocation to the acquisition side between our gro our traditional grocery anchored stuff and our everyday retail, again, a, a b a piece where we think there's, there's opportunity to whe-whe if we can find it and get to the unlevered IRRs that we are targeting, we think there's, there's opportunity to, to allocate capital there as well.
Speaker #3: And, you know, we we as we I think we've said a few times, we, we can purchase 300 million dollars of property and, and, and do REDEV in, in 300 million dollars of property without going back to the market and keeping our leverage where it is today.
Jeff Edison: You know, as we, I think we've said a few times, we can purchase $300 million of property and do redev in $300 million property without going back to the market and keeping our leverage where it is today. So we have opportunities for that growth. We want to continue to where we find the opportunities to be able to take advantage of that. So all those are part of it. We are always looking at share buybacks. Since, you know, since we started, we've looked at that. Right now, you know, we're not. We're in sort of that tweener zone where it's really not a great time to be issuing equity.
Jeff Edison: You know, as we, I think we've said a few times, we can purchase $300 million of property and do redev in $300 million property without going back to the market and keeping our leverage where it is today. So we have opportunities for that growth. We want to continue to where we find the opportunities to be able to take advantage of that. So all those are part of it. We are always looking at share buybacks. Since, you know, since we started, we've looked at that. Right now, you know, we're not. We're in sort of that tweener zone where it's really not a great time to be issuing equity.
Speaker #3: So we have opportunities for that growth. And, and we want we wanna continue to, to where, where we find the opportunities to be able to take advantage of that.
Speaker #3: So all those are part of it. We, we, we are always looking at share buybacks. We, since, you know, since we started, we've looked at that.
Speaker #3: right now, you know, we're n we're in sort of that tweener zone where it's really not a great time to be issuing equity. But also, it's we're it's not we don't we think we can get better returns for our investors with buying properties than we can and, and doing our REDEV than we can buying our stock back.
Jeff Edison: But also, we think we can get better returns for our investors with buying properties than we can and doing our redev than we can buying our stock back. So we're in that sort of between range. And that's why we've laid out, you know, the vision for this year that we have. And we're excited about it. I think we can do some really exciting things. The one piece that is in addition here is the dispositions. And the dispositions give us more opportunity to buy at a larger scale, and that is something that we'll be looking at this year as well.
Jeff Edison: But also, we think we can get better returns for our investors with buying properties than we can and doing our redev than we can buying our stock back. So we're in that sort of between range. And that's why we've laid out, you know, the vision for this year that we have. And we're excited about it. I think we can do some really exciting things. The one piece that is in addition here is the dispositions. And the dispositions give us more opportunity to buy at a larger scale, and that is something that we'll be looking at this year as well.
Speaker #3: So we're in that sort of between range. And, and that's why we've laid out, you know, the—the—the—the vision for this year that we have.
Speaker #3: And we're excited about it. I think we can do some really exciting things. Here is the dispositions, and the dispositions give us more opportunity to buy at a larger scale.
Speaker #3: And that is something that we'll be looking at this year as well.
Speaker #3: well. That's a great
[Analyst] (Mizuho): That's great color. I wanted to ask a question about Amazon. Some headlines out there that they're closing some, some stores, some Amazon Go, Fresh locations. I guess I'm curious, one, if you have much, if any, exposure there and if that's impacting your, your conversations or impacting grocery demand, impact for, for space. Thanks.
Haendel St. Juste: That's great color. I wanted to ask a question about Amazon. Some headlines out there that they're closing some, some stores, some Amazon Go, Fresh locations. I guess I'm curious, one, if you have much, if any, exposure there and if that's impacting your, your conversations or impacting grocery demand, impact for, for space. Thanks.
Speaker #8: One of the questions asked was about Amazon—there are some headlines out there that they're closing some Amazon Go and Fresh locations. I'm curious if, one, you have much, if any, exposure there, and if that's impacting your conversations or impacting grocery demand, or impacting the need for space.
Speaker #8: color. one of the asked a question about Amazon, some headlines out there that they're closing some, some stores, some Amazon Go, fresh locations. I'm guess I'm curious if one, if you have much if any exposure there, and if that's impacting your, your conversations or impacting grocery demand, impact f-for space.
Speaker #8: Thanks. Yeah.
Jeff Edison: Yeah. So, Amazon Fresh is closing their stores. It's not a surprise to us that they are. They've really had a tough time with brick-and-mortar retail, and they're trying to figure that out. I think that Whole Foods is their avenue, and you're hearing, you know, things about them expanding that banner. That's sort of the next step in their brick-and-mortar campaign, which I think they're going to keep trying different things until they find something that works. And to date, they have not found anything that can work. They have made some announcements about more delivery on the grocery side, which we're watching pretty closely. And our feeling is that if you look at it today, over 80% of grocery delivery, just the delivery part of grocery, is done from the store.
Jeff Edison: Yeah. So, Amazon Fresh is closing their stores. It's not a surprise to us that they are. They've really had a tough time with brick-and-mortar retail, and they're trying to figure that out. I think that Whole Foods is their avenue, and you're hearing, you know, things about them expanding that banner. That's sort of the next step in their brick-and-mortar campaign, which I think they're going to keep trying different things until they find something that works. And to date, they have not found anything that can work. They have made some announcements about more delivery on the grocery side, which we're watching pretty closely. And our feeling is that if you look at it today, over 80% of grocery delivery, just the delivery part of grocery, is done from the store.
Speaker #3: So, Amazon Fresh is closing their stores. It's not a surprise to us that they are. They, they, they, they really have had a tough time with bricks-and-mortar retail.
Speaker #3: And they're trying to figure that out. I think that Whole Foods is their avenue. And you're hearing, you know, things about them expanding that banner.
Speaker #3: That's sort of the next step in their bricks-and-mortar campaign, which I think they're going to keep trying different things until they find something that works.
Speaker #3: And to date, they have not found anything that can work. They have made some announcements about more delivery on the grocery side, which we're watching pretty closely.
Speaker #3: And we—our feeling is that if you look at it today, over 80% of grocery delivery—just the delivery part of grocery—is done from the store.
Speaker #3: And so, how do you—how do they make it work from when, when you don't have the store footprint that a Kroger has, that a Walmart has, and, and the rest of the traditional grocers have?
Jeff Edison: And so how do they make it work, when you don't have the store footprint that a Kroger has, that a Walmart has, and the rest of the traditional grocers have? It's going to be tough. And so we'll continue to watch it. You never underestimate them. They're a, you know, great company. So we'll keep watching them and seeing what they do. To date, they've been underimpressive on the brick-and-mortar side.
Jeff Edison: And so how do they make it work, when you don't have the store footprint that a Kroger has, that a Walmart has, and the rest of the traditional grocers have? It's going to be tough. And so we'll continue to watch it. You never underestimate them. They're a, you know, great company. So we'll keep watching them and seeing what they do. To date, they've been underimpressive on the brick-and-mortar side.
Speaker #3: It's gonna be tough. And so we'll continue to watch it. You never underestimate them. They're a, you know, great company. So we'll keep watching them and seeing what they do.
Speaker #3: To date, I think they've been under-impressive on the bricks-and-mortar side.
[Analyst] (Mizuho): Thanks. Thank you. Appreciate the color.
Haendel St. Juste: Thanks. Thank you. Appreciate the color.
Speaker #8: Thanks. Thank you. Appreciate
Speaker #8: the color. Yeah.
Jeff Edison: Yep.
Jeff Edison: Yep.
Speaker #2: Our next question, yep, is going to come from the line of Caitlin Burrows with Goldman Sachs. Please go ahead.
Operator: Our next question is going to come from the line of Caitlin Burrows with Goldman Sachs. Please go ahead.
Operator: Our next question is going to come from the line of Caitlin Burrows with Goldman Sachs. Please go ahead.
Speaker #4: Hi, everyone. Maybe as a follow-up to some of the other questions—John, you talked about it a little bit—but how does cost of capital influence PECO’s acquisition pace?
[Analyst] (Goldman Sachs): Hi, everyone. Maybe as a follow-up to some of the other questions, John, you talked about it a little bit, but how does cost of capital influence PECO's acquisition pace? Do you feel constrained at all? Would a higher share price make you interested in a higher acquisition target for the year?
Caitlin Burrows: Hi, everyone. Maybe as a follow-up to some of the other questions, John, you talked about it a little bit, but how does cost of capital influence PECO's acquisition pace? Do you feel constrained at all? Would a higher share price make you interested in a higher acquisition target for the year?
Speaker #4: Do you feel constrained at all? Would a higher share price make you interested in a higher acquisition target for the—
Speaker #4: year? Y
Speaker #3: Great, great question, Caitlin. Thank you. The answer is yes—a higher stock price would encourage us to be more active on the acquisition side.
Jeff Edison: Great, great question, Caitlin. Thank you. The answer is yes. A higher stock price would encourage us to be more active on the acquisition side. We have the capital to and the ability to meet the targets that we've set for this year without issuing additional equity. So we're prepared for that. We also are going to be active on the disposition side so that we can use that additional capital to protect perhaps be able to grow even faster than what we have talked about in our guidance. So we think that if there are opportunities, we will find the capital to be able to do it. And hopefully, that's in a share price that is commensurate with where we think it should be.
Jeff Edison: Great, great question, Caitlin. Thank you. The answer is yes. A higher stock price would encourage us to be more active on the acquisition side. We have the capital to and the ability to meet the targets that we've set for this year without issuing additional equity. So we're prepared for that. We also are going to be active on the disposition side so that we can use that additional capital to protect perhaps be able to grow even faster than what we have talked about in our guidance. So we think that if there are opportunities, we will find the capital to be able to do it.
Speaker #3: We have the capital to, and the ability to, meet the targets that we've set for this year without issuing additional equity. So we're prepared for that.
Speaker #3: We also are gonna be active on the on the disposition side. So that we can use that additional capital to prote perhaps be able to grow even faster than what we have, have talked about in, in our guidance.
Speaker #3: So, there are we—we think that if there are opportunities, we will find the capital to be able to do it. And hopefully, that's in a share price that is commensurate with where we think it should be.
Jeff Edison: And hopefully, that's in a share price that is commensurate with where we think it should be. If not, we will, you know, we've got multiple other channels that we can use to get that growth. And there's a lot of interest from outside parties to JV with us and other things like that where we could add to the growth that we have projected now.
Speaker #3: if not, we will we you know, we've got multiple other channels that we can use to, to get that, that growth. And there's a lot of interest from outside parties to JV with us and other things like that, where we could we could add to the to the growth that we have projected
Jeff Edison: If not, we will, you know, we've got multiple other channels that we can use to get that growth. And there's a lot of interest from outside parties to JV with us and other things like that where we could add to the growth that we have projected now.
Speaker #3: now. Got it.
[Analyst] (Goldman Sachs): Got it. Okay. And then maybe just on the bad debt side, it did pick up a little in Q4. Can you discuss what led to that, how much visibility you had to it, and then to what extent your expectations for 2026 might have evolved, since the business update in December? Or is it kind of all in line with the past couple months' expectations? Thanks.
Caitlin Burrows: Got it. Okay. And then maybe just on the bad debt side, it did pick up a little in Q4. Can you discuss what led to that, how much visibility you had to it, and then to what extent your expectations for 2026 might have evolved, since the business update in December? Or is it kind of all in line with the past couple months' expectations? Thanks.
Speaker #4: Okay. And then maybe just on the bad debt side, it did pick up a little in Q4. Can you discuss what led to that, how much visibility you had to it, and then to what extent your expectations for 2026 might have evolved since the business update in December?
Speaker #4: Or is it kind of all in line with the past couple of months' expectations? Thanks.
Speaker #3: John, you wanna take that?
Jeff Edison: John, you want to take that?
Jeff Edison: John, you want to take that?
Speaker #8: Sure. They always leave the fun ones for me. Thanks for the question, Caitlin. Look, ultimately, if you're comparing towards the fourth quarter of '24, I would say that was the lower run rate.
John Caulfield: Sure. They always leave the fun ones for me. Thanks for the question, Caitlin. Look, ultimately, if you're comparing towards the fourth quarter of '24, I would say that was the lower run rate. Overall, this year, our bad debt has really actually been pretty consistent. We finished this year around 78 basis points. And as we look forward, that is pretty consistent with where we believe it will be. So when we set the guidance in December, the information and the data points we have from January and February so far are very consistent with that. We're really encouraged by the continued leasing demand that we have and are encouraging our teams to find the best operators, the best merchandising mix for our properties that are going to allow us to drive rent and make our neighbors successful.
John Caulfield: Sure. They always leave the fun ones for me. Thanks for the question, Caitlin. Look, ultimately, if you're comparing towards the fourth quarter of '24, I would say that was the lower run rate. Overall, this year, our bad debt has really actually been pretty consistent. We finished this year around 78 basis points. And as we look forward, that is pretty consistent with where we believe it will be. So when we set the guidance in December, the information and the data points we have from January and February so far are very consistent with that.
Speaker #8: Overall, this year, our bad debt has actually been pretty consistent. We finished this year around 78 basis points, and as we look forward, that is pretty consistent with where we believe it will be.
Speaker #8: So, when we set the guidance in December, the information and the data points we have from January and February so far are very consistent with that.
John Caulfield: We're really encouraged by the continued leasing demand that we have and are encouraging our teams to find the best operators, the best merchandising mix for our properties that are going to allow us to drive rent and make our neighbors successful. So we don't see anything on the bad debt side that is concerning. Q4, it was a little elevated, but ultimately, still very consistent with what we've seen this year and what we expect in 2026.
Speaker #8: We're really encouraged by the continued leasing demand that we have, and are encouraging our teams to find the best operators, the best merchandising mix for our properties that are gonna allow us to drive rents and make our neighbors successful.
Speaker #8: So, we don't see anything on the bad debt side that is concerning. The fourth quarter, it was a little elevated, but ultimately, still very consistent with what we've seen this year and what we expect in '26.
John Caulfield: So we don't see anything on the bad debt side that is concerning. Q4, it was a little elevated, but ultimately, still very consistent with what we've seen this year and what we expect in 2026.
Speaker #4: Thanks.
[Analyst] (Goldman Sachs): Thanks.
Caitlin Burrows: Thanks.
Speaker #2: Our next question is going to come from the line of Onmoteo Ask Askusanya with Deutsche Bank. Please go ahead.
Operator: Our next question is going to come from the line of Omotayo Okusanya with Deutsche Bank. Please go ahead.
Operator: Our next question is going to come from the line of Omotayo Okusanya with Deutsche Bank. Please go ahead.
Speaker #5: Yes. Hi, everyone. John, this one's for you. Y-you had made a comment earlier on about just your overall credit rating, and kind of your in-house view that, you know, you—you probably should be at a higher, G kind of credit rating.
[Analyst] (Deutsche Bank): Yes. Hi, everyone. John, this one's for you. You had made a comment earlier on about just your overall credit rating, and kind of your in-house view that, you know, you probably should be at a higher kind of credit rating. Just curious, when you talk to the rating agencies at this point, what's kind of preventing that from happening? And then kind of if and when it does, how do you expect that to kind of impact your cost of debt?
Omotayo Okusanya: Yes. Hi, everyone. John, this one's for you. You had made a comment earlier on about just your overall credit rating, and kind of your in-house view that, you know, you probably should be at a higher kind of credit rating. Just curious, when you talk to the rating agencies at this point, what's kind of preventing that from happening? And then kind of if and when it does, how do you expect that to kind of impact your cost of debt?
Speaker #5: Just curious, when you talk to the rating agencies at this point, what kind of things are preventing that from happening? And then, if and when it does, how do you expect that to impact your cost of—
Speaker #5: Debt? Thanks for the question, Teo.
John Caulfield: Thanks for the question, Teo. And thank you for the opportunity to use this as a platform. So we do believe we are an underrated credit. When we compare our leverage level compared to our peers, we have the same leverage metrics or better in some cases than they do. The rating agencies at this point are more focused on scale. If you look to those that have achieved A ratings in our space, they are quite a bit larger than us. So as we look at it, we think our continued scale and acquisition activity are going to give us opportunities to increase our debt issuance in the unsecured bond market. It will hopefully give us opportunities to access the equity markets to increase our institutional holdings and our float.
John Caulfield: Thanks for the question, Teo. And thank you for the opportunity to use this as a platform. So we do believe we are an underrated credit. When we compare our leverage level compared to our peers, we have the same leverage metrics or better in some cases than they do. The rating agencies at this point are more focused on scale. If you look to those that have achieved A ratings in our space, they are quite a bit larger than us. So as we look at it, we think our continued scale and acquisition activity are going to give us opportunities to increase our debt issuance in the unsecured bond market. It will hopefully give us opportunities to access the equity markets to increase our institutional holdings and our float.
Speaker #3: And thank you for the opportunity to use this as a platform. So, we do believe we are an underrated credit when we compare our leverage level to our peers.
Speaker #3: We have the same leverage metrics, or better in some cases, than they do. The rating agencies at this point are more focused on scale.
Speaker #3: If you look to those that have achieved A ratings and are space, they are quite a bit larger than us. So, as we look at it, we think our continued scale and acquisition activity are going to give us opportunities to increase our debt issuance in the unsecured bond market.
Speaker #3: It will hopefully give us opportunities to access the equity markets to increase our institutional holdings and our float. Ultimately, we think the, you know, the, the, the rhyme is usually, I've been told, is 25 basis points per credit notch.
John Caulfield: Ultimately, we think, you know, the rhyme is usually, I've been told, 25 basis points per credit notch. But I will say that the fixed-income investors are definitely paying attention. And I do think they have compressed that range for us. So while I do believe there is benefit to a ratings increase, the fixed-income investors do recognize the strength of grocery-anchored portfolio, our performance, our track record. So ultimately, I think right now, if we issued 10-year debt, it'd probably be around 5.25%. I think that could, you know, be better if we were in a higher-rated position. It is a conversation that I continue to impress upon the rating agencies. At this point, I think it's going to be around scale, but we're going to continue to fight the fight.
John Caulfield: Ultimately, we think, you know, the rhyme is usually, I've been told, 25 basis points per credit notch. But I will say that the fixed-income investors are definitely paying attention. And I do think they have compressed that range for us. So while I do believe there is benefit to a ratings increase, the fixed-income investors do recognize the strength of grocery-anchored portfolio, our performance, our track record. So ultimately, I think right now, if we issued 10-year debt, it'd probably be around 5.25%. I think that could, you know, be better if we were in a higher-rated position. It is a conversation that I continue to impress upon the rating agencies. At this point, I think it's going to be around scale, but we're going to continue to fight the fight.
Speaker #3: But I will say that the fixed income investors are definitely paying attention, and I do think they have compressed that range for us. So, while I do believe there is benefit to a ratings increase, the fixed income investors do recognize the strength of our grocery-anchored portfolio, our performance, and our track record.
Speaker #3: So ultimately, I think right now, if we issued 10-year debt, it'd probably be around 5 and a quarter. I think that that could, could be, you know, better if we were in a, in a, a higher-rated position.
Speaker #3: It is a conversation that I continue to impress upon the rating agencies at this point. I—I think it's going to be around scale.
Speaker #3: But we'll—we're gonna continue to fight the
Speaker #3: fight. Gotcha.
[Analyst] (Deutsche Bank): Gotcha. That's helpful. But if I may just follow up still on the balance sheet. Again, your variable-rate debt, the percentage of variable-rate debt, is a little higher than probably most of your peers. Just thinking, you know, how are you guys thinking about that in light of whatever forecast you may have about where, where interest rates are going, on a going forward basis? The viewpoint of maybe putting swaps on some of that stuff to kind of reduce it, or, or how do you kind of think through that?
Omotayo Okusanya: Gotcha. That's helpful. But if I may just follow up still on the balance sheet. Again, your variable-rate debt, the percentage of variable-rate debt, is a little higher than probably most of your peers. Just thinking, you know, how are you guys thinking about that in light of whatever forecast you may have about where, where interest rates are going, on a going forward basis? The viewpoint of maybe putting swaps on some of that stuff to kind of reduce it, or, or how do you kind of think through that?
Speaker #5: That's helpful. Then, if I may, just to follow up still on the balance sheet—again, your variable-rate debt, the percentage of variable-rate debt, is a little higher than probably most of your peers.
Speaker #5: Just thinking, you know, how you guys are thinking about that in light of whatever forecast you may have about where interest rates are going.
Speaker #5: On a going-forward basis, the viewpoint of maybe putting swaps on some of that stuff to kind of reduce it, or, how do you kind of think through that?
Speaker #5: On a going-forward basis, the viewpoint of maybe putting swaps on some of that stuff to kind of reduce it, or—how do you kind of think through that?
Speaker #3: So, we finished the year at 85%. We have a long-term target of 90% fixed rate. We believe in this environment, you know, the key piece that we watch is really our maturity calendar.
John Caulfield: So we finished the year at 85%. We have a long-term target of 90% fixed rate. We believe in this environment, you know, the key piece that we watch is really our maturity calendar. And that's the piece that I'm focused on. So we have some maturities that are coming up in January of 2027 that we are going to work on this year. And when we access longer-dated capital, that will be fixed in that component and naturally move us in that way. We believe that the, the market currently in is a position where there's, there's questions around what will happen with short-term rates. But I do think that stability is, is there. And, and I think the curve being more positively sloped now, there isn't a, a penalty per se for this.
John Caulfield: So we finished the year at 85%. We have a long-term target of 90% fixed rate. We believe in this environment, you know, the key piece that we watch is really our maturity calendar. And that's the piece that I'm focused on. So we have some maturities that are coming up in January of 2027 that we are going to work on this year. And when we access longer-dated capital, that will be fixed in that component and naturally move us in that way. We believe that the, the market currently in is a position where there's, there's questions around what will happen with short-term rates. But I do think that stability is, is there. And, and I think the curve being more positively sloped now, there isn't a, a penalty per se for this.
Speaker #3: And that's the piece that I'm focused on. So we have some maturities that are coming up in January of 2027 that we are going to work on this year.
Speaker #3: And when we access longer-dated capital, that will be fixed in that component and, naturally, move us in that way. We believe that the market currently is in a position where there are questions around what will happen with short-term rates.
Speaker #3: But I do think that stability is there. And I think the curve being more positively sloped now, there isn't a penalty, per se, for this.
Speaker #3: We are focused on making sure that it's available and opportunistic, and not in a position where we must move. So our preferred method of this is the same way that we've done it the last few years, which is going to be continuing to acquire and match funding those acquisitions.
John Caulfield: We are focused on making sure that it's available and opportunistic and not in a position where we must move. So our preferred method of this is the same way that we've done it the last few years, which is going to be continuing to acquire and match funding those acquisitions, which will, as well as working on our refinancing activity, is going to allow us to add duration and fixed-rate coupons to our debt stack.
John Caulfield: We are focused on making sure that it's available and opportunistic and not in a position where we must move. So our preferred method of this is the same way that we've done it the last few years, which is going to be continuing to acquire and match funding those acquisitions, which will, as well as working on our refinancing activity, is going to allow us to add duration and fixed-rate coupons to our debt stack.
Speaker #3: Well, as well as working on our refinancing activity, it is going to allow us to add duration and fixed-rate coupons to our debt.
Speaker #3: stack. Great.
[Analyst] (Deutsche Bank): Great. Thank you.
Omotayo Okusanya: Great. Thank you.
Speaker #5: Thank
Speaker #5: you. Thank
John Caulfield: Thank you.
John Caulfield: Thank you.
Speaker #2: Our next question is going to come from the line of Ronald Camden with Morgan Stanley. Please go ahead.
Operator: Our next question is going to come from the line of Ronald Kamdem with Morgan Stanley. Please go ahead.
Operator: Our next question is going to come from the line of Ronald Kamdem with Morgan Stanley. Please go ahead.
Speaker #2: ahead. Hi.
[Analyst] (Goldman Sachs): Hi. This is Caroline on for Ron. Thank you for taking my question. You've mentioned being active on the disposition side. I was just wondering if you could share a little bit more about what you're seeing or anticipating, and overall just a little more color on what you're seeing in terms of cap rates and unlevered IRRs for those dispositions.
[Analyst] (Morgan Stanley): Hi. This is Caroline on for Ron. Thank you for taking my question. You've mentioned being active on the disposition side. I was just wondering if you could share a little bit more about what you're seeing or anticipating, and overall just a little more color on what you're seeing in terms of cap rates and unlevered IRRs for those dispositions.
Speaker #6: This is Caroline on for Ron. Thank you for taking my question. You've mentioned being active on the disposition side. I was just wondering if you could share a little bit more about what you're seeing or anticipating, and overall just a little more color on what you're seeing in terms of cap rates and unlevered IRRs for those dispositions.
Speaker #5: Sure. Caroline, thanks for the question. Bob, you want to talk a little bit about the disposition side?
Jeff Edison: Sure, Caroline. Thanks for the question. Bob, you want to talk a little bit about the disposition side?
Jeff Edison: Sure, Caroline. Thanks for the question. Bob, you want to talk a little bit about the disposition side?
Speaker #3: Yeah, great question. We ended up selling about $140 million worth in 2025. And that was something that we wanted to be more intentional about in terms of property recycling, and really, our core strategy on the disposition side is trading out assets that we've stabilized, where we have unlevered return targets that might be, say, 7%, and replacing it with our strategies and the opportunities we're seeing today with unlevered returns.
Bob Myers: Yeah. Great question. We ended up selling about $140 million worth in 2025. That was something that we wanted to be more intentional about in terms of property recycling. Really, our core strategy on the disposition side is trading out assets that we've stabilized where we have unlevered return targets that might be, say, 7% and replacing it with our strategies and the opportunities we're seeing today with unlevered returns between 9% and, you know, 10 to 10.5%. In terms of expectations for 2026, we'll continue to do the same thing. We put a budget in place between $100 and 150 million to execute the same strategy.
Rob Myers: Yeah. Great question. We ended up selling about $140 million worth in 2025. That was something that we wanted to be more intentional about in terms of property recycling. Really, our core strategy on the disposition side is trading out assets that we've stabilized where we have unlevered return targets that might be, say, 7% and replacing it with our strategies and the opportunities we're seeing today with unlevered returns between 9% and, you know, 10 to 10.5%. In terms of expectations for 2026, we'll continue to do the same thing. We put a budget in place between $100 and 150 million to execute the same strategy.
Speaker #3: Between 9 and, you know, 10, 10 and a half percent. In terms of expectations for 2026, we'll continue to do the same thing. We put a budget in place between $100 and $150 million.
Speaker #3: To, to execute the same
Speaker #3: strategy. Very helpful.
[Analyst] (Goldman Sachs): Very helpful. Thank you.
[Analyst] (Morgan Stanley): Very helpful. Thank you.
Speaker #6: Thank
Speaker #6: you. Yeah.
Speaker #5: Thanks, Chris.
[Analyst] (Morgan Stanley): Yeah. Thanks, Chris.
Rob Myers: Yeah. Thanks, Chris.
Speaker #2: Our next question is going to come from the line of Floris Ventitcom, with Ladenburg. Please go ahead.
Operator: Our next question is going to come from the line of Floris van Dijkum with Ladenburg Thalmann. Please go ahead.
Operator: Our next question is going to come from the line of Floris van Dijkum with Ladenburg Thalmann. Please go ahead.
Speaker #7: Hey, guys. Thanks for taking my question. Going back to CAL capital allocation, maybe just, if you can talk a little bit about why your everyday, or unanchored, GR strategy isn't bigger if you're getting, you know, higher IRRs in, and, you know, is there not enough, you know, an opportunity set there?
Jeff Edison: Hey, guys. Thanks for taking my question. Going back to cap capital allocation, maybe just, if you can talk a little bit about why your everyday or unanchored growth strategy isn't bigger if you're getting, you know, higher IRRs in, and, you know, is there not enough, you know, an opportunity set there? Or I would have thought it would be bigger, actually. If you can maybe talk about that. And then also, on the dispositions, you know, do you think of, you know, where do you think you can sell assets at? Is it a 5, 5.5, you know, sub-5 cap on some of your assets? Yep. Floris, thanks. On the capital allocation side with regard to everyday retail, we've set targets of getting to $1 billion over the next three years.
Floris van Dijkum: Hey, guys. Thanks for taking my question. Going back to cap capital allocation, maybe just, if you can talk a little bit about why your everyday or unanchored growth strategy isn't bigger if you're getting, you know, higher IRRs in, and, you know, is there not enough, you know, an opportunity set there? Or I would have thought it would be bigger, actually. If you can maybe talk about that. And then also, on the dispositions, you know, do you think of, you know, where do you think you can sell assets at? Is it a 5, 5.5, you know, sub-5 cap on some of your assets?
Speaker #7: Or I would've thought it would be bigger, actually. if you can maybe talk about that. And then also, on the dispositions, you know, d-do you think of, you know, f w-w-where do you think you can sell assets at?
Speaker #7: Is it a 5, 5 and a half, you know, sub-5 cap, cap? On, on some of your assets?
Floris van Dijkum: Yep. Floris, thanks. On the capital allocation side with regard to everyday retail, we've set targets of getting to $1 billion over the next three years. We hope we can do, do it quicker than that. And if the opportunities arise, we will do that. You know, as you know, we're really disciplined about this business. We want to make sure that it is the kind of product where when we put the PECO machine to work on it, that we can get accelerated and, you know, outsized returns.
Speaker #5: Yeah. Floris Banks, on the capital allocation side, with regard to everyday retail, we've set targets of getting to $1 billion over the next three years.
Speaker #5: We hope we can do it, do it quicker than that. And if the opportunities arise, we will do that. You know, as you know, we're really disciplined about this business.
Jeff Edison: We hope we can do, do it quicker than that. And if the opportunities arise, we will do that. You know, as you know, we're really disciplined about this business. We want to make sure that it is the kind of product where when we put the PECO machine to work on it, that we can get accelerated and, you know, outsized returns. That, that means we have to be disciplined, that we won't go, we might not go as fast as if we were just buying, you know, you know, straight triple net deals that are, you know, more, more homogeneous. But we think that's where the opportunity is in this space. And we think that we can find that product. And, and if we find more of that product, we'll buy more of that product.
Speaker #5: We want to make sure that it is the kind of product where, when we put the Pico to machine to work on it, that we can get accelerated and, you know, outsized returns.
Floris van Dijkum: That, that means we have to be disciplined, that we won't go, we might not go as fast as if we were just buying, you know, you know, straight triple net deals that are, you know, more, more homogeneous. But we think that's where the opportunity is in this space. And we think that we can find that product. And, and if we find more of that product, we'll buy more of that product.
Speaker #5: That, that means we have to be disciplined. and we won't go we might not go as fast as if we were just buying, you know, s you know, straight triple net, deals that are, you know, more, more homogenous.
Speaker #5: But we think that's where the opportunity is in this space. And we think that we can find that product, and if we find more of that product, we'll buy more of that product.
Speaker #5: And that is, that will be the—the government will be on whether we can find that, that level of opportunity. So that's our key sort of allocation question there.
Jeff Edison: And that is, that will be the governor on whether we can find that level of opportunity. So that's our key sort of allocation question there. And in terms of dispositions, there are really two buckets, Floris, that we look at when we're selling properties. One is projects where there is not a ton of upside, where we have put the machine to work on it, we stabilized the product, and we think we can get good pricing on it that will price it in, you know, where, in our mind, the unlevered IRR would be in that 7, 7.5 kind of range. That's a bucket that we did.
Floris van Dijkum: And that is, that will be the governor on whether we can find that level of opportunity. So that's our key sort of allocation question there. And in terms of dispositions, there are really two buckets, Floris, that we look at when we're selling properties. One is projects where there is not a ton of upside, where we have put the machine to work on it, we stabilized the product, and we think we can get good pricing on it that will price it in, you know, where, in our mind, the unlevered IRR would be in that 7, 7.5 kind of range. That's a bucket that we did.
Speaker #5: And, in terms of dispositions, they're, they're, they're, they're really two buckets, Floris, that we look at in when we're selling properties. One is projects where there is not a ton of upside, where we have put the machine to work on it, we've stabilized the product, and we we think we can get good pricing on it that will price it in, you know, where, where the in our mind, the unlevered IRR would be in that 7, 7 and a half kind of range.
Speaker #5: that-that's a bucket that we did. And, you know, we, we, we sold a project in California last year. Had a 5, 7, 5, 8 cap rate that, that fit into that bucket.
Jeff Edison: You know, we sold a project in California last year at a 5.7–5.8% cap rate that fit into that bucket. The other bucket is just more of a de-risking bucket where we see that we can get good pricing, but where we think that the IRR will still be in that, you know, 6.5–7% range. But it's more because we think we can take some risk out of the portfolio in selling it. So those are the two buckets, we tend to take to market more than what we actually, you know, anticipate executing on because we want to make sure that we're getting the pricing and we have the variety of product that allows us to, you know, make sure that if we get the pricing, we sell it.
Floris van Dijkum: You know, we sold a project in California last year at a 5.7–5.8% cap rate that fit into that bucket. The other bucket is just more of a de-risking bucket where we see that we can get good pricing, but where we think that the IRR will still be in that, you know, 6.5–7% range. But it's more because we think we can take some risk out of the portfolio in selling it. So those are the two buckets, we tend to take to market more than what we actually, you know, anticipate executing on because we want to make sure that we're getting the pricing and we have the variety of product that allows us to, you know, make sure that if we get the pricing, we sell it.
Speaker #5: The other bicket bucket is just more of a de-risking bucket where we see that we can get good pricing, but where we think that the IRR will still be in that, you know, 7%, 6 and a half, 7% range.
Speaker #5: But we—but it's more because we think we can take some risk out of the portfolio in selling it. So those are the two buckets.
Speaker #5: We tend to take to market more than what we actually, you know, anticipate executing on because we want to make sure that we're getting the pricing and we have the variety of product that allows us to, you know, make sure that if we get the pricing, we sell it.
Speaker #5: If we don't get the pricing, we don't sell it, because these are all, you know, solid assets that we will hold long-term otherwise. But that is how we approach the disposition market.
Jeff Edison: If we don't get the pricing, we don't sell it, because these are all, you know, solid assets that we will hold long-term otherwise. But when that is how we approach the disposition market. And then, obviously, that ties into how it helps to manage the balance sheet as well. Does that answer your question, Floris? It helps. Thanks, Jeff. No, it's, again, the spread between the unanchored and the, you know, non-core sales is pretty wide. So, yeah. My follow-up. Yeah. We're excited about that, Floris. We think there is an opportunity there. And that is why we're in it.
Floris van Dijkum: If we don't get the pricing, we don't sell it, because these are all, you know, solid assets that we will hold long-term otherwise. But when that is how we approach the disposition market. And then, obviously, that ties into how it helps to manage the balance sheet as well. Does that answer your question, Floris?
Speaker #5: And then the obviously, that, that ties into how we how it helps to manage the balance sheet as well. Was that is that answer your question, Floris?
Floris van Dijkum: It helps. Thanks, Jeff. No, it's, again, the spread between the unanchored and the, you know, non-core sales is pretty wide. So, yeah. My follow-up.
Speaker #3: It, it helps. Thanks, Jeff. No, it's—again, the, the spread between the unanchored and the, and the, you know, n-non-core sales is, is—
Speaker #5: Yeah.
Speaker #3: Pretty wide. So
Speaker #5: Yeah. We're.
Speaker #3: My, my, my. My fault.
Jeff Edison: Yeah. We're excited about that, Floris. We think there is an opportunity there. And that is why we're in it. That's why we think we're getting paid to take what is, you know, I think the risk that people believe is there is a lot less than what we think. And that's why we're, you know, excited about it.
Speaker #3: Yeah. We're done. Yeah.
Speaker #5: So we're excited about that, Floris. We, we think there is an opportunity there. And that and that is why we're in it. That's why we think we're getting paid to take what is you know, I think the I think the risk that people believe is there is a lot less than what we think.
Jeff Edison: That's why we think we're getting paid to take what is, you know, I think the risk that people believe is there is a lot less than what we think. And that's why we're, you know, excited about it. Maybe in my follow-up, I think I might have asked this on a previous call. But, you know, your renewal spreads were really strong, but your options sort of, you know, impact your overall, your average spread still including options were still, you know, 13%+. So, you know, very solid. But what are you doing on the options in going forward leases? Because obviously, are you signing new leases with no options so that, again, some of that, you know, some of that break on spread is removed going forward? Yeah.
Speaker #5: And that's why we're, you know, excited about it.
Floris van Dijkum: Maybe in my follow-up, I think I might have asked this on a previous call. But, you know, your renewal spreads were really strong, but your options sort of, you know, impact your overall, your average spread still including options were still, you know, 13%+. So, you know, very solid. But what are you doing on the options in going forward leases? Because obviously, are you signing new leases with no options so that, again, some of that, you know, some of that break on spread is removed going forward? Yeah.
Speaker #3: Maybe in my, my follow-up, I, I think I, I might've asked this on a previous call, but I, you know, the y-your renewal spreads were, were really strong.
Speaker #3: But your options sort of, you know, impact your overall—your, your, your—your average spread. Still, including options, we're still, you know, 13-plus percent.
Speaker #3: So, you know, very solid. But what are you doing on the options in going-forward leases? 'Cause obviously, is—are you signing new leases with no options so that, again, some of that, you know, some of that break on, on, spread is removed going forward?
Speaker #5: Yeah, the answer is yes. Bob, do you want to talk a little bit about sort of option strategy on the leasing side?
Jeff Edison: The answer is yes. Bob, do you want to talk a little bit about sort of option strategy on the leasing side?
Jeff Edison: The answer is yes. Bob, do you want to talk a little bit about sort of option strategy on the leasing side?
Speaker #4: Yeah, Floris, it's a great question. This is something that we're very focused on. Certainly, with 93% retention and the leverage we have on the renewal side, we're getting a lot of that in the negotiation with your 20% increases and 3.25% CAGRs, as an example.
Bob Myers: Yeah, Floris. It's a great question. This is something what we're very focused on. Certainly, with 93% retention and the leverage we have on the renewal side, we're getting a lot of that in the negotiation with your 20% increases and 3.25% CAGRs as an example. On the new deal side, you know, our new leasing spread was around 34%. We're seeing CAGRs, you know, anywhere between 2% and 3% on new deals. So that's in terms of the existing portfolio. I think as part of our negotiation strategy on new deals, we simply say, "No." If a tenant wants to have an option, we always start with saying, "No." I know the options don't benefit the landlords.
Rob Myers: Yeah, Floris. It's a great question. This is something what we're very focused on. Certainly, with 93% retention and the leverage we have on the renewal side, we're getting a lot of that in the negotiation with your 20% increases and 3.25% CAGRs as an example. On the new deal side, you know, our new leasing spread was around 34%. We're seeing CAGRs, you know, anywhere between 2% and 3% on new deals. So that's in terms of the existing portfolio. I think as part of our negotiation strategy on new deals, we simply say, "No." If a tenant wants to have an option, we always start with saying, "No." I know the options don't benefit the landlords.
Speaker #4: On the new deal side, you know, our new leasing spread was around 34%. And we're seeing CAGRs, you know, anywhere between 2% and 3% on new deals.
Speaker #4: So that's in terms of the existing portfolio. I think as part of our negotiation strategy on new deals, we simply say no. If a tenant wants to have an option, we always start with saying no.
Speaker #4: I know the options don't benefit the landlords. If, however, when you have a nice portfolio that has the integrity of, you know, a lot of national and regional tenants in it, they're investing a lot of capital alongside us in this space.
Bob Myers: If however, when you have a nice portfolio that has the integrity of, you know, a lot of national and regional tenants in it, they're investing a lot of capital alongside us in this space. So they do want some protection above and beyond either their 5 or 10-year primary terms. So it makes sense. On those, what we've really been pushing for, and it's hard to get, is 20% increases during each option period plus a 3% CAGR on top of that. I incentivize my leasing team to drive that behavior. We're moving in that direction. But it is a difficult one. But you're spot on in terms of continuing to figure out ways to have less options and higher CAGRs.
Rob Myers: If however, when you have a nice portfolio that has the integrity of, you know, a lot of national and regional tenants in it, they're investing a lot of capital alongside us in this space. So they do want some protection above and beyond either their 5 or 10-year primary terms. So it makes sense. On those, what we've really been pushing for, and it's hard to get, is 20% increases during each option period plus a 3% CAGR on top of that. I incentivize my leasing team to drive that behavior. We're moving in that direction. But it is a difficult one. But you're spot on in terms of continuing to figure out ways to have less options and higher CAGRs.
Speaker #4: So, they do want some protection above and beyond either their 5- or 10-year primary term, so it makes sense. On those, what we've really been pushing for—and it's hard to get—is CAGR on top of that.
Speaker #4: 20% increases during each option period, plus a 3%. I incentivize my leasing team to drive that behavior. We're, we're, we're moving in that direction.
Speaker #4: But it is a difficult one. But you're—you're spot on in terms of continuing to figure out ways to have less options and higher—
Speaker #4: But it is a difficult one. But you're—you’re spot on in terms of continuing to figure out ways to have fewer options and higher CAGRs.
Speaker #6: Your next question comes from the line of Todd Thomas with KeyBank Capital Markets. Please go ahead.
Operator: Your next question comes from the line of Todd Thomas with KeyBank Capital Markets. Please go ahead.
Operator: Your next question comes from the line of Todd Thomas with KeyBank Capital Markets. Please go ahead.
Speaker #7: Yeah, hi, thanks. I wanted to ask a couple of questions around acquisitions and JV activity in particular, where, you know, you've seen a measured pace of activity.
[Analyst] (KeyBank Capital Markets): Yeah. Hi. Thanks. I wanted to ask a couple of questions around acquisitions, and JV activity in particular where, you know, you've seen a measured pace of activity. Bob, you mentioned that you're seeing a pickup in offerings. And, you know, I guess two questions here. You know, should we expect to see JV activity ramp up a little bit more meaningfully in 2026? And then second, Jeff, I think you commented that you're having discussions with some other potential sources of capital. Are there other potential JV partners that you are having discussions with for another vehicle, perhaps?
Todd Thomas: Yeah. Hi. Thanks. I wanted to ask a couple of questions around acquisitions, and JV activity in particular where, you know, you've seen a measured pace of activity. Bob, you mentioned that you're seeing a pickup in offerings. And, you know, I guess two questions here. You know, should we expect to see JV activity ramp up a little bit more meaningfully in 2026? And then second, Jeff, I think you commented that you're having discussions with some other potential sources of capital. Are there other potential JV partners that you are having discussions with for another vehicle, perhaps?
Speaker #7: Bob, you mentioned that you're seeing a pickup in offerings. And, you know, I guess, I guess two, two questions here. You know, should we expect to see JV activity ramp up a little bit more meaningfully in 2026?
Speaker #7: And then second, Jeff, I think you commented that you're having discussions with some other potential sources of capital. Are there other potential JV partners that you are having discussions with for another vehicle, perhaps?
Speaker #5: So I'll, I'll answer the second one. And Bob, you wanna jump in on the on the JV, activity, for this year. w I, Todd, we-we're always look talking to, potential, JV partners who have specific needs, that might fit into our overall necessity-based grocery anchor, shopping center, focus.
Jeff Edison: So I'll answer the second one. And Bob, you want to jump in on the JV activity for this year? Todd, we're always talking to potential JV partners who have specific needs that might fit into our overall necessity-based grocery-anchored shopping center focus. And that this is no different than that. And we will continue to have those conversations. And in the right case, that will be an opportunity like it was, you know, when with the two JVs that we have. And you know, when your stock is not trading where you want it to, the JV opportunity is one that, you know, you've got to keep looking at more closely. Hey, Bob, do you want to talk about JV activity this year a little bit?
Jeff Edison: So I'll answer the second one. And Bob, you want to jump in on the JV activity for this year? Todd, we're always talking to potential JV partners who have specific needs that might fit into our overall necessity-based grocery-anchored shopping center focus. And that this is no different than that. And we will continue to have those conversations. And in the right case, that will be an opportunity like it was, you know, when with the two JVs that we have. And you know, when your stock is not trading where you want it to, the JV opportunity is one that, you know, you've got to keep looking at more closely. Hey, Bob, do you want to talk about JV activity this year a little bit?
Speaker #5: And that th-th-this is no different than that. and we will continue to have those conversations. And in the right case, th-th-that will be an opportunity, like it was, you know, when w-with, with the, the two JVs that, that we have.
Speaker #5: And, you know, when your stock is not trading where you want it to, the JV opportunity is one that, you know, you've got to keep looking at more closely.
Speaker #5: Hey, Bob, do you want to talk about JV activity this year a little?
Speaker #4: Yes. We continue to see increased opportunity. We have a weekly meeting for the investment committee with our partners, and we're typically presenting anywhere between 2 and 4 new sites weekly to the team.
Bob Myers: Yes. We continue to see increased opportunity. We have a weekly meeting, for investment committee with, with our partners. And we're typically presenting anywhere between 2 and 4 new sites weekly to the team. So I do think that we'll see more activity this year than we have in the past. I think we're going to see more product. And, you know, things, things are heading in the right direction, behind the opportunity set, the pricing opportunities that we're seeing. I think we'll close out our, our one fund. We need one or two more deals that we currently have under contract. So that'll close out one. And then our Cohen & Steers joint venture has not only been very successful early days, but is well-equipped with capital to continue to take advantage of market opportunities, which we're seeing. So I'm encouraged by the activity in the joint ventures.
Rob Myers: Yes. We continue to see increased opportunity. We have a weekly meeting, for investment committee with, with our partners. And we're typically presenting anywhere between 2 and 4 new sites weekly to the team. So I do think that we'll see more activity this year than we have in the past. I think we're going to see more product. And, you know, things, things are heading in the right direction, behind the opportunity set, the pricing opportunities that we're seeing. I think we'll close out our, our one fund.
Speaker #4: So, I do think that we'll see more activity this year than we have in the past. I think we're gonna see more product. And, you know, things are heading in the right direction, behind the opportunity set.
Speaker #4: The pricing opportunities that we're seeing—I think we'll close out our one fund. We need one or two more deals that we currently have under contract.
Rob Myers: We need one or two more deals that we currently have under contract. So that'll close out one. And then our Cohen & Steers joint venture has not only been very successful early days, but is well-equipped with capital to continue to take advantage of market opportunities, which we're seeing. So I'm encouraged by the activity in the joint ventures.
Speaker #4: So that'll close out one. And then our Cohen & Steers joint venture has not only been very successful in the early days, but is well equipped to take advantage of market opportunities, which we're seeing.
Speaker #4: So, I'm encouraged by the activity in the joint.
Speaker #4: ventures. Okay.
Jeff Edison: Okay. And then, with regards to you know, you continue to talk about, you know, sort of, you know, IRRs, you know, north of 9% for, for core acquisitions, for grocery-anchored acquisitions. And then I think you said north of 10% for everyday retail. Can you just, you know, walk through sort of the basic framework and underwriting assumptions that you're looking at or targeting for those, you know, sort of IRR hurdles? Sure. Why don't Jeff, Bob, do you want to, you want to walk through sort of just how we're, just so you, Todd, I mean, the simple answer is that we do a very standard underwriting. And it's consistent across everything we look at. And it's, you know, it's something we've refined over 30 years. And we've been in this business.
Todd Thomas: Okay. And then, with regards to you know, you continue to talk about, you know, sort of, you know, IRRs, you know, north of 9% for, for core acquisitions, for grocery-anchored acquisitions. And then I think you said north of 10% for everyday retail. Can you just, you know, walk through sort of the basic framework and underwriting assumptions that you're looking at or targeting for those, you know, sort of IRR hurdles?
Speaker #7: And then, with regards to—you know, you continue to talk about, you know, sort of, you know, IRRs, you know, north of 9% for a core.
Speaker #7: A—acquisitions for grocery-anchored acquisitions, and then I think you said north of 10% for everyday retail. Can you just, you know, walk through sort of the basic framework and underwriting assumptions that you're looking at or targeting for those, you know, sort of IRR?
Speaker #7: hurdles? sure.
Jeff Edison: Sure. Why don't Jeff, Bob, do you want to, you want to walk through sort of just how we're, just so you, Todd, I mean, the simple answer is that we do a very standard underwriting. And it's consistent across everything we look at. And it's, you know, it's something we've refined over 30 years. And we've been in this business. It's been very, we've refined it to the point where we are very accurate in it. If you will, you know, what we do once a year is we go back. We look at everything that we underwrote. We compare it to what we've performed on.
Speaker #5: Why don’t—Je, Bob, do you wanna, you wanna walk through sort of just how we’re it, it, it, the—just so you, Todd, I mean, I, I—the simple answer is that we, we, we do a very standard underwriting and it’s consistent across everything we look at.
Speaker #5: And it's, you know, it's something we've refined over 30 years that we've been in this business. And it's been very—we've refined it to the point where we are very accurate in it.
Jeff Edison: It's been very, we've refined it to the point where we are very accurate in it. If you will, you know, what we do once a year is we go back. We look at everything that we underwrote. We compare it to what we've performed on. We're, we performed about 1% above what our underwriting is across a portfolio over, you know, a decade. So it shows that we've, you know, we, we have the, we believe we have the right system in place to actually get to what we're going to, what we believe will happen in the portfolio. It's proven itself out.
Speaker #5: And if you—we, you know, we do, once a year, as we go back, we look at everything that we underwrote and we compare it to what we performed on.
Jeff Edison: We're, we performed about 1% above what our underwriting is across a portfolio over, you know, a decade. So it shows that we've, you know, we, we have the, we believe we have the right system in place to actually get to what we're going to, what we believe will happen in the portfolio. It's proven itself out.
Speaker #5: And we're a we performed about 1% above where what our underwriting is across a portfolio over, you know, a decade. so it shows that we've, you know, we, we have the, the I, I we believe we have the right, system in place to actually get to what we what we're gonna what we believe will happen in the portfolio.
Speaker #5: And it's—it's proven itself out.
Speaker #4: And, Jeff, I will add, when you specifically look at our everyday retail, the nine centers that we have, roughly 100 and, you know, 80 million dollars, one upside opportunity that helps us get above the 10% unlevered return is the current occupancy and vacancy and mark-to-market opportunity.
Bob Myers: And Jeff, I will add, when you specifically look at our everyday retail, the 9 centers that we have, roughly $180 million, one upside opportunity that helps us get above the 10% unlevered return is the current occupancy and vacancy and mark-to-market opportunity. So we've done a very good job, given the lack of new supply coming on the market and the leverage to be able to push rents. As an example, on that 9-property portfolio, we've generated over 45% new leasing spreads and over 27% renewal spreads with CAGRs. And we're very focused on a, you know, a solid strategy that's in our core markets where we can take our national accounts team. We can remerchandise. We're very focused on transitioning our merchandising focus towards necessity-based goods and services. You think about fast casual, health and beauty, med-tail services.
Rob Myers: And Jeff, I will add, when you specifically look at our everyday retail, the 9 centers that we have, roughly $180 million, one upside opportunity that helps us get above the 10% unlevered return is the current occupancy and vacancy and mark-to-market opportunity. So we've done a very good job, given the lack of new supply coming on the market and the leverage to be able to push rents. As an example, on that 9-property portfolio, we've generated over 45% new leasing spreads and over 27% renewal spreads with CAGRs. And we're very focused on a, you know, a solid strategy that's in our core markets where we can take our national accounts team. We can remerchandise. We're very focused on transitioning our merchandising focus towards necessity-based goods and services. You think about fast casual, health and beauty, med-tail services.
Speaker #4: So, we've done a very good job given the lack of new supply coming on the market and the leverage to be able to push rents, as an example.
Speaker #4: On that nine-property portfolio, we've generated over 45% new leasing spreads and over 27% renewal spreads, with CAGRs. And we're very focused on a, you know, a solid strategy that's in our core markets where we can take our national accounts team, we can re-merchandise.
Speaker #4: We're very focused on transitioning our merchandising focus towards necessity-based goods and services. You think about fast-casual, health and beauty, MedTail, services—those are the areas where we're seeing demand and we're seeing validity.
Bob Myers: Those, those are the areas where we're seeing demand. We're seeing validity in our overall merchandising. Right now, you'll typically see in this strategy that we'll acquire between, yeah, it's been between a 6.7 and a 7. Maybe we'll go down to 6.5 if there's more vacancy for growth. But as Jeff pointed out, yes, in our underwriting, we do not compress cap rates on the back end of this. We're taking advantage of pure growth. These will have NOI CAGRs between 4.3% and 6%. We'll be able to move the occupancy, which even in the last year on the 9 properties, we've already moved occupancy from 91.6% to 94.7%, 310 basis points. We're seeing unlevered returns increase above our underwriting. To Jeff's point, 100 basis points. We're above 11.
Rob Myers: Those, those are the areas where we're seeing demand. We're seeing validity in our overall merchandising. Right now, you'll typically see in this strategy that we'll acquire between, yeah, it's been between a 6.7 and a 7. Maybe we'll go down to 6.5 if there's more vacancy for growth. But as Jeff pointed out, yes, in our underwriting, we do not compress cap rates on the back end of this. We're taking advantage of pure growth. These will have NOI CAGRs between 4.3% and 6%. We'll be able to move the occupancy, which even in the last year on the 9 properties, we've already moved occupancy from 91.6% to 94.7%, 310 basis points. We're seeing unlevered returns increase above our underwriting. To Jeff's point, 100 basis points. We're above 11.
Speaker #4: And our overall merchandising. Right now, you'll typically see in this strategy that we'll acquire between, it's been between a 6.7 and a 7.
Speaker #4: Maybe we'll go down to 6.5% if there's more vacancy for growth. But as Jeff pointed out, yes, in our underwriting, we do not compress cap rates on the back end of this.
Speaker #4: So, we are taking advantage of pure growth. These will have NOI CAGRs between 4.3% and 6%. We'll be able to move the occupancy, which—even in the last year on the nine properties—we've already moved occupancy from 91.6% to 94.7%, or 310 basis points.
Speaker #4: And we're seeing unlevered returns increase above our underwriting—to Jeff's point, 100 basis points. We're above 11. So that's the benefit of the strategy as we continue to use our operational expertise to re-merchandise and create value long-term.
Bob Myers: So that's the benefit of the strategy as we continue to use our operational expertise to remerchandise and create value long-term. That's why we're also excited about, over the next 3 or 4 years, growing this part of our business to $700 million to $1 billion over time, the Phillips Edison way.
Rob Myers: So that's the benefit of the strategy as we continue to use our operational expertise to remerchandise and create value long-term. That's why we're also excited about, over the next 3 or 4 years, growing this part of our business to $700 million to $1 billion over time, the Phillips Edison way.
Speaker #4: That's why we're also excited about, over the next three or four years, growing this part of our business to $700 million—to a billion over time—at Phillips Edison.
Speaker #4: way. Okay.
Jeff Edison: Okay. That's, that's really helpful, Color. I appreciate that. One last one, John. A quick, quick one on the guidance. You know, it includes gross acquisitions, $400 to $500 million. But, you know, it seems like there's, you know, this $100 to $200 million of dispositions that's also, you know, contemplated for the year. Is that embedded in the range, you know, or is the disposition activity not currently factored into the guidance specifically?
Todd Thomas: Okay. That's, that's really helpful, Color. I appreciate that. One last one, John. A quick, quick one on the guidance. You know, it includes gross acquisitions, $400 to $500 million. But, you know, it seems like there's, you know, this $100 to $200 million of dispositions that's also, you know, contemplated for the year. Is that embedded in the range, you know, or is the disposition activity not currently factored into the guidance specifically?
Speaker #7: That's, that's really helpful, Connor. I appreciate that. One last one, John. Quick, quick one on the guidance. You know, it includes gross acquisitions—$400 to $500 million.
Speaker #7: But, you know, it seems like there's, you know, this $100 to $200 million of dispositions that's also contemplated for the year. Is that embedded in the range?
Speaker #7: You know, or is the disposition activity not currently factored into the guidance specifically?
Speaker #4: It is in our guidance. The dispositions are considered in the guidance that we've provided.
Kim Green: It is in our guidance. The dispositions are considered in the guidance that we've provided. Yes.
John Caulfield: It is in our guidance. The dispositions are considered in the guidance that we've provided. Yes.
Speaker #4: Yes. Our next question
Operator: Our next question is going to come from the line of Cooper Clark with Wells Fargo. Please go ahead.
Operator: Our next question is going to come from the line of Cooper Clark with Wells Fargo. Please go ahead.
Speaker #1: The next question is going to come from the line of Cooper Clark with Wells Fargo. Please go ahead.
Speaker #7: Great, thanks for taking the question. I guess just to stay on the disposition pipeline, I'm curious, as you think about marketing deals today, what the depth of the bidder pools looks like and the buyer profiles you're seeing.
Jeff Edison: Great. Thanks for taking the question. I guess just to stay on the disposition pipeline, curious, as you think about marketing deals today, what the depth of the bidder pools looks like and the buyer profiles you're seeing? Cooper, thanks for the question. Yeah, the buyer profile is pretty dispersed. I mean, there's a breadth to it that is pretty solid, and certainly more solid than it was; it was pretty solid last year. So it's very comparable to what we saw last year in terms of the level and the variety of buyers. We don't see that changing this year. And we certainly haven't seen it so far this year. Obviously, we're still finding enough product to meet our goals, but it's a broader market, and it's a broader level of interest.
Cooper Clark: Great. Thanks for taking the question. I guess just to stay on the disposition pipeline, curious, as you think about marketing deals today, what the depth of the bidder pools looks like and the buyer profiles you're seeing?
Jeff Edison: Cooper, thanks for the question. Yeah, the buyer profile is pretty dispersed. I mean, there's a breadth to it that is pretty solid, and certainly more solid than it was; it was pretty solid last year. So it's very comparable to what we saw last year in terms of the level and the variety of buyers. We don't see that changing this year. And we certainly haven't seen it so far this year. Obviously, we're still finding enough product to meet our goals, but it's a broader market, and it's a broader level of interest.
Speaker #3: Cooper, thanks for the question. Yeah, the buyer profile is pretty dispersed. I mean, there, there, there's a breadth to it that is pretty solid.
Speaker #3: And certainly more solid—it was pretty solid last year. So it's very comparable to what we saw last year in terms of the level and the variety of buyers.
Speaker #3: We don't see that changing this year, and we certainly haven't seen it so far this year. Obviously, we're still finding enough product to meet our goals.
Speaker #3: But it is—it's a more, the—it's a broader market, and it's a broader level of interest. And each property has a, you know, its own little character.
Jeff Edison: Each property has a, you know, its own little character. And each character has its own set that different buyers, whether it's a family office or whether it's an institutional buyer, looking at it, you know, how are they going to evaluate and see value in it? And that's what we're, you know, that's what we do. And we find those specific opportunities where we can find that, the right buyer for our product.
Jeff Edison: Each property has a, you know, its own little character. And each character has its own set that different buyers, whether it's a family office or whether it's an institutional buyer, looking at it, you know, how are they going to evaluate and see value in it? And that's what we're, you know, that's what we do. And we find those specific opportunities where we can find that, the right buyer for our product.
Speaker #3: And as, and each character has its own set that different buyers, whether it's a family office or whether it's an institutional buyer, looking at it, you know, how are they gonna evaluate and, and, and see value in it.
Speaker #3: And that's what we're—you know, that's what we do. And we find those specific opportunities where we can, where we can find the right, the right PO buyer for our—
Speaker #3: product. Our next
Operator: Our next question is going to come from the line of Hong Zhang with J.P. Morgan. Please go ahead.
Operator: Our next question is going to come from the line of Hong Zhang with J.P. Morgan. Please go ahead.
Speaker #1: The question is going to come from the line of Hong Zhang with J.P. Morgan. Please go ahead.
Speaker #8: Yeah. Hey. I guess my first question: you’ve talked in the past about the potential to proactively take back space in order to push rents higher.
[Analyst] (KeyBank Capital Markets): Yeah. Hey. I guess my first question, you've talked in the past about the potential to proactively take back space in order to push rents higher in the long term. Where you sit today, do you see any opportunities this year that could potentially be a little bit of a headwind to occupancy but ultimately push rents higher in the longer term?
Hong Zhang: Yeah. Hey. I guess my first question, you've talked in the past about the potential to proactively take back space in order to push rents higher in the long term. Where you sit today, do you see any opportunities this year that could potentially be a little bit of a headwind to occupancy but ultimately push rents higher in the longer term?
Speaker #8: And in the long term, where you sit today, do you see any opportunities this year that could potentially be a bit of a headwind to occupancy, but ultimately push rents higher in the longer term?
Speaker #8: And in the long-term, where you sit today, do you see any opportunities this year that could potentially be a little bit of a headwind to occupancy but ultimately push rents higher in the longer term?
Speaker #3: Bob, do you want to talk about—
Jeff Edison: Bob, you want to talk about that?
Jeff Edison: Bob, you want to talk about that?
Speaker #3: that? Yeah.
Bob Myers: Yeah. I appreciate the question. I don't believe we're going to see any headwinds in terms of occupancy. What, what I'm encouraged by we will be very selective from a merchandising standpoint on recapturing spaces where either a Neighbor doesn't choose to step up to the current market rent or we're not seeing the renewal increases or viability and the profitability of the Neighbor. So, that'll be a case-by-case decision, asset by asset. Given the 93% retention and, you know, what we saw in Q4 as a trend, only spending $0.24 a foot, it's just a lot better economic decision than replacing a new Neighbor and pushing the rents. The rents have to be extremely high on that first-year renewal spread when you're investing somewhere, say, between $22 and $28 a foot in tenant improvements.
Rob Myers: Yeah. I appreciate the question. I don't believe we're going to see any headwinds in terms of occupancy. What, what I'm encouraged by we will be very selective from a merchandising standpoint on recapturing spaces where either a Neighbor doesn't choose to step up to the current market rent or we're not seeing the renewal increases or viability and the profitability of the Neighbor. So, that'll be a case-by-case decision, asset by asset. Given the 93% retention and, you know, what we saw in Q4 as a trend, only spending $0.24 a foot, it's just a lot better economic decision than replacing a new Neighbor and pushing the rents. The rents have to be extremely high on that first-year renewal spread when you're investing somewhere, say, between $22 and $28 a foot in tenant improvements.
Speaker #4: I appreciate the question. I don't believe we're going to see any headwinds in terms of occupancy. What I'm encouraged by, we will be very selective from a merchandising standpoint on recapturing spaces where either a neighbor doesn't choose to step up to the current market rent, or we're not seeing the renewal increases or viability in the profitability of the neighbor.
Speaker #4: So wh that'll be a, a case-by-case decision, asset-by-asset. Given the 93% retention, and, you know, what we saw in the fourth quarter as a trend, only spending 24 cents a foot, it's just a, a, a lot better economic decision than replacing a new neighbor and, and pushing the rents.
Speaker #4: The rents have to be extremely high on that first-year renewal spread when you're investing somewhere, say, between $22 and $28 a foot in tenant improvements.
Speaker #4: So the good news is, we'll continue to have flexibility to re-merchandise. The way we can be, just given the lack of supply and the leverage we have in our existing portfolio.
Bob Myers: So the good news is we'll continue to have flexibility to remerchandise the way we can be, just given the lack of supply and the leverage we have in our existing portfolio. I don't see any signs of occupancy weakening. Again, it'll just be case by case and mark-to-market opportunities so we can maximize the value of the portfolio.
Rob Myers: So the good news is we'll continue to have flexibility to remerchandise the way we can be, just given the lack of supply and the leverage we have in our existing portfolio. I don't see any signs of occupancy weakening. Again, it'll just be case by case and mark-to-market opportunities so we can maximize the value of the portfolio.
Speaker #4: I don't see any signs of occupancy weakening. Again, it'll just be case by case. And mark-to-market opportunities so we can maximize the value of the portfolio.
Speaker #1: Your next question is going to come from the line of Michael Goldsmith with UBS. Please go ahead.
Operator: Your next question is going to come from the line of Michael Goldsmith with UBS. Please go ahead.
Operator: Your next question is going to come from the line of Michael Goldsmith with UBS. Please go ahead.
Speaker #1: ahead. Good afternoon.
[Analyst]: Good afternoon. Thanks a lot for taking my question. Earlier, you talked about maybe having 100 basis points of upside for the shop occupancy. Seems like the demand is there. So what needs to change in order for you to realize that upside? Thanks.
Michael Goldsmith: Good afternoon. Thanks a lot for taking my question. Earlier, you talked about maybe having 100 basis points of upside for the shop occupancy. Seems like the demand is there. So what needs to change in order for you to realize that upside? Thanks.
Speaker #9: Thanks a lot for taking my question. Earlier, you talked about maybe having 100 basis points of upside for the shop occupancy. Seems like the demand is there.
Speaker #9: So, what needs to change in order for you to realize that upside? Thanks.
Speaker #3: Bob, do you want to talk about the upside?
Jeff Edison: Bob, you want to talk about the upside?
Jeff Edison: Bob, you want to talk about the upside?
Speaker #8: Great question. So, that is a topic that we continue to discuss—what we can do. One initiative that we put in place is, you know, getting ahead of the curve, whether we discuss supply chain or making improvements to the space where we can turn them faster.
Bob Myers: Great question. So that is a topic that we continue to discuss, on what we can do. One initiative that we put in place is, you know, getting ahead of the curve, whether we discuss supply chain or making improvements to the space where we can turn them faster. You know, in every portfolio, you'll have some spaces that are located in unique spots or spaces that are tired. And I think that'll be a new strategy as we see where our portfolio is today, not only identifying spaces where we should invest capital earlier, but the other thing that I've done with our leasing team is I've put incentives in place on our top 100 vacant opportunities that generate the highest NOI for the center. And I'm compensating it like a bounty program if we can get those leased.
Rob Myers: Great question. So that is a topic that we continue to discuss, on what we can do. One initiative that we put in place is, you know, getting ahead of the curve, whether we discuss supply chain or making improvements to the space where we can turn them faster. You know, in every portfolio, you'll have some spaces that are located in unique spots or spaces that are tired. And I think that'll be a new strategy as we see where our portfolio is today, not only identifying spaces where we should invest capital earlier, but the other thing that I've done with our leasing team is I've put incentives in place on our top 100 vacant opportunities that generate the highest NOI for the center. And I'm compensating it like a bounty program if we can get those leased.
Speaker #8: You know, in every portfolio, you'll have some spaces that are located in unique spots, or spaces that are tired. And I think that'll be a new strategy as we see where our portfolio is today.
Speaker #8: Not only identifying spaces where we should invest capital earlier, but the other thing that I've done with our leasing team is I've put incentives in place on our top 100 vacant opportunities that generate the highest NOI for the center.
Speaker #8: And I'm compensating it like a bounty program if we can get those leased. One thing we've seen a lot of success with at Phillips Edison is when you have incentive pay and commissions to drive a behavior, it works.
Bob Myers: One thing we've seen a lot of success at Phillips Edison is when you have incentive pay and commissions to drive a behavior, it works. That's part of the reason why you're seeing new leasing spreads, renewal spreads, and the integrity of our portfolio. This is something I'm excited about. This is going to help move the needle another 100, 150 basis points with a targeted space leasing approach.
Rob Myers: One thing we've seen a lot of success at Phillips Edison is when you have incentive pay and commissions to drive a behavior, it works. That's part of the reason why you're seeing new leasing spreads, renewal spreads, and the integrity of our portfolio. This is something I'm excited about. This is going to help move the needle another 100, 150 basis points with a targeted space leasing approach.
Speaker #8: That's part of the reason why you're seeing new leasing spreads, renewal spreads, and the integrity of our portfolio. This is something I'm excited about.
Speaker #8: This is going to help move the needle another 100–150 basis points with a targeted space leasing approach.
Speaker #1: Your next question is going to come from the line of Sidney Rome with Barclays. Please go ahead.
Operator: Your next question is going to come from the line of Sydney Rome with Barclays. Please go ahead.
Operator: Your next question is going to come from the line of Sydney Rome with Barclays. Please go ahead.
Speaker #10: Hi, thanks very much for taking the question. With regards to the $400 to $500 million acquisition guidance alongside higher interest expense, I know you commented on the $100 to $150 million disposition budget, but I was hoping you could help us bridge how much of the remaining funding comes from incremental debt versus free cash flow.
Kim Green: Hi. Thanks very much for taking the question. With regards to the $400 to 500 million acquisition guide, alongside higher interest expense, I know you commented on $100 to 150 million of disposition budget, but I was hoping you could help us bridge how much of the remaining funding comes from incremental debt versus free cash flow generation.
Sydney Rome: Hi. Thanks very much for taking the question. With regards to the $400 to 500 million acquisition guide, alongside higher interest expense, I know you commented on $100 to 150 million of disposition budget, but I was hoping you could help us bridge how much of the remaining funding comes from incremental debt versus free cash flow generation.
Speaker #10: generation. Sidney, thank you for the
Jeff Edison: Sydney, thank you for the question. John, do you want to talk about the allocation there between the two?
Jeff Edison: Sydney, thank you for the question. John, do you want to talk about the allocation there between the two?
Speaker #3: John, do you want to talk about the allocation there between the two?
Speaker #11: Thanks for the question. We generate over $100 million. Actually, this year we think it'll be closer to over $120 million of cash flow available to us after distributions. As we said earlier, about $70 million of that will likely go towards our development and redevelopment activity.
Kim Green: Thanks for the question. We generate over $100 million. Actually, this year, we think it'll be closer to over $120 million of cash flow available to us after distributions. As we said earlier, about $70 million of that will likely go towards our development and redevelopment activity. And then, you consider the proceeds from the disposition activity. So as we look to the debt markets here, we will utilize incremental debt capital but also to refinance it. So the math there, I think I kind of pointed to the pieces that could do it. But ultimately, we would be looking at, you know, one to two bond offerings this year or other debt offerings that we would look at, but depending upon, you know, pricing at the time. So we're going to, you know, again, work on those January maturities.
John Caulfield: Thanks for the question. We generate over $100 million. Actually, this year, we think it'll be closer to over $120 million of cash flow available to us after distributions. As we said earlier, about $70 million of that will likely go towards our development and redevelopment activity. And then, you consider the proceeds from the disposition activity. So as we look to the debt markets here, we will utilize incremental debt capital but also to refinance it. So the math there, I think I kind of pointed to the pieces that could do it. But ultimately, we would be looking at, you know, one to two bond offerings this year or other debt offerings that we would look at, but depending upon, you know, pricing at the time. So we're going to, you know, again, work on those January maturities.
Speaker #11: And then you consider the proceeds from the disposition activity. So, as we look to the debt markets here, we will utilize incremental debt capital, but also to refinance it.
Speaker #11: So the, the, the math there—I think I kind of pointed to the pieces that could do it—but ultimately we would be looking at, you know, one to two bond offerings this year, or other debt offerings that we would look at, but depending upon, you know, pricing at the time.
Speaker #11: So we're gonna, you know, again, work on those January maturities, but I would say we have over $900 million of liquidity available to us between a revolver, and at the end of the year we had some dollars available in 1031 proceeds that have been invested in the acquisitions we've already closed.
Kim Green: But I would say we have over $900 million of liquidity available to us between a revolver. And at the end of the year, we had some dollars available in 1031 proceeds that have been invested in the acquisitions we've already closed. So we feel really good about the availability of debt capital in the markets across types in addition to the free cash flow generation that we have.
John Caulfield: But I would say we have over $900 million of liquidity available to us between a revolver. And at the end of the year, we had some dollars available in 1031 proceeds that have been invested in the acquisitions we've already closed. So we feel really good about the availability of debt capital in the markets across types in addition to the free cash flow generation that we have.
Speaker #11: So, we feel really good about the availability of debt capital in the markets to the free cash flow generation across types. In addition, we
Speaker #11: have. Our next
Operator: Our next question is going to come from the line of Paulina Rojas with Green Street. Please go ahead.
Operator: Our next question is going to come from the line of Paulina Rojas with Green Street. Please go ahead.
Speaker #1: The question is going to come from the line of Paulina Rojas with Green Street. Please go ahead.
Speaker #12: Good afternoon. Can you please share some rough numerical guidelines on how CapEx has differed between your everyday retail and typical grocery-anchored centers?
Kim Green: Good afternoon. Can you please share some rough numerical guidelines on how CapEx has differed between your everyday retail and typical grocery anchored centers?
Paulina Rojas: Good afternoon. Can you please share some rough numerical guidelines on how CapEx has differed between your everyday retail and typical grocery anchored centers?
Speaker #3: Paulina, thank you, for the question. I, I wanna make sure I get it. You're, you're saying what, what, what capital are we spending on the, our, our, our core grocery stuff versus capital on everyday retail?
Jeff Edison: Paulina, thank you for the question. I want to make sure I get it. You're saying what capital are we spending on our core grocery stuff versus capital on everyday retail? Is that, and so, is that the comparison you're looking at?
Jeff Edison: Paulina, thank you for the question. I want to make sure I get it. You're saying what capital are we spending on our core grocery stuff versus capital on everyday retail? Is that, and so, is that the comparison you're looking at?
Speaker #3: Is that the-- and so, is that the comparison you're looking for?
Speaker #12: Yes, correct. Ideally, as a percent.
Kim Green: Yes. Correct. Ideally, as a percent of NOI or something like that.
Paulina Rojas: Yes. Correct. Ideally, as a percent of NOI or something like that.
Speaker #3: Okay.
Speaker #12: Of NOI, or something like that.
Speaker #3: John, do you, you that?
Jeff Edison: John, do you want to walk through that?
Jeff Edison: John, do you want to walk through that?
Speaker #3: wanna walk through Absolutely.
Kim Green: Absolutely. As we look at it, we are targeting over 10% unlevered IRRs. And to Bob's point earlier, actually, even 100 basis points are higher above that. For us, at this point in the strategy, I would say that the capital as a percentage of NOI actually looks a lot like our grocery anchored centers because of the growth that we're generating. As we stabilize these assets, we do believe they will be very efficient from a CapEx perspective. As you get to renewing neighbors and just pushing rents, that it because of the character of how we are evaluating these everyday centers and opportunities to push rents that are in place, but more so change the merchandising mix, upgrade the merchandising rates. We talk about it because we, we also have similarly that there's market data that suggests they, the capital for these centers should be more efficient.
John Caulfield: Absolutely. As we look at it, we are targeting over 10% unlevered IRRs. And to Bob's point earlier, actually, even 100 basis points are higher above that. For us, at this point in the strategy, I would say that the capital as a percentage of NOI actually looks a lot like our grocery anchored centers because of the growth that we're generating. As we stabilize these assets, we do believe they will be very efficient from a CapEx perspective. As you get to renewing neighbors and just pushing rents, that it because of the character of how we are evaluating these everyday centers and opportunities to push rents that are in place, but more so change the merchandising mix, upgrade the merchandising rates.
Speaker #11: As we look at it, we are targeting over 10% unlevered IRRs and, to Bob's point earlier, actually even 100 basis points or higher above that.
Speaker #11: For us, at this point in the strategy, I would say that the capital as a percentage of NOI actually looks a lot like our grocery-anchored centers because of the growth that we're generating.
Speaker #11: As we stabilize these assets, we do believe they will be very efficient from a CapEx perspective. As you get to renewing neighbors and just pushing rents, that is because of the character of how we are evaluating these everyday centers and opportunities to push rents that are in place, but more so to change the merchandising mix and upgrade the merchandising rates.
John Caulfield: We talk about it because we, we also have similarly that there's market data that suggests they, the capital for these centers should be more efficient. I think that is a data point to look at. I'm looking at it as an opportunity to get above a 10% unlevered when you include the impact of this capital. So when we look at the everyday retail in its current state, it actually looks a lot like, you know, the 12% to 13% of AFFO CapEx that we're spending at these centers generally because there's smaller, not as many opportunities to build out parcels given the footprint. But we think that it has the capability. But right now, we're focused on remerchandising, releasing, pushing rents. And that will ultimately get to that capital efficiency.
Speaker #11: We talk about it because we, we also have, similarly, that there's market data that suggests the capital for these centers should be more efficient.
Speaker #11: I think that is a data point to look at. I'm looking at it as an opportunity to get above a 10% unlevered when you include the impact of this capital.
Kim Green: I think that is a data point to look at. I'm looking at it as an opportunity to get above a 10% unlevered when you include the impact of this capital. So when we look at the everyday retail in its current state, it actually looks a lot like, you know, the 12% to 13% of AFFO CapEx that we're spending at these centers generally because there's smaller, not as many opportunities to build out parcels given the footprint. But we think that it has the capability. But right now, we're focused on remerchandising, releasing, pushing rents. And that will ultimately get to that capital efficiency.
Speaker #11: So when we look at the everyday retail in its current state, it actually looks a lot like, you know, the 12 to 13 percent of AFFO CapEx that we're spending at these centers generally, because they're smaller—not as many opportunities to build out parcels, given the footprint.
Speaker #11: But we think that it has the capability, but right now we're focused on remerchandising, releasing, pushing rents, and that will ultimately get to that capital efficiency.
Speaker #3: Yeah. And, and Paulina, we're, we're, we're programming that in our underwriting. So we, we oftentimes when we're buying, you know, some of the, everyday retail, we, we have significant capital that we're putting in upfront to, to redo the centers, to, to bring in the, the, the, the, the, the merchandising that we wanna have at that center.
Jeff Edison: Yeah. And Paulina, we're programming that in our underwriting. So we oftentimes when we're buying, you know, some of the everyday retail, we have significant capital that we're putting in upfront to redo the centers, to bring in the merchandising that we want to have at that center. And then you get to what John's talking about, which is on a stabilized basis. We think it will be less, it less of a cost. But if you truly want to turn around the capital we think is necessary.
Jeff Edison: Yeah. And Paulina, we're programming that in our underwriting. So we oftentimes when we're buying, you know, some of the everyday retail, we have significant capital that we're putting in upfront to redo the centers, to bring in the merchandising that we want to have at that center. And then you get to what John's talking about, which is on a stabilized basis. We think it will be less, it less of a cost. But if you truly want to turn around the capital we think is necessary.
Speaker #3: And then you get to what John's talking about, which is on a stabilized basis. We think it will be less, in less of a cost.
Speaker #3: But if you, if you truly want to turn around the, the capital, we think is
Speaker #3: necessary. This
Operator: This concludes our question and answer session. I will now turn the conference back to Jeff Edison for some closing remarks. Jeff.
Operator: This concludes our question and answer session. I will now turn the conference back to Jeff Edison for some closing remarks. Jeff.
Speaker #1: That concludes our question and answer session. I will now turn the conference back to Jeff Edison for some closing remarks.
Speaker #1: remarks. Jeff. Great.
Jeff Edison: Great. Yeah. Thank you, operator. In closing, I want to reiterate that PECO performed very well in 2025. Our grocery-anchored necessity-based portfolio provided both growth and stability. We're carrying that momentum into 2026. Our high-quality, reliable cash flows continue to grow as a result of our solid operational metrics and disciplined investment strategy. We remain confident in our ability to execute on our acquisition plans and are focused on generating attractive long-term IRRs. With our shares trading at a discount to our long-term growth profile, we believe PECO represents an attractive opportunity to invest in a leading operator that can deliver mid to high single-digit annual earnings growth. We will continue to drive more alpha with less beta. In conclusion, I want to thank our PECO associates for their continued hard work. I'd like to thank our shareholders and our neighbors for their continued support.
Jeff Edison: Great. Yeah. Thank you, operator. In closing, I want to reiterate that PECO performed very well in 2025. Our grocery-anchored necessity-based portfolio provided both growth and stability. We're carrying that momentum into 2026. Our high-quality, reliable cash flows continue to grow as a result of our solid operational metrics and disciplined investment strategy. We remain confident in our ability to execute on our acquisition plans and are focused on generating attractive long-term IRRs.
Speaker #3: Yeah. Thank you, operator. In closing, I want to reiterate that PECO performed very well in 2025. Our grocery-anchored, necessity-based portfolio provided both growth and stability.
Speaker #3: We're carrying that momentum into 2026. Our high-quality, reliable cash flows continue to grow as a result of our solid operational metrics and disciplined investment strategy.
Speaker #3: We remain confident in our ability to execute on our acquisition plans and are focused on generating attractive long-term IRRs. With our shares trading at a discount to our long-term growth profile, we believe PECO represents an attractive opportunity to invest in a leading operator that can deliver mid- to high single-digit annual earnings growth.
Jeff Edison: With our shares trading at a discount to our long-term growth profile, we believe PECO represents an attractive opportunity to invest in a leading operator that can deliver mid to high single-digit annual earnings growth. We will continue to drive more alpha with less beta. In conclusion, I want to thank our PECO associates for their continued hard work. I'd like to thank our shareholders and our neighbors for their continued support.With that, we'll end our conversation. Thank you. Have a great day, everyone.
Speaker #3: We will continue to drive more alpha, with less beta. In conclusion, I want to thank our PICO associates for their continued hard work, and I'd like to thank our shareholders and our neighbors for their continued support.
Speaker #3: With that, we'll end our conversation. We thank you, and have a great day.
Jeff Edison: With that, we'll end our conversation. Thank you. Have a great day, everyone.
Speaker #3: everyone. Ladies and gentlemen,
Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.
